Highmark sells Davis Vision unit for undisclosed amount
Highmark Inc. is selling a vision subsidiary for an undisclosed price in a deal CEO David Holmberg said would free up capital to invest in Allegheny Health Network and other community health care providers.
The insurer is selling Davis Vision, a managed vision care subsidiary, to New York City-based investment firm Centerbridge Partners, the companies announced Wednesday. Centerbridge will combine the company with Superior Vision, another company it owns, and Highmark will hold a minority ownership interest in the combined venture, according to the companies.
Centerbridge also will acquire a minority equity stake in Visionworks, another Highmark-owned vision subsidiary, according to the announcement.
Davis Vision and Visionworks make up Highmark's vision unit, HVHC, which in 2016 generated $1.6 billion in revenue with an operating gain of about $79 million.
The deal is expected to be finalized in the fourth quarter of 2017, according to the announcement. The companies wouldn't disclose any financial details of the transaction. A Reuters story from 2016 cited anonymous sources saying Centerbridge was working on a deal to pay close to $2 billion for the vision unit.
“This gives us a lot of capability to reinvest,” Holmberg said Wednesday.
Davis Vision customers won't see any changes to their eye doctors, or where they get their glasses or schedule eye procedures, Holmberg wrote in a Wednesday blog post.
Highmark acquired HVHC, formerly known as Eye Care Centers of America, in 2006. Based in San Antonio, the company has more than 9,000 employees and operates in all 50 states and Washington, D.C. It manufactures eyeglasses at five plants in Texas, New York and Newtown Square, Delaware County.
HVHC fabricates more than 4.5 million pairs of glasses a year, and Visionworks has nearly 750 retail stores across the country. Davis Vision reported revenues of nearly $780 million and 18 percent network growth in 2016. The company has more than 22 million members.
The announcement comes two weeks after the Pennsylvania Insurance Department gave Highmark approval to invest more freely in Allegheny Health Network and community hospitals and doctors the insurer works with.
The approval allows Highmark to spend as much as 10 percent of its surplus on health systems without notifying the state, where before it had to seek approval for investments of $250 million or more. The department included the investment conditions in a 2013 order related to Highmark's creation of Allegheny Health Network.
Holmberg said the money from the deal would help finance about 20 major projects underway at AHN. Highmark has invested more than $1 billion in the system.
He said the money also could help strengthen its commercial customer base.
Highmark announced an operating gain of $64 million for 2016, an improvement over the prior two years when losses on the Affordable Care Act's individual marketplaces drove overall losses.
The insurer raised premiums and reduced its offerings on the marketplace, shedding policyholders. It is seeking some of the largest increases in the state for its 2018 marketplace plans.
Officials say the company is financially healthy. In his Wednesday blog post, Holmberg addressed questions over whether the company made the sale because it needs cash to remain healthy and continue investments.
“I know that some people may point to the losses we incurred during the first three years of serving the Affordable Care Act on-exchange market, and the financial demands of standing up our Allegheny Health Network, and ask whether our agreement with Centerbridge is because we ‘need cash,' ” he wrote. “In short — no.”