* * HEALTH QUARTERLY STATEMENT AS OF JUNE 30, 2018 OF THE CONDITION AND AFFAIRS OF THE

Transcription

1 * * HEALTH QUARTERLY STATEMENT AS OF JUNE 30, 018 OF THE CONDITION AND AFFAIRS OF THE of New England, NAIC Group Code NAIC Company Code Employer's ID Number (Current) (Prior) Organized under the Laws of Rhode Island, State of Domicile or Port of Entry RI Country of Domicile Licensed as business type: United States of America Health Maintenance Organization Is HMO Federally Qualified? Yes [ ] No [ X ] Incorporated/Organized 11/14/1984 Commenced Business 1/7/1984 Statutory Home Office 475 Kilvert Street, Suite 310, Warwick, RI, US (Street and Number) (City or Town, State, Country and Zip Code) Main Administrative Office 4 Research Drive, 5th Floor (Street and Number) Shelton, CT, US 06484, (City or Town, State, Country and Zip Code) (Area Code) (Telephone Number) Mail Address 4 Research Drive, 5th Floor, Shelton, CT, US (Street and Number or P.O. Box) (City or Town, State, Country and Zip Code) Primary Location of Books and Records 4 Research Drive, 5th Floor (Street and Number) Shelton, CT, US 06484, (City or Town, State, Country and Zip Code) (Area Code) (Telephone Number) Internet Website Address Statutory Statement Contact Joseph James Dewey, (Name) (Area Code) (Telephone Number) joseph_j_dewey@uhc.com, ( Address) (FAX Number) OFFICERS President Stephen John Farrell Chief Executive Officer Mary Rachel Snyder # Secretary Christina Regina Palme-Krizak Chief Financial Officer Craig Andrew Stillman Steven Marc Burstein, Assistant Secretary Heather Anastasia Lang Jacobsen, Assistant Secretary OTHER Patrice Evelyn Cooper, Vice President, Medicaid Operations Jessica Leigh Zuba, Assistant Secretary Nyle Brent Cottington, Vice President DIRECTORS OR TRUSTEES Patrice Evelyn Cooper Stephen John Farrell Mary Rachel Snyder # State of County of Rhode Island Kent SS: The officers of this reporting entity being duly sworn, each depose and say that they are the described officers of said reporting entity, and that on the reporting period stated above, all of the herein described assets were the absolute property of the said reporting entity, free and clear from any liens or claims thereon, except as herein stated, and that this statement, together with related exhibits, schedules and explanations therein contained, annexed or referred to, is a full and true statement of all the assets and liabilities and of the condition and affairs of the said reporting entity as of the reporting period stated above, and of its income and deductions therefrom for the period ended, and have been completed in accordance with the NAIC Annual Statement Instructions and Accounting Practices and Procedures manual except to the extent that: (1) state law may differ; or, () that state rules or regulations require differences in reporting not related to accounting practices and procedures, according to the best of their information, knowledge and belief, respectively. Furthermore, the scope of this attestation by the described officers also includes the related corresponding electronic filing with the NAIC, when required, that is an exact copy (except for formatting differences due to electronic filing) of the enclosed statement. The electronic filing may be requested by various regulators in lieu of or in addition to the enclosed statement. Stephen John Farrell Christina Regina Palme-Krizak Craig Andrew Stillman President Secretary Chief Financial Officer a. Is this an original filing? Yes [ X ] No [ ] Subscribed and sworn to before me this b. If no, 0 day of July State the amendment number. Date filed 3. Number of pages attached Deborah Lynette Gambell Notary Public - State of Minnesota January 31, 00

2 ASSETS 1 Assets Current Statement Date 4 3 December 31 Net Admitted Assets Prior Year Net Nonadmitted Assets (Cols. 1 - ) Admitted Assets 1. Bonds 11,747,689 11,747,689 10,63,005. Stocks:.1 Preferred stocks 0 0. Common stocks 68,763,59 68,763,59 5,576, Mortgage loans on real estate: 3.1 First liens Other than first liens Real estate: 4.1 Properties occupied by the company (less $ encumbrances) Properties held for the production of income (less $ encumbrances) Properties held for sale (less $ encumbrances) Cash ($ (1,937,408)), cash equivalents ($ 5,651,45 ) and short-term investments ($ ) 3,714,044 3,714,044 1,57, Contract loans (including $ premium notes) Derivatives Other invested assets Receivables for securities Securities lending reinvested collateral assets Aggregate write-ins for invested assets Subtotals, cash and invested assets (Lines 1 to 11) 84,5, ,5,35 64,367, Title plants less $ charged off (for Title insurers only) Investment income due and accrued 1,56,358 1,56,358 1,174, Premiums and considerations: 15.1 Uncollected premiums and agents' balances in the course of collection 9,43, ,569 9,07,54 7,06, Deferred premiums, agents' balances and installments booked but deferred and not yet due (including $ earned but unbilled premiums) Accrued retrospective premiums ($ ) and 16. Reinsurance: contracts subject to redetermination ($ 35,971,49 ) 35,971,49 35,971,49 3,560, Amounts recoverable from reinsurers 81,871 81, , Funds held by or deposited with reinsured companies Other amounts receivable under reinsurance contracts 5,440 5, Amounts receivable relating to uninsured plans 1,00,846,58 1,198,588 1,351, Current federal and foreign income tax recoverable and interest thereon 0 4,107, Net deferred tax asset 1,813,875 1,813,875 3,657, Guaranty funds receivable or on deposit Electronic data processing equipment and software Furniture and equipment, including health care delivery assets ($ ) 0 0. Net adjustment in assets and liabilities due to foreign exchange rates Receivables from parent, subsidiaries and affiliates 1,70,180 1,70, Health care ($,580,177 ) and other amounts receivable 7,898,915 5,318,738,580,177 0,050, Aggregate write-ins for other than invested assets 115, , Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines 1 to 5) 363,46,180 5,671, ,790,335 36,393, From Separate Accounts, Segregated Accounts and Protected Cell Accounts Total (Lines 6 and 7) 363,46,180 5,671, ,790,335 36,393, DETAILS OF WRITE-INS Summary of remaining write-ins for Line 11 from overflow page Totals (Lines 1101 through 1103 plus 1198)(Line 11 above) Premium Tax Receivable 114, , Prepaid Expenses Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 501 through 503 plus 598)(Line 5 above) 115, ,749 0

