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Insurers' Profits Meet or Exceed Forecasts

May 06, 1999| From Bloomberg News

PacifiCare Health Systems Inc. posted first-quarter earnings well above expectations and Foundation Health Systems Inc. posted results in line with estimates after raising medical premiums in January, results showed Wednesday.

Santa Ana-based PacifiCare said its net income rose 79% to $74 million, or $1.61 a share, from $41.3 million, or 90 cents, in the year-ago period, well above the $1.28 average estimate of analysts polled by First Call Corp.

PacifiCare is the biggest operator of HMOs marketed to recipients of Medicare, the government health plan for the elderly. Last year, several health insurers reported problems with the Medicare HMO market after the 1997 balanced-budget law cut expected growth in payments from the program.

PacifiCare, though, has managed to hold down its costs, partly because most of its Medicare HMO patients are treated by physicians who share some costs of patient care in exchange for fixed monthly payments. And the company raised premiums in commercial medical plans more than costs from those plans increased, analysts said.

Woodland Hills-based Foundation and others left some Medicare markets at the beginning of the year. Foundation said first-quarter profit from operations rose to $46.3 million, or 23 cents, from $43.3 million, or 22 cents, in the year-ago period. Results were in line with the 22-cent estimate.

PacifiCare shares rose $13.94 to close at $93.81 on Nasdaq; Foundation shares fell 31 cents to $14.94 on the New York Stock Exchange.

At a Glance

* Humana Inc. reported lower first-quarter profit as the company wrestled with bigger-than-expected increases in medical costs. Analysts said that while many of Humana's troubles stem from company-specific issues, rising health-care costs are still a threat to other companies.

Humana on April 8 said that it expected to report first-quarter profit from operations of 20 cents to 24 cents, less than the 34-cent average estimate of analysts at the time. Louisville, Ky.-based Humana on Wednesday said its profit from operations fell 34% to $33 million, or 20 cents, from $50 million, or 30 cents, in the year-ago period.

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