Incorporated/Organized 07/05/1887 Commenced Business 02/05/1965. (Street and Number) Carmel, IN 46032, Carmel, IN 46032,

Transcription

1 LIFE AND ACCIDENT AND HEALTH COMPANIES - ASSOCIATION EDITION QUARTERLY STATEMENT AS OF SEPTEMBER 30, 008 OF THE CONDITION AND AFFAIRS OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA NAIC Group Code NAIC Company Code 7635 Employer's ID Number (Current) (Prior) Organized under the Laws of Pennsylvania, State of Domicile or Port of Entry Pennsylvania Country of Domicile United States of America Incorporated/Organized 07/05/887 Commenced Business 0/05/965 Statutory Home Office 30 Tillman Drive, Bensalem, PA 900 (Street and Number) (City or Town, State and Zip Code) Main Administrative Office 85 North Pennsylvania Street (Street and Number) Carmel, IN 4603, (City or Town, State and Zip Code) (Area Code) (Telephone Number) Mail Address 85 North Pennsylvania Street, Carmel, IN 4603 (Street and Number or P.O. Box) (City or Town, State and Zip Code) Primary Location of Books and Records 85 North Pennsylvania Street (Street and Number) Carmel, IN 4603, (City or Town, State and Zip Code) (Area Code) (Telephone Number) Internet Web site Address Statutory Statement Contact Ginger Susan Darrough, (Name) (Area Code) (Telephone Number) Ginger_Darrough@Conseco.com, ( Address) (FAX Number) OFFICERS President & Chief Executive Officer John Wain Wells # Chief Operating Officer Brian Charles Wegner # Chief Financial Officer Dean George Sarantos # OTHER DIRECTORS OR TRUSTEES Julianne Marie Bowler # Cecil Dale Bykerk # Charles Everett Koop # Dean George Sarantos # Gregory Vincent Serio # Brian Charles Wegner # John Wain Wells State of County of Illinois Cook 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: () 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. John Wain Wells Brian Charles Wegner Dean George Sarantos President & Chief Executive Officer Chief Operating Officer Chief Financial Officer a. Is this an original filing? Yes [ X ] No [ ] Subscribed and sworn to before me this b. If no, th day of November, 008. State the amendment number. Date filed 3. Number of pages attached Sherry Kremer Notary Public, State of Illinois, Cook County My Commission Expires February 4, 0

2 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA ASSETS Assets Current Statement Date 4 3 December 3 Net Admitted Assets Prior Year Net Nonadmitted Assets (Cols. - ) Admitted Assets. Bonds. Stocks:. Preferred stocks. Common stocks 3. Mortgage loans on real estate: 3. First liens 3. Other than first liens 4. Real estate: 4. Properties occupied by the company (less $ encumbrances) 4. Properties held for the production of income (less $ encumbrances) 4.3 Properties held for sale (less $ encumbrances) 5. Cash ($ ), cash equivalents ($ ) and short-term investments ($ ) 6. Contract loans, (including $ premium notes) 7. Other invested assets 8. Receivables for securities 9. Aggregate write-ins for invested assets 0. Subtotals, cash and invested assets (Lines to 9). Title plants less $ charged off (for Title insurers only). Investment income due and accrued 3. Premiums and considerations: 3. Uncollected premiums and agents' balances in the course of collection 3. Deferred premiums, agents' balances and installments booked but deferred and not yet due (including $ earned but unbilled premiums) 3.3 Accrued retrospective premiums 4. Reinsurance: 4. Amounts recoverable from reinsurers 4. Funds held by or deposited with reinsured companies 4.3 Other amounts receivable under reinsurance contracts 5. Amounts receivable relating to uninsured plans 6. Current federal and foreign income tax recoverable and interest thereon 6. Net deferred tax asset 7. Guaranty funds receivable or on deposit 8. Electronic data processing equipment and software 9. Furniture and equipment, including health care delivery assets ($ ) 0. Net adjustment in assets and liabilities due to foreign exchange rates. Receivables from parent, subsidiaries and affiliates. Health care ($ ) and other amounts receivable 3. Aggregate write-ins for other than invested assets 4. Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines 0 to 3) 5. From Separate Accounts, Segregated Accounts and Protected Cell Accounts 6. Total (Lines 4 and 5) DETAILS OF WRITE-INS Summary of remaining write-ins for Line 9 from overflow page Totals (Lines 090 through 0903 plus 0998)(Line 9 above) 30.!!"! Summary of remaining write-ins for Line 3 from overflow page 399. Totals (Lines 30 through 303 plus 398)(Line 3 above)