3 LIABILITIES, CAPITAL AND SURPLUS 1 Covered Current Period Uncovered 3 Total Prior Year 4 Total 1. Claims unpaid (less $ 1,117,531 reinsurance ceded) 11,836,408 11,836,408 98,791,096. Accrued medical incentive pool and bonus amounts 3,978,38 3,978,38 3,91, Unpaid claims adjustment expenses 1,59,810 1,59, , Aggregate health policy reserves, including the liability of $,190,59 for medical loss ratio rebate per the Public Health Service Act 1,719,157 1,719,157 18,77, Aggregate life policy reserves Property/casualty unearned premium reserve Aggregate health claim reserves 77,911 77, , Premiums received in advance 64,767,66 64,767,66 59,194, General expenses due or accrued 0,839,939 0,839,939 6,338, Current federal and foreign income tax payable and interest thereon (including $ 0 on realized gains (losses)) 1,874,65 1,874, Net deferred tax liability 13,844 13, Ceded reinsurance premiums payable 689, ,950 1,068,38 1. Amounts withheld or retained for the account of others 158,05 158,05 16, Remittances and items not allocated 11,141 11,141 14, Borrowed money (including $ current) and interest thereon $ (including $ current) Amounts due to parent, subsidiaries and affiliates 0 6,04, Derivatives Payable for securities 1,659,77 1,659, Payable for securities lending Funds held under reinsurance treaties (with $ authorized reinsurers, $ unauthorized reinsurers and $ certified reinsurers) Reinsurance in unauthorized and certified ($ ) companies Net adjustments in assets and liabilities due to foreign exchange rates 0 0. Liability for amounts held under uninsured plans 8,633,599 8,633,599 17,018, Aggregate write-ins for other liabilities (including $ 1,88 current) 1,88 0 1,88 3, Total liabilities (Lines 1 to 3) 50,191, ,191,747 1,57, Aggregate write-ins for special surplus funds XXX XXX 0 1,59, Common capital stock XXX XXX 5,86,835 5,86, Preferred capital stock XXX XXX 8. Gross paid in and contributed surplus XXX XXX 1,000,000 1,000, Surplus notes XXX XXX 30. Aggregate write-ins for other than special surplus funds XXX XXX Unassigned funds (surplus) XXX XXX 89,735,753 74,743, Less treasury stock, at cost: 3.1 shares common (value included in Line 6 $ ) XXX XXX 3. shares preferred (value included in Line 7 $ ) XXX XXX 33. Total capital and surplus (Lines 5 to 31 minus Line 3) XXX XXX 107,598, ,865, Total liabilities, capital and surplus (Lines 4 and 33) XXX XXX 357,790,335 36,393,907 DETAILS OF WRITE-INS 301. Unclaimed Property 1,88 1,88 3, Summary of remaining write-ins for Line 3 from overflow page Totals (Lines 301 through 303 plus 398)(Line 3 above) 1,88 0 1,88 3, Section 9010 ACA Subsequent Fee Year Assessment XXX XXX 0 1,59, XXX XXX 503. XXX XXX 598. Summary of remaining write-ins for Line 5 from overflow page XXX XXX Totals (Lines 501 through 503 plus 598)(Line 5 above) XXX XXX 0 1,59, XXX XXX 300. XXX XXX XXX XXX Summary of remaining write-ins for Line 30 from overflow page XXX XXX Totals (Lines 3001 through 3003 plus 3098)(Line 30 above) XXX XXX 0 0 3

4 STATEMENT OF REVENUE AND EXPENSES Current Year To Date 1 Uncovered Total Prior Year To Date 3 Total Prior Year Ended December 31 4 Total 1. Member Months XXX 9,404 84,16 1,708,301. Net premium income ( including $ non-health premium income) XXX 569,419,55 490,54,99 994,568, Change in unearned premium reserves and reserve for rate credits XXX 11,695,176 (5,161,644) (0,11,315) 4. Fee-for-service (net of $ medical expenses) XXX 5. Risk revenue XXX 6. Aggregate write-ins for other health care related revenues XXX Aggregate write-ins for other non-health revenues XXX Total revenues (Lines to 7) XXX 581,114,78 485,381, ,456,60 Hospital and Medical: 9. Hospital/medical benefits 433,608,63 348,749,85 714,480, Other professional services 1,439,60 487, , Outside referrals 1. Emergency room and out-of-area 13. Prescription drugs 7,588,411 64,195,585 17,48, Aggregate write-ins for other hospital and medical Incentive pool, withhold adjustments and bonus amounts 1,700,71 1,643,118 3,654, Subtotal (Lines 9 to 15) 0 509,337, ,075, ,575,497 Less: 17. Net reinsurance recoveries,191,496 5,931,48 1,15, Total hospital and medical (Lines 16 minus 17) 0 507,145,85 409,144,46 834,360, Non-health claims (net) 0. Claims adjustment expenses, including $ 14,360,098 cost containment expenses 3,646,535 0,760,508 41,030,76 1. General administrative expenses 56,419,107 30,61,689 65,809,703. Increase in reserves for life and accident and health contracts (including $ increase in reserves for life only) 0 3. Total underwriting deductions (Lines 18 through ) 0 587,11, ,56,63 941,00, Net underwriting gain or (loss) (Lines 8 minus 3) XXX (6,096,766) 4,854,75 33,56, Net investment income earned,95,154,18,068 4,746,35 6. Net realized capital gains (losses) less capital gains tax of $ 5,39 (6,019) 30,110 (13,664) 7. Net investment gains (losses) (Lines 5 plus 6) 0,919,135,1,178 4,53, Net gain or (loss) from agents or premium balances charged off [(amount recovered $ 61,743 ) (amount charged off $ 3,56 )] (170,819) (4,33) (394,53) 9. Aggregate write-ins for other income or expenses 0 0 (9,768) (9,768) 30. Net income or (loss) after capital gains tax and before all other federal income taxes (Lines 4 plus 7 plus 8 plus 9) XXX (3,348,450) 6,83,81 37,385, Federal and foreign income taxes incurred XXX 1,615,938 6,766,305 13,757, Net income (loss) (Lines 30 minus 31) XXX (4,964,388) 0,066,507 3,67,439 DETAILS OF WRITE-INS XXX 060. XXX XXX Summary of remaining write-ins for Line 6 from overflow page XXX Totals (Lines 0601 through 0603 plus 0698)(Line 6 above) XXX XXX 070. XXX XXX Summary of remaining write-ins for Line 7 from overflow page XXX Totals (Lines 0701 through 0703 plus 0798)(Line 7 above) XXX Summary of remaining write-ins for Line 14 from overflow page Totals (Lines 1401 through 1403 plus 1498)(Line 14 above) Fines and Penalties 0 (9,768) (9,768) Summary of remaining write-ins for Line 9 from overflow page Totals (Lines 901 through 903 plus 998)(Line 9 above) 0 0 (9,768) (9,768) 4

