Delivering best-in-class service and solutions.

2008 ANNUAL REPORT

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Our Mission

We are a national dental insurance companyproviding high-quality, cost-effective dental benefitprograms. Our mission is to create superior valuefor our stakeholders: customers, participatingdentists, employees, our owners and thecommunities we serve.

Our Vision

Our vision is to be the dental industry leader byproviding our customers with the best value indental benefit programs through:

• Comprehensive dental networks and access to care

• Innovative products and services

• Competitive and fair pricing

• Outstanding service delivered by highly committed employees

• Commitment to improving members’oral health

Table ofContents

1 Leadership Message

2 Overview

3 Best-In-Class Service

4 Best-In-Class Solutions

5 Focusing on WellnessSaving Time

6 Making a Difference

7 Financials

8 Senior Management Team

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2008 was another solid year for United Concordia Dental.We continued to increase our membership base; exceed ourbenchmarks for service, satisfaction and network growth; anddevelop new programs designed to sustain our success into2009 and beyond.

Revenue approached $1.4 billion with a pre-tax profit ofmore than $61 million.We invested in our people, ouroperational capabilities and our systems infrastructure. Ofparticular note, we began to lay the groundwork for newonline capabilities that will complement personal interaction,allowing our various stakeholders to communicate with uswhen and how they choose.

In 2008, we were awarded the new Active Duty DentalProgram (ADDP), with an effective date of August 1, 2009.We will provide a network of over 50,000 dentists for anexpected 100,000 active duty service members (ADSMs)annually.We also implemented the NCFlex dental programfor the State of North Carolina, and saw a doubling ofsubscribers in our Federal Employee Dental and VisionProgram (FEDVIP) offering.We exceeded our goal fornetwork growth, adding nearly 2,200 new dentists to ournetworks.We also introduced a new product enhancement,Preventive Incentive®

Leadership Message

To each of you who made2008 such a successfulyear—our members, ourclients, our network providers,our producers, our businesspartners and especially theUnited Concordia Dentalteam—we thank you.

Daniel J. LebishChairman and CEO

F. G. “Chip” Merkel, IIIPresident and COO

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2008 was another solid year for United Concordia Dental.We continued to increase our membership base; exceed ourbenchmarks for service, satisfaction and network growth; anddevelop new programs designed to sustain our success into2009 and beyond.

Revenue approached $1.4 billion with a pre-tax profit ofmore than $61 million.We invested in our people, ouroperational capabilities and our systems infrastructure. Ofparticular note, we began to lay the groundwork for newonline capabilities that will complement personal interaction,allowing our various stakeholders to communicate with uswhen and how they choose.

In 2008, we were awarded the new Active Duty DentalProgram (ADDP), with an effective date of August 1, 2009.We will provide a network of over 50,000 dentists for anexpected 100,000 active duty service members (ADSMs)annually.We also implemented the NCFlex dental programfor the State of North Carolina, and saw a doubling ofsubscribers in our Federal Employee Dental and VisionProgram (FEDVIP) offering.We exceeded our goal fornetwork growth, adding nearly 2,200 new dentists to ournetworks.We also introduced a new product enhancement,Preventive Incentive®, which extends a member’s benefitdollars by exempting covered diagnostic and preventiveservices from counting against the annual maximum.

Best-in-class service continues to be our hallmark.Whetherit is measured in the prompt, accurate payment of more than13 million claims; a friendly, knowledgeable response to oneof nearly 10 million phoned, written or e-mailed inquiries;or the flawlessly executed implementation of a new client,we work hard to exceed expectations.And it’s reflected notonly in our financial success, but also in our client,membership and network-provider retention.

While we expect to continue to grow in 2009, we know thatour success depends very much on how we adapt to thebreadth and depth of these challenging economic times.Weintend to manage through this period by being prudentmanagers of both time and expenses, while also recognizingand supporting the needs of our clients.We’ve alreadyimplemented some expense-control measures as part of ourongoing repositioning and are prepared to take other actionsshould they be warranted.

Despite the ambiguities in the economy and theuncertainties surrounding health care reform’s effect on ourindustry, we are looking to our future.We are investing incrucial elements within our company in order to positionourselves to take advantage of the opportunities that willarise when the economy recovers.We are investing in ourpeople through improved communications, leadershiptraining, job shadowing and recognition programs, and theimplementation of new core competencies, known as PACE(passionate, accountable, collaborative and ethical).We areinvesting in our infrastructure through a multi-year eBusinessinitiative.We are investing in our growth through newproduct initiatives, cross-sales with our parent company andsister subsidiaries, and new strategic relationships. Finally, weare investing in our communities, with a minimum of 50dental clinics to assist underserved individuals, and a greateremphasis on volunteerism and outreach.

