The Employee Benefits segment experienced a net decrease of 1,232 group health care customers (employer groups) during 2001. There was an 18% decrease in total health care membership from 3.2 million at the end of 2000 to 2.6 million at year-end 2001. POS and HMO members decreased 30% from 718,400 in 2000 to 500,600 in 2001.
Much of the health care decline in 2002 and 2001 can be attributed to terminations resulting from aggressive pricing related to target margins as well as a decrease in the employee base for existing group health care customers and the general decline in the economy. In 2001, the decline in membership was also, in part, due to difficulties with the implementation of a systems enhancement, which was resolved by the end of 2001.
The sales force reorganization will continue in 2003. The Company has discontinued new sales under the Alta, GenAm and New England names and has combined these teams with its own sales force to create a unified sales force organized along distribution channels. Resources will also be invested to enhance a unified brand identity.
The 401(k) block of business under administration totaled 6,012 employer groups and 477,300 individual participants in 2002, compared to 6,447 employer groups and 545,800 individual participants in 2001 and 6,514 employer groups and 551,000 individual participants in 2000.
The Company follows rigorous procedures to control interest rate risk and observes strict asset and liability matching guidelines. These guidelines ensure that even under changing market conditions, the Company's assets will meet the cash flow and income requirements of its liabilities. Using dynamic modeling to analyze the effects of a range of possible market changes upon investments and policyholder benefits, the Company ensures that its investment portfolio is appropriately structured to fulfill financial obligations to its policyholders.
Generally, the Company has met its operating requirements by maintaining appropriate levels of liquidity in its investment portfolio and utilizing positive cash flows from operations. Liquidity for the Company has remained strong, as evidenced by significant amounts of short-term investments and cash that totaled $864.4 million and $638.4 million as of December 31, 2002 and 2001, respectively. In addition, as of December 31, 2002 and 2001, 97% and 98%, respectively, of the bond portfolio carried an investment grade rating, thereby providing significant liquidity to the Company's overall investment portfolio.
The Company has a commercial paper program that is partially supported by a $50,000 standby letter-of-credit. At December 31, 2002, commercial paper outstanding of $96,645 had maturities ranging from 3 to 66 days and interest rates ranging from 1.40% to 1.88%. At December 31, 2001, commercial paper outstanding of $97,046 had maturities from 4 to 63 days and an interest rates ranging from 1.91% to 2.55%.
The Company has two reportable segments: Employee Benefits and Financial Services. The Employee Benefits segment markets group life and health to small and mid-sized corporate employers. The Financial Services segment markets and administers savings products to public and not-for-profit employers, corporations, and individuals and offers life insurance products to individuals and businesses. The Company's reportable segments are strategic business units that offer different products and services. They are managed separately as each segment has unique distribution channels. Prior to 2002, the Employee Benefits segment marketed and administered corporate savings products (401(k) plans). In 2002 the Financial Services segment assumed responsibility for these products. The 2001 and 2000 segment information has been reclassified to account for this change.