CERTIFICATE OF SERVICE

The undersigned hereby certifies that on March 28, 2000, a copy of Applicant’s Exhibit C-37, Pre-filed Testimony of Keith Vangeison, Confidential Version was served by United States mail, first class postage prepaid, or, where indicated, by hand delivery, or e-mail, on each of the persons listed below.

James B. Zimpritch

Pierce Atwood

One Monument Square

Portland, Maine 04101

e-mail: jzimpritch@pierceatwood.com

Judith Chamberlain, Esq.

State of Maine

Department of the Attorney General

6 State House Station

Augusta, Maine 04333-0006

e-mail: judy.chamberlain@state.me.us

(Bureau of Insurance)

William H. Laubenstein, Esq.

State of Maine

Department of the Attorney General

6 State House Station

Augusta, Maine 04333-0006

e-mail: bill.laubenstein@state.me.us

(Office of the Attorney General)

Gregory A. Brodek, Esq.

Duane, Morris & Heckscher, LLP

15 Columbia Street, 4^th Floor

Bangor, Maine 04401-6355

e-mail: gabrodek@duanemorris.com

(Maine Health Alliance)

Joseph P. Ditre, Esq.

Consumer Health Law Program

One Weston Court, Level One

P.O. Box 2490

Augusta, Maine 04338-2490

e-mail: jditre@mainecahc.org

(Consumers for Affordable Health Care Foundation/Coalition)

Michele M. Garvin, Esq.

Ropes & Gray

One International Place

Boston, Massachusetts 02110-2624

e-mail: Mgarvin@Ropesgray.com

(Central Maine Healthcare Corporation; Central Maine Partners Health Plan)

Robert I. Goldman

Maine Council of Senior Citizens

27 Bowery Beach Road

Cape Elizabeth, Maine 04107

e-mail: Rgoldma1@maine.rr.com

(Maine Council of Senior Citizens)

Bonnie Post

Executive Director of the Maine Ambulatory Care Coalition

P.O. Box 390

Manchester, Maine 04351

e-mail: bdpmacc@mint.net

(Sacopee Valley Health center, Regional Medical center at Lubec, Eastport Health Care, Inc., and the Maine Ambulatory Care Coalition)

John Dieffenbacher-Krall

Executive Director

Maine People’s Alliance

192 State Street

Portland, Maine 04101

e-mail: MPA@gwi.net

(Maine People’s Alliance)

Gordon H. Smith, Esq.

Maine Medical Association

30 Association Drive

P.O. Box 190

Manchester, Maine 04351

e-mail: gsmith@ctel.net

(Maine Medical Association)

 

Donald E. Quigley, Esq.

General Counsel

465 Congress Street, Suite 600

Portland, Maine 04101-3537

e-mail: quigld@mail.mmc.org

(Maine Medical center)

Sandra L. Parker, Esq.

Attorney for MHA, Inc.

150 Capitol Street

Augusta, Maine 04330

e-mail: sparker@themha.org

(MHA, Inc.)

 

 

 

 

Kellie P. Miller, M.S.

Executive Director

Maine Osteopathic Association

693 Western Avenue

Manchester, Maine 04351

e-mail: meosteo@mint.net

(Maine Osteopathic Association)

John P. Doyle, Esq.

Preti, Flaherty, Beliveau & Pachios, LLC

One City center

PO Box 9546

Portland, Maine 04112-9546

(Maine Hospital Association)

 

Michel LaFond

Sulloway and Hollis, P.L.L.C.

9 Capitol Street

Box 1256

Concord, New Hampshire 03302-1256

 

 

 

Applicants’ Exhibit 40

 

 

STATE OF MAINE
DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
BUREAU OF INSURANCE

 

 

 

March 28, 2000

 

Q.Please state your name and occupation.

A. My name is Kevin Collins. I am a managing director of Houlihan Lokey Howard & Zukin Financial Advisors, Inc. I have been assisted in the preparation of this testimony by Stephen Krug, who is a vice president at Houlihan Lokey.

Q. What service has Houlihan Lokey performed in relation to the Anthem/ BlueCross BlueShield of Maine transaction under consideration by the Superintendent ?

A. Houlihan Lokey was retained by BCBSME to provide an appraisal of the fair market value of the aggregate equity of BCBSME as of July 13, 1999, the date on which the Company entered into an Asset Purchase Agreement with Anthem Insurance Companies. Our appraisal assumed the completion of the Company’s conversion as of July 13, 1999.

Q. What is Houlihan Lokey’s experience in the field of corporate valuations that was brought to bear in this engagement ?

