-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E45iTazFdeiSaSAL70FpD7D36b5I+wpfPh1CWgJlQxWqVVArfQbFKFNJpuX5/Be4 CQ0PX3rFQmzI54cHIx50cQ== 0000950133-99-002311.txt : 19990630 0000950133-99-002311.hdr.sgml : 19990630 ACCESSION NUMBER: 0000950133-99-002311 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COVENTRY HEALTH CARE INC CENTRAL INDEX KEY: 0001054833 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-OFFICES & CLINICS OF DOCTORS OF MEDICINE [8011] IRS NUMBER: 522073000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 000-29676 FILM NUMBER: 99655508 BUSINESS ADDRESS: STREET 1: 6705 ROCKLEDGE DR STE 100 CITY: BETHESDA STATE: MD ZIP: 20817 BUSINESS PHONE: 3015810600 MAIL ADDRESS: STREET 1: 6705 ROCKLEDGE DR SUITE 100 STREET 2: STE 250 CITY: BETHESDA STATE: MD ZIP: 20817 11-K 1 FORM 11-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------ FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One): [ X] ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ___________ to ________________ Commission file number 000-19147 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN 6705 Rockledge Drive, Suite 900 Bethesda, MD 20817 B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: COVENTRY HEALTH CARE, INC. 6705 Rockledge Drive, Suite 900 Bethesda, MD 20817 2 REQUIRED INFORMATION 1) Financial Statements and Schedules (and Notes thereto) 2) Consent of Independent Accountants to Incorporation By Reference (attached) SIGNATURES Coventry Health Care, Inc. Retirement Savings Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrators have duly caused this Annual Report to be signed on its behalf by the undersigned hereunto duly authorized. COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN Date: June 25, 1999 By: /s/ DALE B. WOLF ------------------------------- Dale B. Wolf, Plan Adminstrator By: /s/ HARVEY C. DEMOVICK, JR. ------------------------------- Harvey C. DeMovick, Jr., Plan Administrator 3 COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 4 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Administrative Committee of the Coventry Health Care, Inc. Retirement Savings Plan: We have audited the accompanying statement of net assets available for benefits of Coventry Health Care, Inc. Retirement Savings Plan (the "Plan") as of December 31, 1998, and the related statement of changes in net assets available for benefits for the nine-months ended December 31, 1998. 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 audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1998, and the changes in its net assets available for benefits for the nine-months ended December 31, 1998, in conformity with generally accepted accounting principles. Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes and reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP Baltimore, Maryland June 25, 1999 5 COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN TABLE OF CONTENTS
PAGE STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS As of December 31, 1998 1 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS For the Nine-Months Ended December 31, 1998 2 NOTES TO FINANCIAL STATEMENTS AND SCHEDULES As of December 31, 1998 4 ITEM 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES As of December 31, 1998 8 ITEM 27(d)--SCHEDULE OF REPORTABLE TRANSACTIONS For the Nine-Months Ended December 31, 1998 9 SCHEDULES OMITTED BECAUSE THERE WERE NO SUCH ITEMS As of and for the Nine-Months Ended December 31, 1998: Item 27(b) - Schedule of Loans or Fixed-Income Obligations Item 27(c) - Schedule of Leases in Default or Classified as Uncollectible Item 27(e) - Schedule of Nonexempt Transactions
6 COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 1998
