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| Blue Cross and Blue Shield of North Carolina Announces Financial Performance through Second Quarter 2003
CHAPEL HILL, N.C.--(BUSINESS WIRE)--Aug. 15, 2003--An improvement in Blue Cross and Blue Shield of North Carolina's (BCBSNC) medical expenses, combined with growth in membership, revenue and investment income, resulted in net income of $119.8 million for the first half of 2003. This compares to net income of $38.2 million in the same period for 2002. BCBSNC saw its medical loss ratio decline from 85.2 percent in the first six months of 2002 to 76.8 percent for the same period this year. These lower medical costs can be attributed to three factors, each accounting for approximately one third of the overall improvement: BizVantage – Beyond the news: indepth on business, investment and technology. -- Better-than-expected medical trend -- Lower costs resulting from reduced spending on prescription drugs; employers opting for plans that reduce their costs through higher deductibles and co-pays, and improved performance of large groups -- Changes in prior period estimated claims liability (claims paid that were less than originally estimated) "While the cost of services continues to rise, we are seeing some welcome signs of moderation," BCBSNC Chief Financial Officer Dan Glaser said. "We are responding to this development by reflecting the lower trends we are seeing in our rate filings. Our customers should see rate increases begin to stabilize. If the medical trend we have seen so far in 2003 continues, rate increases can be lower relative to the high double digit increases we and the rest of the industry have recently seen." Also contributing to BCBSNC's strong results so far in 2003 is the growth in membership of 115,713 customers over the same period in 2002. Total membership for the period ending June 30, 2003 was nearly 2.9 million (including approximately 492,000 members served on behalf of other Blue Plans). In addition, BCBSNC's reported net investment income and net realized gains for the first half of 2003 increased $10.6 million to $33.4 million. This compares to $22.8 million for the same period last year. BCBSNC's total revenue for the first half of 2003 increased approximately 7 percent to $1.5 billion, compared to $1.4 billion for the first half of 2002. "Our customer focus continues to fuel our success, as reflected by our membership growth despite a difficult labor market around the state," BCBSNC President and CEO Bob Greczyn said. "Our goals are to help our members take control of their health, invest in improving the way we do business and differentiate ourselves through innovation for customers, while maintaining stable day-to-day operating costs." BCBSNC's year-to-date overall operating expense ratio increased to 17.1 percent, up from 16.4 percent in 2002. Specifically, the increase was due to higher broker commissions; increased employee benefit expenses; and costs associated with corporate projects centered around improving technology and bringing innovative products to market. Excluding these items, BCBSNC's "day-to-day" expenses were flat. The company's total statutory reserves represent approximately three months of total expenses (including claims and administrative expenses). North Carolina General Statute requires existing health plans maintain total reserves of three to six months of total expenses. About Blue Cross and Blue Shield of North Carolina Blue Cross and Blue Shield of North Carolina is a leader in delivering innovative health care products, services and information to nearly 2.9 million members, including approximately 492,000 served on behalf of other Blue plans. The company offers its members the Blue Extras(SM) value-added programs, which provide discounts and information on a wide variety of health-related services at no additional cost. BCBSNC also offers life, dental, long-term care and disability insurance products. For 70 years, the company has served its customers by offering access to quality health care at a competitive price and has served the people of North Carolina through support of community organizations, programs and events that promote good health. BCBSNC's HMO and POS products have earned Excellent Accreditation from the National Committee for Quality Assurance (NCQA), an independent, not-for-profit organization dedicated to improving the quality of health care delivered to people everywhere. BCBSNC also has North Carolina's first and only NCQA accredited PPO plan - Blue Options(SM). Blue Cross and Blue Shield of North Carolina is an independent licensee of the Blue Cross and Blue Shield Association. Access BCBSNC online at www.bcbsnc.com. Income Statement for the period ending June 30, 2003 follows this release. Blue Cross and Blue Shield of North Carolina
Consolidated Statements of Income (Unaudited)
For the Year to Date Periods Ended June 30, 2003 and 2002
(dollars in thousands)
2003 2002
Revenues:
Premiums $1,416,669 $1,339,202
Administrative fees and other revenue 88,002 76,165
Operating revenue 1,504,671 1,415,367
Net investment income 21,153 19,467
Net realized investment gains 12,292 3,285
Total revenue 1,538,116 1,438,119
Expenses:
Claims and medical expenses 1,087,725 1,140,569
Operating expenses 258,006 231,776
Interest expense 8,193 5,519
Total expenses 1,353,924 1,377,864
Income before income taxes 184,192 60,255
Income tax expense 64,438 22,039
Net income $119,754 $38,216
Operating income1 $158,940 $43,022
Medical loss ratio2 76.80% 85.20%
Operating expense ratio2 17.10% 16.40%
Operating income ratio2 10.60% 3.00%
Net income ratio2 7.80% 2.70%
1) Pretax operating revenue less claims and medical expenses and
operating expenses (excluding interest expense).
2) Ratios calculated as a percentage of premiums for medical loss
ratio, a percentage of operating revenues for operating income and
operating expense ratios and a percentage of total revenue for net
income ratio.
Membership
Insured 1,067,621 1,130,202
Self-funded 1,330,313 1,152,019
Total membership 2,397,934 2,282,221
BlueCard host 491,518 473,341
Total members served 2,889,452 2,755,562
This statement should be read in conjunction with the attached
press release.
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