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Parthenon. Neither Parthenon nor the sister subsidiaries
intended to or did treat the reserve strengthening payments as
equity investment. Additionally, both the Department of
Insurance and Blue Cross treated the reserve strengthening
payments as insurance premiums. We conclude that, in fact and in
substance, the sister subsidiaries did not own any of Parthenon's
stock.
Respondent contends further that the Department of Insurance
did not strictly regulate Parthenon. The record in the instant
case establishes that the Tennessee Department of Insurance did
not promise, and we are persuaded that it did not extend special
privileges to Parthenon. The supervision that the Department of
Insurance exercised over Parthenon's operations, including
periodic financial examinations, was no different from the
supervision exercised over any other captive insurer licensed in
the State of Tennessee. Although the Department of Insurance did
not annually establish or approve the premium rates between
Parthenon and its sister subsidiaries, the examination report of
Parthenon prepared by the Department of Insurance as of December
31, 1979, indicates that the basic premium rating process used by
Parthenon for that period had the approval of the Department of
Insurance. Parthenon's process for setting premium rates did not
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