To each of you who made 2008 such a successful year—ourmembers, our clients, our network providers, our producers,our business partners and especially the United ConcordiaDental team—we thank you.

Leadership Message

To each of you who made2008 such a successfulyear—our members, ourclients, our network providers,our producers, our businesspartners and especially theUnited Concordia Dentalteam—we thank you.

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At United Concordia, ourcompany-wide dedication todelivering best-in-class productsand services is evident in thedesign, implementation,administration and servicing ofour dental benefit programs.Thisfocus, along with our position asone of the nation’s largest dentalinsurers, enabled us to achievesolid financial results for 2008.

United Concordia...m Serves nearly 8 million members worldwide1

m Covers more than 1.8 million active duty service familymembers and National Guard Reservists and theirfamilies as the selected dental carrier for the Departmentof Defense’s TRICARE Dental Program1

m Holds DIACAP3 certification

m Has nearly 40 years of dental expertise1

m Posted revenues of $1.4 billion in 20082

m Offers the only dental plans endorsed by the AmericanHospital Association4

m Maintains an A- (Excellent) A.M. Best rating5

m Owns Advantage Plus, the largest discounted PPOnetwork in the nation, with 67,600 dentists at nearly130,000 total locations1, and offering a 27% discount6

m Retained 96% of members over the past 5 years2

m Means satisfied members: more than 9 out of 10members are satisfied with their United ConcordiaDental program7

m Processed more than 13.3 million claims in 20082

m 97.9% within 14 days2

m 99.9% within 30 days2

m Handled over 50% of claims and over 70% of inquirytransactions electronically as of 12/08

m Resolves 95% of telephone inquiries on first-contact1

m Documents 100% of all member-inquiry calls

m Provides automated access to information 24/7, throughour Internet-based services and Interactive VoiceResponse (IVR) system

1. Based on United Concordia internal research & reports, 4/09. 2. Based on UnitedConcordia internal research & reports, 12/08. 3. Department of Defense InformationAssurance Certification and Accreditation Process since 02/08. 4.AHA-solutions.org,02/09. 5.A.M. Best Insurance Reports, 06/09.Applies to United ConcordiaCompanies, Inc., United Concordia Insurance Company, United Concordia InsuranceCompany of NY and United Concordia Life and Health for overall financial strength andability to meet ongoing obligations to policyholders. 6. Discounts based on national average,04/08. 7. United Concordia survey, members utilizing provider network, 2006.

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More than 9 out of 10 members are satisfied with their United Concordia Dental program.7

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Best-in-Class ServiceService excellence has been and continues to be ourhallmark.Whether it is measured in the prompt, accuratepayment of more than 13 million claims; a friendly,knowledgeable response to one of nearly 10 millioninquiries from members, dentists and group administrators;or a flawlessly executed implementation of a new client,we work hard to exceed expectations.And it’s reflected notonly in our financial success, but also in our client,membership and network-provider retention.

Our commitment to service and quality is affirmed inmany ways. United Concordia’s members express theirsatisfaction year after year in the surveys we conduct, bothamong our membership base as a whole and for specificclients. 2008 was no exception. In fact, we achieved ourhighest member-satisfaction scores to datein our annual national PPO member survey.

New clients and members provide anothermeasurement. Our growth came from thepublic and private sectors, from clients largeand small, from 46 states across the nation.And it’s expressed in persistency of currentclients and members.That we were awardedthe new Active Duty Dental Program forAugust 1, 2009 implementation,implemented a new state dental programand renewed two others demonstrates thesuccess of our collaborative approach indelivering value and service to our clientsand their members.

Our claims staff receives initial and ongoingtraining, and with an average tenure of nineyears, there’s little that they haven’t alreadyseen and handled efficiently.They work as ateam with our customer servicerepresentatives to resolve inquiries quickly.Our customer service personnel receiveextensive training as well, to ensure that

they can deliver fast and accurate service to ourmembers, group administrators and dentists. Not a daygoes by without letters, phone calls and emails thankingus for our dedication and commitment to them andtheir needs.

We are also very proud to serve more than 1.8 millionactive duty service family members and National Guardand Reservists and their families as the selected dentalcarrier for the Department of Defense’s TRICAREDental Program.We appreciate the challenges ourmilitary service members and their families face each dayand we’re dedicated to ensuring that they receive theextra care and attention they deserve.

... went above and beyond to help me. She is avery, very good customer service representative.[She] is top notch!

~ Member, Hawaii

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…is excellent! He is professional, polite – he went above and beyond for me. Customer Servicelike this is few and far between.

