<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A No. 1
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 1999
OR
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission file number 001-12617
Trigon Healthcare, Inc.
(Exact name of registrant as specified in its charter)
Virginia 54-1773225
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2015 Staples Mill Road, Richmond, VA 23230
(Address of principal executive offices)
Registrant's telephone number, including area code (804) 354-7000
Securities registered pursuant to Section 12(b)
of the Act:
Class A Common Stock, $.01 Par Value New York Stock Exchange
(Title of Class) (Name of Exchange)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 24, 2000 was approximately $1,424,133,000 (based on the
last reported sales price of $37 13/16 per share on April 24, 2000, on the New
York Stock Exchange).
As of April 24, 2000, 37,663,024 shares of the registrant's Class A Common
Stock, par value $.01 per share, were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain portions of Trigon Healthcare Inc.'s Annual Report to Shareholders for
the year ended December 31, 1999 into Parts II and IV of this Form 10-K.
Certain portions of Trigon Healthcare Inc.'s definitive Proxy Statement dated
March 24, 2000 for the Annual Meeting of Shareholders into Part III of this Form
10-K.
<PAGE>
The exhibits to this Form 10-K/A No. 1 are amended to include the 1999 annual
reports for the Trigon Healthcare, Inc. Employee Stock Purchase Plan and the
Trigon Insurance Company 401(k) Restoration Plan and Consents of Independent
Auditors. There are no other differences.
PART I
ITEM 1. BUSINESS
Omitted
ITEM 2. PROPERTIES
Omitted
ITEM 3. LEGAL PROCEEDINGS
Omitted
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Omitted
ITEM 6. SELECTED FINANCIAL DATA
Omitted
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Omitted
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Omitted
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Omitted
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Omitted
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Omitted
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
1. Consolidated Financial Statements from Trigon Healthcare Inc.'s 1999
Annual Report to Shareholders are incorporated herein by reference in
Item 8:
Omitted
2. Financial statement schedules
Omitted
3. Exhibits. The following is a list of exhibits to this Form 10-K.
Exhibit
Number Description
- ------ -----------
2 -- Amended and Restated Plan of Demutualization. (1)
3.1 -- Amended and Restated Articles of Incorporation of Trigon
Healthcare, Inc. (1)
3.2 -- Amended and Restated Bylaws of Trigon Healthcare, Inc. dated
April 28, 1999. (9)
3.3 -- Articles of Amendment to Amended and Restated Articles of
Incorporation setting forth the designation, preferences and
rights of Series A Junior Participating Preferred Stock of Trigon
Healthcare, Inc. dated July 16, 1997. (4)
4 -- Form of Stock Certificate (other Instruments Defining the Rights
of Security-Holders). (1)
4.1 -- Rights Agreement dated as of July 16, 1997 between Trigon
Healthcare, Inc. and First Chicago Trust Company of New York, as
Rights Agent. (4)
4.2 -- Form of Rights Certificate. (4)
10.1 -- License Agreement by and between the Blue Cross and Blue Shield
Association and the Company. (2)
(a) Blue Cross license
(b) Blue Shield license
10.2 -- Limited Fixed Return Plan for Certain Officers and Directors of
Trigon Insurance Company. (1) *
10.4 -- Non-Contributory Retirement Program for Certain Employees of
Trigon Insurance Company. (1) *
<PAGE>
10.5 -- Amended and Restated Supplemental Executive Retirement Program for
Certain Employees of Trigon Insurance Company dated as of October
1, 1998. (8)*
10.6 -- Salary Deferral Plan for Norwood H. Davis, Jr. (1) *
10.7 -- Amended and Restated Employment Agreement dated September 16, 1998
by and between Trigon Insurance Company and Norwood H. Davis,
Jr. (7) *
10.9 -- Amended and Restated Employees' Thrift Plan of Trigon Insurance
Company dated as of October 1, 1998. (8)*
10.10 -- Amended and Restated Trigon Insurance Company 401(k) Restoration
Plan dated as of October 1, 1998. (8)*
10.12 -- Form of Employment Agreement dated as of December 12, 1990 by and
between Trigon Insurance Company and John C. Berry
and certain other executive officers. (1) *
10.14 -- Credit Agreement dated as of February 5, 1997 among Trigon
Healthcare, Inc., the banks party thereto and Morgan Guaranty
Trust Company of New York, as Agent. (2)
10.15 -- 1997 Stock Incentive Plan. (6) *
10.16 -- Employee Stock Purchase Plan. (6) *
10.17 -- Non-Employee Directors Stock Incentive Plan. (6) *
10.18 -- Amendment to the License Agreement by and between the Blue Cross
and Blue Shield Association and the Company. (5)
10.19 -- Amendment to the Non-Contributory Retirement Program for Certain
Employees of Trigon Insurance Company. (3) *
10.20 -- Form of Executive Continuity Agreement dated as of September 16,
1998 between Trigon Insurance Company and Thomas G. Snead, Jr. and
certain other executive officers. (7) *
10.21 -- Form of Executive Continuity Agreement dated as of September 16,
1998 between Trigon Insurance Company and John C. Berry and
certain other executive officers. (7) *
10.22 -- Amendment to the Non-Contributory Retirement Program for Certain
Employees of Trigon Insurance Company (now to be known as) The
Trigon Insurance Company Retirement Program dated as of October 1,
1998. (8) *
10.23 -- Clarifying Amendment to the Non-Contributory Retirement Program
for Certain Employees of Trigon Insurance Company (now to be known
as) The Trigon Insurance Company Retirement Program dated as of
October 1, 1998. (8) *
10.24 -- Thomas G. Snead Employment Agreement dated May 19, 1999. (10) *
10.25 -- Amendment No. 1 to Executive Continuity Agreement Between Trigon
Insurance Company and Thomas G. Snead, Jr. dated May 19, 1999.
(10) *
10.26 -- Clarifying Amendment No. 2 to the Non-Contributory Retirement
Program for Certain Employees of Trigon Insurance Company (now to
be known as) The Trigon Insurance Company Retirement Program.
(11) *
10.27 -- Clarifying Amendment No. 3 to the Non-Contributory Retirement
Program for Certain Employees of Trigon Insurance Company (now to
be known as) The Trigon Insurance Company Retirement Program.
(11) *
10.28 -- Clarifying Amendment No. 4 to The Trigon Insurance Company
Retirement Program. (11) *
<PAGE>
10.29 -- Amendment No. 1 dated December 14, 1999 to the Credit Agreement
dated as of February 5, 1997 among Trigon Healthcare, Inc., the
banks party thereto and Morgan Guaranty Trust Company of New York,
as Agent. (11)
11 -- Computation of per share earnings. Refer to Note 15, "Net Income
and Pro Forma Net Income Per Share," on page 49 of Trigon
Healthcare Inc.'s 1999 Annual Report to Shareholders, which is
incorporated herein by reference.
