Anthem Blue Cross 2002 Annual Report Download - page 59

MANAGEMENT’S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations (Continued)
54 Anthem, Inc. 2002 Annual Report
Anthem Southeast has started a four-year, estimated
$84.0 million building construction project to expand its
regional offices in Richmond, Virginia. The expansion
plan includes construction of a four-story, 308,000-
square-foot building to house the operations center and
major renovation to Trigon’s existing headquarter build-
ing. Construction for the new building began in 2001,
with completion scheduled for mid-2003. Renovations of
the current facility will begin once the new building is
completed with a scheduled completion date in 2005.
The project will be funded using internal cash and invest-
ments. There are currently no other commitments for
major capital expenditures to support existing business.
Through December 31, 2002, we have capitalized $36.1
million related to the ongoing construction. In addition,
we have recorded capitalized interest of $0.8 million,
bringing the total amount included in work-in-progress as
of December 31, 2002 to $36.9 million.
We currently have an acquisition pending with
BCBS-KS for a purchase price of $190.0 million. See the
“Significant Transactions” section of this discussion for
additional details.
For additional information on our future debt matu-
rities and lease commitments, see Notes 5 and 14 to our
audited consolidated financial statements for the years
ended December 31, 2002, 2001 and 2000.
Risk-Based Capital
Our regulated subsidiaries’ states of domicile have
statutory risk-based capital, or RBC, requirements for
health and other insurance companies largely based on
the NAIC’s RBC Model Act. These RBC requirements
are intended to measure capital adequacy, taking into
account the risk characteristics of an insurer’s invest-
ments and products. The NAIC sets forth the formula for
calculating the RBC requirements, which are designed to
take into account asset risks, insurance risks, interest rate
risks and other relevant risks with respect to an individual
insurance company’s business. In general, under this Act,
an insurance company must submit a report of its RBC
level to the state insurance department or insurance com-
missioner, as appropriate, at the end of each calendar
year. Our risk-based capital as of December 31, 2002,
which was the most recent date for which reporting was
required, was in excess of all mandatory RBC thresholds.
In addition to exceeding the RBC requirements, we are in
compliance with the liquidity and capital requirements of
a licensee of the Blue Cross Blue Shield Association.
This management’s discussion and analysis contains certain forward-looking information. Words such as “expect(s)”,
“feel(s)”, “believe(s)”, “will”, “may”, “anticipate(s)”, “estimate(s)”, “should”, “intend(s)” and similar expressions are intended
to identify forward-looking statements. Such statements are subject to known and unknown risks and uncertainties that could
cause actual results to differ materially from those projected. These risks and uncertainties may include: trends in healthcare costs
and utilization rates; our ability to secure sufficient premium rate increases; competitor pricing below market trends of increasing
costs; increased government regulation of health benefits and managed care; significant acquisitions or divestitures by major
competitors; introduction and utilization of new prescription drugs and technology; a downgrade in our financial strength ratings;
an increased level of debt; litigation targeted at health benefits companies; our ability to contract with providers consistent with past
practice; our ability to achieve expected synergies and operating efficiencies from the Trigon acquisition and to successfully integrate
our operations; and general economic downturns. Readers are cautioned not to place undue reliance on these forward-looking
statements that speak only as of the date hereof. We undertake no obligation to republish revised forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.