5 STATEMENT OF REVENUE AND EXPENSES (Continued) 1 Current Year to Date Prior Year to Date 3 Prior Year Ended December 31 CAPITAL AND SURPLUS ACCOUNT 33. Capital and surplus prior reporting year 113,865, ,03, ,03, Net income or (loss) from Line 3 (4,964,388) 0,066,507 3,67, Change in valuation basis of aggregate policy and claim reserves 36. Change in net unrealized capital gains (losses) less capital gains tax of $ 13,994 5,796 (715) 37. Change in net unrealized foreign exchange capital gain or (loss) 38. Change in net deferred income tax (1,843,885) (,169,314) (1,36,755) 39. Change in nonadmitted assets 488,15 (619,011) (747,14) 40 Change in unauthorized and certified reinsurance Change in treasury stock Change in surplus notes Cumulative effect of changes in accounting principles 44. Capital Changes: 44.1 Paid in Transferred from surplus (Stock Dividend) Transferred to surplus 45. Surplus adjustments: 45.1 Paid in Transferred to capital (Stock Dividend) 45.3 Transferred from capital 46. Dividends to stockholders (11,800,000) (6,800,000) 47. Aggregate write-ins for gains or (losses) in surplus Net change in capital & surplus (Lines 34 to 47) (6,67,35) 5,478,18 (5,157,155) 49. Capital and surplus end of reporting period (Line 33 plus 48) 107,598,588 14,501,77 113,865,940 DETAILS OF WRITE-INS Summary of remaining write-ins for Line 47 from overflow page Totals (Lines 4701 through 4703 plus 4798)(Line 47 above)

6 CASH FLOW 1 Current Year To Date Prior Year To Date 3 Prior Year Ended December 31 Cash from Operations 1. Premiums collected net of reinsurance 566,48, ,785,058 1,01,389,077. Net investment income 3,73,875,763,475 5,954, Miscellaneous income Total (Lines 1 to 3) 569,70, ,548,533 1,07,343, Benefit and loss related payments 494,505, ,707, ,90, Net transfers to Separate Accounts, Segregated Accounts and Protected Cell Accounts 7. Commissions, expenses paid and aggregate write-ins for deductions 53,708,103 38,888,956 90,64, Dividends paid to policyholders 9. Federal and foreign income taxes paid (recovered) net of $ 0 tax on capital gains (losses) (4,360,07) (6,677,999) 9,418, Total (Lines 5 through 9) 543,853,69 441,918,76 937,585, Net cash from operations (Line 4 minus Line 10) 5,848,76 41,630,57 89,757,833 Cash from Investments 1. Proceeds from investments sold, matured or repaid: 1.1 Bonds 17,057,85 15,97,500 57,47, Stocks 576,869, ,416,566 1,039,993, Mortgage loans Real estate Other invested assets Net gains or (losses) on cash, cash equivalents and short-term investments Miscellaneous proceeds 1,659,77 587, Total investment proceeds (Lines 1.1 to 1.7) 595,586, ,931,35 1,097,465, Cost of investments acquired (long-term only): 13.1 Bonds 18,937,546 3,199,434 69,51, Stocks 593,056,754 50,949,549 1,079,943, Mortgage loans Real estate Other invested assets Miscellaneous applications , Total investments acquired (Lines 13.1 to 13.6) 611,994, ,148,983 1,149,787, Net increase (or decrease) in contract loans and premium notes Net cash from investments (Line 1.8 minus Line 13.7 and Line 14) (16,407,36) (13,17,631) (5,31,98) 16. Cash provided (applied): Cash from Financing and Miscellaneous Sources 16.1 Surplus notes, capital notes Capital and paid in surplus, less treasury stock Borrowed funds Net deposits on deposit-type contracts and other insurance liabilities Dividends to stockholders 0 11,800,000 6,800, Other cash provided (applied) (7,54,81) (0,410,599) (17,906,48) 17. Net cash from financing and miscellaneous sources (Line 16.1 through Line 16.4 minus Line 16.5 plus Line 16.6) (7,54,81) (3,10,599) (44,706,48) RECONCILIATION OF CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 18. Net change in cash, cash equivalents and short-term investments (Line 11, plus Lines 15 and 17),186,579 (3,797,973) (7,70,631) 19. Cash, cash equivalents and short-term investments: 19.1 Beginning of year 1,57,465 8,798,096 8,798, End of period (Line 18 plus Line 19.1) 3,714,044 5,000,13 1,57,465 Note: Supplemental disclosures of cash flow information for non-cash transactions: 6

