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SunAmerica Profit Jumps 27%, Led by Annuity Sales

November 11, 1998| From Bloomberg News

SunAmerica Inc. said Tuesday that its fiscal fourth-quarter earnings rose 27%, led by sales of tax-deferred retirement saving plans known as variable annuities.

Profit from operations, excluding gains and losses from investment sales, rose to $148.3 million, or 68 cents a share, in the three months ended Sept. 30, from $116.4 million, or 53 cents, in the same period last year. Analysts expected the Los Angeles financial services company to report earnings of 67 cents a share, according to a First Call Corp. survey.

Sales of variable annuities, a hybrid of insurance policies and mutual funds that provides income to retirees, grew 48% in the quarter to $973 million, from $656 million a year earlier. Total sales rose 58% to $2.3 billion, the company said.

Net income, which included $52.9 million in investment losses, fell 3% to $113.9 million, or 52 cents a share. A year ago, investment gains of about $1 million made net income $117.5 million, or 54 cents.

The report is expected to be the last from SunAmerica, which in August agreed to be acquired by American International Group Inc., the largest publicly traded U.S. insurer, for stock worth about $16 billion. For each SunAmerica share, investors will get 0.86 of an AIG share.

SunAmerica stock fell 75 cents to close at $71.69, following shares of AIG, which declined $1.63 to close at $85.81. Both trade on the New York Stock Exchange.

Foundation Health Systems Inc. said third-quarter earnings from continuing operations fell 52%, before a charge, as it exited unprofitable businesses to focus on its largest health plans.

Foundation said profit fell to $28.7 million, or 24 cents a share, from $59.8 million, or 49 cents, a year earlier, meeting analysts' revised average estimates. Revenue rose to $2.2 billion from $1.8 billion a year earlier.

Although Woodland Hills-based Foundation has shed its unprofitable workers' compensation business and made plans to shut money-losing health maintenance organizations marketed to patients on the government's Medicare program, it still has work to do to focus on its HMOs in California.

"It still doesn't look so good," said Sheryl Skolnick, an analyst with BancBoston Robertson Stephens. "They met expectations, but it was less than what was expected a week ago."

Foundation warned last week that its earnings would fall short of the 28 cents average estimate of analysts.

Foundation shares rose 19 cents to close at $14.75 on the New York Stock Exchange.

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