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
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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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