REPORTOF

FINANCIAL EXAMINATION

CIGNA Dental Health of Missouri, Inc.

Asof:

DECEMBER 31, 2007

ST ATE OF MISSOURI

DEPARTMENT OF lNSURANCE, fINANCIAL lNSTITUTIONS AND PROFESSIONAI .. REGISTRATION

JEFFERSON CITY, MISSOURI

TADLE OF CONTENTS

SCOPE OF EXAMINAl'lON ........................................................................................... 1 Period Covered ..................................................................................................................... 1 Procedures ............................................................................................................................ 2 Prior Examination Comments .............................................................................................. 2 IIISTORY ........................................................................................................................... 2 General ................................................................................................................................. 2 Capital Stock ........................................................................................................................ 2 Dividends ............................................................................................................................. 2 Managcnicnt ......................................................................................................................... 3 Conflict of Interest ...................................................................................................... : ........ 3 Corporatc Rccords ............................................................................................................... 3 Acquisitíons, Mergers, and Major Corporate Events ........................................................... 4 Surplus Dcbcnturcs .............................................................................................................. 4 AFFILIATED COMPANIES ........................................................................................... 4 Holding Company, Subsidiarics and Affiliales .................................................................. .4 Organizational Chart ............................................................................................................ 4 lntcrcon1pany Transactions .................................................................................................. 5 FIDELITY BOND AND OTIIER INSURANCE. ...................... ..................................... 5 EMPLOY~E BENEFťl'S AND PENSION PLAN .......................................................... 6 STATUTORY DEPOSITS ................................................................................................ 6 Deposils with thc Statc of Missouri ..................................................................................... 6 Deposits with Other States ................................................................................................... 6 INSURANCE PRODUCI'S AND RELATED PRACTICES ......................................... 6 Territory and Pian of Operations ......................................................................................... 6 Marketing ............................................................................................................................. 6 Grievance Procedures .......................................................................................................... 7 REINSURANCE ................................................................................................................ 7 ACCOUNTS AND RECORDS ......................................................................................... 7 Indcpcndent Auditor ............................................................................................................ 7 Company Actuary ................................................................................................................ 7 }'INANCIAL STATEMENTS .... ....................................................................................... 7 BAi.ANCE SHEET ............................................................................................................ 8 INCOME STATEMENT .................................................................................................. 9 CAPITAL AN'D SURPLUS ............................................................................................... 9 NOTES TO THE FINANCIAL STATEMENTS .......................................................... 10 EXAMINATION CIIANGES ............................. '. ........................................................... 10 GENERAL COMMENTS AND RECOMMENDATIONS ......................................... 10 SUBSEQUENT EVENl'S ................................................................................................ 10 ACKNOWLEDGEMENT ............................................................................................... 11 VERIFICAl'ION .............................................................................................................. 11 SIJPERVISION ................................................................................................................ 11

Honorablc Alfred W. Gross, Commissioner Bureau of Insurance Virginia State Corporale Commission Chainnan, Financial Condition (E) Committee, NAIC

Honorahle Merle D. Scheiber, Director Dívision of Insurance State of South Dakota Secretary, Midwestern Zone, NAJC

Honorable John M. Huff, Direclor Missouri Department of lnsurance, Financial

Institutions and Professional Registration 301 West High Street, Room 530 Jefferson City, Missouri 65101

Dcar Sirs:

April 17, 2009 St. Louis, MO

In accordancc with your financial cxamination warrant, a comprehensive financial examination ha~ been made of the records, affairs and financial condition of

CIGNA Denta) Ilealth of Missouri, Inc.

hereinafter referred to as such or as the "Company". The Company's officc is located at 1571 Sawgrass Corporate Parkway, Suite 140; Sunrise, Florida 33323; telephone numbcr (954) 514-6600. Examination fieldwork began on January 26, 2009 and concluded on lhc abovc datc.

SCOPE OF EXAMINATION

Period Covere<l

The last comprehcnsivc financial examinatíon of the Company was performcd as of December 31, 2004, by examiners from the stale oť Missouri.

The current financial examination of the Company covers the period from January 1, 2005 through December 31, 2007, and was conductcd by examíners from the state of Missouri. This cxamination also included material transactions or cvents occurring suhsequent to December 31, 2007.

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Procedures

This examination was conducle<l using the guidelines set forth in thc Financíal Condition Examiners llandbook of the National Association of Insurance Commissioners (NAlC), except wherc practices, procedures and applicable regulations of thc Missouri Department of Jnsurance, Financial lnstitutions and Professional Registration (Department) and stalulcs of the state of Missouri prevailed.