DECEMBER 31, 1998 -------------- ASSETS: Investments, at fair value- Principal Life Insurance Company: Guaranteed Interest Account $ 1,022,963 Money Market Separate Account 5,056,207 Government Securities Separate Account 875,004 Bond & Mortgage Separate Account 4,147,727 Stock Index 500 Separate Account 17,362,543 Medium Company Value Separate Account 3,796,865 Small Company Blend Separate Account 1,206,762 Small Company Growth Separate Account 1,105,417 International Stock Separate Account 3,500,568 Neuberger & Berman Genesis Trust 880,218 T. Rowe Price Mid-Cap Growth Fund 3,022,553 Vanguard Asset Allocation Fund 10,199,888 Vanguard Growth & Income Fund 7,533,397 Vanguard PRIMECAP Fund 3,391,894 Vanguard U.S. Growth Fund 3,897,470 Coventry Health Care, Inc. Common Stock 5,237,377 Participant Loans 1,313,393 -------------- Total investments 73,550,246 -------------- Receivables Participant contributions 171,296 Employer contributions 98,386 Interest and dividends receivables 14,919 -------------- Total receivables 284,601 -------------- Total assets available for benefits 73,834,847 -------------- LIABILITIES: Excess contributions payable 3,439 -------------- NET ASSETS AVAILABLE FOR BENEFITS $73,831,408 ==============
The accompanying notes are an integral part of this statement. - 1 - 7 COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE NINE-MONTHS ENDED DECEMBER 31, 1998
NON-PARTICIPANT DIRECTED PARTICIPANT DIRECTED ------------------------ ------------------------------- -------------- PRINCIPAL PRINCIPAL PRINCIPAL MONEY GOVERNMENT GUARANTEED MARKET SECURITIES EXCESS CONTRIBUTIONS INTEREST SEPARATE SEPARATE PAYABLE ACCOUNT ACCOUNT ACCOUNT ------------------------ ------------- ------------ -------------- ADDITIONS: Contributions- Employee $ - $ 658,028 $ 604,229 $275,054 Employer, net of forfeitures (3,439) - - - ------- ---------- ---------- -------- Total contributions (3,439) 658,028 604,229 275,054 ------- ---------- ---------- -------- Investment income- Interest and dividends - - - - Net increase (decrease) in fair market value of investments - - - - Net investment income in pooled separate accounts - 13,918 93,416 10,116 ------- ---------- ---------- -------- Investment earnings - 13,918 93,416 10,116 ------- ---------- ---------- -------- Total additions (3,439) 671,946 697,645 285,170 ------- ---------- ---------- -------- DEDUCTIONS: Benefit distributions - (37,425) (114,776) (8,419) Administrative expenses - (453) (855) (221) ------- ---------- ---------- -------- Total deductions - (37,878) (115,631) (8,640) PARTICIPANT LOAN REPAYMENTS - 5,020 16,337 2,320 PARTICIPANT LOAN DISTRIBUTIONS - (6,467) (14,518) (3,568) TRANSFERS FROM COVENTRY CORPORATION RETIREMENT SAVINGS PLAN - - 4,843,258 617,465 INTERFUND TRANSFERS - 390,342 (370,884) (17,743) ------- ---------- ---------- -------- NET INCREASE (DECREASE) (3,439) 1,022,963 5,056,207 875,004 NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR - - - - ------- ---------- ---------- -------- NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $(3,439) $1,022,963 $5,056,207 $875,004 ======= ========== ========== ========
PARTICIPANT DIRECTED ----------------------------------------------------------------------- PRINCIPAL PRINCIPAL PRINCIPAL MEDIUM SMALL BOND & PRINCIPAL COMPANY COMPANY MORTGAGE STOCK INDEX VALUE BLEND SEPARATE 500 SEPARATE SEPARATE SEPARATE ACCOUNT ACCOUNT ACCOUNT ACCOUNT ------------- ----------------- -------------- -------------- ADDITIONS: Contributions- Employee $ 679,230 $ 2,196,624 $1,862,131 $1,181,721 Employer, net of forfeitures - - - - ---------- ----------- ---------- ---------- Total contributions 679,230 2,196,624 1,862,131 1,181,721 ---------- ----------- ---------- ---------- Investment income- Interest and dividends - - - - Net increase (decrease) in fair market value of investments - - - - Net investment income in pooled separate accounts 26,175 3,371,441 301,949 (58,845) ---------- ----------- ---------- ---------- Investment earnings 26,175 3,371,441 301,949 (58,845) ---------- ----------- ---------- ---------- Total additions 705,405 5,568,065 2,164,080 1,122,876 ---------- ----------- ---------- ---------- DEDUCTIONS: Benefit distributions (182,903) (372,716) (137,873) (108,000) Administrative expenses (1,110) (2,778) (1,426) (609) ---------- ----------- ---------- ---------- Total deductions (184,013) (375,494) (139,299) (108,609) PARTICIPANT