3 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA LIABILITIES, SURPLUS AND OTHER FUNDS Current December 3 Prior Year Statement Date. Aggregate reserve for life contracts $ less $ included in Line 6.3 (including $ Modco Reserve). Aggregate reserve for accident and health contracts (including $ Modco Reserve) 3. Liability for deposit-type contracts (including $ Modco Reserve) 4. Contract claims: 4. Life 4. Accident and health 5. Policyholders dividends $ and coupons $ due and unpaid 6. Provision for policyholders dividends and coupons payable in following calendar year - estimated amounts: 6. Dividends apportioned for payment (including $ Modco) 6. Dividends not yet apportioned (including $ Modco) 6.3 Coupons and similar benefits (including $ Modco) 7. Amount provisionally held for deferred dividend policies not included in Line 6 8. Premiums and annuity considerations for life and accident and health contracts received in advance less $ discount; including $ accident and health premiums 9. Contract liabilities not included elsewhere: 9. Surrender values on canceled contracts 9. Provision for experience rating refunds, including $ accident and health experience rating refunds 9.3 Other amounts payable on reinsurance, including $ assumed and $ ceded 9.4 Interest Maintenance Reserve 0. Commissions to agents due or accrued-life and annuity contracts $, accident and health $ and deposit-type contract funds $. Commissions and expense allowances payable on reinsurance assumed. General expenses due or accrued 3. Transfers to Separate Accounts due or accrued (net) (including $ accrued for expense allowances recognized in reserves, net of reinsured allowances) 4. Taxes, licenses and fees due or accrued, excluding federal income taxes 5. Current federal and foreign income taxes, including $ on realized capital gains (losses) 5. Net deferred tax liability 6. Unearned investment income 7. Amounts withheld or retained by company as agent or trustee 8. Amounts held for agents'account, including $ agents'credit balances 9. Remittances and items not allocated 0. Net adjustment in assets and liabilities due to foreign exchange rates. Liability for benefits for employees and agents if not included above. Borrowed money $ and interest thereon $ 3. Dividends to stockholders declared and unpaid 4. Miscellaneous liabilities: 4. Asset valuation reserve 4. Reinsurance in unauthorized companies 4.3 Funds held under reinsurance treaties with unauthorized reinsurers 4.4 Payable to parent, subsidiaries and affiliates 4.5 Drafts outstanding 4.6 Liability for amounts held under uninsured plans 4.7 Funds held under coinsurance 4.8 Payable for securities 4.9 Capital notes $ and interest thereon $ 5. Aggregate write-ins for liabilities 6. Total liabilities excluding Separate Accounts business (Lines to 5) 7. From Separate Accounts Statement 8. Total liabilities (Lines 6 and 7) 9. Common capital stock 30. Preferred capital stock 3. Aggregate write-ins for other than special surplus funds 3. Surplus notes 33. Gross paid in and contributed surplus 34. Aggregate write-ins for special surplus funds 35. Unassigned funds (surplus) 36. Less treasury stock, at cost: 36. shares common (value included in Line 9 $ ) 36. shares preferred (value included in Line 30 $ ) 37. Surplus (Total Lines ) (including $ in Separate Accounts Statement) 38. Totals of Lines 9, 30 and Totals of Lines 8 and 38 DETAILS OF WRITE-INS !" #$% Summary of remaining write-ins for Line 5 from overflow page 599. Totals (Lines 50 through 503 plus 598)(Line 5 above) Summary of remaining write-ins for Line 3 from overflow page 399. Totals (Lines 30 through 303 plus 398)(Line 3 above) Summary of remaining write-ins for Line 34 from overflow page Totals (Lines 340 through 3403 plus 3498)(Line 34 above) 3

4 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA SUMMARY OF OPERATIONS Current Year Prior Year To Date 3 Prior Year Ended December 3 To Date. Premiums and annuity considerations for life and accident and health contracts. Considerations for supplementary contracts with life contingencies 3. Net investment income 4. Amortization of Interest Maintenance Reserve (IMR) 5. Separate Accounts net gain from operations excluding unrealized gains or losses 6. Commissions and expense allowances on reinsurance ceded 7. Reserve adjustments on reinsurance ceded 8. Miscellaneous Income: 8. Income from fees associated with investment management, administration and contract guarantees from Separate Accounts 8. Charges and fees for deposit-type contracts 8.3 Aggregate write-ins for miscellaneous income 9. Totals (Lines to 8.3) 0. Death benefits. Matured endowments (excluding guaranteed annual pure endowments). Annuity benefits 3. Disability benefits and benefits under accident and health contracts 4. Coupons, guaranteed annual pure endowments and similar benefits 5. Surrender benefits and withdrawals for life contracts 6. Group conversions 7. Interest and adjustments on contract or deposit-type contract funds 8. Payments on supplementary contracts with life contingencies 9. Increase in aggregate reserves for life and accident and health contracts 0. Totals (Lines 0 to 9). Commissions on premiums, annuity considerations, and deposit-type contract funds (direct business only). Commissions and expense allowances on reinsurance assumed 3. General insurance expenses 4. Insurance taxes, licenses and fees, excluding federal income taxes 5. Increase in loading on deferred and uncollected premiums 6. Net transfers to or (from) Separate Accounts net of reinsurance 7. Aggregate write-ins for deductions 8. Totals (Lines 0 to 7) 9. Net gain from operations before dividends to policyholders and federal income taxes (Line 9 minus Line 8) 30. Dividends to policyholders 3. Net gain from operations after dividends to policyholders and before federal income taxes (Line 9 minus Line 30) 3. Federal and foreign income taxes incurred (excluding tax on capital gains) 33. Net gain from operations after dividends to policyholders and federal income taxes and before realized capital gains or (losses) (Line 3 minus Line 3) 34. Net realized capital gains (losses) (excluding gains (losses) transferred to the IMR) less capital gains tax of $ (excluding taxes of $ transferred to the IMR) 35. Net income (Line 33 plus Line 34) CAPITAL AND SURPLUS ACCOUNT 36. Capital and surplus, December 3, prior year 37. Net income (Line 35) 38. Change in net unrealized capital gains (losses) less capital gains tax of $ 39. Change in net unrealized foreign exchange capital gain (loss) 40. Change in net deferred income tax 4. Change in non-admitted assets 4. Change in liability for reinsurance in unauthorized companies 43. Change in reserve on account of change in valuation basis, (increase) or decrease 44. Change in asset valuation reserve 45. Change in treasury stock 46. Surplus (contributed to) withdrawn from Separate Accounts during period 47. Other changes in surplus in Separate Accounts Statement 48. Change in surplus notes 49. Cumulative effect of changes in accounting principles 50. Capital changes: 50. Paid in 50. Transferred from surplus (Stock Dividend) 50.3 Transferred to surplus 5. Surplus adjustment: 5. Paid in 5. Transferred to capital (Stock Dividend) 5.3 Transferred from capital 5.4 Change in surplus as a result of reinsurance 5. Dividends to stockholders 53. Aggregate write-ins for gains and losses in surplus 54. Net change in capital and surplus for the year (Lines 37 through 53) 55. Capital and surplus, as of statement date (Lines ) DETAILS OF WRITE-INS !"# $ % $" Summary of remaining write-ins for Line 8.3 from overflow page Totals (Lines through plus ) (Line 8.3 above) 70. &' 70. % $" Summary of remaining write-ins for Line 7 from overflow page 799. Totals (Lines 70 through 703 plus 798)(Line 7 above) 530. ()*+"# #, Summary of remaining write-ins for Line 53 from overflow page Totals (Lines 530 through 5303 plus 5398)(Line 53 above) 4