~ Member, North Carolina

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The TDP rep was wonderful and answered all myquestions. I wish United Concordia handled themedical claims as well.

~ Military Spouse, California

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Best-in-Class SolutionsAs soon as a new client decides to move to UnitedConcordia, one of our experienced teams ofimplementation specialists immediately beginsworking directly with the client to get their UnitedConcordia dental plans up and running in a verytimely manner.Then an account service team isassigned to the client to ensure that day-to-day needsare met.

To support both small businesses and the producerswho represent them, we created the Small BusinessUnit (SBU).The SBU is a team of experienced salesand service representatives who are experts inhandling the needs of small businesses (group size 2 -50).The SBU team is available to brokers and groupadministrators to address their questions and concerns.

In late 2008, United Concordia began offering freecontinuing-education classes for the producercommunity and will expand the initiative in 2009.Producers must attend continuing-education classes onan annual basis in order to keep their insurancelicenses up to date.While many producers prefer totake these classes in person, they are often deterred byeither lack of availability and/or cost considerations.

Our goal is to offer classes that are convenient and atno cost for producers.These classes promote acommon knowledge of industry trends, terminology,requirements and specifications, thus benefiting notonly the attendees, but carriers and clientsas well.

Access to care remains a key element in oursuccess.This goes beyond ensuring thatthere are enough network dental providersin the right locations to serve ourmembers—a key element in membersatisfaction. Provider satisfaction withUnited Concordia is equally important in

recruiting and retaining our dentist networks. Ourprofessional relations representatives not onlyrecruit dentists into the network, but also serve astheir advocates within United Concordia. OurNational Dental Advisory Council, comprised of11 practicing dentists, is another way we ensurethat dentists’ concerns and needs are met.

We value each of our stakeholders highly, anddedicate ourselves to exceeding expectations.Wework to understand each stakeholder’s uniqueneeds and to tailor solutions to meet those needs.

Everyone involved in the implementation of the dental plan…were ontop of their game in regards to issues needing addressing.This was theeasiest implementation I have ever experienced.

~ Phyllis L. Perry, State of North Carolina Flex Program

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The implementation team was great. I enjoyedworking with everyone in setting up the account.(The Implementation Manager) was very detailedand kept us abreast of any and all changes.

~ Lori Carson, Cubic Corporation

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Focusing on Wellness In recent years, researchers have found that poor oral health isassociated with a range of health problems, includingcardiovascular disease, low-birthweight and preterm births,diabetes, respiratory disease, and certain types of cancer.Andthe list is growing. In order to help our members maintaingood oral health, we offer benefit plan features and informationthat encourage our members to obtain preventive care, therebyreducing their risk of developing more serious oral and overallhealth problems.

In 2008, we launched a new benefit feature, PreventiveIncentive®, which enables members’ benefits dollars to gofarther.With Preventive Incentive, all covered Class IDiagnostic and Preventive dental services are exempted fromapplying against a member’s annual plan maximum.These

services may include cleanings, exams, x-rays, palliativetreatment, and fluoride treatments and sealants for dependentchildren.

The Smile for Health® Maternity Dental Benefit is a standardbenefit feature that provides pregnant women with anadditional dental cleaning during pregnancy.This extra cleaningcan help reduce the risk of periodontal (gum) disease whichhas been linked to premature and low-birthweight babies, aswell as help control pregnancy gingivitis.

Our online Smile for Health® Dental Health Center providesmembers with information on the possible connectionbetween oral health and overall health, details on proper dentalcare throughout life, oral health videos and a kids’ corner tokeep tots through teens interested in their dental health.

Saving TimeTime is a precious resource for all of our stakeholders.Wecontinue to design and offer new solutions that make it easierto do business with us, as well as save time and money for thosewhom we serve and with whom we work.

Benefits administrators today wear many hats.We introducedour secure online eBill system during 2008. eBill is a convenienttool that clients can use to review and pay their bill quickly andeasily, whether it be premium or administrative fees and claimsreimbursement. In 2009 we will introduce eReporting, whichwill enable them to run standard reports whenever they want.

Making it easy for producers to sell United Concordia’sproducts is an ongoing goal for us.We work to provide themwith the resources they need to quickly and efficiently addresstheir clients’ dental benefits needs.Toward that end, in February2008, United Concordia released ConcordiaConnect, an onlinesupport tool for producers.This new technology allows brokersand consultants to instantly issue standard proposals and rates,request quotes for experience-rated groups, view and export

detailed commission payment reports, reference updatedproduct information and news, as well as review current andrequest new state appointments.