13 -- Excerpts from the Company's Annual Report to Shareholders for the
year ended December 31, 1999. (11)
21 -- Subsidiaries of the Registrant. (11)
23.1 -- Consent of Independent Auditors. (11)
23.2 -- Consent of Independent Auditors.
23.3 -- Consent of Independent Auditors.
27 -- Financial Data Schedule. (11)
99.1 -- Trigon Healthcare, Inc. Employee Stock Purchase Plan Audited
Financial Statements as of December 31, 1999 and 1998 and for
years ended December 31, 1999 and 1998 and the period May 1, 1997
(inception) through December 31, 1997.
99.2 -- Trigon Insurance Company 401(k) Restoration Plan Audited Financial
Statements as of December 31, 1999 and 1998 and for the three
years ended December 31, 1999, 1998 and 1997.
(1) Incorporated by reference to exhibits filed with the Company's Registration
Statement on Form S-1 (registration number 333-09773).
(2) Incorporated by reference to exhibits filed with the Company's Form 10-K
for the year ended December 31, 1996.
(3) Incorporated by reference to exhibits filed with the Company's Form 10-K
for the year ended December 31, 1997.
(4) Incorporated by reference to exhibits filed with the Company's Form 8-A/A
filed on July 16, 1997.
(5) Incorporated by reference to exhibits filed with the Company's Form 10-Q
for the period ended September 30, 1997.
(6) Incorporated by reference to exhibits filed with the Company's Proxy
Statement dated March 13, 1997.
(7) Incorporated by reference to exhibits filed with the Company's Form 10-Q
for the period ended September 30, 1998.
(8) Incorporated by reference to exhibits filed with the Company's Form 10-K
for the year ended December 31, 1998.
(9) Incorporated by reference to exhibits filed with the Company's Form 10-Q
for the period ended March 31, 1999.
(10) Incorporated by reference to exhibits filed with the Company's Form 10-Q
for the period ended June 30, 1999.
(11) Incorporated by reference to exhibits filed with the Company's Form 10-K
for the year ended December 31, 1999.
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of this Form
10-K.
<PAGE>
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
TRIGON HEALTHCARE, INC.
Registrant
By: /s/ THOMAS R. BYRD
------------------
THOMAS R. BYRD
Title: SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date: April 26, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amendment has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ THOMAS G. SNEAD, JR. Chairman of the Board, President April 26, 2000
- --------------------------------- and Chief Executive Officer
THOMAS G. SNEAD, JR (Principal Executive Officer)
/s/ THOMAS R. BYRD Senior Vice President and Chief April 26, 2000
- --------------------------------- Financial Officer (Principal
THOMAS R. BYRD Financial and Accounting Officer)
/s/ LENOX D. BAKER, JR. Director April 26, 2000
- ---------------------------------
LENOX D. BAKER, JR., M.D.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ ROBERT M. FREEMAN Director April 26, 2000
- ---------------------------------
ROBERT M. FREEMAN
/s/ WILLIAM R. HARVEY Director April 26, 2000
- ---------------------------------
WILLIAM R. HARVEY, Ph.D.
/s/ GARY A. JOBSON Director April 26, 2000
- ---------------------------------
GARY A. JOBSON
/s/ JOSEPH S. MALLORY Director April 26, 2000
- ---------------------------------
JOSEPH S. MALLORY
/s/ DONALD B. NOLAN Director April 26, 2000
- ---------------------------------
DONALD B. NOLAN, M.D.
/s/ WILLIAM N. POWELL Director April 26, 2000
- ---------------------------------
WILLIAM N. POWELL
/s/ J. CARSON QUARLES Director April 26, 2000
- ---------------------------------
J. CARSON QUARLES
/s/ R. GORDON SMITH Director April 26, 2000
- ---------------------------------
R. GORDON SMITH, ESQ.
/s/ HUBERT R. STALLARD Director April 26, 2000
- ---------------------------------
HUBERT R. STALLARD
/s/ JACKIE M. WARD Director April 26, 2000
- ---------------------------------
JACKIE M. WARD
/s/ STIRLING L. WILLIAMSON, JR. Director April 26, 2000
- ---------------------------------
STIRLING L. WILLIAMSON, JR.
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
23.2 -- Consent of Independent Auditors.
23.3 -- Consent of Independent Auditors.
99.1 -- Trigon Healthcare, Inc. Employee Stock Purchase Plan Audited
Financial Statements as of December 31, 1999 and 1998 and for
years ended December 31, 1999 and 1998 and the period May 1, 1997
(inception) through December 31, 1997.
99.2 -- Trigon Insurance Company 401(k) Restoration Plan Audited Financial
Statements as of December 31, 1999 and 1998 and for the three
years ended December 31, 1999, 1998 and 1997.
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
The Board of Directors
Trigon Healthcare, Inc.:
We consent to incorporation by reference in the registration statement (No.
333-26187) on Form S-8 of Trigon Healthcare, Inc. of our report dated April 14,
2000, relating to the statements of financial condition of the Trigon
Healthcare, Inc. Employee Stock Purchase Plan as of December 31, 1999 and 1998,
and the related statements of income and changes in plan equity for the years
ended December 31, 1999 and 1998 and the period May 1, 1997 (inception) through
December 31, 1997, which report is included in this Form 10-K/A No. 1 of Trigon
Healthcare, Inc.
/s/ KPMG LLP
Richmond, Virginia
April 28, 2000
<PAGE>
Exhibit 23.3
Consent of Independent Auditors
The Board of Directors
Trigon Healthcare, Inc.:
We consent to incorporation by reference in the registration statements (No.
333-22463) on Form S-8 of Trigon Healthcare, Inc. of our report dated April 21,
2000, relating to the statements of financial condition, with fund information,
of the Trigon Insurance Company 401(k) Resoration Plan as of December 31, 1999
and 1998, and the related statements of income and changes in plan equity, with
fund information, for each of the years in the three-year period ended December
31, 1999, which report is included in this Form 10-K/A No. 1 of Trigon
Healthcare, Inc.
/s/ KPMG LLP
Richmond, Virginia
April 28, 2000
<PAGE>
EXHIBIT 99.1
TRIGON HEALTHCARE, INC.
EMPLOYEE STOCK PURCHASE PLAN
Financial Statements
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
<PAGE>
TRIGON HEALTHCARE, INC.
