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Press Release

Highmark Health reports financial results through June 30, 2015

Geographic expansion continues; strong investment in the Allegheny Health Network; diversified businesses grow.

Company notes that strong performance in Health Plan commercial business offset by challenges with Affordable Care Act enrollment.

PITTSBURGH (Sept. 3, 2015) — Today, Highmark Health announced financial results for the first six months of 2015, citing an excess of revenue over expenses of $221 million, which was an improvement of $226 million from the same period in 2014. Year-over-year pre-tax income of $289 million is an improvement over the previous year by $206 million. This was driven primarily by realized gains associated with Highmark's investment portfolio and net assets acquired through the merger with Blue Cross of Northeastern Pennsylvania (NEPA) in June 2015. The organization maintains $6.6 billion in cash and investments and net assets of $5.6 billion.

Highmark Health also reported an operating loss of $171 million, which was $183 million behind the previous year. The operating loss is attributable to the performance of its Affordable Care Act (ACA) exchange products, which have faced a sustained high level of medical costs in 2015 similar to many insurance carriers across the nation. The Health Plans commercial and senior insurance markets continue to experience strong customer retention and financial stability, and Highmark Health's diversified businesses, including dental, vision and stop loss, also had another year of significant earnings.

"The past six months have been a particularly dynamic time at Highmark Health with several specific accomplishments," said David L. Holmberg, Highmark Health's president and chief executive officer. "We have continued our geographic expansion and maintained our commitment to invest in and grow Allegheny Health Network. While discreet parts of our enterprise are facing challenges, we remain focused on getting the basics right, investing in the future and working to redefine health care."

"Highmark Health's mid-year results reflect good operating fundamentals in our core health plan commercial and senior business, strong performance in our diversified businesses and excellent results in our investment portfolio," said Karen Hanlon, executive vice president and chief financial officer. "At the same time, we are weathering challenges in the health plan's Affordable Care Act enrollment as well as at Allegheny Health Network, where results are lagging our expectations. We are aggressively working to address those challenges. It's also important to note that Highmark Health has invested more than $150 million across the enterprise through June 2015, as we believe that our strategy remains sound and our outlook is promising."

The Health Plan business reported a loss of $146 million, which is $223 million lower compared to the prior year. This was driven by higher enrollment and increased utilization of services in the ACA products, as noted above, and partially offset by improved performance in the commercial and senior markets. The Health Plan remains the market-share leader in western Pennsylvania, Delaware and West Virginia with membership of 5.3 million policyholders as of June 30, 2015, which includes 264,000 members as a result of the merger with NEPA. Despite the challenging economic climate, competitive market pressures and the changing industry landscape in Pennsylvania and nationally, July renewals were strong, with a 98 percent retention rate.

Highmark Health's diversified businesses delivered strong results, reporting a gain of $128 million through June 2015. This was a $30 million improvement over the previous year, which was driven by performance in the vision business. Visionworks continues to expand its national presence and opened 15 new stores in 2015, bringing its total to more than 660. Davis Vision has grown enrollment to nearly 22 million lives, including the recent signing of a contract with Boeing to provide coverage to 342,000 retirees, employees and their eligible dependents. HM Insurance Group, which offers stop loss and worker's compensation products, has also seen significant improvement year-over-year, and the company's dental business also continues to perform well.

Highmark Health's portfolio of insurance businesses serves 42.5 million members nationwide.

Allegheny Health Network remains on its turnaround plan, albeit at a slower pace than originally anticipated, reporting an operating loss of $16 million for the first half of 2015. These losses are driven by Highmark Health's commitment to transitioning care to home and community settings, which offers convenience and cost effective delivery to our members. The enterprise also continues to make critical capital investments to expand capabilities and services so that the people of western Pennsylvania have access and choice. These commitments are pressuring operating results. However, due to these investments, Allegheny Health Network realized increases in year-over-year inpatient and outpatient volumes of 3.3 percent and 3.1 percent, respectively, for the period.

HM Health Solutions generated operating income of $4 million through June 2015 compared to $2 million in the prior year. The business continues to focus on meeting the platform and technology needs of the Highmark Health enterprise as well as other health insurance plans. It is currently supporting 11 Blue Cross Blue Shield plans in seven states and three countries on its state-of-the-art technology platforms.

Consolidated Statement of Operations (unaudited) (in millions)
  Period ended
June 30, 2015
Period ended
June 30, 2014
Operating revenue 8,670 8,371
 
Operating Results:
Health Plan    
Commercial & Senior Business 172 153
Individual ACA Business (318) (76)
Diversified Businesses 128 98
AHN (16) (12)
HMHS 4 2
Corporate & Other (142) (152)
Operating (loss) gain (171) 12
 
Net investment income 260 111
Interest Expense (32) (29)
Gain (loss) on debt extinguisment 8 (9)
Other non-operating expenses (5) (2)
Net assets acquired of NEPA 229 -
Excess of revenue over expenses before income taxes 289 83
Income tax provision 68 87
Excess of revenue over expense 221 (5)
See all 2015 Press Releases

Contact us for more information or to arrange an interview:

Lynn Seay
Highmark Health
412-544-2771
Lynn.Seay@highmarkhealth.org

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Highmark Health, a Pittsburgh, PA based enterprise that employs more than 35,000 people nationwide and serves 40 million Americans in all 50 states, is the third largest integrated health care delivery and financing network in the nation. Highmark Health is the parent company of Highmark Inc., Allegheny Health Network, and HM Health Solutions. Highmark Inc. and its subsidiaries and affiliates provide health insurance to 5.2 million members in Pennsylvania, West Virginia and Delaware as well as dental insurance, vision care and related health products through a national network of diversified businesses that include United Concordia Companies, HM Insurance Group, Davis Vision and Visionworks. Allegheny Health Network is the parent company of an integrated delivery network that includes eight hospitals, a community-based network of physician organizations, and a group purchasing organization, ambulatory surgery centers, and health and wellness pavilions in western Pennsylvania. HM Health Solutions focuses on meeting the information technology platform and other business needs of the Highmark Health enterprise as well as unaffiliated health insurance plans by providing proven business processes, expert knowledge and integrated cloud-based platforms. To learn more, please visit www.highmarkhealth.org.

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