LOAN REPAYMENTS 6,529 19,164 10,204 6,838 PARTICIPANT LOAN DISTRIBUTIONS (14,063) (50,757) (16,730) (11,735) TRANSFERS FROM COVENTRY CORPORATION RETIREMENT SAVINGS PLAN 3,931,830 13,014,218 1,939,578 - INTERFUND TRANSFERS (297,961) (812,653) (160,968) 197,392 ---------- ----------- ---------- ---------- NET INCREASE (DECREASE) 4,147,727 17,362,543 3,796,865 1,206,762 NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR - - - - ---------- ----------- ---------- ---------- NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $4,147,727 $17,362,543 $3,796,865 $1,206,762 ========== =========== ========== ==========
--------------------------------------------------------------------- PRINCIPAL SMALL PRINCIPAL COMPANY INTERNATIONAL GROWTH STOCK NEUBERGER & SEPARATE SEPARATE BERMAN ACCOUNT ACCOUNT GENESIS TRUST SUBTOTAL ----------------- --------------- --------------- --------------- ADDITIONS: Contributions- Employee $1,116,469 $1,047,982 $414,575 $10,036,043 Employer, net of forfeitures - - - (3,439) ---------- ---------- -------- ----------- Total contributions 1,116,469 1,047,982 414,575 10,032,604 ---------- ---------- -------- ----------- Investment income- Interest and dividends - - 4,471 4,471 Net increase (decrease) in fair market value of investments - - 3,746 3,746 Net investment income in pooled separate accounts 26,351 468,629 - 4,253,150 ---------- ---------- -------- ----------- Investment earnings 26,351 468,629 8,217 4,261,367 ---------- ---------- -------- ----------- Total additions 1,142,820 1,516,611 422,792 14,293,971 ---------- ---------- -------- ----------- DEDUCTIONS: Benefit distributions (83,194) (127,845) (29,941) (1,203,092) Administrative expenses (583) (1,184) - (9,219) ---------- ---------- -------- ----------- Total deductions (83,777) (129,029) (29,941) (1,212,311) PARTICIPANT LOAN REPAYMENTS 6,718 8,378 1,856 83,364 PARTICIPANT LOAN DISTRIBUTIONS (8,920) (23,654) (2,296) (152,708) TRANSFERS FROM COVENTRY CORPORATION RETIREMENT SAVING PLAN - 2,370,840 - 26,717,189 INTERFUND TRANSFERS 48,576 (242,578) 487,807 (778,670) ---------- ---------- -------- ----------- NET INCREASE (DECREASE) 1,105,417 3,500,568 880,218 38,950,835 NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR - - - - ---------- ---------- -------- ----------- NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $1,105,417 $3,500,568 $880,218 $38,950,835 ========== ========== ======== ===========
The accompanying notes are an integral part of this statement. - 2 - 8 COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE NINE-MONTHS ENDED DECEMBER 31, 1998 (CONTINUED)
PARTICIPANT DIRECTED ----------------------------------------------------- T. ROWE PRICE VANGUARD MID-CAP ASSETS VANGUARD GROWTH ALLOCATION GROWTH & FUND FUND INCOME FUND ---------------- --------------- --------------- ADDITIONS: Contributions- Employee $ 872,184 $ 848,749 $ 959,919 Employer, net of forfeitures - - - ---------- ----------- ---------- Total contributions 872,184 848,749 959,919 ---------- ----------- ---------- Investment income- Interest and dividends - 215,555 40,163 Net increase (decrease) in fair market value of investments 580,124 1,060,042 1,290,126 Net investment income in pooled separate accounts - - - ---------- ----------- ---------- Investment earnings 580,124 1,275,597 1,330,289 ---------- ----------- ---------- Total Additions 1,452,308 2,124,346 2,290,208 ---------- ----------- ---------- DEDUCTIONS: Benefits distributions (86,756) (196,710) (133,118) Administrative expenses - - - ---------- ----------- ---------- Total deductions (86,756) (196,710) (133,118) PARTICIPANT LOAN REPAYMENTS 9,601 8,600 12,286 PARTICIPANT LOAN DISTRIBUTIONS (14,055) (11,490) (14,688) TRANSFERS FROM COVENTRY CORPORATION RETIREMENT SAVINGS PLAN 1,558,558 8,606,118 5,164,884 INTERFUND TRANSFERS 102,897 (330,976) 213,825 ---------- ----------- ---------- NET INCREASE (DECREASE) 3,022,553 10,199,888 7,533,397 NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR - - - ---------- ----------- ---------- NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $3,022,553 $10,199,888 $7,533,397 ========== =========== ==========