EMPLOYEE STOCK PURCHASE PLAN
Table of Contents
Page
Independent Auditors' Report 1
Statements of Financial Condition 2
Statements of Income and Changes in Plan Equity 3
Notes to Financial Statements 4
<PAGE>
Independent Auditors' Report
The Human Resources, Compensation and Employee
Benefits Committee of the Board of Directors
Trigon Healthcare, Inc.:
We have audited the accompanying statements of financial condition of the Trigon
Healthcare, Inc. Employee Stock Purchase Plan (Plan) as of December 31, 1999 and
1998, and the related statements of income and changes in plan equity for the
years ended December 31, 1999 and 1998 and the period May 1, 1997 (inception)
through December 31, 1997. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial condition of the Plan as of December 31,
1999 and 1998 and the income and changes in plan equity for the years ended
December 31, 1999 and 1998 and the period May 1, 1997 (inception) through
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Richmond, Virginia
April 14, 2000
<PAGE>
TRIGON HEALTHCARE, INC.
EMPLOYEE STOCK PURCHASE PLAN
Statements of Financial Condition
December 31, 1999 and 1998
1999 1998
------------- -----------
Assets:
Investments, at estimated fair value - $ 3,670,355 2,967,244
Trigon Healthcare, Inc. Class A
common stock (cost, $3,109,078 and
$1,860,570, respectively)
Contributions receivable:
Employee 292,564 259,215
Employer 51,629 45,745
----------- -----------
Total assets $ 4,014,548 3,272,204
=========== ===========
Plan equity $ 4,014,548 3,272,204
=========== ===========
See accompanying notes to financial statements.
2
<PAGE>
TRIGON HEALTHCARE, INC.
EMPLOYEE STOCK PURCHASE PLAN
Statements of Income and Changes in Plan Equity
Years ended December 31, 1999 and 1998 and
Period May 1, 1997 (inception) through December 31, 1997
<TABLE>
<CAPTION>
May 1, 1997
through
December 31,
1999 1998 1997
---------- ---------- ------------
<S> <C> <C> <C>
Income:
Net unrealized appreciation (depreciation) in
fair value of investments $ (545,397) 1,000,638 106,036
Contributions:
Employee 1,383,148 1,318,963 748,958
Employer 244,085 232,758 132,169
----------- ------------ ----------
Total contributions 1,627,233 1,551,721 881,127
----------- ------------ ----------
Total income 1,081,836 2,552,359 987,163
Distributions to employees 339,492 240,391 26,927
----------- ------------ ----------
Net increase in plan equity 742,344 2,311,968 960,236
Plan equity, beginning of period 3,272,204 960,236 --
----------- ------------ ----------
Plan equity, end of period $ 4,014,548 3,272,204 960,236
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
TRIGON HEALTHCARE, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(1) Summary of Significant Accounting Policies
(a) Organization
The Trigon Healthcare, Inc. Employee Stock Purchase Plan (Plan)
was adopted by the Board of Directors and approved by the
shareholders of Trigon Healthcare, Inc. (Company) in April 1997
for the purpose of providing a means by which the employees
(Participant) of the Company and its subsidiaries can be given an
opportunity to acquire the Company's Class A common stock (Common
Stock) through payroll deductions.
The following are the significant accounting policies followed by
the Plan:
(b) Basis of Accounting
The financial statements of the Plan are prepared under the
accrual method of accounting. Accordingly, employee contributions
to the Plan are recorded as of the date the contributions are
withheld from the Participants' compensation. Employer
contributions are recorded as of the last day of each calendar
quarter and represent the fifteen percent discount given to
Participants under the Plan's provisions. Distributions to
Participants are accounted for at the average historical cost of
the Common Stock distributed, plus cash paid in lieu of
fractional shares, where applicable. Cash paid by the Company in
lieu of fractional shares is accounted for at the fair market
value of the shares at the time of the distribution. The Company
will also separately refund to any withdrawing Participant
employee contributions which have been withheld but have not been
forwarded to the Plan for the purchase of Common Stock.
(c) Investment Valuation
The investments in Common Stock are stated at estimated fair
value, based on the closing price on the New York Stock Exchange
on the last trading day of the period. Investment transactions
are recorded on a trade date basis.
(d) Administrative Expenses
The Company pays all administrative expenses of the Plan.
Administrative expenses incurred by the Company during 1999, 1998
and 1997 were $16,870, $25,317 and $20,967, respectively.
(e) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes, including
disclosure of contingent assets and liabilities. Actual results
could differ from those estimates.
4 (Continued)
<PAGE>
TRIGON HEALTHCARE, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(2) Summary of Significant Provisions of the Plan
The Plan is an employee stock purchase plan and is intended to qualify
under Internal Revenue Code (Code) Section 423. The Plan is administered
by the Human Resources, Compensation and Employee Benefits Committee of
the Company's Board of Directors (Committee). The Common Stock owned by
Participants prior to withdrawal from the Plan are held in individual
participant accounts in a custodian account with The Bank of New York
(Custodian). Prior to October 1998, the custodian was First Chicago
Trust Company of New York. Participants should refer to the plan
agreement and prospectus for a more complete description of the Plan's
provisions.
The Company has reserved for issuance and purchase by Participants under
the Plan an aggregate of one million shares of Common Stock. These
shares are authorized but unissued. Shares needed to satisfy the
requirements of the Plan may be newly issued by the Company or acquired
by purchases at the expense of the Company on the open market or in
private transactions. During 1999, 1998 and 1997, all shares needed to
satisfy the requirements of the Plan were purchased on the open market.
The Company paid the difference between the purchase price in the open
market, including brokerage fees, and the amount provided by the
employee and employer contributions.
Any person who is employed by the Company (or by any eligible subsidiary
of the Company) is eligible to participate in the Plan on the first day
of any payroll period following the employee's commencement of
employment. A Participant may make voluntary contributions to the Plan
in whole percentage amounts ranging from one to fifteen percent of
compensation for the year. Under Code section 423(b)(8), a Participant
is limited to purchases of no more than $25,000 of Common Stock, at fair
value, in any calendar year. The Plan had 809 and 743 Participants as of
December 31, 1999 and 1998, respectively.
Payroll deductions are accumulated by the Company during each calendar
quarter and transferred to the Plan at the end of each calendar quarter
to be applied towards the purchase of full and partial shares of Common
Stock. The purchase price per share at which Common Stock shares are
acquired by Participants equals the lower of (a) eighty-five percent of
the fair market value of a share of Common Stock on the first trading
day of each calendar quarter (Grant Date), or (b) eighty-five percent of
the fair market value of a share of Common Stock on the last trading day
of each calendar quarter (Investment Date). The Plan defines fair market
value to be the closing trading price of the Common Stock on the New
York Stock Exchange as reported in the Wall Street Journal. During 1997,
the first Grant Date was May 1, 1997, the first payroll period after the
Plan was approved. The first Investment Date was June 30, 1997. All
subsequent purchase periods followed the calendar quarter schedule as
defined in the Plan's provisions. Participants are fully vested in their
individual participant accounts at all times and have the right at any
time to obtain certificates for full shares of Common Stock in these
accounts.