Dentists’ offices are busy places.With our online tools, provideroffices can check on claims and payment status. Using MyPatients’ Benefits, office staff can confirm a patient’s eligibilityand see plan specifics, instantly.Approximately 50% of claimsthat we receive are submitted electronically, speeding theadjudication process…and helping the environment.

Members will have access to a cost estimator tool through My Dental Benefits. In 2008 we introduced the ability formembers to sign up for paperless explanation of benefitsstatements.This builds on the enthusiastic acceptance of MyDental Benefits as a means of making available certificates ofcoverage to our members.This not only is more convenient for them, but it also helps all of us be more environmentallyconscious.

The future of dentistry is very exciting, and will include evidence-based advancementsin dental technology that will better meet the needs of dental patients. In addition, wewill likely have the ability to tailor dental benefit programs to an individual’s uniqueneeds based on health status and life stage.

~ Paul Manos, DDS, United Concordia California Dental Director

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Free Dental ClinicsDuring 2008, we sponsored 30 free dental clinics,providing more than $100,000 of free dental services to nearly 2,500 individuals without dental insurance.We are deeply appreciative of the volunteer dentists,hygienists and others in the community who staff theclinics.We work with our parent company,

Highmark Inc., and sister subsidiaries to sponsor some ofthe clinics; others are the result of collaborations withdental schools and community dental clinics.

Dental services performed at these clinics vary bylocation and include screenings, cleanings, x-rays,restorative treatments and sealants. Patients also learn

about proper oral hygiene and receive apacket containing a toothbrush, floss andoral health education information.

Through March 2009, UnitedConcordia has sponsored 19 clinics,providing nearly $100,000 in free dentalservices.This puts us well on the path toour goal of at least 50 clinics across thecountry this year.

We take very seriously our responsibility to help thecommunities we serve.We believe that strategic, sociallyresponsible initiatives create strong and vibrantcommunities and help enhance our performance.

Through various program objectives, including corporategiving, community outreach, outreach to military servicemembers and their families, and providing oral health

care to underserved individuals, United Concordia workswith groups and organizations to offer professionaldevelopment, education and health service opportunities.Employee involvement is the cornerstone of UnitedConcordia’s community involvement, as it reflects thehigh priority United Concordia places on being a goodcorporate citizen in the communities in which we liveand work.

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Making a Difference

United Concordia is at the top of a short list of truly communityminded corporations that look at the big picture of service to othersand the greater good.

~ Rex Law, DDS, Chair,Texas Oral Health Coalition

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Harrisburg Area Community College (HACC) Dental Hygiene Program appreciates the supportand interest that United Concordia has shown to our program.We have partnered together to providedental care to underserved children in the Harrisburg area through United Concordia’s annual FreeDay of Care at our clinic.These children have been the recipients of free dental services provided byUnited Concordia volunteer dentists and HACC dental hygiene students.These volunteeropportunities enable our students to provide preventive services in a “real world” setting and encouragethem to “give back” to their community.This year, United Concordia has also shown support of ourstudents in the form of $5,000.00 in scholarship aid to first year dental hygiene students.

~ Sandra Z. Zagar, RDH, MSA, Dental Hygiene Program Director, Harrisburg Area Community College

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FinancialsCONSOLIDATED BALANCE SHEETSAs of December 31, 2008 2008 2007(in thousands)

AssetsCash and cash equivalents $ 231,052 $ 245,449Investments 206,681 142,967Receivables 145,270 138,211Other Assets 47,618 47,127

Total Assets $ 630,621 $ 573,754

Liabilities and Stockholders’ Equity

Claims outstanding $ 106,382 $ 117,829Unearned subscription income 73,316 78,115Other payables and accrued expenses 100,502 77,818

Total Liabilities 280,200 273,762Stockholders’ equity 350,421 299,992

Total Liabilities and Stockholders’ Equity $ 630,621 $ 573,754

CONSOLIDATED STATEMENTS OF OPERATIONSFor the year ended December 31, 2008 2008 2007(in thousands)

Revenue $ 1,408,923 $ 1,310,009Dental care expenses 1,093,376 1,019,288Administrative and other expenses 221,718 204,841

Total Expenses 1,315,094 1,224,129Income before taxes 93,829 85,880Provision for income taxes 32,787 28,958

Net Income $ 61,042 $ 56,922

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the year ended December 31, 2008 2008 2007(in thousands)

Net income $ 61,042 $ 56,922 Adjustments to reconcile net income to cash flows

provided by operating activities (12,121) 5,871 Net cash provided by operating activities 48,921 62,793 Net cash provided by (used in) investing activities (66,745) 24,232 Net cash provided by (used in) financing activities 3,427 (11,231)