7 EXHIBIT OF PREMIUMS, ENROLLMENT AND UTILIZATION 1 Comprehensive (Hospital & Medical) Total Individual 3 Group Medicare Supplement Vision Only Dental Only Federal Employees Health Benefit Plan Title XVIII Medicare Title XIX Medicaid Other Total Members at end of: 1. Prior Year 144, , ,175 94,93 0. First Quarter 154, , ,001 95, Second Quarter 153, , ,479 93,74 4. Third Quarter 0 5. Current Year 0 6. Current Year Member Months 9, , , ,57 Total Member Ambulatory Encounters for Period: 7 Physician 1,056, , ,98 475, Non-Physician 570, ,65 91, Total 1,66, , , , Hospital Patient Days Incurred 8, ,968 56, Number of Inpatient Admissions 1, ,085 15, Health Premiums Written (a) 573,,196 9,358 4,850, ,834,483 61,444, Life Premiums Direct Property/Casualty Premiums Written Health Premiums Earned 584,917,37 9,358 4,85, ,446,490 67,56, Property/Casualty Premiums Earned Amount Paid for Provision of Health Care Services 497,756, ,707 3,065, ,306,584 44,46, Amount Incurred for Provision of Health Care Services 509,337, ,466 3,163, ,8,449 43,0,501 (a) For health premiums written: amount of Medicare Title XVIII exempt from state taxes or fees $ 306,834,483

8 Claims Unpaid (Reported) STATEMENT AS OF JUNE 30, 018 OF THE of New England, CLAIMS UNPAID AND INCENTIVE POOL, WITHHOLD AND BONUS (Reported and Unreported) 1 Account Aging Analysis of Unpaid Claims 1-30 Days Days Days Days 6 Over 10 Days 7 Total Aggregate accounts not individually listed-uncovered Aggregate accounts not individually listed-covered 36,53,838,75, ,764 13, ,375 40,039, Subtotals 36,53,838,75, ,764 13, ,375 40,039, Unreported claims and other claim reserves 73,353, Total amounts withheld 561, Total claims unpaid 113,953, Accrued medical incentive pool and bonus amounts 3,978,38

9 UNDERWRITING AND INVESTMENT EXHIBIT Line of Business ANALYSIS OF CLAIMS UNPAID - PRIOR YEAR - NET OF REINSURANCE Claims Paid Year to Date 1 On Claims Incurred Prior to January 1 of Current Year On Claims Incurred During the Year Liability End of Current Quarter 3 4 On Claims Unpaid Dec. 31 of Prior Year On Claims Incurred During the Year 5 6 Claims Incurred in Prior Years (Columns 1 + 3) Estimated Claim Reserve and Claim Liability December 31 of Prior Year 1. Comprehensive (hospital and medical) 160,471 1,151,007 17, , , ,451. Medicare Supplement Dental Only Vision Only Federal Employees Health Benefits Plan Title XVIII - Medicare 43,548,949 04,440,935 4,85,35 7,980,110 48,401,184 60,45,5 9 7 Title XIX - Medicaid 34,63,860 09,97,076 1,785,703 33,467,736 36,049,563 38,790,43 8. Other health Health subtotal (Lines 1 to 8) 77,973,80 415,564,018 6,655,03 106,909,96 84,68,303 99,59, Healthcare receivables (a) 7,604,038 17,641,68,647,503 7,604,038 5,80, Other non-health Medical incentive pools and bonus amounts 1,597,799 77,67,690 1,710,69 3,865,489 3,91, Totals (Lines ) 71,967, ,9,613 8,9, ,97,485 80,889,754 77,638,998 (a) Excludes $ 5,691 loans or advances to providers not yet expensed.

10 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GOING CONCERN A. Accounting Practices The statutory basis financial statements of the Company are presented on the basis of accounting practices prescribed and permitted by the Rhode Island Department of Business Regulation ( the Department ). The Department recognizes only statutory accounting practices, prescribed and permitted by the State of Rhode Island ( the State ), for determining and reporting the financial condition and results of operations of an HMO, for determining its solvency under Rhode Island Insurance Law. The State prescribes the use of the National Association of Insurance Commissioners ( NAIC ) Accounting Practices and Procedures manual ( NAIC SAP ) in effect for the accounting periods covered in the statutory basis financial statements. No significant differences exist between the practices prescribed and permitted by the State and those prescribed and permitted by the NAIC SAP which materially affect the statutory basis net (loss) income and capital and surplus, as illustrated in the table below: Net (Loss) Income June 30, December 31, SSAP # F/S Page # F/S Line # (1) Company state basis (Page 4, Line 3, Columns & 4) XXX XXX XXX $ (4,964,388) $ 3,67,439 () State prescribed practices that are an increase/(decrease) from NAIC SAP: None - - (3) State permitted practices that are an increase/(decrease) from NAIC SAP: None - - (4) NAIC SAP ( = 4) XXX XXX XXX $ (4,964,388) $ 3,67,439 Capital and Surplus (5) Company state basis (Page 3, Line 33, Columns 3 & 4) XXX XXX XXX $ 107,598,588 $ 113,865,940 (6) State prescribed practices that are an increase/(decrease) from NAIC SAP: None - - (7) State permitted practices that are an increase/(decrease) from NAIC SAP: None - - (8) NAIC SAP ( = 8) XXX XXX XXX $ 107,598,588 $ 113,865,940 B. Use of Estimates in the Preparation of the Statutory Basis Financial Statements No significant change. C. Accounting Policy (1 5) No significant change. (6) U.S. government and agency securities and corporate debt securities include loan-backed securities (mortgage-backed securities and asset-backed securities), which are valued using the retrospective adjustment methodology. Prepayment assumptions for the determination of the book/adjusted carrying value, commonly referred to as amortized cost, of loan-backed securities are based on a three-month constant prepayment rate history obtained from external data source vendors. The Company s investment policy limits investments in nonagency residential mortgage-backed securities, including home equity and sub-prime mortgages, to 10% of total cash and invested assets. Total combined investments in mortgage-backed securities and assetbacked securities cannot exceed more than 30% of total cash and invested assets. (7 13) No significant change. 10