Participants may cease participation in or withdraw shares from the Plan
at any time, but may not begin payroll deductions again for six months.
A Participant may change the payroll deduction percentage
5 (Continued)
<PAGE>
TRIGON HEALTHCARE, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 1999 and 1998
up to four times per year. Participation in the Plan is automatically
terminated upon retirement, termination of active employment or death.
(3) Investment in Common Stock
The net unrealized appreciation (depreciation) in fair value of
investment in Common Stock as of December 31, 1999, 1998 and 1997 and
the change in such amount during the periods were as follows:
<TABLE>
<CAPTION>
Net
unrealized
Fair appreciation
value Cost (depreciation)
------------- ------------- ----------------
<S> <C> <C> <C>
Balance, May 1, 1997 $ -- -- --
Change for the period ended
December 31, 1997 585,523 479,487 106,036
------------- ------------- ----------------
Balance, December 31, 1997 585,523 479,487 106,036
Change for the year ended
December 31, 1998 2,381,721 1,381,083 1,000,638
------------- ------------- ----------------
Balance, December 31, 1998 2,967,244 1,860,570 1,106,674
Change for the year ended
December 31, 1999 703,111 1,248,508 (545,397)
------------- ------------- ----------------
Balance, December 31, 1999 $ 3,670,355 3,109,078 561,277
============= ============= ================
</TABLE>
The Plan held 124,419 and 79,524 shares of Common Stock on December 31,
1999 and 1998, respectively. In addition, 16,698 shares were pending
purchase on December 31, 1999.
(4) Tax Status
The Plan is intended to qualify under the provisions of Code Section
423. Under these provisions, Participants are taxed on amounts withheld
for the purchase of Common Stock when such amounts are actually
withheld. Other than this tax, no income is taxable to a Participant
until disposition of the Common Stock acquired. The method of taxation,
as ordinary income or as capital gains, will depend upon the holding
period of the purchased shares.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Plan. The Company is generally
entitled to a deduction to the extent the amounts are taxed as ordinary
income to a Participant.
6 (Continued)
<PAGE>
TRIGON HEALTHCARE, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(5) Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to terminate the Plan. In the event of a plan
termination, Participants will be refunded the amounts of any employee
contributions which have not yet been applied to the purchase of Common
Stock and the Common Stock shares in their individual participant
accounts.
(6) Year 2000 Readiness Disclosure
The Company had a unified Year 2000 plan for the Company and its
subsidiaries. As part of the plan, the Company monitored the Year 2000
efforts of the vendors performing critical outsourced functions for the
Plan through the use of surveys. The information provided by the vendors
was confirmed by phone but was not independently verified. The Plan's
recordkeeper and custodian, The Bank of New York, reported that
renovation and testing of its mission-critical systems were
substantially completed by December 31, 1998 in compliance with the
requirements set forth by the Federal Financial Institutions Examination
Council. In addition, The Bank of New York indicated that its business
continuity plans were being reviewed and upgraded in an effort to
mitigate potential risks.
The Bank of New York in turn uses third-party vendors to support its
activities for the Plan. Examples include security brokers, banks and
stock exchanges. It was not within the Company's ability to determine
the Year 2000 status of these companies. The Company relied on the
efforts of the vendors it selected for outsourced functions to ensure
that these vendors could conduct their business on and after January 1,
2000.
The Plan experienced no material Year 2000-related disruptions as a
result of noncompliance by its critical vendors.
7
<PAGE>
EXHIBIT 99.2
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Financial Statements
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Table of Contents
Page
Independent Auditors' Report 1
Statement of Financial Condition, with Fund Information -
December 31, 1999 2
Statement of Financial Condition, with Fund Information -
December 31, 1998 3
Statement of Income and Changes in Plan Equity, with Fund
Information - Year ended December 31, 1999 4
Statement of Income and Changes in Plan Equity, with Fund
Information - Year ended December 31, 1998 5
Statement of Income and Changes in Plan Equity, with Fund
Information - Year ended December 31, 1997 6
Notes to Financial Statements 7
<PAGE>
Independent Auditors' Report
Human Resources, Compensation and Employee
Benefits Committee of the Board of Directors
Trigon Healthcare, Inc.:
We have audited the accompanying statements of financial condition, with fund
information, of the Trigon Insurance Company 401(k) Restoration Plan (Plan) as
of December 31, 1999 and 1998, and the related statements of income and changes
in plan equity, with fund information, for each of the years in the three-year
period ended December 31, 1999. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial condition of the Plan as of December 31,
1999 and 1998 and the income and changes in plan equity for each of the years in
the three-year period ended December 31, 1999 in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statements of
financial condition and income and changes in plan equity is presented for
purposes of additional analysis rather than to present the financial condition
and income and changes in plan equity of each fund. The fund information has
been subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ KPMG LLP
Richmond, Virginia
April 21, 2000
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Statement of Financial Condition, with Fund Information
December 31, 1999
<TABLE>
<CAPTION>
Fund Information
-----------------------------------------------------------------------------
Participant Directed
-----------------------------------------------------------------------------
Treasury Short-term S&P 500
Money Fixed Equity Domestic Global International
Market Income Bond Index Equity Equity Equity
Fund Fund Fund Fund Fund Fund Fund
---------- ---------- -------- -------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets - contributions
receivable - employer
(note 4) $ 18,988 30,316 43,261 355,175 325,700 40,265 461,359
========== ========== ======== ======== ========= ======== =============
Plan equity $ 18,988 30,316 43,261 355,175 325,700 40,265 461,359
========== ========== ======== ======== ========= ======== =============
<CAPTION>
Fund Information
------------------------------------
Non-
participant
Participant Directed Directed
------------------------ -----------
Domestic
Aggressive Trigon Trigon
Growth Stock Stock
Fund Fund Fund Total
---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Assets - contributions
receivable - employer
(note 4) 756,224 1,598,387 33,758 3,663,433
========== =========== ======== ===========
Plan equity 756,224 1,598,387 33,758 3,663,433
========== =========== ======== ===========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Statement of Financial Condition, with Fund Information
December 31, 1998
<TABLE>
<CAPTION>
Fund Information