5 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA Cash from Operations CASH FLOW Current Year To Date Prior Year Ended December 3. Premiums collected net of reinsurance. Net investment income 3. Miscellaneous income 4. Total (Lines to 3) 5. Benefit and loss related payments 6. Net transfers to Separate Accounts, Segregated Accounts and Protected Cell Accounts 7. Commissions, expenses paid and aggregate write-ins for deductions 8. Dividends paid to policyholders 9. Federal and foreign income taxes paid (recovered) net of $ tax on capital gains (losses) 0. Total (Lines 5 through 9). Net cash from operations (Line 4 minus Line 0) Cash from Investments. Proceeds from investments sold, matured or repaid:. Bonds. Stocks.3 Mortgage loans.4 Real estate.5 Other invested assets.6 Net gains or (losses) on cash, cash equivalents and short-term investments.7 Miscellaneous proceeds.8 Total investment proceeds (Lines. to.7) 3. Cost of investments acquired (long-term only): 3. Bonds 3. Stocks 3.3 Mortgage loans 3.4 Real estate 3.5 Other invested assets 3.6 Miscellaneous applications 3.7 Total investments acquired (Lines 3. to 3.6) 4. Net increase (or decrease) in contract loans and premium notes 5. Net cash from investments (Line.8 minus Line 3.7 and Line 4) Cash from Financing and Miscellaneous Sources 6. Cash provided (applied): 6. Surplus notes, capital notes 6. Capital and paid in surplus, less treasury stock 6.3 Borrowed funds 6.4 Net deposits on deposit-type contracts and other insurance liabilities 6.5 Dividends to stockholders 6.6 Other cash provided (applied) 7. Net cash from financing and miscellaneous sources (Line 6. through Line 6.4 minus Line 6.5 plus Line 6.6) RECONCILIATION OF CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 8. Net change in cash, cash equivalents and short-term investments (Line, plus Lines 5 and 7) 9. Cash, cash equivalents and short-term investments: 9. Beginning of year 9. End of period (Line 8 plus Line 9.) Note: Supplemental disclosures of cash flow information for non-cash transactions: !!" # $% 5

6 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA EXHIBIT DIRECT PREMIUMS AND DEPOSIT-TYPE CONTRACTS Current Year To Date Prior Year To Date 3 Prior Year Ended December 3. Industrial life. Ordinary life insurance 3. Ordinary individual annuities 4. Credit life (group and individual) 5. Group life insurance 6. Group annuities 7. A & H - group 8. A & H - credit (group and individual) 9. A & H - other 0. Aggregate of all other lines of business. Subtotal. Deposit-type contracts 3. Total DETAILS OF WRITE-INS Summary of remaining write-ins for Line 0 from overflow page 099. Totals (Lines 00 through 003 plus 098)(Line 0 above) 6

7 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA NOTES TO FINANCIAL STATEMENTS Note # Description Page # Summary of Significant Accounting Policies 7. Accounting Changes and Corrections of Errors 7. 3 Business Combinations and Goodwill 7. 4 Discontinued Operations 7. 5 Investments 7. 6 Joint Ventures, Partnerships and Limited Liability Companies 7. 7 Investment Income 7. 8 Derivative Instruments 7. 9 Income Taxes 7. 0 Information Concerning Parent, Subsidiaries and Affiliates 7. Debt 7.3 Retirement Plans, Deferred Compensation, Postemployment Benefits and Compensated Absences And Other Postretirement Benefit Plans Capital and Surplus, Shareholders Dividend Restrictions and Quasi-Reorganizations Contingencies Leases Information About Financial Instruments With Off-Balance Sheet Risk and Financial Instruments With Concentrations of Credit Risk Sale, Transfer and Servicing of Financial Assets and Extinguishments of Liabilities Gain or Loss to the Reporting Entity from Uninsured Plans and the Uninsured Portion of Partially Insured Plans Direct Premium Written/Produced by Managing General Agents/Third Party Administrators Other Items 7.4 Events Subsequent 7.4 Reinsurance Retrospectively Rated Contracts & Contracts Subject to Redetermination Change in Incurred Losses and Loss Adjustment Expenses Intercompany Pooling Arrangements Structured Settlements Health Care Receivables Participating Policies Premium Deficiency Reserves Reserves for Life Contracts and Annuity Contracts Analysis of Annuity Actuarial Reserves and Deposit-Type Liabilities by Withdrawal Characteristics Premium and Annuity Considerations Deferred and Uncollected Separate Accounts Loss/Claim Adjustment Expenses 7.6 7

