Thursday, Oct. 23, 2003 | 11:10 a.m.
Sierra Health Services Inc., the largest health insurer in Nevada, on Wednesday reported third-quarter net income of $22.2 million, or 72 cents per share, meeting expectations. Officials reported a strong increase in membership in Nevada during the quarter.
The results represent a 58 percent increase over the $14.1 million, or 44 cents per share, reported for the same period a year ago.
Third-quarter revenue rose to $389.2 million from $331 million a year ago.
In mid-day trading today, Sierra shares dropped 22 cents to $22.28.
The Las Vegas-based company announced in January that it was seeking alternatives for its workers' compensation subsidiary, CII Financial, which is now being reported as a discontinued operation. The subsidiary contributed $30,000 to net income for the quarter. Alternatives could include a sale, spin off or management buyout.
Sierra Health hopes to announce its plans for the subsidiary within a few weeks, said Peter O'Neill, vice president of public and investor relations for Sierra Health.
Commercial membership increased 7.3 percent to 199,400 members in the third quarter from 185,800 members in the year-ago quarter.
"The ongoing population influx into the Las Vegas Metropolitan Statistical Area and its stable local economy continues to provide Sierra with enrollment growth opportunities," a report by Prudential Equity Group Inc. said. "Looking forward, Sierra's Las Vegas commercial enrollment growth should trend in the 7 percent range driven by gains in the small- and mid-size employer segment."
Sierra officials and analysts attributed the strong third-quarter results to good pricing and strict cost controls.
O'Neill said health care costs will continue to rise, but at a slower rate in the coming quarters, which should help hospitals, consumers and insurance companies.
As more expensive, heavily used prescription drugs become available over-the-counter, that will help the health care industry and consumers, O'Neill said. In 2004, Sierra Health expects to earn between $3 and $3.10 per share, which is higher than the $2.97 per share some analysts are projecting, O'Neill said. Sierra Health's core market is in Nevada, but it also operates workers' compensation services in California, Colorado and Utah. It also manages insurance benefits for about 704,000 active and retired military personnel in 13 eastern states through the TRICARE program. The contract runs through Sept. 2004 and will be followed by a six-month transitional period.
The company lost a contract bid in August that would have expanded its TRICARE services to personnel in the current states plus people in 10 additional states. Sierra Health is appealing the decision with the U.S. Department of Defense.
Sierra Health owns multiple health-related subsidiaries including Health Plan of Nevada Inc., Nevada's largest health maintenance organization; Sierra Health and Life Insurance Co., a preferred provider organization; and Southwest Medical Associates Inc., a medical group practice.
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