-----------------------------------------------------------------------------------------------
Participant Directed
-----------------------------------------------------------------------------------------------
Short-term S&P 500 Domestic International
Fixed Equity Domestic Global International Aggressive Aggressive Trigon
Income Bond Index Equity Equity Equity Growth Growth Stock
Fund Fund Fund Fund Fund Fund Fund Fund Fund Total
---------- ---- ------- -------- ------- ------------- ---------- ------------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets - contributions
receivable - employer
(note 4) $ 54,308 48,067 213,037 331,414 4,102 135,241 319,303 -- 1,060,586 2,166,058
========= ====== ======= ======= ====== ============= ========== ============ ========= =========
Plan equity $ 54,308 48,067 213,037 331,414 4,102 135,241 319,303 -- 1,060,586 2,166,058
========= ====== ======= ======= ====== ============= ========== ============ ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Statement of Income and Changes in Plan Equity, with Fund Information
Year ended December 31, 1999
<TABLE>
<CAPTION>
Fund Information
------------------------------------------------------------------------------------------
Participant Directed
------------------------------------------------------------------------------------------
Treasury Short-term S&P 500
Money Fixed Equity Domestic Global International
Market Income Bond Index Equity Equity Equity
Fund Fund Fund Fund Fund Fund Fund
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Net appreciation (depreciation)
in fair value of investments $ 325 (1,174) (1,244) 33,319 (23,628) 7,356 147,352
Net realized gains on investments -- 3,351 1,020 23,242 23,143 3,010 22,599
Contributions:
Employee 4,419 22,076 22,496 165,018 136,065 17,922 100,195
Employer 241 2,247 5,493 30,864 30,611 7,932 25,119
----------- --------- --------- --------- --------- -------- ---------
Total income 4,985 26,500 27,765 252,443 166,191 36,220 295,265
----------- --------- --------- --------- --------- -------- ---------
Expenses - distributions and
withdrawals -- 607 869 24,131 2,200 -- 720
Transfers between funds, net 14,003 (49,885) (31,702) (86,174) (169,705) (57) 31,573
----------- --------- --------- --------- --------- -------- ---------
Net increase (decrease)
in plan equity 18,988 (23,992) (4,806) 142,138 (5,714) 36,163 326,118
Plan equity, beginning of year -- 54,308 48,067 213,037 331,414 4,102 135,241
----------- --------- --------- --------- --------- -------- ---------
Plan equity, end of year $ 18,988 30,316 43,261 355,175 325,700 40,265 461,359
=========== ========= ========= ========= ========= ======== =========
<CAPTION>
Fund Information
----------------------------------------
Non-
participant
Participant Directed Directed
------------------------ -----------
Domestic
Aggressive Trigon Trigon
Growth Stock Stock
Fund Fund Fund Total
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Income:
Net appreciation (depreciation)
in fair value of investments 329,895 (326,357) (4,277) 161,567
Net realized gains on investments 32,080 1,229 194 109,868
Contributions:
Employee 164,263 383,451 -- 1,015,905
Employer 29,372 85,537 39,625 257,041
--------- ---------- --------- -----------
Total income 555,610 143,860 35,542 1,544,381
--------- ---------- --------- -----------
Expenses - distributions and
withdrawals 4,902 11,793 1,784 47,006
Transfers between funds, net (113,787) 405,734 -- --
--------- ---------- --------- -----------
Net increase (decrease)
in plan equity 436,921 537,801 33,758 1,497,375
Plan equity, beginning of year 319,303 1,060,586 -- 2,166,058
--------- ---------- --------- -----------
Plan equity, end of year 756,224 1,598,387 33,758 3,663,433
========= ========== ========= ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Statement of Income and Changes in Plan Equity, with Fund Information
Year ended December 31, 1998
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------------------------------------
Participant Directed
-------------------------------------------------------------------------------------------------
Short-term S&P 500 Domestic
Fixed Equity Domestic Global International Aggressive
Income Bond Index Equity Equity Equity Growth
Fund Fund Fund Fund Fund Fund Fund
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Net appreciation (depreciation)
in fair value of investments $ (6,138) 650 31,216 25,853 608 17,207 (2,379)
Net realized gains (losses) on
investments 9,423 1,607 7,515 15,617 (256) 2,570 31,388
Contributions:
Employee 28,625 18,791 96,771 87,854 937 41,014 148,412
Employer, before reduction
for forfeitures 3,018 4,802 20,610 18,621 277 9,547 35,469
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total income 34,928 25,850 156,112 147,945 1,566 70,338 212,890
---------- ---------- ---------- ---------- ---------- ---------- ----------
Expenses:
Distributions and withdrawals 115,681 9,454 -- 18,784 -- 9,669 62,746
Forfeitures 47 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total expenses 115,728 9,454 -- 18,784 -- 9,669 62,746
---------- ---------- ---------- ---------- ---------- ---------- ----------
Transfers between funds, net 3,324 (2,759) (33,660) 72,584 (996) 19,830 (130,139)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)
in plan equity (77,476) 13,637 122,452 201,745 570 80,499 20,005
Plan equity, beginning of year 131,784 34,430 90,585 129,669 3,532 54,742 299,298
---------- ---------- ---------- ---------- ---------- ---------- ----------
Plan equity, end of year $ 54,308 48,067 213,037 331,414 4,102 135,241 319,303
========== ========== ========== ========== ========== ========== ==========
<CAPTION>
Fund Information
------------------------
Participant Directed
------------------------
International
Aggressive Trigon
Growth Stock
Fund Fund Total
------------- ---------- ----------
<S> <C> <C> <C>
Income:
Net appreciation (depreciation)
in fair value of investments 1,072 243,966 312,055
Net realized gains (losses) on
investments (5,221) 13,041 75,684
Contributions:
Employee 24,086 270,245 716,735
Employer, before reduction
for forfeitures 3,624 67,124 163,092
---------- ---------- ----------
Total income 23,561 594,376 1,267,566
---------- ---------- ----------
Expenses:
Distributions and withdrawals 110 69,282 285,726
Forfeitures -- -- 47
---------- ---------- ----------
Total expenses 110 69,282 285,773
---------- ---------- ----------
Transfers between funds, net (44,315) 116,131 --
---------- ---------- ----------
Net increase (decrease)
in plan equity (20,864) 641,225 981,793
Plan equity, beginning of year 20,864 419,361 1,184,265
---------- ---------- ----------
Plan equity, end of year -- 1,060,586 2,166,058
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Statement of Income and Changes in Plan Equity, with Fund Information
Year ended December 31, 1997
<TABLE>
<CAPTION>
Fund Information
-----------------------------------------------------------------------------------------------
Participant Directed
-----------------------------------------------------------------------------------------------
Short-term S&P 500 Domestic
Fixed Equity Domestic Global International Aggressive
Income Bond Index Equity Equity Equity Growth
Fund Fund Fund Fund Fund Fund Fund
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Net appreciation (depreciation)
in fair value of investments $ 3,886 (84) 5,326 10,118 (665) (18,433) (15,973)