8 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA. Summary of Significant Accounting Policies NOTES TO FINANCIAL STATEMENTS A. The Company reclassified a prior year s liability for remediation of long-term care claims in accordance with multistate examination in the amount of $4,000,000 from remittances and items not allocated (Liabilities, Surplus and Other Funds, Line 9, Column ) to aggregate write-ins for liabilities (Liabilities, Surplus and Other Funds, Line 5, Column ) to conform to the current year presentation.. Accounting Changes and Corrections of Errors A. During 008, the Company determined that active life reserves for certain long-term care policies that had elected a non-forfeiture option were overstated due to incorrect assumptions regarding inflationary benefits. Therefore, aggregate reserves for accident and health contracts (Liabilities, Surplus and Other Funds, Line ) and increase in aggregate reserves for life and accident and health contracts (Summary of Operations, Line 9) were overstated in the prior year by $4,304,36. As a result, in accordance with Statement of Statutory Accounting Principles ( SSAP ) #3, Accounting Changes and Corrections of Errors, Line of the Liabilities, Surplus and Other Funds has been decreased in the current year by $4,304,36 and Line 35, unassigned surplus, has been increased, net of tax, in the current year by $,797,753. The increase to surplus has been reported as an aggregate write-in on Line 53 of the Capital and Surplus Account section of the Summary of Operations. 3. Business Combinations and Goodwill None 4. Discontinued Operations None 5. Investments No significant changes 6. Joint Ventures, Partnerships and Limited Liability Companies No significant changes 7. Investment Income No significant changes 8. Derivative Instruments No significant changes 9. Income Taxes A. The components of the net deferred tax asset recognized in the Company s Assets, Liabilities, Surplus and Other funds are as follows: September 30 December Change Total gross deferred tax assets $ 3,49,40 $ 30,664,64 $ 584,759 Total gross deferred tax liabilities,67,805,45,784,0 Net deferred tax assets 39,98,596 39,48,858 56,738 Deferred tax assets nonadmitted 309,743,847 30,844,938 (,0,09) Net deferred tax assets admitted $ 0,37,749 $ 8,573,90 $,663,89 B. No significant changes C. The change in net deferred income tax from December 3, 007 to September 30, 008 is comprised of the following: Change in net deferred tax assets $ 56,738 Tax effect of unrealized gains (losses) 35,307 Change in net deferred income tax $ 878,045 7.

9 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA 9. Income Taxes, continued NOTES TO FINANCIAL STATEMENTS D. The provision for federal income taxes incurred is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The significant items causing this difference for the nine months ended September 30, 008 were as follows: Effective 008 Tax Rate Provision computed at statutory rate $ (,983,86) 35.0 % Amortization of interest maintenance reserve (,6,009) 3.3 % Nonadmitted assets 307,943 (0.9) % True up of prior year taxes (7,600) 0. % Other (40,069) 0. % Total federal income tax benefit $ (,904,56) 37.7 % The federal income tax benefit is comprised of the following: Tax on loss from operations $ (,905,96) 34.8 % Tax on current year capital gains (losses) (0,554) 0.3 % Change in net deferred income tax (878,045).6 % Total federal income tax benefit $ (,904,56) 37.7 % E. () At September 30, 008, the Company had $9,06,908 of net operating loss carryforwards originating in 003 through 008. If unused, $8,86,67, $3,38,435, $5,798,44 and $6,839,60 will expire in 08, 0, 0 and 03, respectively. At September 30, 008, the Company had $5,573,36 of net capital loss carryforwards originating in 003 through 008. If unused, $9,688,37, $,089,78 and $3,795,46 will expire in 008, 0 and 03, respectively. () No significant changes F. () No significant changes () No significant changes Intercompany tax balances are settled quarterly. The federal income tax liability at September 30, 008 of $4,35,63 was payable to its former parent, Conseco Life Insurance Company of Texas ( Conseco Life of Texas ). The federal income tax liability at December 3, 007 of $5,605,885 was payable to Conseco Life of Texas. 0. Information Concerning Parent, Subsidiaries and Affiliates A., B., & C. Effective September 30, 008, the Company transferred accident and health reserves totaling $,738,359 to an affiliate, Conseco Life Insurance Company ( Conseco Life ), on Connecticut business included in its recapture and termination of a coinsurance ceded agreement with an unaffiliated reinsurer (see Note 0. C. for further details) on September 30, 008. The transfer of reserves was in accordance with an existing coinsurance agreement, amended to include the recaptured business, whereby all business written by the Company in Connecticut is ceded from the Company to Conseco Life. The Company recorded a reinsurance payable of $,58,9 on the transaction, including a ceded recapture allowance of $49,933. On September 30, 008, the Company sold its portion of the principal balance of two unaffiliated commercial mortgage loans at book value, which approximates fair value, totaling $6,837, to its ultimate parent, Conseco, Inc., for cash. The Company did not recognize any gain or loss on the sale. On June 5, 008, the Company purchased an unaffiliated credit tenant loan at fair value, including accrued interest, of $,06,4 from an affiliate, Conseco Insurance Company ( Conseco Insurance ). On June 5, 008, the Company purchased unaffiliated commercial mortgage loans at fair value, including accrued interest, totaling $3,76,95 from an affiliate, Conseco Insurance. D., E., & F. No significant changes G. On July 3, 008, the Company s former direct parent, Conseco Life of Texas, paid a dividend, which was declared on April 4, 008, to its direct parent, CDOC, Inc. ( CDOC ), in the form of 00% of the common stock of the Company. As a result, all outstanding shares of the Company at September 30, 008 were owned by CDOC, which is a wholly-owned subsidiary of Conseco, Inc. ( Conseco ). 7.