Net (decrease) increase in cash andcash equivalents (14,397) 75,794

Cash and cash equivalents at beginning of year 245,449 169,655 Cash and Cash Equivalents at End of Year $ 231,052 $ 245,449

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Senior Management TeamDaniel J. Lebish*

Chairman and Chief Executive Officer

F. G. “Chip” Merkel, III*

President and Chief Operating Officer

Jon K. SeltenheimSenior Vice President, Customer Service Operations

Daniel J.WrightSenior Vice President, Finance

Lawrence D. McKinley, DDSCorporate Vice President,TRICARE Dental Program

Harlon L. RobinsonCorporate Vice President, Human Resources andAdministration

Karen A.WhiteselCorporate Vice President, Professional Relations

Richard P. Klich, DMDVice President and National Dental Director

Sandra F. Stefanic*

Vice President, Dental Enterprise Information Services

Richard J. Enterline*

Vice President and Deputy General Counsel

From left to right: Daniel Wright; Jon Seltenheim; Richard Klich, DMD; Lawrence McKinley, DDS; Harlon Robinson; Karen Whitesel.

*Not pictured

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Office LocationsCORPORATE HEADQUARTERS

United Concordia 4401 Deer Path Road Harrisburg, PA 171101-800-972-4191

REGIONAL OFF ICES

400 Vestavia ParkwaySuite 205Birmingham, AL 35216Phone: 205-824-1235Toll Free: 800-554-6155

2198 East Camelback RoadSuite 260Phoenix, AZ 85016Phone: 602-667-2200Toll Free: 800-998-8224

516 West Shaw AvenueSuite 200, Office #17Fresno, CA 93704Phone: 559-221-9400Toll Free: 888-308-8224

4900 Hopyard RoadSuite 100Pleasanton, CA 94588Phone: 925-463-4845

4370 La Jolla Village DriveSuite 429 San Diego, CA 92122Phone: 858-646-3041

21700 Oxnard StreetSuite 500Woodland Hills, CA 91367Phone: 818-710-5181Toll Free: 800-876-6432

999 18th StreetSuite 3000Denver, CO 80202Phone: 303-357-2388

1408 N.Westshore Blvd.Suite 512Tampa, FL 33607Phone: 813-287-1823Toll Free: 888-441-8585

2500 Northwinds ParkwaySuite 360Alpharetta, GA 30009Phone: 678-893-8650Toll Free: 888-340-2001

849 West Maple AvenueSuite 903Homewood, IL 60430Phone: 708-957-5320

309 International CircleSuite 130Hunt Valley, MD 21030Phone: 443-886-9500

3250 W. Big BeaverSuite 327Troy, MI 48084Phone: 248-458-1580

390 South Woods Mill RoadSuite 175Chesterfield, MO 63017Phone: 314-205-9605

4775 Indian School Rd. NESuite 310Albuquerque, NM 87110Phone: 505-353-5523

159 Express StreetPlainview, NY 11803Phone: 516-827-6720

420 Fifth Avenue, 3rd FloorNew York, NY 10018Phone: 212-921-0394

2601 Weston ParkwaySuite 103Cary, NC 27513Phone: 919-678-8060Toll Free: 888-303-8224

525 North Tryon StreetSuite 1600Charlotte, NC 28202Phone: 704-331-6571

7000 S. Edgerton RoadSuite 106Brecksville, OH 44141Phone: 216-838-0431

121 Southwest Salmon StreetSuite 1132Portland, OR 97204Phone: 503-471-1466Toll Free: 888-815-8224

120 5th AvenueSuite P2503Pittsburgh, PA 15222Phone: 412-544-3650

1000 First AvenueSuite 403King of Prussia, PA 19406 Phone: 610-878-2260Toll Free: 800-555-1825

175 Pine StreetSuite 205Williamsport, PA 17701Phone: 570-321-5124

8214 Westchester DriveSuite 600Dallas,TX 75225Phone: 214-378-6410

11200 WestheimerSuite 820Houston,TX 77042Phone: 713-787-0138Toll Free: 888-828-6432

8000 IH 10 WestSuite 606San Antonio,TX 78230Phone: 210-524-7753

11350 Random Hills RoadSuite 842Fairfax,VA 22030Phone: 703-279-6563

4860 Cox RoadSuite 200Glen Allen,VA 23060Phone: 804-217-8336Toll Free: 800-454-3224

2200 Sixth AvenueSuite 804Seattle,WA 98121Phone: 206-374-0937Toll Free: 888-245-8224

red

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www.uni tedconcordia .com

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