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Highmark maintains financial strength in 2012

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PITTSBURGH (April 10, 2013) — Highmark Inc. today reported sound operational and financial performance in 2012, driven by consistent operating performance of all lines of business — health, vision, dental and reinsurance — strong retention of health care membership and higher-than-anticipated investment income.

Nanette DeTurk, Highmark's executive vice president and chief financial officer, said Highmark remains financially stable in an uncertain industry environment. "The current and future marketplace changes, combined with health care reform, are affecting every aspect of our business," she said. "Highmark has the financial resources to compete in all of our markets, support investments in our emerging integrated delivery network (IDN) and develop new products and services to meet changing customer needs."

The company's 2012 total revenues reached $15.2 billion, compared to $14.8 billion in 2011. After consideration of its affiliation with Highmark Delaware, Highmark had a net income of $432.3 million in 2012, compared to $444.7 million in 2011. The affiliation resulted in a one-time recognition of the market value of Highmark Delaware's assets totaling $186 million. Highmark's net income, including the Highmark Delaware affiliation, represented 2.9 percent of Highmark's operating revenue.

Highmark and its affiliated companies paid $159.9 million in non-payroll federal, state and local taxes in 2012, including $5 million in property taxes in Pennsylvania.

Despite the challenging economic climate and changing industry landscape in Pennsylvania and nationally, Highmark retained more than 95 percent of its customers in the large and mid-sized group markets and grew its national membership base by approximately 75,000 members. Highmark and its affiliated companies had approximately 5.3 million health care members at the end of 2012, which includes the addition of nearly 300,000 members from Highmark Delaware. All told, more than 33 million individuals were served by all Highmark products and services (vision, dental, reinsurance and health).

The 2012 gains in investment income were primarily driven by better-than-expected equity and fixed income markets and realized gains from the rebalancing of investments in the company's portfolio.

The company's vision, reinsurance and dental businesses continue to support the company's core health care business. Combined, the three diversified businesses had net income of $193.6 million. "The consistent performance of our health-related businesses demonstrates the importance of having a diversified mix of products," DeTurk said. "The continued growth of these companies enables us to maintain adequate capital to meet the requirements under health care reform and support investments in our integrated delivery network."

Highmark's vision business, which includes vision insurance, manufacturing and distribution of eyewear products and eyewear retailing, grew to nearly 18 million covered lives in 2012. Highmark's reinsurance business generated more than $695 million in "stop loss" premiums in 2012, and ranks among the top three companies in the national stop loss market. Highmark's dental company, the sixth largest dental carrier in the United States, continued to grow its commercial business nationally and in Pennsylvania, and introduced a new product that can help improve overall health and wellness by expanding coverage for treating gum disease.

In 2012, Highmark continued to support community health and human services programs in a variety of ways. By providing grants and support to nonprofit organizations and hospitals throughout Pennsylvania, West Virginia and Delaware, Highmark and the Highmark Foundation addressed the health care needs of children, families and seniors; improved workforce development opportunities; and improved the overall medical, dental and vision health and wellness of the community. The company's investments at Jefferson Regional Medical Center in the Pittsburgh region underscore Highmark's commitment to preserve provider choice, and support charitable and health and wellness programs in the community.

2012 Highmark Financial Facts
(dollars in millions)

 

2012

2011

Revenues

 

 

Operating revenues

$14,867.4

$14,628.2

Net investment income

$302.4

$148.1

Total revenues

$15,169.8

$14,776.4

Expenses

Claims expenses

$11,091.5

$10,848.8

Operating expenses

$3,276.2

$3,050.1

Other expenses

$409.5

$401.9

Total expenses

$14,777.2

$14,300.8

Net income before taxes
and Delaware affiliation

$392.6

$475.6

Income tax expense

$146.1

$30.9

Net income before Delaware affiliation

$246.5

$444.7

Net assets of Highmark Delaware

$185.8

 

Net income

$432.3

 

 

Key Financial Measures (Highmark Inc.)

Net income as a % of operating revenues
(before Delaware affiliation)

1.7%

3.0%

Net income as a % of operating revenues

2.9%

 

Surplus (statutory basis)

$4.1 billion

$4.1 billion

Total operating expenses (health care business)

$1.6 billion

$1.6 billion

 

Net Income of Key Subsidiaries
(dollars in millions)

 

2012

2011

HM Insurance Group

$60.8

$49.6

United Concordia Companies (UCCI)

$68.1

$89.7

Highmark Vision Companies

$64.7

$68.2

 

Health care membership
(as of December 31, 2012)

Total individuals served

33.5 million

Total health care membership (Highmark and affiliated companies)

5.3 million

Western Pennsylvania

3.2 million

Central Pennsylvania/Lehigh Valley

1.1 million

West Virginia

0.3 million

Delaware

0.3 million

 

About Highmark
Highmark Inc. is a national diversified health and wellness company based in Pittsburgh that serves 33.5 million people across the United States through its businesses in health insurance, dental insurance, vision care, information technology and integrated health care delivery. The company, which has more than 20,000 employees, is among the largest health insurers in the U.S. and the fourth-largest Blue Cross and Blue Shield-affiliated company. Highmark operates health insurance plans in Pennsylvania, Delaware and West Virginia that serve 5.3 million members.

The company also offers health and wellness products to clients with employees throughout the country and is a recognized leader in reinsurance. In addition, Highmark operates more than 600 optical retail stores (Visionworks) and four U.S.-based eyewear manufacturing facilities. Highmark is an independent licensee of the Blue Cross and Blue Shield Association, an association of independent Blue Cross and Blue Shield companies. For more information, visit www.highmark.com.

For more information, contact:
Aaron Billger
Highmark Inc.
412-544-7826
aaron.billger@highmark.com