A. Houlihan Lokey has extensive experience and expertise in the area of corporate appraisal and is reflected in documents provided as part of BCBSME’s Responses to the Superintendent’s First Discovery Request, ¶’s 1 and 2, and in BCBSME’s Response to the Attorney General’s Second Discovery Request, ¶‘s 4 and 5. These documents are included as Applicants’ Exhibit 50, Exhibit C-51, and Exhibit C-52. Among other things, Houlihan Lokey has provided financial advisory, corporate finance, valuation, and financial restructuring services in connection with mergers and acquisitions and non-profit conversions. Houlihan Lokey has also worked with clients in most segments of the healthcare industry including health maintenance organizations.

Q. What is your and Mr. Krug’s background and experience in these subject areas?

A. I am in charge of the valuation practice in Houlihan Lokey's New York office, and have been involved in business and securities valuation for the past ten years. I have provided financial advisory services in a range of transactions including mergers, acquisitions, spin-offs, sales, repurchases of minority and controlling interest blocks, and other corporate finance activities. I have a B.S. in Business Administration from the State University of New York at Albany and an M.B.A. from the University of Rochester. Prior to joining Houlihan Lokey, I was a corporate lending officer with Security Pacific National Bank. Mr. Krug is a Vice President in the Atlanta office of Houlihan Lokey Howard & Zukin, responsible for the management of investment banking and valuation engagements involving healthcare companies based on the East Coast. Prior to rejoining Houlihan Lokey in 1998, Mr. Krug served as Director of Business Planning and Development with merger and acquisition oversight responsibilities for PHP Healthcare Corporation (NYSE-PPH), a managed care company, and Manager of New Venture Analysis for Inova Healthcare Systems, a large non-profit hospital system located in Northern Virginia. He also served as Senior Associate in Houlihan Lokey’s Washington D.C. office performing transactional opinion and valuation services in a number of industries. He holds a B.S. degree in Business Administration with a duel concentration in finance and marketing from the University of Virginia. He is a Chartered Financial Analyst and an NASD registered representative. In the past 10 years, he also has participated in the managed care business valuation assignments described in Exhibit 50.

Q. In performing its valuation of BlueCross BlueShield of Maine, what information did Houlihan Lokey rely upon ?

A. Houlihan Lokey reviewed extensive information provided by the Company, including financial information such as historical and projected balance sheets and income statements, and non-financial information such as membership profile, product offerings and the provider network, among other things. Houlihan Lokey visited the Company’s offices in South Portland, Maine and interviewed management to discuss the Company’s operations, financial condition and prospects as they were known as of July 13, 1999. Houlihan Lokey also reviewed and analyzed economic and industry data and evidence concerning the market capitalization and related financial parameters of comparable publicly traded companies, and public information concerning merger and acquisition transactions involving health insurance firms. A fuller statement of the basis for our valuation opinion is summarized in our letter to the Board of Directors of BCBSME, dated September 15, 1999, pp. 2-3. This letter is included at the beginning of the document entitled "Valuation of BlueCross BlueShield of Maine, Valuation as of July 13, 1999, which appears behind Tab 2-D of the Applicant’s Initial Consolidated Filing (hereinafter "the Valuation Report") (Applicants’ Exhibit 1A (non-confidential) and Applicants’ Exhibit C-1C (confidential).

Q. What valuation methodologies did Houlihan Lokey consider in formulating its valuation of the equity of BCBSME ?

A. Houlihan Lokey considered the valuation methodologies set forth in 24 M.R.S.A. § 2301, sub-§ 9-D(B)(6), discussed in more detail in the Valuation Report, and generally performed its valuation in conformance with the Uniform Standards of Professional Appraisal Practice.

Q. Does Houlihan Lokey have any financial or other relationship with BlueCross BlueShield of Maine or Anthem Insurance Companies that would qualify its independence in performing this valuation engagement. ?

A. No. As noted in the Certification accompanying our Valuation Report, Houlihan Lokey has no present or future interest in BCBSME, and neither our performance nor our compensation in performing the engagement for BCBSME was contingent upon the conclusions reached or values estimated.

Q. What was your conclusion as to the fair market value of the aggregate equity of BlueCross BlueShield of Maine ?

A. As set forth in the Valuation Report, and subject to the limiting factors and other assumptions described in the Report, Houlihan Lokey’s opinion was that as of July 13, 1999, the fair market value of the aggregate equity of the converted stock of BCBSME, assuming completion of the conversion plan as of that date, was $102.5 million. This valuation was conducted assuming 100% of the stock was freely transferable and available for purchase without restriction, and did not include expenses that would be incurred by BCBSME in converting to stock form.

Q. What other services have you provided in the course of your engagement with BlueCross BlueShield of Maine ?

A. Houlihan Lokey presented its Valuation Report to the Board of Directors of BlueCross BlueShield of Maine on September 15, 1999. We assisted the Company in responding to discovery questions posed by the Superintendent in this proceeding that related to valuation. At the Company’s request, we also provided information reflecting the change in stock prices of the Comparable Public Companies listed on p. 28 of the Valuation Report, covering the period from the time of our valuation to March 22, 2000.

Date: March 28, 2000

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