10 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA NOTES TO FINANCIAL STATEMENTS 0. Information Concerning Parent, Subsidiaries and Affiliates, continued H., I., J., K., L. No significant changes. Debt None. Retirement Plans, Deferred Compensation, Postemployment Benefits and Compensated Absences and Other Postretirement Benefit Plans No significant changes 3. Capital and Surplus, Shareholders' Dividend Restrictions and Quasi-Reorganizations No significant changes 4. Contingencies A. No significant changes B. No significant changes C. None D. No significant changes E. All Other Contingencies Under an assignment agreement effective October, 008 with Conseco Life, all of the assets and liabilities pertaining to the Company s non-long-term care business were assigned and assumed by Conseco Life. See Note for further details on this transaction. The Company will remain contingently liable in the event Conseco Life, for whatever reason, fails to perform its obligations under the assignment agreement. On June 4, 008, a purported class action complaint was filed in the Cook County Illinois Circuit Court Chancery Division, Sheldon Langendorf, et. al. individually and on behalf of themselves and all others similarly situated v. Conseco Senior Health Insurance Company, and Conseco, Inc., et. al. Case No. 08CH057. Plaintiff is claiming breach of contract and consumer fraud and seeks a declaratory judgment, claiming that the Company and other affiliated companies routinely and improperly refuse to accept Medicare explanations of benefits as documentation in support of proofs of claim on individual hospital indemnity and other policies of health insurance. The Company subsequently removed the action to the U.S. District Court for the Northern District of Illinois, where it is now pending as Case No. 08-CV-394. By stipulation of the parties, Conseco, Inc. was dismissed as a party on September 9, 008. The Company filed a motion to dismiss and/or for summary judgment on August, 008, which motion is now fully briefed and before the court for ruling. The Company believes the action is without merit, and intends to defend it vigorously. The ultimate outcome of the action cannot be predicted with certainty. Effective November, 008, Conseco agreed to assume liability for pending long-term care litigation against the Company (except for payment of any policy benefits) and the Company transferred to Conseco an amount equal to the reserves for such litigation. 5. Leases None 6. Information About Financial Instruments With Off-Balance Sheet Risk and Financial Instruments With Concentrations of Credit Risk No significant changes 7. Sale, Transfer and Servicing of Financial Assets and Extinguishments of Liabilities A. None B. None C. There were no securities with NAIC designation 3 or below sold during the nine months ended September 30, 008 and reacquired within 30 days of the sale date. 7.3

11 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA NOTES TO FINANCIAL STATEMENTS 8. Gain or Loss to the Reporting Entity from Uninsured Plans and the Uninsured Portion of Partially Insured Plans None 9. Direct Premium Written/Produced by Managing General Agents/Third Party Administrators None 0. Other Items A. None B. None C. Other Disclosures Effective October 0, 008, the Company changed its name from Conseco Senior Health Insurance Company to Senior Health Insurance Company of Pennsylvania, after approval by the Pennsylvania Department of Insurance. The states of Pennsylvania, Illinois, Texas, Florida and Indiana led a multistate examination of the long-term care claims administration and complaint handling practices of the Company and its affiliate, Bankers Life and Casualty Company ( Bankers Life ), as well as the sales and marketing practices of Bankers Life. This examination commenced in July 007 and on May 7, 008, the Company announced a settlement among the state insurance regulators and the Company and Bankers Life. This examination covered the years 005, 006, and 007. More than 40 states are parties to the settlement, under which the Company will pay a fine of up to $.3 million, with an additional $0 million payable in the event the Company fails to meet the process improvement benchmarks over the next two-and-a-half years. As of September 30, 008, the Company has paid $.9 million in fines. The Company will review certain claims from and provide up to $4 million of remediation, of which $0.9 million has been paid as of September 30, 008. The fine and remediation cost were accrued in 007. In addition, the settlement requires the Company to implement a detailed process improvement plan designed to achieve performance standards for the timely processing of claims and complaints and other processes as part of an improvement program undertaken by the Company in 007. Under that program, the Company is moving several long-term care back-office functions to the Long-Term Care Group, Inc. to better manage the Company s business and improve customer service, and the Company and certain affiliates are investing $6 million on system enhancements and business process improvements over the next two-and-a-half years. The process improvement plan will be monitored by the lead states. Effective September 30, 008, the Company terminated and recaptured a coinsurance agreement whereas certain accident and health business was reinsured to an unaffiliated company, General Re Life Corporation, formerly known as Cologne Life Reinsurance Company. At September 30, 008, the Company recorded a reinsurance receivable totaling $96,780,980 representing a transfer of reserves to the Company of $76,448,586 and a recapture allowance of $0,33,394. D. None E. None F. None G. None H. No significant changes I. No significant changes. Events Subsequent On August, 008, Conseco and CDOC (the "Conseco Parties"), entered into a Transfer Agreement with Senior Health Care Transition Trust (the "Transition Trust"), pursuant to which the Conseco Parties would transfer the stock of the Company to an independent trust to be named Senior Health Care Oversight Trust (the "Oversight Trust") for the exclusive benefit of the company's long-term care policyholders. On August, 008, the Transition Trust filed a Form A, "Statement Regarding the Acquisition of Control of Conseco Senior Health Insurance Company" with the Pennsylvania Insurance Department. On November, 008, the Pennsylvania Insurance Department approved the transaction, the Transition Trust was merged into the Oversight Trust and ownership of the Company was obtained by the Oversight Trust by transfer of 00% of the outstanding common stock from CDOC and 00% of the outstanding preferred stock from Bankers Life and Casualty Company and Conseco Insurance Company. The Oversight Trust is governed by an independent Board of Trustees composed of former insurance regulators and financial experts. The Oversight Trust and the Company will be subject to oversight from the Pennsylvania Insurance Department. Management transferred from Conseco to the Company includes John Wells, who serves as the President and Chief Executive Officer of the Company, as well as his senior management team for operations and finance. Approved and consummated as part of the transfer were the following transactions: 7.4