Workpapcrs of the Cornpany's independent auditor, PricewaterhouseCoopcrs LLP, wcrc rnade available to the examiners for rcvicw. Standard examination procedures were modificd as deeme<l appropriate under the circumstances.

Prior Examination Comments

Tltcrc werc no comments from the previous examination.

HISTOR\'

General

CIGNA Dental Health of Missouri, lne. was incorporated on April 4, 2000, and began opcrations on January 1, 2002 umler Chapler 354 RSMo (Ilealth Services Corporations­Health Maintenance Corporations-Prepaid Denta! Plans). The Company is a prepaid dcntal pian that provides denlal memberships to groups in Missouri.

Capital Stock

Tbc Company is authorizcd to íssuc 2,000 sharcs of $50 par value common stock. As of December 31, 2007, 1,000 shares were íssued and outstanding to CIGNA Dental Health, Inc., for a common capital stock balance of $50,000.

Dividcnds

Thc Company has declared and paid dívidends to the stockholder as follows:

Prior to 2004 2004 2005 2006 2007

Total

2

so 1,500,000 1,000,000

500,000 500,000

$3.500,000

Management

The board oť tiircctors consists of three memhers duly elected at an annual meeting of thc stockholder as authorized by the Company's articlcs of íncorporation. The directors serving as ofDcccmbcr 31, 2007, were:

Karen Sue Rohan Ware,MA

Michele Iris Haas Cooper C ity, FL

Lcanne Jane Nicholson North Granby, CT

Prj piarv Occupation

President Cf GNA Denta) Heaith of Missouri, Inc.

Seere tary CIGNA Dcntal Hcalth of Missouri, Inc.

Treasurcr ClGNA Dental Ileahh uf Missouri, Inc.

The officers elected an<l scrving as of J)ecember 31, 2007, werc:

Karen Sue Rohan

Michele Iris Haas

I .eanne Jane Nicholson

David Anthony T obin

C9nflict of 1ntcrest

President

Secretary

Treasurer

Actuary

Conflicl of interest certifications wcrc made by the staťť of thc Company. These are documented online through the affinnation statcment required to be compJeted annually by all employees of the CIGNA companies.

Corporate Records

A rcview was made of thc articles of incorporation and bylaws of the Company. The articles oť incorporation were amendcd in 2006 to set the numbcr of board members at tluee.

The minutes of thc meetings of the stockholder and hoard of directors were reviewed for thc period under examínation. Those minutes provided sufficient documcntatíon of major corporate transactions.

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Acquisitions. Mergcrs, and Major Corporate Eve11ts

There werc no acquisitions, mergers or major corporak events during \he examination period .

.S.wplus Debentures

None.

AFFILIAT}:D COMPANJRS

Holding Company, Suhsid iaries and Aff_i liatcs

The Company is a membcr of an insurancc holding company system as defincd in Section 382.01 O RSMo, (Definítions). Annual rcgistration statemcnts werc filed as required by Section 382. l 00 RSMo, (Registration). Thc Company is a wholly owne<l subsi<liary of CIGNA Denta) Hcalth, Tne., which is a wholly owncd subsidiary of Connecticut General Corporation. Connecticut General Corporation is a wholly owned subsi<liary of CIGNA Holdings, Inc. CIGNA Corporation, which owns CIGNA Holdings, Inc., is thc ultimatc controlling entity within the holding company systcm.

Organizntional .Chart

This chart shuws the ownership structure of the Company as of December 31 , 2007.

Sl1areholders (CIGNA Corp. is apublicly held company.)

I CIGNA C orp o ra tion

D el a wure

I CIGNA Holdings, lne.

Dela ware

I Connecticut General Corporation

Co nnec ticut

I C(GNJ\. Dcntal H eallh, lne.

Florida

I C lGNA Dental Hcalt.h of Missouri, Inc.

Missouri

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Intt:.rcompany Transactions

The Company has two agreements with related entities.

Administrative Serviccs J\grcemem

Parties: CIGNA Dental Health of Missouri, Inc. and CIGNA Dental Health, lne.

Effectivc: January 1, 2002

Tcrms: CIGNA Dcntal Hcalth, lne. agrccs to providc CIGNA Dental Health of Missouri) Inc. with administrative and management services and scrviccs critical to thc dclivcry of dcntal care. ln consideration for these services provided, CIGNA Dental I-Iealth of Missouri, Inc. agrccs to pay C1<JNA Dental Health, lne. a monthly fee hased on the number of subscribers and dependents.

