STATE OF MAINE
DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
BUREAU OF INSURANCE
| IN RE: |
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| Application of Associated Hospital Service |
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| of Maine d/b/a Blue Cross and Blue Shield |
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| of Maine to convert to a Stock Insurer |
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| and Voluntarily Liquidate and Dissolve |
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|
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FIRST DISCOVERY REQUEST |
| and |
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OF THE SUPERINTENDENT OF |
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INSURANCE |
| IN RE: |
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| Application of Anthem Health Plan of |
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| Maine, Inc. to Acquire the Assets of |
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| Associated Hospital Service of Maine d/b/a |
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| Blue Cross and Blue Shield of Maine and |
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| Related Transactions |
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| Docket No. INS-99-14 |
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| (CONSOLIDATED) |
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TO: Associated Hospital Service of Maine
c/o Robert Frank, Esq.
Harvey and Frank
Two City center
P.O. Box 126
Portland, Maine 04112-0126
Anthem Health Plan of Maine, Inc.
c/o James Zimpritch, Esq.
Pierce Atwood
One Monument Square
Portland, Maine 04101-1110
The Superintendent of Insurance requests that you provide responses to the following
inquiries and document requests. In producing the requested documents, the Applicants are
requested to furnish all documents regardless of whether they are in the possession of
Associated Hospital Service, Anthem Health Plan of Maine, or any subsidiary, affiliate, or
parent of either entity. If the Applicants refuse for any reason to provide any of the
documents described below, the Applicants should identify in writing each such document
and provide the reason for such refusal.
Valuation
- Please provide the curriculum vitae for each of the review appraisers and contributing
appraisers identified in the certification of appraisal appended to the valuation of Blue
Cross and Blue Shield of Maine completed by Houlihan, Lokey, Howard and Zukin Financial
Advisors, Inc. which appears as Tab D to the application on file with the Superintendent.
- In addition to a curriculum vitae, please provide any other relevant background
information with respect to the contributing and reviewing appraisers including similar
engagements in which each individual has been involved over the course of the past ten
years.
- Please describe in detail the process utilized by the Board of Directors of Associated
Hospital Service in selecting Houlihan, Lokey, Howard and Zukin as the appraisal firm for
the completion of the valuation of Blue Cross and Blue Shield of Maine.
Financial
- Please provide the audited financial statements for Anthem Insurance Companies on a GAAP
basis for the years ended December 31, 1997 and 1998 including the report of Independent
Auditors. Note: Although some statements are referenced in the filing as appearing in Book
2 at Tab I, they appear to be missing.
- The auditor’s report for the year ended December 31, 1998 of Blue Cross and Blue
Shield of Maine appears in Book 2, Tab Q of the filing. Please provide pages 7, 8 and 10,
as those pages appear to be missing.
- Financial projections for Blue Cross and Blue Shield of Maine on a consolidated basis
are provided in the confidential portion of the filing. Please identify the companies
whose financial figures are included within the projections.
- Financial statements for Anthem Insurance Companies are provided at Book 2, Tabs K, L,
M, R and S. For each of these statements, please indicate which are done on a consolidated
basis. For those statements which are consolidated, please identify the companies included
within each statement.
- The membership information contained in the BCBSME financial projections in the
confidential binder at page 50 provided with respect to Maine Partners Health Plan as of
the year ended December 31, 1998 differs from the same information provided on the 1998
annual statement filed with the Bureau of Insurance. Please compare the two documents and
explain the deviation. Additionally, please prepare and file the same financial
projections on a SAP basis.
- The information contained in the BCBSME financial projections in the confidential binder
at page 51 provided with respect to Central Maine Partners Health Plan as of the year
ended December 31, 1998 differs from the same information provided on the 1998 annual
statement filed with the Bureau of Insurance. Please compare the two documents and explain
the deviation. Additionally, please prepare and file the same financial projections on a
SAP basis.
- Please provide the NAIC annual statement for the year ended December 31, 1998 for Anthem
Insurance Companies.
- A comparison of the 1997 financial statement on a GAAP basis (at Book 2, Tab R) to the
1997 financial statement on a SAP basis (at Book 2, Tab J) for Anthem Insurance Companies
revealed discrepancies in some of the values including revenue and assets. Please compare
the two documents and explain in detail any discrepancies.
- The June 30, 1999 quarterly statement for Anthem Insurance Companies (at Book 2, Tab M)
reflects a refund from the Internal Revenue Service. Please explain the basis for this
refund and whether such a refund is expected to be a one-time event. What amount of tax
refund is projected as of year end 1999 and what percentage of income is it expected to
comprise?
- Please describe in detail the methodology used by Anthem Insurance Companies in
determining the appropriate deduction from the purchase price should Blue Cross and Blue
Shield of Maine fall short in its financial projections. Identify all considerations taken
into account in reaching the conclusion that a $5.00 reduction in the purchase price is
appropriate.
- Please explain with specificity the measures Anthem Insurance Companies, through Anthem
Health Plan of Maine, will undertake in order to improve the administrative expense ratio
of Blue Cross and Blue Shield of Maine should the proposed acquisition be approved.
- Please describe the procedures currently utilized by Anthem Insurance Companies and its
subsidiaries to assure compliance with 18 U.S.C. §§1033 and 1034. Does Anthem anticipate
the use of these same procedures by Anthem Health Plan of Maine should the proposed
acquisition be approved? If not, please describe in detail the procedures to be used by
Anthem Health Plan of Maine.
- The bulk reinsurance agreement as well as other documents within the application on file
refers to the intent of Anthem Health Plan of Maine to assume "substantially
all" of the liabilities of BCBSME. Please provide a detailed itemization of those
liabilities which will not be assumed including a complete description of the liability
and the estimated or known amount of the liability.
Pursuant to Rule 350 of the Bureau of Insurance Rules of Practice and Procedure, you
are required to respond to this request within 14 days after your receipt. Should you
require any clarification with respect to the requests being made, you may contact my
legal counsel, Judith Chamberlain, Assistant Attorney General, at 626-8835.
DATED:
______________________________
ALESSANDRO
A. IUPPA
Superintendent
of Insurance