PARTICIPANT DIRECTED ------------------------------------------------------ COVENTRY VANGUARD VANGUARD HEALTH CARE, PRIMECAP U.S. GROWTH INC. FUND FUND COMMON STOCK --------------- --------------- ----------------- ADDITIONS: Contributions- Employee $1,132,898 $1,039,750 $ 242,158 Employer, net of forfeitures - - 2,090,653 ---------- ---------- ---------- Total contributions 1,132,898 1,039,750 2,332,811 ---------- ---------- ---------- Investment income- Interest and dividends 21,439 16,908 - Net increase (decrease) in fair market value of investments 596,337 679,226 838,543 Net investment income in pooled separate accounts - - - ---------- ---------- ---------- Investment earnings 617,776 696,134 838,543 ---------- ---------- ---------- Total Additions 1,750,674 1,735,884 3,171,354 ---------- ---------- ---------- DEDUCTIONS: Benefits distributions (62,562) (147,177) (84,241) Administrative expenses - - - ---------- ---------- ---------- Total deductions (62,562) (147,177) (84,241) PARTICIPANT LOAN REPAYMENTS 8,701 11,123 36,148 PARTICIPANT LOAN DISTRIBUTIONS (8,576) (14,374) (1,482) TRANSFERS FROM COVENTRY CORPORATION RETIREMENT SAVINGS PLAN 1,363,595 1,745,909 2,228,841 INTERFUND TRANSFERS 340,062 566,105 (113,243) ---------- ---------- ---------- NET INCREASE (DECREASE) 3,391,894 3,897,470 5,237,377 NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR - - - ---------- ---------- ---------- NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $3,391,894 $3,897,470 $5,237,377 ========== ========== ==========
PARTICIPANT DIRECTED ---------------------------------- PARTICIPANT LOANS RECEIVABLES TOTAL --------------- ------------- --------------- ADDITIONS: Contributions- Employee $ 270,971 $171,296 $15,573,968 Employer, net of forfeitures - 98,386 2,185,600 ---------- -------- ----------- Total contributions 270,971 269,682 17,759,568 ---------- -------- ----------- Investment income- Interest and dividends - 14,919 313,455 Net increase (decrease) in fair market value of investments - - 5,048,144 Net investment income in pooled separate accounts - - 4,253,150 ---------- -------- ----------- Investment earnings - 14,919 9,614,749 ---------- -------- ----------- Total Additions 270,971 284,601 27,374,317 ---------- -------- ----------- DEDUCTIONS: Benefits distributions - - (1,913,656) Administrative expenses - - (9,219) ---------- -------- ----------- Total deductions - - (1,922,875) PARTICIPANT LOAN REPAYMENTS (169,823) - - PARTICIPANT LOAN DISTRIBUTIONS 217,373 - - TRANSFERS FROM COVENTRY CORPORATION RETIREMENT SAVINGS PLAN 994,872 - 48,379,966 INTERFUND TRANSFERS - - - ---------- -------- ----------- NET INCREASE (DECREASE) 1,313,393 284,601 73,831,408 NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR - - - ---------- -------- ----------- NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $1,313,393 $284,601 $73,831,408 ========== ======== ===========
The accompanying notes are an integral part of this statement. - 3 - 9 COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS AND SCHEDULES AS OF DECEMBER 31, 1998 1. PLAN DESCRIPTION: The following description of the Coventry Health Care, Inc. Retirement Savings Plan (the "Plan") is provided for general information purposes only. More complete information regarding the Plan's provisions may be found in the Plan document. GENERAL Coventry Health Care, Inc. (the "Company") adopted a savings plan and trust effective April 1, 1998. The Plan is a defined contribution plan established by Coventry Health Care, Inc. under the provisions of Section 401(a) of the Internal Revenue Code ("IRC"), which includes a qualified cash or deferred arrangement as described in Section 401(k) of the IRC, for the benefit of eligible employees of the Company. All employees of the Company are automatically enrolled to participate in the Plan upon commencement of employment. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended. Effective April 1, 1998, Coventry Health Care, Inc. (formerly "Coventry Corporation") completed its acquisition of certain health plans of Principal Health Care, Inc. ("PHC") from Principal Life Insurance Company. The Plan commenced operations on April 1, 1998. On April 1, 1998, any prior PHC participant account balances, including participant loans, included in the assets of another qualified retirement plan were rolled over into the Plan at the election of the former PHC employees. During 1998, approximately $11.5 million in PHC participant account balances were rolled over into the Plan and are included in employee contributions in the accompanying statement of changes in net assets available for benefits. Effective October 1, 1998, the Plan was merged with the Coventry Corporation Retirement Savings Plan (the "Former Plan") and substantially all of the assets of the Former Plan were transferred to the Plan. All employees that were participants under the Former Plan became participants in the Plan on April 1, 1998. PLAN ADMINISTRATION Under a trust agreement dated March 13, 1998, the Bankers Trust Company was appointed trustee for the Plan. The Plan is administered by an employee benefits committee, which is appointed by the Board of Directors of the Company. CONTRIBUTIONS Eligible employees can contribute an amount up to 15 percent of compensation, as defined by the Plan, subject to certain limitations under the IRC. In addition, the Company provides a matching contribution equal to 100 percent of each participant's contribution up to a maximum of 3 percent of compensation, and 50 percent of each participant's contribution in excess of 3 percent up to a maximum of 6 percent of compensation. VESTING Participants are fully vested in their contributions and the earnings thereon. Vesting in employer matching contributions is based on years of service. For former PHC employees, if the employment date was before July 1, 1997, participants are fully vested in their employer matching contributions. If the employment commencement date with PHC occurred on or after July 1, 1997, but before April 1, 1998, a participant vests in their employer matching contributions according to the following schedule: Less than one year 0% One year or more 100% - 4 - 10 If the employment commencement date with the Company occurs on or after April 1, 1998, a participant vests in their employer matching contributions according to the following schedule: Less than one year 0% One year 50% Two years or more 100% FORFEITED ACCOUNTS At December 31, 1998, forfeited nonvested accounts totaled $475,972. These accounts will be used to reduce future employer contributions. During 1998, $386 in forfeited nonvested accounts were used to reduce employer contributions. BENEFITS Upon termination of service due to death, disability, or retirement, a participant may elect to receive an amount equal to the value of the participant's vested interest in his or her account. The form of payment is a lump-sum distribution. PARTICIPANT ACCOUNTS Individual accounts are maintained for each of the Plan's participants to reflect the participant's contributions and related employer matching contributions, as well as the participant's share of the Plan's income and any related administrative expenses. Allocations are based on the proportion that each participant's account balance has to the total of all participants' account balances. INVESTMENT OPTIONS Participants may direct employee contributions and any related earnings into sixteen investment options. Participants may change their investment elections daily. Employer contributions are funded with Coventry Health Care, Inc. Common Stock. A description of each investment option is provided below: PRINCIPAL GUARANTEED INTEREST ACCOUNT-- This account invests in private-market bonds, commercial mortgages, and mortgage-backed securities. Money placed in this account earns a guaranteed interest rate for a specific number of years. PRINCIPAL MONEY MARKET SEPARATE ACCOUNT -- This account invests in high-quality commercial paper (short-term, unsecured corporate loans). The