12 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA. Events Subsequent, continued NOTES TO FINANCIAL STATEMENTS The Company entered into an assignment agreement with Conseco Life, effective October, 008, pursuant to which the assets and liabilities pertaining to the Company's non-long-term care business have been assigned and assumed by Conseco Life, and Conseco Life has the right and the obligation to administer, manage and oversee all aspects of the non-long-term care business of the Company. The Company received a ceding commission of $35.7 million on November, 008 upon closing of the assignment agreement. Net policy liabilities on the assigned business, excluding the related Interest Maintenance Reserve, were approximately $346 million at September 30, 008. The transfer of its non-long-term care business to Conseco Life under the assignment agreement is intended to allow the Company to focus purely on long-term care business by enabling Conseco Life to become primarily liable for the obligations under the nonlong-term care policies issued by the Company. In addition to the transfer of the Company's stock, the Conseco Parties transferred $75 million of additional capital to the Company and the Oversight Trust which was comprised of the following: ) $5 million to the Company in the form of a Conseco Senior Note. The Senior Note is unsecured, with a five-year maturity date, interest payable at 6%, and annual principal payments of $5 million. ) $35.7 million to the Company in the form of invested assets as payment of the ceding commission on non-long-term care business assigned to Conseco Life as previously discussed. 3) $3.3 million to the Company as a result of the forgiveness of accrued and unpaid dividends on the Company's preferred shares. 4) $ million to the Oversight Trust in the form of cash. Included in the transaction were the following service agreement changes, effective November, 008: ) The investment advisory services agreement between the Company and Advisors, Inc. was terminated and replaced with an agreement providing similar services from an unaffiliated company. ) The mortgage loan origination and servicing agreement between the Company and Mortgage Capital, Inc. was terminated and replaced with an agreement providing similar services from Mortgage Capital, Inc. 3) The administrative services agreement with Conseco Services, LLC ("Conseco Services"), was terminated and replaced in part with a separation and transition matters agreement with Conseco Services, whereby Conseco Services will provide all services necessary in order to provide for the orderly transition by the Company to become a stand alone company. 4) Administrative services agreements were entered into between the Company and Washington National Insurance Company and Bankers Conseco Life Insurance Company ("Certain Conseco Subsidiaries'), for administrative services provided by the Company to Certain Conseco Subsidiaries related to their closed block long-term care business.. Reinsurance No significant changes 3. Retrospectively Rated Contracts & Contracts Subject to Redetermination None 4. Change in Incurred Losses and Loss Adjustment Expenses No significant changes 5. Intercompany Pooling Arrangements None 6. Structured Settlements None 7. Health Care Receivables None 8. Participating Policies No significant changes 7.5

13 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA 9. Premium Deficiency Reserves None NOTES TO FINANCIAL STATEMENTS 30. Reserves for Life Contracts and Annuity Contracts No significant changes 3. Analysis of Annuity Actuarial Reserves and Deposit-Type Liabilities by Withdrawal Characteristics No significant changes 3. Premium and Annuity Considerations Deferred and Uncollected No significant changes 33. Separate Accounts None 34. Loss/Claim Adjustment Expenses No significant changes 7.6

14 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA GENERAL INTERROGATORIES (Responses to these interrogatories should be based on changes that have occurred since the prior year end unless otherwise noted) PART - COMMON INTERROGATORIES GENERAL. Did the reporting entity experience any material transactions requiring the filing of Disclosure of Material Transactions with the State of Domicile, as required by the Model Act?. If yes, has the report been filed with the domiciliary state?. Has any change been made during the year of this statement in the charter, by-laws, articles of incorporation, or deed of settlement of the reporting entity?. If yes, date of change: 3. Have there been any substantial changes in the organizational chart since the prior quarter end? If yes, complete the Schedule Y - Part - organizational chart. 4. Has the reporting entity been a party to a merger or consolidation during the period covered by this statement? 4. If yes, provide the name of the entity, NAIC Company Code, and state of domicile (use two letter state abbreviation) for any entity that has ceased to exist as a result of the merger or consolidation. Name of Entity NAIC Company Code 3 State of Domicile 5. If the reporting entity is subject to a management agreement, including third-party administrator(s), managing general agent(s), attorneyin-fact, or similar agreement, have there been any significant changes regarding the terms of the agreement or principals involved? If yes, attach an explanation. 6. State as of what date the latest financial examination of the reporting entity was made or is being made. 6. State the as of date that the latest financial examination report became available from either the state of domicile or the reporting entity. This date should be the date of the examined balance sheet and not the date the report was completed or released. 6.3 State as of what date the latest financial examination report became available to other states or the public from either the state of domicile or the reporting entity. This is the release date or completion date of the examination report and not the date of the examination (balance sheet date). 6.4 By what department or departments? Pennsylvania 6.5 Have all financial statement adjustments within the latest financial examination report been accounted for in a subsequent financial statement filed with Departments? 6.6 Have all of the recommendations within the latest financial examination report been complied with? 7. Has this reporting entity had any Certificates of Authority, licenses or registrations (including corporate registration, if applicable) suspended or revoked by any governmental entity during the reporting period? 7. If yes, give full information: 8. Is the company a subsidiary of a bank holding company regulated by the Federal Reserve Board? 8. If response to 8. is yes, please identify the name of the bank holding company. 8.3 Is the company affiliated with one or more banks, thrifts or securities firms? 8.4 If response to 8.3 is yes, please provide below the names and location (city and state of the main office) of any affiliates regulated by a federal regulatory services agency [i.e. the Federal Reserve Board (FRB), the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), the Federal Deposit Insurance Corporation (FDIC) and the Securities Exchange Commission (SEC)] and identify the affiliate's primary federal regulator. Affiliate Name Location (City, State) 3 FRB 4 OCC 5 OTS 6 FDIC 7 SEC 8