Amended and Restated Consolidated Federal lncome Tax Agreement

Parties: CIGNA Corporalion and CIGNA Dcntal Hcalth of Missouri, Tne. and various other suhsidiaries

Effcctivc: ClGNA Denta! Health of Missouri, Inc. became a party to tbc agreement October 1, 2001

Terms: This agreement providcs that a consolidated return wil1 be filed by CIGNA Corporation for each taxable year. The tax liability or refund due from or to cach mcmber wíll be cornputed as if each member filed a separate stand-alone federal rt:.lurn. Paymcnts rcquired pursuant to this agrecmcnt shall be made quarterly with the final selllemcnt for each year due on November 151

h of tbc ycar following the tax year.

FIDELITY BOND AND OTHER INSURANCE

The Company is thc named insured on a Crime/Fidelity policy with a limit of $2)000,000 and a $100,000 deductible. This is in excess of the suggested minimum amount of coverage rccommcnded by NATC guidelines.

Tbc Company also receives protection Lhrough additional policies providing covcragcs that include professional liability, insurance company errors and omissions, managed care crrors and omissions. vicarious liability, medical professional liability, healthcare government liability and healthcare errors an<l ornissíons.

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EMPLOYEE BENEFITS AND PENSION PLAN

CIGNA Denta! Health of Missouri, Inc. has no direct employees. Services are provided by its pare.nt, CJGNA Dental Hcalth, Inc. under an Administrative Services Agreement. The serviccs are provided to tbc Company on a fcc-basis ralhcr than a percenlage-of-cost or reimbursement basis. The Company has no liability for ernployee benefit<;.

STA TUTORY DEPOSITS

Deposits with tbe State of Missouri

The funds on deposit with tbc Department as of Dccember 31, 2007, as reflected below, werc deemecl sufficienl in par aml market value to meet the deposit requirements for the state of Missouri in accordance with Section 354.707 RSMo (Capital and surplus requirements; deposit rcquired).

Securfu US Treasury Note

Deposit~ with Oth~r Slates

None.

Par Valµe

$55,000 Stalcment Valuc

$54,470 Market Value

$55,288

INSURANCE PRODUCTS AND RELATKD PRAC'TICES

Territory and Plan of Operations

The Company is licensed by the Missouri Department of Insurance, Financial Inslitutions and Profossional Rcgistration under Chapter 354 RSMo (Health Services Corporalion­Heallh Maintenance Orgaoizations-Prepaíd Denta! Pfans) to offer coverage on a prepaid basis. Denta! services are listed in a schedule of henefits. A nctwork of dentists and specíalist<; is maintaincd with payments made on a capitation basis. The Company ensures an effective network through its crcdentialing process and through quality management rcviews.

Marketing

Tbc Company markets to medium and largc employcr groups in Missouri through licenscd and appointed agents ťrom thc internal group sales offices of Conne<.:ticut General Ufe Insurance Company and other CIGNA HealthCare companics. Thc advcrtising cfforts are primarily through direct distribution of informational materials to prospcctive mcmhers.

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Grievance Procc<lures

The Company has established procedures to manage gricvances and complaints filed by its members, as rcquired by Sl:ction 354.715 RSMo (Scrvice contracts: complaint procedurcs). This policy is communicated annually to all members.

REINSURANC:E

Thc Company docs not assurne or cedc any reinsurance .

ACCOUNTS AND RECORDS

Independent Auditor

The Company's financial statcments were audíted by the firm of PricewaterhouseCoopers LLP, for thc period covered by this examination.

Company Actua.ry

The Company' s actuarial opinions, for thc period under examination, wcre prepared by its chieť actuary, David A. Tobin, PSA, MAAA.

FINANCIAL STATEMENTS

The following financial slatemcnls, with supporting cxhibits, present the financial condition of tbc Company as of December 31, 2007, and the rcsults of operations for thc year then cnded. Any examination adjustmenl<; to lhe amounts reported in lhe financial statemcnts and/or comments rcgarding such are madc in the "Notes to the Finandal Statcments," which follow tbe financial statement<;.

There may have becn additional diťforences found in the course of lhis examínation, which are not shown in the "Notes to the Financial Statements." These differences were detcrmined to be immaterial in relation to tbc financial statements, an<l therefore werc only communicatc<l to the Company and noted in the workpapers for each individual annual statement item.