average maturity is usually less than one month. PRINCIPAL GOVERNMENT SECURITIES SEPARATE ACCOUNT -- This account invests in various types of government securities such as Government National Mortgage Association Certificates (GNMA), Fannie Maes (FNMA Federal National Mortgage Association), Freddie Macs (FHLMC Federal Home Loan Mortgage Company) and Sallie Maes (SLMA Student Loan Marketing Association). PRINCIPAL BOND & MORTGAGE SEPARATE ACCOUNT -- This account invests in intermediate-term, investment-grade fixed-income securities; mainly private placement bonds and commercial mortgages. This account may also invest in publicly traded bonds. PRINCIPAL STOCK INDEX 500 SEPARATE ACCOUNT -- This account invests in the common stocks of those companies listed in the Standard & Poor's 500 Stock Index ("S & P 500"). The S & P 500 Index is a measure of stock earnings based on the stocks of 500 of the largest companies. PRINCIPAL MEDIUM COMPANY VALUE SEPARATE ACCOUNT -- This account invests in medium-sized stocks whose prices -- relative to their companies' profits, assets, and other value measures -- are lower than average. Many of these stocks are temporarily out of favor with investors and can be bought at bargain prices. PRINCIPAL SMALL COMPANY BLEND SEPARATE ACCOUNT -- This account invests in stocks of smaller, seasoned companies where potential for long-term growth is expected to be above average. The account looks both at "growth" and "value" stocks, resulting in a "blend" portfolio. PRINCIPAL SMALL COMPANY GROWTH SEPARATE ACCOUNT -- This account invests in small stocks with above-average growth characteristics. Companies held in this account are in the early stages of development, which means a higher level of risk. PRINCIPAL INTERNATIONAL STOCK SEPARATE ACCOUNT -- This account invests in common stocks of companies located outside the U.S., mainly in Western Europe and Asia. Countries and industries are selected after evaluating the economic, social, and political factors of each market. NEUBERGER & BERMAN GENESIS TRUST -- This trust invests primarily in common stocks of companies with small market capitalization up to $1.5 billion at the time of investment. The fund seeks to achieve long-term capital appreciation by investing in stocks that appear to be undervalued and are issued by companies with proven management, sound finances, and strong potential for market growth. T. ROWE PRICE MID-CAP GROWTH FUND -- This fund seeks long-term growth and invests in the common stocks of medium-sized companies. - 5 - 11 VANGUARD ASSET ALLOCATION FUND -- This fund invests in a mix of stocks, long-term U.S. Treasury bonds, and short-term money market instruments. Computer analysis is used to determine how much of the Fund's assets to direct to each category at any given time. VANGUARD GROWTH & INCOME FUND -- This fund invests in companies that are less expensive than the market as a whole. These companies pay relatively high dividends and are fairly stable. VANGUARD PRIMECAP FUND --This fund primarily invests in companies with market values between $1 billion and $5 billion. VANGUARD U.S. GROWTH FUND -- This fund invests in stocks of high-quality, seasoned U.S. Companies with records of exceptional growth. The portfolio emphasizes companies with strong positions in their markets, reasonable financial strength, and low sensitivity to changing economic contributions. COVENTRY HEALTH CARE, INC. COMMON STOCK -- This fund invests primarily in Coventry Health Care, Inc. Common Stock. Due to the trading limitations or the need for liquidity, a portion of the fund may be invested in short-term money market investments. Because of the lack of diversification, this fund has a high degree of volatility and investment risk. PARTICIPANT LOANS A participant may borrow a maximum of the lesser of $50,000 or 50 percent of his or her vested account balance with a minimum loan amount of $500. Loans are repayable through payroll deductions over periods ranging up to five years. The interest rate is determined by the plan administrator based on prevailing market rates available for similar loans from commercial lending institutions and is fixed over the life of the note. The interest rates at December 31, 1998, ranged from 7.00 percent to 10.00 percent. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF ACCOUNTING The accompanying financial statements are prepared on the accrual basis of accounting. USE OF ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires the Plan's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. INCOME RECOGNITION Interest income is recorded as earned on the accrual basis. Dividend income is recorded on the ex-dividend date. INVESTMENT VALUATION Investments of the Plan are stated at fair market value based on quoted net asset values on the last business day of the Plan year. Participant loans are valued at cost, which approximates fair value. ADMINISTRATIVE EXPENSES During the nine-months ended December 31, 1998, the Company paid all administrative expenses on behalf of the Plan. Administrative expenses paid by the Company were $89,456 in 1998. Starting January 1, 1999, administrative expenses will be paid by the Plan and allocated to individual participant accounts. PAYMENT OF BENEFITS Benefits are recorded when paid out of the Plan. 3. INVESTMENTS: The values of individual assets that represent 5 percent or more of the Plan's net assets as of December 31, 1998, are as follows: 1998 ------------- Principal Money Market Separate Account $ 5,056,207 Principal Bond & Mortgage Separate Account 4,147,727 Principal Stock Index 500 Separate Account 17,362,543 Principal Medium Company Value Separate Account 3,796,865 - 6 - 12 Vanguard Asset Allocation Fund 10,199,888 Vanguard Growth & Income Fund 7,533,397 Vanguard U.S. Growth Fund 3,897,470 Coventry Health Care, Inc. Common Stock 5,237,377 4. TAX STATUS: The Plan has not yet received a determination letter from the Internal Revenue Service stating that the Plan, as designed, is in compliance with the applicable requirements of the Internal Revenue Code. However, the Plan Administrator and the Plan's tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan's financial statements. 5. PLAN TERMINATION: Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of plan termination, participants will become 100 percent vested in their account balances. - 7 - 13 SCHEDULE I COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN ITEM 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF DECEMBER 31, 1998
IDENTITY OF ISSUE, BORROWER, LESSOR, OR SIMILAR PARTY DESCRIPTION OF INVESTMENT COST CURRENT VALUE - -------------------------------- ---------------------------------- --------------- --------------- Principal Life Insurance Company: Guaranteed Interest Accounts Fixed income fund $ 1,009,165 $ 1,022,963 Money Market Separate Account Money market 5,019,221 5,056,207 Government Securities Separate Account U.S. government bond fund 864,630 875,004 Bond & Mortgage Separate Account Fixed income fund 4,093,975 4,147,727 Stock Index 500 Separate Account Equity mutual fund 15,579,737 17,362,543 Medium Company Value Separate Account Equity mutual fund 3,635,047 3,796,865 Small Company Blend Separate Account Equity mutual fund 1,244,834 1,206,762 Principal Small Company Growth Separate Account Equity mutual fund 1,059,094 1,105,417 International Stock Separate Account Equity mutual fund 3,294,131 3,500,568 Neuberger & Berman Genesis Trust Equity mutual fund 879,176 880,218 T. Rowe Price Mid-Cap Growth Fund Equity mutual fund 2,662,362 3,022,553 Vanguard Asset Allocation Fund Mixed mutual fund 9,975,576 10,199,888 Vanguard Growth & Income Fund Equity mutual fund 6,980,616 7,533,397 Vanguard PRIMECAP Fund Equity mutual fund 3,065,959 3,391,894 Vanguard U.S. Growth Fund Equity mutual fund 3,617,974 3,897,470 Coventry Health Care, Inc. Common Stock Common stock 4,594,905 5,237,377 * Participant Loans Maturing at various dates; interest rates ranging from 7.00% to 10.00% 1,313,393 1,313,393 ------------- ------------- $ 68,889,795 $ 73,550,246 ============= =============
