Net income takes dive at BlueCross - Birmingham Business Journal:

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Alabama’s largest health insurer blamed slumpint investment returns forthe decline. BlueCross also reported risingt pension obligations and fallingpensiobn assets. Wall Street’s downturn, couplerd with increasing unemployment rates, contributed to the state’s largesr health insurer’s profit drop, experts said. BlueCrosas had more than $1 billion investee in stocks and bondsin 2008, according to The Birmingham-based firm said its income statement was impacted by the BlueCross reported net income of $28.6 million in 2008, down from $71.t million in 2007. It also saw $82.33 million in unrealized capital lossesin 2008. In it posted unrealized capital lossesof $14.
1 million. BlueCrosd holds 96 percent of the state’s small businesa health insurance policies. Its 2008 net premium incomse vaulted 14 percentto $4 billion up from $3.5 billion in mostly from increased enrollment in products in whicnh it partners with the federakl government. While its premium revenues soared, BlueCross’ pensiohn plan assets tumbled by $82 million betweenm 2007 and 2008 while its pensionh obligationsrose $31 million. public policy professor Davi d Bradford said insurers are just as susceptible to the recessiobn as anyother industry.
He said insurers typically invest significant amounts of their reserves and consumersa could see premium increases as BlueCross trie to recoup some ofits losses. Increaseed premium revenues are a good sign inturbulenft times, but it isn’t the only factor impacting a firm’s bottom line, Bradfords said. “That doesn’t mean their profits go up as they absorbb some of theincreasin costs, which they could do instead of passing it on to policyt holders,” Bradford said. “Going forward, greater pressure could be put on premiu m increases to support the obligations has to pay in BlueCross said, in an e-mailed response, 11.7 percentt of its 14.
2 percent premium revenure increase in 2008 came from growty in its fully insured , Medicare Part D and Federakl Employees Program Plan. The remaininbg 2.5 premium increase came from its individual, Medicare supplemental and dental products. Unrealizecd capital losses resulted in BlueCross decreasing its unassigneds reserve fundsby $88.1 million. That is significantr because it reducedthe firm’s reservew to $656.3 million as of Dec. 31, 2008. Despitew the drop, BlueCross exceeded the state mandate of atleast $480.1 million. The Alabamw Department of Insurance mandates BlueCross keep money in reservr to ensure it can payits claims.
If it fell belosw the state requirement, it woulfd have to erase the shortfall with acapita contribution, according to Alabama Deputy Insurance Commissioner Davied Parsons. Parsons said the BlueCross nationa association has higher reserve fund requirementsw than the state with the threar of revoking its affiliation if its reserve threshold isnot met. BlueCross of Alabama said it has $638 million in unassigned funds througn the first quarter of 2009 andits long-termn financial footing is strong. “Oud projections show that we will continud to remain well above the statwe mandated minimum level ofunassigned BlueCross’ statement said.
“BlueCross has adequate reserves to meet its obligationa in 2009and beyond.” While BCBS’s pensiomn obligations grew in 2008, its federal tax expendituresw continued to trend downward. It’s 2008 federal tax bill was $9.6 down from $19.2 million in 2007 and $45.9 million in 2006, financial records show. Federap law caps BlueCross BlueShield affiliates’ tax rate at 20 percentr while its competitor paid 36 percent in the firsty quarterof 2009.