11 D. Going Concern The Company has the ability and will continue to operate for a period of time sufficient to carry out its commitments, obligations and business objectives.. ACCOUNTING CHANGES AND CORRECTION OF ERRORS No significant change. 3. BUSINESS COMBINATIONS AND GOODWILL A D. No significant change. 4. DISCONTINUED OPERATIONS A. Discontinued Operation Disposed of or Classified as Held for Sale (1 4) No significant change. B. Change in Plan of Sale of Discontinued Operations Not applicable. C. Nature of any Significant Continuing Involvement with Discontinued Operations after Disposal Not applicable. D. Equity Interest Retained in the Discontinued Operation after Disposal Not applicable. 5. INVESTMENTS AND OTHER INVESTED ASSETS A. Mortgage Loans, including Mezzanine Real Estate Loans No significant change. B. Debt Restructuring No significant change. C. Reverse Mortgages No significant change. D. Loan-Backed Securities (1) U.S. government and agency securities and corporate debt securities include loan-backed securities, which are valued using the retrospective adjustment methodology. Prepayment assumptions for the determination of the book/adjusted carrying value, commonly referred to as amortized cost, of loan-backed securities are based on a three-month constant prepayment rate history obtained from external data source vendors. () The Company did not recognize any other-than-temporary impairments ( OTTIs ) on loan-backed securities as of June 30, 018. (3) As of June 30, 018, the Company did not have any loan-backed securities with OTTIs to report by CUSIP. 10.1

12 (4) The following table illustrates the fair value, gross unrealized losses, and length of time that the loan-backed securities have been in a continuous unrealized loss position as of June 30, 018 and December 31, 017: June 30, 018 The aggregate amount of unrealized losses: 1. Less than 1 months $ 897,88. 1 Months or longer 185,697 The aggregate related fair value of securities with unrealized losses: 1. Less than 1 months 45,338, Months or longer 6,66,13 December 31, 017 The aggregate amount of unrealized losses: 1. Less than 1 months $ 06, Months or longer 87,10 The aggregate related fair value of securities with unrealized losses: 1. Less than 1 months 8,466, Months or longer 7,188,7 (5) The Company believes that it will collect all principal and interest due on all investments that have an amortized cost in excess of fair value. The unrealized losses as of June 30, 018 were primarily caused by interest rate increases and not by unfavorable changes in the credit ratings associated with these securities. E. Dollar Repurchase Agreements and/or Securities Lending Transactions Not applicable. F. Repurchase Agreements Transactions Accounted for as Secured Borrowing Not applicable. G. Reverse Repurchase Agreements Transactions Accounted for as Secured Borrowing Not applicable. H. Repurchase Agreements Transactions Accounted for as a Sale Not applicable. I. Reverse Repurchase Agreements Transactions Accounted for as a Sale Not applicable. J. Real Estate Not applicable. K. Low-Income Housing Tax Credits Not applicable. L. Restricted Assets Not applicable. M. Working Capital Finance Investments Not applicable. N. Offsetting and Netting of Assets and Liabilities The Company does not have any offsetting or netting of assets and liabilities as it relates to derivatives, repurchase and reverse repurchase agreements, and securities borrowing and securities lending activities. O. Structured Notes 10.

13 The details of structured notes by CUSIP as of June 30, 018 and December 31, 017 are presented below: June 30, 018 Book/ Mortgage Adjusted Referenced Carrying Security CUSIP Identification Actual Cost Fair Value Value (Yes/No) 9188Q60 $,066,80 $,081,31 $,101,305 No 9188SA9,163,898,176,059,199,715 No Total $ 4,30,718 $ 4,57,380 $ 4,301,00 December 31, 017 Book/ Mortgage Adjusted Referenced Carrying Security CUSIP Identification Actual Cost Fair Value Value (Yes/No) 9188Q60 $,066,80 $,07,904 $,066,501 No 9188SA9,163,898,170,856,163,704 No Total $ 4,30,718 $ 4,43,760 $ 4,30,05 P. 5* Securities The Company does not have any investments with an NAIC designation of 5* as of June 30, 018 and December 31, 017. Q. Short Sales Not applicable. R. Prepayment Penalty and Acceleration Fees Not applicable. 6. JOINT VENTURES, PARTNERSHIPS, AND LIMITED LIABILITY COMPANIES A B. No significant change. 7. INVESTMENT INCOME A B. No significant change. 8. DERIVATIVE INSTRUMENTS A H. No significant change. 9. INCOME TAXES A C. No significant change. D. The Tax Cut and Jobs Act ( Tax Reform ) enacted by the U.S. federal government in December 017 changed the existing United States tax law including reducing the U.S. corporate income tax rate to 1% beginning in 018. The ratio between the provision for federal income taxes and net loss before federal income taxes and net realized capital gains has changed from the prior year primarily due to the Tax Reform, partially offset by the annual health insurer fee ( HIF ) under Section 9010 of the Patient Protection and Affordable Care Act. The HIF is included in the statutory basis statement of operations, but is non-deductible for income tax purposes in 018. The Company is required to expense 100% of the estimated annual fee on January 1, 018. The Company s health insurer fee expense is $19,945,079 in 018, which will be paid in September 018. Due to the moratorium in 017, there was no HIF included in the 017 statutory basis statements of operations. E G. No significant change. 10. INFORMATION CONCERNING PARENT, SUBSIDIARIES, AND AFFILIATES A N. Material Related Party Transactions No significant change. 10.3