* Party-in-interest The accompanying notes are an integral part of this schedule. - 8 - 14 SCHEDULE II COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN ITEM 27(d)--SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE NINE-MONTHS ENDED DECEMBER 31, 1998
PURCHASES ------------------------------ NUMBER OF PURCHASE IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET TRANSACTIONS PRICE --------------------------------------------- ---------------------------------------- -------------- ------------ * Principal Life Insurance Company Money Market Fund 107 $7,590,923 * Principal Life Insurance Company Bond and Mortgage Fund 114 5,841,957 * Principal Life Insurance Company Stock Index 500 Fund 159 21,489,882 * Principal Life Insurance Company Medium Company Fund 124 4,604,817 * Principal Life Insurance Company International Stock Fund 123 4,437,768 * Delaware Charter Guarantee & Trust Company T. Rowe Price Mid-Cap Growth Fund 124 3,393,935 * Delaware Charter Guarantee & Trust Company Vanguard Asset Allocation Fund 141 13,633,054 * Delaware Charter Guarantee & Trust Company Vanguard Growth and Income Fund 147 9,300,276 * Delaware Charter Guarantee & Trust Company Vanguard PRIMECAP Fund 127 3,771,942 * Delaware Charter Guarantee & Trust Company Vanguard U.S. Growth Fund 148 4,658,494 * Bankers Trust Company Coventry Health Care, Inc. Common Stock 138 4,932,058
SALES ------------------------------- NUMBER OF IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET TRANSACTIONS SELLING PRICE --------------------------------------------- ---------------------------------------- ------------ --------------- * Principal Life Insurance Company Money Market Fund 127 $2,586,272 * Principal Life Insurance Company Bond and Mortgage Fund 140 1,768,073 * Principal Life Insurance Company Stock Index 500 Fund 191 6,391,202 * Principal Life Insurance Company Medium Company Fund 166 969,420 * Principal Life Insurance Company International Stock Fund 158 1,183,206 * Delaware Charter Guarantee & Trust Company T. Rowe Price Mid-Cap Growth Fund 75 771,416 * Delaware Charter Guarantee & Trust Company Vanguard Asset Allocation Fund 78 3,719,953 * Delaware Charter Guarantee & Trust Company Vanguard Growth and Income Fund 75 2,453,207 * Delaware Charter Guarantee & Trust Company Vanguard PRIMECAP Fund 74 757,495 * Delaware Charter Guarantee & Trust Company Vanguard U.S. Growth Fund 75 1,095,037 * Bankers Trust Company Coventry Health Care, Inc. Common Stock 116 342,516
SALES ---------------------------------- IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET COST OF ASSETS NET GAIN (LOSS) --------------------------------------------- ---------------------------------------- ---------------- ----------------- * Principal Life Insurance Company Money Market Fund $2,571,702 $ 14,570 * Principal Life Insurance Company Bond and Mortgage Fund 1,747,983 20,090 * Principal Life Insurance Company Stock Index 500 Fund 5,910,144 481,058 * Principal Life Insurance Company Medium Company Fund 969,771 (351) * Principal Life Insurance Company International Stock Fund 1,143,637 39,569 * Delaware Charter Guarantee & Trust Company T. Rowe Price Mid-Cap Growth Fund 731,573 39,843 * Delaware Charter Guarantee & Trust Company Vanguard Asset Allocation Fund 3,657,478 62,475 * Delaware Charter Guarantee & Trust Company Vanguard Growth and Income Fund 2,319,660 133,547 * Delaware Charter Guarantee & Trust Company Vanguard PRIMECAP Fund 705,984 51,511 * Delaware Charter Guarantee & Trust Company Vanguard U.S. Growth Fund 1,040,519 54,518 * Bankers Trust Company Coventry Health Care, Inc. Common Stock 337,153 5,363
* Party-in-interest The accompanying notes are an integral part of this schedule. - 9 - EX-1 2 CONSENT OF ARTHUR ANDERSEN LLP 1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report dated June 25, 1999, included in this Form 11-K, into the Company's previously filed registration statements on Form S-8 (File No. 333-36735, File No. 333-39581, and File No. 333-75615). /s/ Arthur Andersen LLP Baltimore, Maryland June 25, 1999 -----END PRIVACY-ENHANCED MESSAGE-----