NON-CONFIDENTIAL
STATE OF MAINE
DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
BUREAU OF INSURANCE
| IN RE: APPLICATION OF ASSOCIATED HOSPITAL
SERVICE OF MAINE, d/b/a BLUE CROSS
AND BLUE SHIELD OF MAINE, TO CONVERT TO A STOCK INSURER AND VOLUNTARILY LIQUIDATE AND
DISSOLVE
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| IN RE: APPLICATION OF ANTHEM HEALTH PLAN OF
MAINE, INC., TO ACQUIRE THE ASSETS OF ASSOCIATED HOSPITAL SERVICE OF MAINE, d/b/a BLUE
CROSS AND BLUE SHIELD OF MAINE, AND RELATED TRANSACTIONS
Docket NO. INS 99-14 (CONSOLIDATED) |
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ANTHEM INSURANCE COMPANIES, INC.’S FIFTH
SUPPLEMENT TO RESPONSE TO SECOND DISCOVERY REQUEST OF THE SUPERINTENDENT
February 18, 2000 |
NON-CONFIDENTIAL
On February 4, 2000, counsel for the Superintendent held a discovery conference to
discuss the Applicants’ responses to the Superintendent’s Second Discovery
Request. As a result of that conference, the Applicants agreed to supplement certain of
their earlier responses, and to provide other additional information requested at the
conference. Anthem Insurance Companies, Inc., on behalf of its subsidiary to be formed,
Anthem Health Plans of Maine, Inc., d/b/a Anthem Blue Cross and Blue Shield (collectively
"Anthem"), has prepared the bulk of the supplemental information requested and
hereby submits its Fifth Supplement to the Second Discovery Request of the Superintendent
of Insurance, dated December 3, 1999, as follows:
The following responses by Anthem are subject to the objections and clarifications
previously filed by Anthem on December 10 and 17, 1999. To the extent that any additional
responsive documents are located in the future, Anthem reserves its rights to object to
producing such documents to the extent covered by the attorney-client and or work product
privileges.
- Please provide a detailed analysis explaining the methodology and practice that will be
followed for allocation of costs and expenses pursuant to the Inter-Company Services
Agreement.
Response: |
CONFIDENTIAL RESPONSE REDACTED. |
- Please provide pro-forma and projected Anthem balance sheets and income statements,
both consolidated and at the Blue Cross company level and on a GAAP and statutory basis,
comparable to those provided regarding Blue Cross and Blue Shield of Maine. The
projections at the consolidated level should include operations from the anticipated
mergers with the New Hampshire, Colorado, and Maine Blue Cross plans.
Response: |
CONFIDENTIAL RESPONSE REDACTED.
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- Please provide, on both a GAAP and statutory basis, company level and consolidated
financial projections demonstrating Anthem’s proposed capitalization and capital
adequacy for the Indiana parent company and all current and pending Blue Cross
subsidiaries in Ohio, Kentucky, Connecticut, New Hampshire, Colorado, and Maine. Include
in such projections comparisons of each Blue Cross plan’s capitalization compared
with regulatory and / or rating agency prescribed capital benchmarks such as statutory
Risk Based Capital requirements, BCBSA capital benchmarks, and S&P capital adequacy
benchmarks.
Response: |
CONFIDENTIAL RESPONSE REDACTED. |
- Please provide a copy of Anthem’s latest Consolidated Business Plan and related
forecasts, including business plans and forecasts related to the assimilation and
operation of the Maine, Colorado, and New Hampshire Blue Cross Blue Shield Plans, with
supporting detail regarding all assumptions supporting the Plan and forecasts such as
operational cost savings, medical cost trends, enrollment, and so on.
Response: |
CONFIDENTIAL RESPONSE REDACTED. |
- To the extent not included in other financial projections, please provide a projection
of anticipated debt and surplus note servicing requirements for at least the next 5 years.
Include in such projection anticipated debt and surplus note servicing requirements
anticipated in relation to the Blue Cross of Maine, New Hampshire, and Colorado
transactions.
| Response:
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On February 3, 2000, Anthem Insurance
Companies, Inc. issued $300MM of 9.125% Surplus Notes due April 1, 2010. The company used
the proceeds to repay the outstanding borrowings of $220MM made on its bank revolver.
Also, the company is currently planning to use the remainder of the proceeds from the
Surplus Notes issuance plus additional internally generated funds to purchase Blue Cross
and Blue Shield of Maine with cash, if the transaction is approved by the Superintendent
of Insurance.
Anthem has also produced a GAAP debt table at December 31, 1999 and a
schedule of annual interest payments, AN-03342, which will be distributed according to the
service list referenced in the filing document. The GAAP debt table includes an as
adjusted column to show the impact of the new Surplus Notes issuance. The second table
includes annual interest payments that are due on the debt outstanding as of February 11,
2000.