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BALANCE SIIEET As oťDecember 31, 2007

Honds

Cash Investrnent incorne due and accrucd Uncollected premiums Net <leferred tax asscl Rcceivablcs from parent and affiliatcs

Aggreg;:itc write-ins TotaJs

Claims unpaid Unpaid claims adjuslment ex.penses Premiums received in advance General cxpenses due or accrued Current federal income tax payahlc

Total liabilities

C'-0mmon capital stock Gross pai<l in and contributed surpJus Aggregate write-ins

Unassigned funds (surplus) Total capital and surplus

T utal liahilities, capital and surplus

8

Assets $54,470

869,830

551 609,917

17,553

24,410

27,766

$1,604,497

Covercd

$302,818

7,685

2,196 9,268

49,137

$371,104

Nonadmitted Nct Admitted A~sets Assets

$0 $54,470

o 869,830

o 551 43,541 566,376

o 17,553

o 24,410

o 27,766

$43,541 $1,560,956_

Um:overcd Total $10,862 $313,680

() 7,685 (} 2,196

o 9,2(,8 o 49,137

$10,862 $381,966

$50,000

52,000

150,000

926.990 _1 ,178.990

ll,,560,956

INCOME STATEMENT For the year cndcd Dcccmbcr 31, 2007

Net premium inoomc

Other professíonal scrviccs Outsidc referrals Total hospital and medical

Claims adjustmcnt expenses Gencral administrativc expenses Total adjustment and administrative expenscs

Total underwriting deductions Net underwriling gain or (loss)

Nel invcslmcnt incomc earned Net realized capital gains or (losscs) kss capital gains tax of Nct invcstmcnt gains or (losses)

Nel incomc or (loss), aťter capital gains tax and beforc all Less: Fcderal and foreign incomc laxcs incurred

Nct income (loss)

CAPITAL AND SURPLUS Changes for 2007

Capital anů surplus Dcccmher 31, 2006

Net income or (loss) from Line 32 Change in net ddc.::rrcd income tax Change in nonaůmíttcd assets

Dívidends lo stockholders Net changc in capital and surplus

Capital and surplus Dcccmher 31, 2007

9

$5,213,619 111,285

5,324,904

7,764 833,930 841,694

51,800 28

$644,019 (30,596)

84,852 ($500,000)

$7,104,169

6,166,598 937,571

51,828

989,399 345,380

~644.019

$980,715

$198,275

NOTES TO THE FINANCIAL STATEMENTS

There are no notes to tbc financial slalements.

EXAMINATION CHANGES

There are no changes to the financial stmements made as a rcsult oť this cxamination.

GENERAL COMMENTS AND RECOMMENOATIONS

None.

SURSEQUENT EVENTS

None.

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ACKNOWLEDGEMENT

The assistance and cooperation extended by the officcrs and employees of CIGNA Dental Hcalth of Missouri, Inc. during the course of this examination is hereby acknowledged and appreciated. In addition to the undersigncd, John Boczkiewicz, CFE, CPA and Doug Danicls, AFE, CP A, examiners for the Missouri Department of Insurance, Financial Institutions and Professional Registration, participatcd in lhís examination.

VERJFICATION State of Missouri )

) SS

County of St Louis)

1, Robert P. Jordan, on my oath swear that lo the best of my knowledge and belief the above examination report is true and accurate and is comprised of only facts appearing upon the books, rccords or othcr documcnts of the Company, íts agents or other persons examined or as ascertained from the testimony of its officers or agents or other persons examined concerning its affairs and such conclusions and recommcndations as thc examiners find reasonably warranted from the facts. _ ~

. ~j) ~-RobértP. Joraan:~ Examiner-in-Charge Missouri Department of Insurance, Financial Jnstitutions and Professional Registration

Sworn to and subscrihed before me this 27:fbday of_M __ a_r .... C"--JJ'--L-________ _ My commission cxpircs: ':lfttri <JrAJJXJi /;ji ý

Noay Puble. Notary ~ Notary Public ~ ST ATE OF MISSOURI

St. Louis County My Commissíon.Expires: Apríl 2, 2011

... _o Sl0n#70 7 .... SUPERVISION

The examination process has been monitored and supervised by thc undcrsigncd. The cxamination report and supporting workpapers have been reviewed and approved. Complíance with NAIC procedures and guidclincs as contained in the Financial Condition Examiners Handbook has heen confirmed.

~L~~ Michael 8hadowens, CFE Audit Manager, St. Louis Missouri Department of Insurance, Fínancial Instilutions and Professional Registration

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