CHAPEL HILL, N.C. – Blue Cross and Blue Shield of North Carolina’s (BCBSNC) net income for 2004 was down 21 percent from 2003, to $155.9 million from $196.3 million. This decrease in net income is due to increased medical costs, lower premium increases and investments in technology, programs and services for members. The state’s largest health insurer added 184,544 members served in 2004 and now serves over 3.1 million.
BCBSNC’s net income represents 4.6 percent of total revenue – less than 5 cents for every dollar of revenue. This is a decrease of nearly 26 percent from the company’s net income ratio of 6.2 percent for 2003.

"A financially sound Blue Cross and Blue Shield of North Carolina is important to our state’s economy," BCBSNC President and CEO Bob Greczyn said. "One in three North Carolinians depend on us to handle their health care claims – a total of over $6.5 billion in claims each year. We employ over 3,500 people and added 250 jobs this year. We also do business with thousands of organizations in our state."
BCBSNC’s membership growth contributed to the increased total revenue for 2004 of $3.4 billion, up 8.4 percent compared with 2003. The insurer’s membership served has increased 65 percent over the last five years.
As a fully taxed corporation, BCBSNC’s federal, state and local tax expenses (including income, premium and payroll taxes) were $135.3 million for the year ending December 31, 2004.
In 2004, 80 cents of every premium dollar went toward medical expenses, up from 78 cents at the end of 2003. Claims expense increased 11.7 percent to $2.5 billion, up from $2.3 billion in 2003.
"After our results in 2003, we promised to lower our margins in 2004," BCBSNC Chief Financial Officer Dan Glaser said. "We delivered on that promise, and we expect our net income ratio to continue to decline through 2005 as we work toward a target of 3.5 to 4.5 percent."
Investment activity, including net realized gains and net investment income, decreased $3.7 million from the same period in 2003 due to fewer gains from investment transactions. Investment income for the year ending December 31, 2004 was $56.3 million, compared with $60.0 million for the same period in 2003.
Operating expenses during the 12–month period ending December 31, 2004, increased $75.4 million compared with the same period in 2003 due to continued growth in business, and investments in technology and personnel that will allow BCBSNC to better serve its customers.
BCBSNC’s statutory reserves at year end remained at 3.7 months of claims and expenses – the same level the company recorded at the end of 2003. This is below BCBSNC’s 20–year average of 4.1 months.
Blue Cross and Blue Shield of North Carolina Consolidated Statements of Income (Unaudited) For the Year Ended December 31, 2004 and 2003
(dollars in thousands)  
Premiums$ 3,149,964$ 2,911,095
Administrative fees and other revenue$ + 215,405$ + 184,870
Operating revenue$ 3,365,369$ 3,095,965
Net investment income$ 47,749$ 43,005
Net realized investment gains$ + 8,568$ - 17,041
Total investment revenue$ 56,317$ 60,046
Total Revenue$ 3,421,686$ 3,156,011
Claims and medical expenses$ 2,526,868$ 2,262,042
Operating expenses$ 658,431$ 583,042
Interest expense$ + 5,950$ + 16,213
Total Expenses$ 3,191,249$ 2,861,297
Income before income taxes$ 230,437$ 294,714
Income tax expense$ 74,500$ 98,430
Net income$ 155,937$ 196,284
Operating income1$ 180,070$ 250,881
Medical loss ratio280.2%77.7%
Operating expense ratio218.8%18.8%
Operating income ratio25.4%8.1%
Net income ratio24.6%6.2%
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.
Total membership2,560,1422,424,159
BlueCard host548,773500,212
Total members served3,108,9152,924,371
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 3.1 million members, including approximately 549,000 served on behalf of other Blue Plans. The company offers its members the Blue ExtrasSM 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 71 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.
BCBSNC’s HMO product has 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. BCBSNC also has North Carolina’s first and only NCQA accredited PPO plan – Blue OptionsSM. Blue Cross and Blue Shield of North Carolina is an independent licensee of the Blue Cross and Blue Shield Association. Access BCBSNC online at