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- Please provide clarification of the source of funds to be utilized to finance the proposed Anthem / BCBSME merger as to how much of the consideration will be financed from:
a.Current cash (not raised by financing activities)
b.Issuance of debt
c.Use of commercial paper or line of credit facilities
d.Issuance of surplus notes
e.Use of financial reinsurance
f.Any other financing mechanism.
Response: |
Please see Anthem’s response to
question no. 32. |
- Please provide information as to the source of funds to be utilized to finance the
pending Anthem mergers with the Blue Cross of New Hampshire and Blue Cross of Colorado
plans as to how much of the consideration will be financed from:
a.Current cash (not raised by financing activities)
b.Issuance of debt
c.Use of commercial paper of line of credit facilities
d.Issuance of surplus notes
e.Use of financial reinsurance
f.Any other financing mechanism.
Response: |
Please see Anthem’s response to
question no. 32.
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- Please provide copies of all of Anthem’s borrowing agreements and surplus note
agreements currently in force.
Response: |
CONFIDENTIAL RESPONSE REDACTED. |
ADDITIONAL INFORMATION REQUESTED BY
THE BUREAU AT THE FEBRUARY 4 CONFERENCE
Centralized Investment
Bureau Question: What procedures does Anthem follow for centralized investment? How
does income get allocated back to the Company’s subsidiaries?
Response: |
Oversight for the investments of an Anthem
subsidiary is consolidated at the company’s headquarters. The actual investments of
the subsidiary, however, are not consolidated, but rather are maintained on a
company-specific basis. Both the investment manager assigned to the subsidiary as well as
Anthem’s custodian, Chase Manhattan Bank, maintain a separate account under the name
of the subsidiary. Also, investment accounting maintains a complete account for the
subsidiary as well. As these three record sources are reconciled periodically, an
excellent record of the investments held by and for the benefit of the subsidiary is
always available from one of three independent sources: 1) Conning & Co.,
Anthem’s external investment accountant; 2) Chase Manhattan, Anthem’s custodian;
or 3) the external investment manager selected to manage the subsidiary’s
investments. The Investment Policy for Anthem Health and Life of New York, and agreement
between Anthem and Anthem Health and Life of New York, AN-03477 to AN-03492, will be
distributed according to the service list referenced in the filing document.
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DATED: February 18, 2000
_____________________________
James B. Zimpritch, Esq.
Jeffrey M. White, Esq.
Catherine R. Connors, Esq.
PIERCE ATWOOD
One Monument Square
Portland, Maine 04101
(207) 791-1100
Attorneys for Anthem Insurance Companies, Inc
CERTIFICATE OF SERVICE
The undersigned hereby certifies that on February 18, 2000 a copy of the
Non-Confidential Version Anthem Insurance Companies, Inc.’s Fifth Supplement to
Response to the Second Discovery Request of the Superintendent was served by United States
mail, first class postage prepaid, or, where indicated, by hand delivery, on each of the
persons listed below.
Judith Chamberlain, Esq.
(hand delivered w/attached documents)
State of Maine
Department of the Attorney General
P.O. Box 126
6 State House Station
Augusta, Maine 04333-0006
e-mail: judy.chamberlain@state.me.us
(Bureau of Insurance)
Robert S. Frank, Esq.
(hand delivered w/attached documents)
Harvey & Frank
Two City Center
Portland, Maine 04112
e-mail: frank@harveyfrank.com
(Blue Cross/Blue Shield of Maine)
William H. Laubenstein, Esq.
(hand delivered w/attached documents)
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)
Michele M. Garvin, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
e-mail: Mgarvin@Ropesgray.com
(Central Maine Healthcare Corporation
and Central Maine Partners Health Plan)
Gordon H. Smith, Esq.
Maine Medical Association
30 Association Drive
P.O. Box 190
Manchester, Maine 04351
e-mail: gsmith@ctel.net
(Thomas D. Hayward, M.D.,
Maroulla S. Gleaton, M.D.,
and the Maine Medical Association)
Gregory A. Brodek, Esq.
Duane, Morris & Heckscher, LLP
15 Columbia Street, 4th 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)
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)
Donald E. Quigley, Esq.
General Counsel
465 Congress Street, Suite 600
Portland, Maine 04101-3537
e-mail: quigld@mail.mmc.org
(Maine Medical Center)
DATED: February 18, 2000
_____________________________
James B. Zimpritch, Esq.
Jeffrey M. White, Esq.
Catherine R. Connors, Esq.
PIERCE ATWOOD
One Monument Square
Portland, Maine 04101
(207) 791-1100
Attorneys for Anthem Insurance Companies, Inc.