15 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA GENERAL INTERROGATORIES 9. Are the senior officers (principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions) of the reporting entity subject to a code of ethics, which includes the following standards? (a) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (b) Full, fair, accurate, timely and understandable disclosure in the periodic reports required to be filed by the reporting entity; (c) Compliance with applicable governmental laws, rules and regulations; (d) The prompt internal reporting of violations to an appropriate person or persons identified in the code; and (e) Accountability for adherence to the code. 9. If the response to 9. is No, please explain: 9. Has the code of ethics for senior managers been amended? 9. If the response to 9. is Yes, provide information related to amendment(s). 9.3 Have any provisions of the code of ethics been waived for any of the specified officers? 9.3 If the response to 9.3 is Yes, provide the nature of any waiver(s). FINANCIAL 0. Does the reporting entity report any amounts due from parent, subsidiaries or affiliates on Page of this statement? 0. If yes, indicate any amounts receivable from parent included in the Page amount: $ INVESTMENT. Were any of the stocks, bonds, or other assets of the reporting entity loaned, placed under option agreement, or otherwise made available for use by another person? (Exclude securities under securities lending agreements.). If yes, give full and complete information relating thereto:. Amount of real estate and mortgages held in other invested assets in Schedule BA: $ 3. Amount of real estate and mortgages held in short-term investments: $ 4. Does the reporting entity have any investments in parent, subsidiaries and affiliates? 4. If yes, please complete the following: Prior Year-End Book/Adjusted Carrying Value Current Quarter Book/Adjusted Carrying Value 4. Bonds $ $ 4. Preferred Stock $ $ 4.3 Common Stock $ $ 4.4 Short-Term Investments $ $ 4.5 Mortgage Loans on Real Estate $ $ 4.6 All Other $ $ 4.7 Total Investment in Parent, Subsidiaries and Affiliates (Subtotal Lines 4. to 4.6) $ $ 4.8 Total Investment in Parent included in Lines 4. to 4.6 above $ $ 5. Has the reporting entity entered into any hedging transactions reported on Schedule DB? 5. If yes, has a comprehensive description of the hedging program been made available to the domiciliary state? If no, attach a description with this statement. 8.

16 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA GENERAL INTERROGATORIES 6. Excluding items in Schedule E, real estate, mortgage loans and investments held physically in the reporting entity s offices, vaults or safety deposit boxes, were all stocks, bonds and other securities, owned throughout the current year held pursuant to a custodial agreement with a qualified bank or trust company in accordance with Section 3, III Conducting Examinations, G - Custodial or Safekeeping Agreements of the NAIC Financial Condition Examiners Handbook? 6. For all agreements that comply with the requirements of the NAIC Financial Condition Examiners Handbook, complete the following: Name of Custodian(s) Custodian Address 6. For all agreements that do not comply with the requirements of the NAIC Financial Condition Examiners Handbook, provide the name, location and a complete explanation: Name(s) Location(s) 3 Complete Explanation(s) 6.3 Have there been any changes, including name changes, in the custodian(s) identified in 6. during the current quarter? 6.4 If yes, give full information relating thereto: Old Custodian New Custodian 3 Date of Change 4 Reason 6.5 Identify all investment advisors, brokers/dealers or individuals acting on behalf of broker/dealers that have access to the investment accounts, handle securities and have authority to make investments on behalf of the reporting entity: Central Registration Depository!"#$% &'( Name(s) 3 Address ) *+$%,-&. 7. Have all the filing requirements of the Purposes and Procedures Manual of the NAIC Securities Valuation Office been followed? 7. If no, list exceptions: 8.

17 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA GENERAL INTERROGATORIES PART - LIFE & HEALTH. Report the statement value of mortgage loans at the end of this reporting period for the following categories: Amount. Long-Term Mortgages In Good Standing. Farm Mortgages $. Residential Mortgages $.3 Commercial Mortgages $.4 Total Mortgages in Good Standing $. Long-Term Mortgages In Good Standing with Restructured Terms. Total Mortgages in Good Standing with Restructured Terms $.3 Long-Term Mortgage Loans Upon which Interest is Overdue more than Three Months.3 Farm Mortgages $.3 Residential Mortgages $.33 Commercial Mortgages $.34 Total Mortgages with Interest Overdue more than Three Months $.4 Long-Term Mortgage Loans in Process of Foreclosure.4 Farm Mortgages $.4 Residential Mortgages $.43 Commercial Mortgages $.44 Total Mortgages in Process of Foreclosure $.5 Total Mortgage Loans (Lines ) (Page, Column 3, Lines ) $.6 Long-Term Mortgages Foreclosed, Properties Transferred to Real Estate in Current Quarter.6 Farm Mortgages $.6 Residential Mortgages $.63 Commercial Mortgages $.64 Total Mortgages Foreclosed and Transferred to Real Estate $ 9

18 NAIC Company Code STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA SCHEDULE S - CEDED REINSURANCE 3 4 Showing All New Reinsurance Treaties - Current Year to Date 5 6 Type of Reinsurance Ceded Federal ID Number Effective Date Name of Reinsurer Location!" #$%$ &'( )* 7 Is Insurer Authorized? (Yes or No) 0