14 11. DEBT A B. The Company had no outstanding debt with third-parties or outstanding Federal Home Loan Bank agreements during 018 and RETIREMENT PLANS, DEFERRED COMPENSATION, POSTEMPLOYMENT BENEFITS AND COMPENSATED ABSENCES, AND OTHER POSTRETIREMENT BENEFIT PLANS A I. The Company has no defined benefit plans, defined contribution plans, multiemployer plans, consolidated/holding company plans, postemployment benefits, and compensated absences plans and is not impacted by the Medicare Modernization Act on postretirement benefits, since all personnel are employees of United HealthCare Services, ( UHS ), which provides services to the Company under the terms of a management agreement. 13. CAPITAL AND SURPLUS, SHAREHOLDERS DIVIDEND RESTRICTIONS, AND QUASI-REORGANIZATIONS (1 13) No significant change. 14. LIABILITIES, CONTINGENCIES AND ASSESSMENTS A E. No significant change. F. All Other Contingencies 15. LEASES The Company has been, or is currently involved, in various governmental investigations, audits and reviews. These include routine, regular and special investigations, audits and reviews by Centers for Medicare and Medicaid Services ( CMS ), state insurance and health and welfare departments and other governmental authorities. Certain aspects of the Company s businesses have been reviewed or are currently under review, for reasons including compliance with coding and other requirements under the Medicare risk-adjustment model. On February 14, 017, the Department of Justice ( DOJ ) announced its decision to pursue certain claims within a lawsuit initially asserted against the Company and filed under seal by a whistleblower in 011. The whistleblower s complaint, which was unsealed on February 15, 017, alleges that the Company made improper risk adjustment submissions and violated the False Claims Act. On February 1, 018, the court granted in part and denied in part the Company s motion to dismiss. In May 018, the DOJ moved to dismiss the Company s counterclaims, which were filed in March 018, and moved for partial summary judgment. Those motions will be argued in September 018. The Company cannot reasonably estimate the outcome that may result from this matter given its procedural status. Risk Adjustment Data Validation Audit No significant change. There are no assets that the Company considers to be impaired at June 30, 018. A B. No significant change. 16. INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK (1 4) No significant change. 17. SALE, TRANSFER, AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES A C. The Company did not have any transfers of receivables, financial assets, or wash sales as of June 30, 018 or December 31, GAIN OR LOSS TO THE REPORTING ENTITY FROM UNINSURED PLANS AND THE UNINSURED PORTION OF PARTIALLY INSURED PLANS A B. No significant change. 10.4

15 C. Medicare or Other Similarly Structured Cost Based Reimbursement Contract The Medicare Part D program is a partially insured plan. The Company recorded a liability for amounts held under uninsured plans in the statutory basis statements of admitted assets, liabilities, and capital and surplus of $5,571,936 and $13,747,69 as of June 30, 018 and December 31, 017, respectively, for cost reimbursement under the Medicare Part D program for the catastrophic reinsurance and low-income member cost-sharing subsidies as described in Note 1, Amounts Receivable Relating to Uninsured Plans and Liability for Amounts Held Under Uninsured Plans. The Company also recorded a receivable of $1,198,588 and $1,347,690 and also a payable of $3,061,663 and $3,71,539 as of June 30, 018 and December 31, 017, respectively, for the Medicare Part D CGDP as described in Note 1, Amounts Receivable Relating to Uninsured Plans and Liability for Amounts Held Under Uninsured Plans. The Company receives payments from CMS under the ACA Cost Sharing Reduction ( CSR ) program designed to reduce copayments, deductibles, and coinsurance for lower-income members. There is no insurance risk to the Company as a result of the CSR program. Overpayments from CMS are reported in liability for amounts held under uninsured plans and underpayments are reported in amounts receivable relating to uninsured plans in the statutory basis statements of admitted assets, liabilities, and capital and surplus. The Company has recorded a receivable of $0 and $3,75 for the CSR program as of June 30, 018 and December 31, 017, respectively. 19. DIRECT PREMIUM WRITTEN/PRODUCED BY MANAGING GENERAL AGENTS/THIRD-PARTY ADMINISTRATORS No significant change. 0. FAIR VALUE MEASUREMENT The NAIC SAP defines fair value, establishes a framework for measuring fair value, and outlines the disclosure requirements related to fair value measurements. The fair value hierarchy is as follows: Level 1 Quoted (unadjusted) prices for identical assets in active markets. Level Other observable inputs, either directly or indirectly, including: Quoted prices for similar assets in active markets; Quoted prices for identical or similar assets in nonactive markets (few transactions, limited information, noncurrent prices, high variability over time, etc.); Inputs other than quoted prices that are observable for the asset (interest rates, yield curves, volatilities, default rates, etc.); Inputs that are derived principally from or corroborated by other observable market data. Level 3 Unobservable inputs that cannot be corroborated by observable market data. The estimated fair values of bonds, short-term investments and common stocks are based on quoted market prices, where available. The Company obtains one price for each security primarily from a thirdparty pricing service ( pricing service ), which generally uses quoted prices or other observable inputs for the determination of fair value. The pricing service normally derives the security prices through recently reported trades for identical or similar securities, making adjustments through the reporting date based upon available observable market information. For securities not actively traded, the pricing service may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, non-binding broker quotes, benchmark yields, credit spreads, default rates and prepayment speeds. As the Company is responsible for the determination of fair value, it performs quarterly analyses on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Company compares the prices received from the pricing service to a secondary pricing source; prices reported by its custodian, its investment consultant and third-party investment advisors. Additionally, the Company compares changes in the reported market values and returns to relevant market indices to test the reasonableness of the reported prices. The Company s internal price verification procedures and review of fair value methodology documentation provided by independent pricing services have not historically resulted in an adjustment in the prices obtained from the pricing service. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest-level input that is significant to the fair value measurement in its entirety. The Company s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. 10.5