Net realized gains (losses) on
investments 2,720 1,540 3,817 27,794 (36) 27,404 30,712
Contributions:
Employee 33,636 5,609 17,389 34,375 447 29,654 78,428
Employer, before reduction
for forfeitures 2,665 875 2,718 1,779 36 2,776 10,656
--------- --------- --------- --------- --------- --------- ---------
Total income 42,907 7,940 29,250 74,066 (218) 41,401 103,823
--------- --------- --------- --------- --------- --------- ---------
Expenses:
Distributions and withdrawals 24,591 31,431 17,608 107,094 26,327 44,872 101,300
Forfeitures -- 107 -- 975 68 184 573
--------- --------- --------- --------- --------- --------- ---------
Total expenses 24,591 31,538 17,608 108,069 26,395 45,056 101,873
--------- --------- --------- --------- --------- --------- ---------
Transfers between funds, net 6,485 7,373 70,065 12,598 5,997 (132,068) (97,007)
--------- --------- --------- --------- --------- --------- ---------
Net increase (decrease)
in plan equity 24,801 (16,225) 81,707 (21,405) (20,616) (135,723) (95,057)
Plan equity, beginning of year 106,983 50,655 8,878 151,074 24,148 190,465 394,355
--------- --------- --------- --------- --------- --------- ---------
Plan equity, end of year $ 131,784 34,430 90,585 129,669 3,532 54,742 299,298
========= ========= ========= ========= ========= ========= =========
<CAPTION>
Fund Information
------------------------
Participant Directed
------------------------
International
Aggressive Trigon
Growth Stock
Fund Fund Total
------------- --------- ---------
<S> <C> <C> <C>
Income:
Net appreciation (depreciation)
in fair value of investments (12,346) 76,543 48,372
Net realized gains (losses) on
investments 17,887 1,018 112,856
Contributions:
Employee 21,801 63,155 284,494
Employer, before reduction
for forfeitures 1,515 13,376 36,396
--------- --------- ---------
Total income 28,857 154,092 482,118
--------- --------- ---------
Expenses:
Distributions and withdrawals 20,021 627 373,871
Forfeitures -- -- 1,907
--------- --------- ---------
Total expenses 20,021 627 375,778
--------- --------- ---------
Transfers between funds, net (139,339) 265,896 --
--------- --------- ---------
Net increase (decrease)
in plan equity (130,503) 419,361 106,340
--------- --------- ---------
Plan equity, beginning of year 151,367 -- 1,077,925
--------- --------- ---------
Plan equity, end of year 20,864 419,361 1,184,265
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(1) Summary of Significant Accounting Policies
(a) Organization
The Trigon Insurance Company 401(k) Restoration Plan (Plan), formerly
known as the Trigon Blue Cross Blue Shield 401(k) Restoration Plan,
was amended and restated effective October 1, 1998. It was originally
adopted effective January 1, 1995 by the Board of Directors of Trigon
Insurance Company (d/b/a Trigon Blue Cross Blue Shield), formerly,
Blue Cross and Blue Shield of Virginia. The purpose of the Plan is to
permit a select group of management or highly compensated employees
(Participants) of Trigon Insurance Company and any subsidiary or
affiliate, including its parent, Trigon Healthcare, Inc.,
(collectively, Company) who are selected for participation in the Plan
to defer compensation without regard to the limits imposed by the
Internal Revenue Code on the Company's tax-qualified plan, the
Employees' Thrift Plan of Trigon Insurance Company (Qualified Plan).
The Qualified Plan is a defined contribution plan of the Company
subject to the provisions of ERISA. The Plan constitutes an unfunded
"top hat" arrangement under Title I of the Employee Retirement Income
Security Act of 1974, as amended (ERISA). Accordingly, the Plan does
not require the Company to segregate assets or establish trusts for
any amounts to be paid to Participants under the Plan. In addition,
Participants do not have any right, title or interest in or to any
specific funds or property of the Company, and their interest,
including vested amounts, is that of a general creditor.
Under the provisions of the Plan, the Plan's assets and changes in the
Plan's assets are calculated based on the corresponding Qualified Plan
investment funds' asset value and adjustments of unit value,
respectively. Since the Plan is unfunded, a receivable from the
Company equivalent to the Plan's deemed investment balance as of
year-end has been recorded in the accompanying statements of financial
condition. The Company has recorded a corresponding liability to the
Plan is its consolidated financial statements.
The following are the significant accounting policies of the Qualified
Plan and are followed by the Plan:
(b) Basis of Accounting
The financial statements of the Plan are prepared under the accrual
method of accounting. Accordingly, employee and employer contributions
to the Plan are recorded as of the date the employees' contributions
are withheld from the Participants' compensation. Net realized gains
(losses) on investments and net appreciation (depreciation) of fair
value of investments are recognized as they occur. Distributions and
withdrawals are recorded when paid and are accounted for at the fair
market value of the unit value of the Participant's account.
Forfeitures are accounted for at the fair market value of the unit
value forfeited.
(c) Investment Valuation and Income Recognition
The Plan's contribution receivable - employer related to deemed
investments is stated at fair value based on quoted market prices as
of year end. Purchases and sales of investments are recorded on a
trade date basis.
7
(Continued)
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Notes to Financial Statements
December 31, 1999 and 1998
The Plan uses unit accounting to account for investment activity. Net
realized gains (losses) on investments are computed on an average-cost
basis. Net appreciation (depreciation) in fair value of investments is
calculated daily based on the change in the market value and net
investment earnings of the investments and participant activity.
(d) Administrative Expenses
The Company pays all administrative expenses of the Plan.
Administrative expenses incurred by the Company during 1999, 1998 and
1997 were $24,374, $23,594 and $26,824, respectively.
(e) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes, including disclosure of contingent
assets and liabilities. Actual results could differ from those
estimates.
(2) Summary of Significant Provisions of the Plan
The Plan is administered by the Human Resources, Compensation and Employee
Benefits Committee of the Company's Board of Directors (Committee). The
recordkeeper is Administrative Solutions Group, an ADP/Mercer Alliance,
Deerfield, Illinois.
Plan participants should refer to the plan agreement or summary plan
description for a more complete description of the Plan's provisions.
(a) Eligibility
Officers of the Company who are Vice Presidents or above are eligible
for participation in the Plan unless otherwise determined at the
discretion of the Committee. All Participants must be a member of a
select group of management or highly-compensated employees and must be
an eligible participant in the Qualified Plan.
(b) Participant Accounts
Individual accounts are maintained by the Plan for the Participant to
reflect the Participant's contributions and related employer matching
contribution, as well as the Participant's share of the Plan's income,
including net realized gains and losses, and related administrative
expenses.