19 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA SCHEDULE T - PREMIUMS AND ANNUITY CONSIDERATIONS Current Year To Date - Allocated by States and Territories Direct Business Only Life Contracts Accident and Health Insurance Premiums, Including Policy, Total Life Insurance Annuity Membership Other Columns Premiums Considerations and Other Fees Considerations Through 5 States, Etc. Active Status Deposit-Type Contracts. Alabama AL. Alaska AK 3. Arizona AZ 4. Arkansas AR 5. California CA 6. Colorado CO 7. Connecticut CT 8. Delaware DE 9. District of Columbia DC 0. Florida FL. Georgia GA. Hawaii HI 3. Idaho ID 4. Illinois IL 5. Indiana IN 6. Iowa IA 7. Kansas KS 8. Kentucky KY 9. Louisiana LA 0. Maine ME. Maryland MD. Massachusetts MA 3. Michigan MI 4. Minnesota MN 5. Mississippi MS 6. Missouri MO 7. Montana MT 8. Nebraska NE 9. Nevada NV 30. New Hampshire NH 3. New Jersey NJ 3. New Mexico NM 33. New York NY 34. North Carolina NC 35. North Dakota ND 36. Ohio OH 37. Oklahoma OK 38. Oregon OR 39. Pennsylvania PA 40. Rhode Island RI 4. South Carolina SC 4. South Dakota SD 43. Tennessee TN 44. Texas TX 45. Utah UT 46. Vermont VT 47. Virginia VA 48. Washington WA 49. West Virginia WV 50. Wisconsin WI 5. Wyoming WY 5. American Samoa AS 53. Guam GU 54. Puerto Rico PR 55. U.S. Virgin Islands VI 56. Northern Mariana Islands MP 57. Canada CN 58. Aggregate Other Aliens OT XXX 59. Subtotal (a) 90. Reporting entity contributions for employee benefits plans XXX 9. Dividends or refunds applied to purchase paidup additions and annuities XXX 9. Dividends or refunds applied to shorten endowment or premium paying period XXX 93. Premium or annuity considerations waived under disability or other contract provisions XXX 94. Aggregate or other amounts not allocable by State XXX 95. Totals (Direct Business) XXX 96. Plus Reinsurance Assumed XXX 97 Totals (All Business) XXX 98. Less Reinsurance Ceded XXX 99. Totals (All Business) less Reinsurance Ceded XXX DETAILS OF WRITE-INS 580. XXX 580. XXX XXX Summary of remaining write-ins for Line 58 from overflow page XXX Totals (Lines 580 through 5803 plus 5898)(Line 58 above) XXX 940. XXX 940. XXX XXX Summary of remaining write-ins for Line 94 from overflow page XXX Totals (Lines 940 through 9403 plus 9498)(Line 94 above) XXX (a) Insert the number of L responses except for Canada and Other Alien.

20 STATEMENT AS OF SEPTEMBER 30, 008 OF THE SENIOR HEALTH INSURANCE COMPANY OF PENNSYLVANIA SCHEDULE Y - INFORMATION CONCERNING ACTIVITIES OF INSURER MEMBERS OF A HOLDING COMPANY GROUP PART - ORGANIZATIONAL CHART Conseco, Inc. FEIN # DE Advisors, Inc. CDOC, Inc. Conseco Equity Sales, Inc. FEIN # DE FEIN # DE FEIN # TX Performance Matters Associates, Inc Mortgage Capital, Inc. K.F. Agency, Inc. American Life & Casualty Marketing Division Co. Conseco Management Services Company FEIN # DE FEIN # DE FEIN # IL FEIN #4-35 IA FEIN # TX % 89.% 9.9% Conseco Services, L.L.C FEIN # % 90% 9% Senior Health Insurance Washington National Conseco Health Conseco Life Insurance Conseco Marketing, Company of Pennsylvania ()() Insurance Company () Insurance Company () Company of Texas L.L.C. NAIC #7635 NAIC #7039 NAIC #7874 NAIC #804 FEIN # PA FEIN # IL FEIN # AZ FEIN # TX FEIN # IN IN Conseco Insurance Conseco Life Bankers Conseco Life Colonial Penn Life Bankers Life and Company () Insurance Company () Insurance Company Insurance Company () Casualty Company () NAIC #6068 NAIC #65900 NAIC #68560 NAIC #6065 NAIC #663 FEIN # IL FEIN # IN FEIN # NY FEIN # PA FEIN # IL C.P. Real Estate Services Corp. BLC Financial Services, Inc. FEIN # NJ FEIN # IL NOTES: All subsidiaries are 00% owned unless otherwise indicated. Names of insurance companies and their parent companies are in bold letters. () The following non-insurance investment entities are reported as affiliated in accordance with SSAP No. 97: Conseco Funding, Ltd., Ownership interests: Conseco Insurance Company 77.4%; Senior Health Insurance Company of Pennsylvania.6% Eagle Creek C.L.O., Ltd., Ownership interests: Bankers Life and Casualty Company 9.9%; Conseco Health Insurance Company.%; Conseco Insurance Company 4.8%; Conseco Life Insurance Company 3.9%: Senior Health Insurance Company of Pennsylvania 3.3%; Washington National Insurance Company.% Fall Creek C.L.O., Ltd., Ownership interests: Bankers Life and Casualty Company.6%; Colonial Penn Life Insurance Company 4.%; Conseco Health Insurance Company 4.%; Conseco Insurance Company 9.8%; Conseco Life Insurance Company 9.8%; Washington National Insurance Company 6.4% () Conseco Senior Health Insurance Company changed its name to Senior Health Insurance Company of Pennsylvania effective October 0, 008. Effective November, 008, ownership of Senior Health Insurance Company of Pennsylvania was transferred to the Senior Health Care Oversight Trust, an unaffiliated independent trust. See Note, Events Subsequent, in the Notes to Financial Statements.