16 A. Fair Value (1) Fair Value Measurements at Reporting Date The following tables present information about the Company s financial assets that are measured and reported at fair value at June 30, 018 and December 31, 017, in the statutory basis statements of admitted assets, liabilities, and capital and surplus according to the valuation techniques the Company used to determine their fair values: Description for Each June 30, 018 Class of Asset or Liability (Level 1) (Level ) (Level 3) Total a. Assets at fair value: Perpetual preferred stock: Industrial and misc $ - $ - $ - $ - Parent, subsidiaries, and affiliates Total perpetual preferred stocks Bonds: U.S. governments Industrial and misc - 59,8-59,8 Hybrid securities Parent, subsidiaries, and affiliates Total bonds - 59,8-59,8 Common stock: Industrial and misc 68,763,59-68,763,59 Parent, subsidiaries, and affiliates Total common stock 68,763, ,763,59 Derivative assets: Interest rate contracts Foreign exchange contracts Credit contracts Commodity futures contracts Commodity forward contracts Total derivatives Total assets at fair value $ 68,763,59 $ 59,8 $ - $ 69,0,874 b. Liabilities at fair value: Derivative liabilities $ - $ - $ - $ - Total liabilities at fair value $ - $ - $ - $ - Description for Each December 31, 017 Class of Asset or Liability (Level 1) (Level ) (Level 3) Total a. Assets at fair value: Perpetual preferred stock: Industrial and misc $ - $ - $ - $ - Parent, subsidiaries, and affiliates Total perpetual preferred stocks Bonds: U.S. governments Industrial and misc Hybrid securities Parent, subsidiaries, and affiliates Total bonds Common stock: Industrial and misc 5,576, ,576,719 Parent, subsidiaries, and affiliates Total common stock 5,576, ,576,719 Derivative assets: Interest rate contracts Foreign exchange contracts Credit contracts Commodity futures contracts Commodity forward contracts Total derivatives Separate account assets Total assets at fair value $ 5,576,719 $ - $ - $ 5,576,719 b. Liabilities at fair value: Derivative liabilities $ - $ - $ - $ - Total liabilities at fair value $ - $ - $ - $

17 There were no transfers between Levels 1 and during the six months ended June 30, 018 and the year ended December 31, 017. () The Company does not have any financial assets with a fair value hierarchy of Level 3 that were measured and reported at fair value for the six months ended June 30, 018 and the year ended December 31, 017. (3) Transfers between fair value hierarchy levels, if any, are recorded as of the beginning of the reporting period in which the transfer occurs. There were no transfers between Levels 1, or 3 of any financial assets or liabilities during the six months ended June 30, 018 and the year ended December 31, 017. (4) The Company has no investments reported with a fair value hierarchy of Level or Level 3 as of June 30, 018 and the year ended December 31, 017 and therefore have no valuation technique to disclose. (5) The Company has no derivative assets and liabilities to disclose. B. Fair Value Combination Not applicable. C. Aggregate Fair Value Hierarchy The aggregate fair value by hierarchy of all financial instruments as of June 30, 018 and December 31, 017, is presented in the table below: June 30, 018 Not Practicable Types of Aggregate Admitted (Carrying Financial Investment Fair Value Assets (Level 1) (Level ) (Level 3) Value) U.S. government and agency securities $ 78,340,679 $ 79,795,49 $ 45,947,359 $ 3,393,30 $ - $ - State and agency municipal securities,5,139,179,348 -,5, City and county municipal securities 15,83,415 15,851,998-15,83, Corporate debt securities 9,310,019 93,91,094-9,310, Equity (including marketable common stock) 68,763,59 68,763,59 68,763, Total bonds, short-term investments, and equity (including marketable common stocks) $ 77,471,844 $ 80,511,81 $ 114,710,951 $ 16,760,893 $ - $ - December 31, 017 Not Practicable Types of Aggregate Admitted (Carrying Financial Investment Fair Value Assets (Level 1) (Level ) (Level 3) Value) U.S. government and agency securities $ 73,600,16 $ 73,999,608 $ 4,700,397 $ 30,899,79 $ - $ - State and agency municipal securities,861,74,394,15 -,861, City and county municipal securities 16,379,91 15,989,446-16,379, Corporate debt securities 97,746,336 97,879,799-97,746,336 Equity (including marketable common stock) 5,576,719 5,576,719 5,576, Total bonds, short-term investments, and equity (including marketable common stocks) $ 63,164,196 $ 6,839,74 $ 95,77,116 $ 167,887,080 $ - $ - Included as Level 1 in U.S. government and agency securities in the fair value hierarchy tables above are U.S. Treasury securities of $45,947,359 and $4,700,397 as of June 30, 018 and December 31, 017, respectively. There are no commercial paper investments included in corporate debt securities in the fair value hierarchy tables as of June 30, 018 and December 31, 017. D. Not Practicable to Estimate Fair Value Not applicable. 1. OTHER ITEMS A H. No significant change.. EVENTS SUBSEQUENT No significant change. 3. REINSURANCE The Company is subject to the reinsurance provisions pursuant to the ACA for compliant individual policies (see Note 4). A D. No significant change. 10.7

