Blue Cross and Blue Shield of North Carolina Reports Lower Third Quarter Financial Results

Chapel Hill, N.C. — Blue Cross and Blue Shield of North Carolina (BCBSNC) today reported consolidated net income of $133.3 million for the nine months ending September 30, 2005, which was 8 percent less than the company earned during the same period last year and approximately 23 percent less than the company earned during the same period in 2003.
 
BCBSNC's net income represents 4.7 percent of revenue, or less than 5 cents for every premium dollar. This is a 17.5 percent decrease from the net income ratio of 5.7 percent at September 30, 2004, and a decrease of 36.5 percent over the same period in 2003. The latest results represent the seventh consecutive quarter in which the company's net income has been lower than the year-to-date results for the previous year.
 
"Just as we planned, we remain on track to deliver a reduced net income ratio for the second year in a row," said BCBSNC Chief Financial Officer Dan Glaser. "Our net income, though reduced, is within the range that we currently need to meet our customers' ongoing medical expense needs and to remain a financially stable business and employer."
 
BCBSNC has added more than 176,000 members since September 30, 2004, and now serves almost 3.3 million people, which is an increase of nearly 1.5 million members over the past five years.
 
BCBSNC's claims and medical expenses increased by $254 million or nearly 14 percent over the same period in 2004, primarily due to increases in medical cost trend and membership growth. Medical costs rose because of increases in drug, professional and outpatient facility expenses. BCBSNC's operating costs were up by about 12 percent compared to the same period in 2004, due to the continued growth in business, which led the company to hire 442 employees in the past year. In addition, the company made investments in technology and projects to benefit the company's growing membership.
 
BCBSNC total revenue as of September 30, 2005, was $2.8 billion, which was up 11 percent compared to the same period in 2004. The company's medical loss ratio was 81.2 percent for the first nine months of 2005, as compared to 78.8 percent for the same period last year.
 
 
Blue Cross and Blue Shield of North Carolina Consolidated Statements of Income (Unaudited) For the Year Ended September 30, 2005 and 2004
(dollars in thousands)
 
 
 
 
 
 
2005
2004
Revenues:
 
 
 
Premiums
$ 2,591,033
 
$ 2,345,238
 
Administrative fees and other revenue
$ + 194,834
 
$ + 160,148
 
Operating revenue
$ 2,785,867
 
$ 2,505,386
 
 
 
 
 
 
Net investment income
$ 40,831
 
$ 32,676
 
Net realized investment gains
$ + 2,082
 
$ - 5,007
 
Total investment revenue
$ 42,913
 
$ 37,683
 
 
 
 
 
 
Total Revenue
$ 2,828,780
 
$ 2,543,069
 
 
 
 
 
 
Expenses:
 
 
 
 
Claims and medical expenses
$ 2,102,650
 
$ 1,848,218
 
Operating expenses
$ 530,200
 
$ 471,804
 
Interest expense
$ + 3,605
 
$ + 4,618
 
Total Expenses
$ 2,636,455
 
$ 2,324,640
 
 
 
 
 
 
Income before income taxes
$ 192,325
 
$ 218,429
 
 
 
 
 
 
Income tax expense
$ 59,031
 
$ 72,942
 
 
 
 
 
 
Net income
$ 133,294
 
$ 145,487
 
 
 
 
 
 
Operating income1
$ 153,017
 
$ 185,364
 
 
 
 
 
 
Medical loss ratio2
81.2%
 
78.8%
 
Operating expense ratio2
19.0%
 
18.8%
 
Operating income ratio2
5.5%
 
7.4%
 
Net income ratio2
4.7%
 
5.7%
 
 
 
 
 
 
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.
Note: Certain prior year amounts have been reclassified to conform with current year presentation.
 
 
 
 
 
Membership
 
 
 
 
Insured
1,152,058
 
1,109,476
 
Self-funded
1,478,890
 
1,429,264
 
Total membership
2,630,948
 
2,538,740
 
BlueCard host
638,181
 
553,651
 
Total members served
3,269,129
 
3,092,391
 
 
 
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 more than 3.3 million members, including approximately 638,000 served on behalf of other Blue Plans. For 72 years, the company has served its customers by offering health insurance at a competitive price and has served the people of North Carolina through support of community organizations, programs and events that promote good health. Blue Cross and Blue Shield of North Carolina is an independent licensee of the Blue Cross and Blue Shield Association. Access BCBSNC online at bcbsnc.com.
 
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