| Trigon Healthcare, Inc. | |||
| Ticker: | TGH | 2015 Staples Mill Road | |
| Exchange: | New York Stock Exchange | Richmond, VA 23230 | |
| Industry: | Financial (SIC Code 6324) | (804) 354-7000 | |
| Type of Shares: | Class A Common Shares | Filing Date: | 8/9/96 | |
| U.S. Shares: | 12,400,000 | Offer Date: | 1/30/97 | |
| Non-U.S. Shares: | 3,100,000 | Filing Range: | $12.00 - $14.00 | |
| Primary Shares: | 15,500,000 | Offer Price: | $13.00 | |
| Secondary Shares: | 0 | Gross Spread: | $0.84 | |
| Offering Amount: | $201,500,000 | Selling: | $0.52 | |
| Expenses: | $1,300,000 | Reallowance: | $0.10 | |
| Shares Out After: | - |
| Manager | Tier | Phone |
| Merrill Lynch & Co. | Lead Manager | (212) 449-4600 |
| Alex. Brown & Sons Incorporated | Co-manager | (410) 895-2700 |
| Dean Witter Reynolds | Co-manager | (212) 392-3223 |
| Morgan Stanley & Co. Incorporated | Co-manager | (212) 761-5900 |
| Wheat First Butcher & Singer Capital Markets | Co-manager | (804) 782-3278 |
Dollar amounts in U.S. millions except for per share data | |||||
| Full Year Audited Income | Latest Unaudited Income | Prior Unaudited Income | Balance Sheet | ||
| 12/31/95 | 3/31/96 | 3/31/95 | 3/31/96 | ||
| Revenue: | $1,157.90 | $319.59 | $275.19 | Assets: | $1,646.15 |
| Net Income: | $46.99 | $23.15 | $30.66 | Curr Assets: | |
| EPS: | Liabilities: | $886.01 | |||
| Prior EPS: | Curr Liabilities: | ||||
| Cash Flow/Oper: | Equity: | $760.14 | |||
| Cash Flow/Fin: | Cash: | ||||
| Cash Flow/Inv: | |||||
| Business Description |
| The company is the largest managed health care company in Virginia, serving approximately 1.8 million members primarily through statewide and regional provider networks. The company's membership represents approximately 27% of the Virginia population and 32% of the Virginia population in those areas where Trigon has the exclusive right to use the Blue Cross and Blue Shield service marks and trademarks. Within Virginia, Trigon provides a comprehensive spectrum of managed care products through three network systems with a range of utilization and cost containment controls. The company is pursuing a growth strategy which includes expansion outside of Virginia into other southeastern and mid-Atlantic states. As of March 31, 1996, the company's network systems consisted of: the health maintenance organization networks which, with 243,693 members, are the company's most tightly managed and cost efficient networks; the preferred provider organization networks and the participating provider network. |
| Competition |
| The health care industry is highly competitive both in Virginia and in other states in the southeastern and mid-Atlantic United States into which the company principally intends to expand. Managed care companies, including large, well-capitalized companies which market managed care products nationwide, have targeted the southeastern and mid-Atlantic regions of the United States as being favorable for expansion, and have begun entering Virginia and markets targeted by Trigon in increasing numbers. In some cases, new market entrants, as well as existing health care companies, have competed with the company for business by offering very favorable pricing terms to customers. This increased pricing pressure has adversely affected the company's medical loss ratio during 1995 and 1996. The company is facing this increased competition in the areas in which it is licensed to use the Blue Cross and Blue Shield service marks and tradenames, as well as the areas in which it operates without these service marks and tradenames. In areas outside of its licensed territory, the company's ability to successfully compete may be adversely affected by its inability to use the Blue Cross and Blue Shield service marks and tradenames, by the presence of competitors that are able to use such service marks and tradenames in the areas, and by the company's lack of substantial market share or established provider networks in these areas. The company also faces competition from a trend among health care providers to combine and form their own networks in order to contract directly with employer groups and other prospective customers to provide health care services. There is no assurance that such overall increased competition will not exert strong pressures upon Trigon's profitability, its ability to increase enrollment or its ability to successfully pursue growth in areas both within and outside of Virginia. The company believes that it has effectively integrated its managed care programs into its traditional business, principally through its PPO and HMO networks and products. |
| Business Plan |
| In 1990, the company implemented a long-term corporate strategy called SHOWCASE with the goals of attaining market leadership in management care and strong financial performance. The strategy initiated specific programs aimed at generating a market-targeted range of managed care products, strengthening managed care support systems and management expertise and enhancing customer support services. From 1990 through 1993 Trigon's membership declined slightly. This slight decline in enrollment was largely the result of two key factors. First, based upon its 1990 SHOWCASE strategy, Trigon decided to focus on increasing profitability by tightening underwriting criteria for new groups. |
| Use of Proceeds |
| Proceeds from the proposed offering will be used to make a portion of the Commonwealth Payment and used to make cash payments to eligible members in the demutualization. The balance of the proceeds will be used for general corporate purposes, including expansion of the company's business both through internal growth and through acquisitions of managed health care companies or related lines of business. |