18 4. RETROSPECTIVELY RATED CONTRACTS AND CONTRACTS SUBJECT TO REDETERMINATION A B. No significant change. C. Pursuant to the ACA, the Company s commercial business is subject to retrospectively rated features based on the actual medical loss ratios experienced on the commercial lines of business. The formula is calculated pursuant to the ACA guidance. The total amount of direct premiums written for the commercial lines of business subject to the retrospectively rated feature was $4,94,833 and $11,465,40, representing 1% of total direct premiums written as of June 30, 018 and December 31, 017, respectively. Pursuant to the ACA, the Company s Medicare business is subject to retrospectively rated features based on the actual medical loss ratios experienced on the Medicare line of business. The formula is calculated pursuant to the ACA guidance. The total amount of direct premiums written for the Medicare line of business subject to the retrospectively rated feature was $306,834,483 and $464,509,07, representing 53% and 46% of total direct premiums written as of June 30, 018 and December 31, 017, respectively. The Company has Medicare Part D risk-corridor amounts from CMS which are subject to a retrospectively rated feature related to Part D premiums. The Company has estimated accrued retrospective premiums related to certain Part D premiums based on guidelines determined by CMS. The formula is tiered and based on the bid medical loss ratio. The total amount of Medicare Part D direct premiums written subject to the retrospectively rated features was $1,941,757 and $3,507,555 representing % of total direct premiums written for June 30, 018 and December 31, 017, respectively. The Medicaid business contract with the state of Rhode Island includes experience rebates. The rebate period is over the contract period, which is a June 30 year-end. The Company estimates accrued retrospective premium adjustments for its Medicaid business based on the tiered rebate formula provided in the contract. The formula is based on net income before taxes. The amount of net premium income that is subject to the state Medicaid contract retrospective rating feature was $61,444,879 and $53,419,053 representing 46% and 53% of total net premium income as of June 30, 018 and December 31, 017, respectively. D. The Company is required to maintain a specific minimum loss ratio on the comprehensive commercial and Medicare lines of business. The following table discloses the minimum medical loss ratio rebate liability which is included in aggregate health policy reserves in the statutory basis statements of admitted assets, liabilities, and capital and surplus for the six months ended June 30, 018 and the year ended December 31, 017: Small Large Other Group Group Categories Individual Employer Employer with Rebates Total Prior reporting year (1) Medical loss ratio rebates incurred $ - $ - $ - $ 5,814,017 $ 5,814,017 () Medical loss ratio rebates paid (3) Medical loss rebates unpaid ,89,6 7,89,6 (4) Plus reinsurance assumed amounts XXX XXX XXX XXX - (5) Less reinsurance ceded amounts XXX XXX XXX XXX - (6) Rebates unpaid net of reinsurance XXX XXX XXX XXX 7,89,6 Current reporting year-to-date (7) Medical loss ratio rebates incurred ,39 4,39 (8) Medical loss ratio rebates paid ,643,33 5,643,33 (9) Medical loss rebates unpaid - - -,190,59,190,59 (10) Plus reinsurance assumed amounts XXX XXX XXX XXX - (11) Less reinsurance ceded amounts XXX XXX XXX XXX - (1) Rebates unpaid net of reinsurance XXX XXX XXX XXX,190,59 E. Risk-Sharing Provisions of the Affordable Care Act (1) The Company has accident and health insurance premiums in 018 and 017 subject to the risksharing provisions of the ACA. The ACA imposed fees and premium stabilization provisions on health insurance issuers offering comprehensive commercial health insurance. The three premium stabilization programs are commonly referred to as the 3Rs risk adjustment, reinsurance, and risk corridors. Risk Adjustment The permanent risk adjustment program, designed to mitigate the potential impact of adverse selection and provide stability for health insurance issuers, applies to all nongrandfathered not subject to transitional relief in the individual and small group markets both inside and outside of the insurance exchanges. Premium adjustments pursuant to the risk adjustment program are accounted for as premium subject to redetermination and user fees are accounted for as assessments. 10.8

19 Reinsurance The transitional reinsurance program was designed to protect issuers in the individual market from an expected increase in large claims due to the elimination of preexisting condition limitations. The transitional reinsurance program was effective from 014 through 016 and applied to all issuers of major medical commercial products and third party administrators. Contributions attributable to enrollees in ACA compliant individual plans, including program administrative costs, were accounted for as ceded premium and payments received were accounted for as ceded benefit recoveries. The portion of the individual contributions earmarked for the U.S. Treasury was accounted for as an assessment. Contributions made for enrollees in fully insured plans other than ACA compliant individual plans, including program administrative costs and payments to the U.S. Treasury, were treated as assessments. Risk Corridors The temporary risk corridors program, designed to provide some aggregate protection against variability for issuers in the individual and small group markets during the period 014 through 016, applied to Qualified Health Plans in the individual and small group markets both inside and outside of the insurance exchanges. Premium adjustments pursuant to the risk corridors program were accounted for as premium adjustments for retrospectively rated contracts. () The following table presents the current year impact of risk-sharing provisions of the ACA on assets, liabilities and operations. Permanent ACA Risk Adjustment Program June 30, 018 Assets 1. Premium adjustments receivable due to ACA Risk Adjustment $ - Liabilities. Risk adjustment user fees payable for ACA Risk Adjustment 4, Premium adjustments payable due to ACA Risk Adjustment 1,789,49 Operations (Revenue & Expense) 4. Reported as revenue in premium for accident and health contracts (written/collected) due to ACA Risk Adjustment (176,694) 5. Reported in expenses as ACA risk adjustment user fees (incurred/paid) 1,93 Transitional ACA Reinsurance Program Assets 1. Amounts recoverable for claims paid due to ACA Reinsurance $ 1,35. Amounts recoverable for claims unpaid due to ACA Reinsurance (Contra Liability) - 3. Amounts receivable relating to uninsured plans for contributions for ACA Reinsurance - Liabilities 4. Liabilities for contributions payable due to ACA Reinsurance - not reported as ceded premium - 5. Ceded reinsurance premiums payable due to ACA Reinsurance - 6. Liability for amounts held under uninsured plans contributions for ACA Reinsurance - Operations (Revenue & Expense) 7. Ceded reinsurance premiums due to ACA Reinsurance - 8. Reinsurance recoveries (income statement) due to ACA reinsurance payments or expected payments - 9. ACA Reinsurance contributions - not reported as ceded premium - Temporary ACA Risk Corridors Program Assets 1. Accrued retrospective premium due to ACA Risk Corridors $ - Liabilities. Reserve for rate credits or policy experience rating refunds due to ACA Risk Corridors - Operations (Revenue & Expense) 3. Effect of ACA Risk Corridors on net premium income (paid/received) 7 4. Effect of ACA Risk Corridors on change in reserves for rate credits