(c) Contributions
Participants may elect to make voluntary contributions to the Plan in
whole percentage amounts ranging from two to sixteen percent of their
compensation for the year, offset by amounts actually deferred in the
Qualified Plan. The Company is obligated under the matching provision
of the Plan to contribute each pay period an amount equal to the
difference between (a) fifty percent of the sum of the contributions
of each Participant in both the Plan and the Qualified
8
(Continued)
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Notes to Financial Statements
December 31, 1999 and 1998
Plan which do not exceed six percent of each Participant's
compensation for such pay period and (b) the amount equal to the
Company's actual matching contribution to the Qualified Plan for such
pay period.
In October 1998, the Plan was amended to permit the Company to
contribute an additional discretionary profit sharing matching
contribution to each Participant's account through the Trigon Stock
Fund. The discretionary contribution is a nonparticipant-directed
contribution and must remain in the Trigon Stock Fund. The
discretionary contribution is calculated using a Plan-prescribed
formula derived from Participant data from the Qualified Plan as of
the most recent Qualified Plan year. The Company made a discretionary
contribution of $39,625 during 1999 and no discretionary contribution
to the Plan during 1998.
(d) Investment Options
Each Participant's contributions are deemed to be invested in the
various funds in the same proportion as each Participant's investment
election in the Qualified Plan. No separate investment election by the
Participant in the Plan is permitted or required. Investment options
of the Qualified Plan consist of nine investment funds, including
investment in the Trigon Stock Fund, added in 1997. A registration
statement on Form S-8 has been filed with the Securities and Exchange
Commission to register the shares of Trigon Healthcare, Inc. Class A
Common Stock (Common Stock) included as an investment option in the
Plan. A description of each investment option follows:
Treasury Money Market Fund - This fund was added to the Plan
effective October 1, 1998. The aim of this fund is to provide
current income while maintaining a stable net asset value. This
fund may invest solely in securities backed by the full faith and
credit of the U.S. government. At least 80% of the assets will be
in U.S. Treasury securities. The remainder may include securities
issued by other government agencies. This fund offers the lowest
risk of any of the funds.
Short-Term Fixed Income Fund - The aim of this fund is to provide
steady investment returns with relatively stable principal value.
This fund may invest in short-term treasury, government agency,
and corporate bonds, money market instruments, guaranteed
investment contracts issued by life insurance companies, which
offer a fixed interest rate, or a pooled fund investing in
similar contracts.
Bond Fund - The objective of this fund is to maximize current
interest income with moderate principal risk. This fund may
invest in treasury, government agency and corporate bonds,
mortgages, U.S. and foreign currency-denominated securities,
money market investments and mutual funds that invest in such
investments.
S&P 500 Equity Index Fund - This fund invests in the common
stocks of those companies that comprise the S&P 500 index, or a
mutual fund or commingled fund that invests in those companies.
The objective of this fund is
9
(Continued)
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Notes to Financial Statements
December 31, 1999 and 1998
to provide long-term growth of capital, with growth of income as
a secondary objective.
Domestic Equity Fund - This fund primarily invests in securities
that have long-term capital appreciation possibilities. The fund
will emphasize common stock, convertible corporate debt and
convertible preferred stock and will periodically hold fixed
income securities. The portfolio is concentrated generally in 15
to 35 stocks that generally are traded on a national exchange or
market. The objective of this fund is to provide long-term
capital growth from stock prices and some current income from
dividends.
Global Equity Fund - This fund primarily invests in common stocks
and bonds of companies based throughout the world, including the
U.S. The objective of this fund is to provide long-term growth of
capital and income.
International Equity Fund - This fund is like the Domestic Equity
Fund except that it primarily invests in common stocks and bonds
of non-U.S. corporations instead of domestic corporations. This
fund's objective is to provide long-term growth of both capital
and income.
Domestic Aggressive Growth Fund - The objective of this fund is
capital growth. This fund invests primarily in the common stocks
of small, rapidly growing domestic companies. It is not expected
that these companies will pay cash dividends.
International Aggressive Growth Fund - The International
Aggressive Growth Fund is similar to the Domestic Aggressive
Growth Fund, except that it invests primarily in stocks of small,
rapidly growing foreign companies, or mutual or collective funds
that invest in such stocks. Pursuit of long-term capital growth
is this fund's primary objective. Effective October 1, 1998, this
fund was no longer offered as an investment selection. All
Participant balances were automatically transferred to the
International Equity Fund along with any investment elections
designated to this fund.
Trigon Stock Fund - This fund invests in Common Stock which is
listed on the New York Stock Exchange, and cash for liquidity
purposes. The objective of this fund is to provide participants
the opportunity to invest in the common stock of the Company's
parent. This fund offers the highest risk of any of the funds
because it invests in the stock of only one company.
Each Qualified Plan investment fund is divided into units of
participation which are calculated daily by the recordkeeper. The
daily value of each unit is determined by dividing the total fair
market value of all assets in each fund by the total number of units
in that fund. The Plan is an unfunded plan. Accordingly, under the
provisions of the Plan, net realized gains (losses) on investments and
net appreciation (depreciation) of fair value of investments are
credited to each Participant's account based on the adjustment of the
unit values in the Qualified Plan. The
10
(Continued)
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Notes to Financial Statements
December 31, 1999 and 1998
payment of administrative expenses for assets of the Qualified Plan is
reflected in the calculation of plan unit value.
(e) Vesting
Participants are fully vested in their contributions and the earnings
thereon at all times. Participants are vested in employer matching
contributions and the earnings thereon upon death, disability or
retirement or after 36 months of service with the Company and any of
its affiliates or any other Blue Cross and/or Blue Shield
organization. Forfeitures reduce the Employer's contributions to the
Plan.
(f) Distributions
Plan distributions are recorded when paid and are made in cash or,
effective October 1, 1998, Common Stock for the portion of a
Participant's account invested in the Trigon Stock Fund in accordance
with a Participant's election. The Plan allows Participants to
withdraw balances in a lump sum or in specified annual installments
upon retirement, death or disability based upon elections made at the
commencement of participation in the Plan. Withdrawals prior to
retirement are distributed in a lump sum. In addition, if previously
elected by a Participant, all amounts in a Participant's account will
be distributed in a lump sum upon a plan-defined change in control of
the Company.
(g) Number of Participants
There were 39 and 34 Participants in the Plan as of December 31, 1999
and 1998, respectively. The number of Participants investing in each
of the Plan's funds as of those dates were as follows:
Investment Fund (1) 1999 1998
------------------- ------------- -------------
Treasury Money Market Fund 2 --
Short-term Fixed Income Fund 8 7
Bond Fund 8 7
S&P 500 Equity Index Fund 19 15
Domestic Equity Fund 23 20
Global Equity Fund 5 3
International Equity Fund 19 17
Domestic Aggressive Growth Fund 25 23
Trigon Stock Fund 34 21
(1) Participants may hold investments in more than one fund; accordingly, the
total participation by individual funds may exceed the total number of
Participants.
