Pittsburgh health insurer Highmark Inc. recorded nearly $14.9 billion in total revenues in 2013, with flat income compared to 2012 and sharply lower profits from its vision and reinsurance subsidiaries. For the year, net income was at $294.1 million, compared to $432.2 million from 2012.
Highmark spokesman Aaron Billger said Wednesday the drop was due to Highmark’s 2011 acquisition of Blue Cross Blue Shield of Delaware. That acquisition meant the insurer had a one-time bump because it had to include BCBS Delaware’s financial assets in its 2012 income statement. Taking the Delaware affiliation assets out of the equation, the year-to-year income drop was about $8.7 million — $372.1 million in 2013, from $380.8 million in 2012.
“This is an accounting issue,” Mr. Billger said. “That’s why the ratings agencies have consistency rated us” strongly.
Last week, insurer ratings agency A.M. Best Co. gave Highmark a financial strength rating of “A-” and issuer credit rating of “a-,” citing the insurer’s operating results and strong market share. “Highmark maintains a strong presence in its core markets of Pennsylvania, West Virginia and Delaware, and its brand is widely recognized,” the rating report said.
Last month, however, Standard & Poor’s downgraded Highmark’s credit rating from A to A-, with a stable outlook, citing “expectation for weaker future earnings than we had previously anticipated.”
“Highmark still [has] a very strong capital cushion,” Jon Reichert, S&P analyst, said Wednesday. But the insurer finds itself in an increasingly competitive operating environment, he said, given its ongoing battle for customers with UPMC Health Plan and other national insurers, and its yearslong feud with UPMC hospital system.
The flat revenues, he said, “were in line with our expectations.”
Highmark’s for-profit subsidiaries — which in recent years had been driving overall profits and helping to offset tepid numbers on the health plan side — were still profitable, but less so than in 2012. HM Insurance Group reported 2013 net income of $46.9 million vs. $60.8 million in 2012; United Concordia dental companies improved slightly to $68.7 million from $68.1 in 2012; and Highmark’s vision unit reported $52.9 million in 2013 net revenue vs. $64.7 million in 2012.
Highmark’s cash surplus now stands at $4.4 billion, up from $4.1 billion in 2012. Claims expenses dropped slightly to $11 billion, and its health plans cover 5.3 million people in Pennsylvania, Delaware and West Virginia, according to the company’s press release.
Wednesday’s report accounts for only Highmark’s insurance division and affiliated companies. The corporate parent company, known as Highmark Health, will report its total income numbers in a month or so, Mr. Billger said. That report will include results from the Allegheny Health Network, which the insurer owns.
Highmark, which reorganized its corporate structure a year ago after its acquisition of West Penn Allegheny Health System was approved by the state, is also filing a 990 tax return this year. That filing, which includes financial and salary data about the nonprofits and charitable organizations that submit them, will be made public later this spring.
First Published April 23, 2014 11:54 AM