11
(Continued)
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATIION PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(3) Units and Unit Values
Each fund in the Plan is valued daily on a unitized basis by the
recordkeeper. The number of units and unit values of net assets, carried to
the second decimal place, as of December 31, 1999 were:
Unit
Investment Fund Units values
------------------- --------------- -----------
Treasury Money Market Fund 1,798.45 $ 10.56
Short-term Fixed Income Fund 2,201.08 13.77
Bond Fund 3,045.23 14.21
S&P 500 Equity Index Fund 14,835.74 23.94
Domestic Equity Fund 12,560.18 25.93
Global Equity Fund 2,324.52 17.32
International Equity Fund 18,193.68 25.36
Domestic Aggressive Growth Fund 19,527.84 38.73
Trigon Stock Fund 111,337.01 14.66
(4) Plan Funding
As discussed in note 1, the Plan is an unfunded plan under Title 1 of ERISA
and the Plan has recorded a receivable from the Company equivalent to the
Plan's deemed investment balance as of year-end in the accompanying
statements of financial condition. The Company has recorded a corresponding
liability to the Plan in its consolidated financial statements. In order to
set aside funds for the purpose of assisting the Company in meeting its
liabilities to the Plan, the Company, through its subsidiary Trigon
Insurance Company, established the Trigon Healthcare, Inc. Grantor Trust,
formerly known as the Trigon Blue Cross Blue Shield Grantor Trust (Trust),
in 1997. Wachovia Corporate Services, Inc. (Wachovia), Winston-Salem, North
Carolina, is the custodian of the assets of the Trust. Under the Trust, the
assets contributed and income earned on such assets must remain in the
Trust until liabilities under the Plan have been satisfied. However, the
assets held in the Trust are considered to be assets of the Company and are
subject to the claims of the Company's creditors in the event of the
Company's insolvency. The Trust does not change the unfunded status of the
Plan. The Participants have no preferred claim on, or any beneficial
interest in, any assets of the Trust. If the balance of the Trust is not
sufficient to make payments in accordance with the terms of the Plan, the
Company must fund the difference using general corporate assets. Once all
payments under the Plan have been made and the Plan is terminated, any
excess assets remaining in the Trust revert back to the Company. In the
event of a change in control of the Company, the Company will make an
irrevocable contribution to the Trust to fully fund all Participants'
account balances as determined by the Plan.
12
(Continued)
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Notes to Financial Statements
December 31, 1999 and 1998
The estimated fair value and cost of investment securities in the Trust as
of December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999
----------------------------------------------------
Net
unrealized
Fair appreciation
value Cost (depreciation)
--------------- --------------- -----------------
<S> <C> <C> <C>
Mutual funds $ 1,901,738 1,439,726 462,012
Common Stock 1,601,201 1,670,131 (68,930)
--------------- --------------- -----------------
$ 3,502,939 3,109,857 393,082
=============== =============== =================
</TABLE>
<TABLE>
<CAPTION>
1998
----------------------------------------------------
Net
unrealized
Fair appreciation
value Cost (depreciation)
--------------- --------------- -----------------
<S> <C> <C> <C>
Mutual funds $ 1,079,380 1,050,758 28,622
Common Stock 1,037,287 756,599 280,688
--------------- --------------- -----------------
$ 2,116,667 1,807,357 309,310
=============== =============== =================
</TABLE>
The Trust held 54,278 and 27,800 shares of Common Stock as of December 31,
1999 and 1998, respectively.
The net appreciation (depreciation) in fair value of the investments in the
Trust as of December 31, 1999, 1998 and 1997 and the change in such amounts
during each year were as follows:
<TABLE>
<CAPTION>
Net
unrealized
Fair appreciation
value Cost (depreciation)
--------------- --------------- -----------------
<S> <C> <C> <C>
Balance, January 1, 1997 $ -- -- --
Change for the year ended December 31, 1997 1,163,487 1,173,192 (9,705)
--------------- --------------- -----------------
Balance, December 31, 1997 1,163,487 1,173,192 (9,705)
Change for the year ended December 31, 1998 953,180 634,165 319,015
--------------- --------------- -----------------
Balance, December 31, 1998 2,116,667 1,807,357 309,310
Change for the year ended December 31, 1999 1,386,272 1,302,500 83,772
--------------- --------------- -----------------
Balance, December 31, 1999 $ 3,502,939 3,109,857 393,082
=============== =============== =================
</TABLE>
13
(Continued)
<PAGE>
TRIGON INSURANCE COMPANY
401(k) RESTORATION PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(5) Tax Status
The Committee believes that the Plan has operated in accordance with the
terms of the plan document and current tax law. Accordingly, no provision
for income taxes has been included in the Plan's financial statements.
Under present Federal income tax laws and regulations, employee and
employer contributions and investment earnings thereon are not taxable to
Participants until distributed. Earnings on assets held in the trust are
taxable to the Company under ordinary tax rules on an annual basis.
(6) Plan Termination
Although it has not expressed any intent to do so, the Company's Board of
Directors has the right under the Plan to terminate the Plan. In the event
of a plan termination, Participants will become fully vested in their
accounts.
(7) Year 2000 Readiness Disclosure
The Company had a unified Year 2000 plan for the Company and its
subsidiaries. As part of the plan, the Company monitored the Year 2000
efforts of the vendors performing critical outsourced functions for the
Plan through the use of surveys. The information provided by the vendors
was confirmed by phone but was not independently verified. The Plan's
recordkeeper, Administrative Solutions Group (ASG), advised the Company in
1998 that its system was Year 2000 ready. During 1998, the Company
installed the vendor-certified Year 2000-enabled version of ASG system
interfaces.
While not part of the Plan, the Trust uses Wachovia as custodian of the
Trust (note 4). Wachovia indicated that it had completed the conversion and
internal testing of all applications systems as of April 1999. In addition,
the Trust purchases mutual funds from numerous investment firms. In
addition to their individual 2000 efforts, it is the Company's
understanding that the investment firms each participated in the securities
industry-wide tests. During 1999, the Company received status reports from
most of these firms indicating they would be Year 2000 compliant by January
1, 2000.
Each of the vendors selected by the Company to perform services for the
Plan and the Trust in turn uses third-party vendors to support their
activities for the Plan. Examples include security brokers, banks and stock
exchanges. It was not within the Company's ability to determine the Year
2000 status of these companies. The Company relied on the efforts of the
vendors it selected for outsourced functions to ensure that these vendors
could conduct their business on and after January 1, 2000.
The Plan experienced no material Year 2000-related disruptions as a result
of noncompliance by its critical vendors.
14
