Insurers post third-quarter gains

Wednesday, Nov. 3, 2004 | 11:11 a.m.

SUN STAFF AND WIRE REPORTS

Two large insurers that operate in Las Vegas reported today an increase in profitability for the third quarter.

Cypress, Calif.-based PacifiCare Health Systems Inc. reported its profit rose 31 percent to $88 million, or 94 cents per share, in the third quarter, compared with $67 million, or 86 cents per share in the year-ago quarter. The results were adjusted to reflect a two-for-one stock split on Jan. 20. Analysts surveyed by Thomson Financial had expected the company to earn an average of 87 cents per share.

Stocks soared 17.5 percent, or $6.08 cents per share, to $40.72 per share in midmorning trading on the New York Stock Exchange.

Separately, Philadelphia-based Cigna Corp. reported its profit rose 64 percent to $320 million, or $2.34 per share, in the third quarter, compared with $195 million, or $1.39 per share in the year-ago quarter.

Cigna's shares rose 4.18 percent, or $2.65 cents per share, to $66.10 per share in midmorning trading on the New York Stock Exchange.

PacifiCare attributed its positive financial results to increased membership, premiums and pharmacy benefit services. The company's third-quarter revenue rose 13 percent to $3.1 billion from $2.74 billion a year ago.

The insurer increased its full-year guidance to between $3.15 and $3.20 per share from $3.07 and $3.17 a share.

The number of people PacifiCare insured on its commercial plans rose 12 percent to 2.3 million during the third quarter from 2.2 million in the year-ago quarter.

PacifiCare increased its premiums by 8.4 percent per member per month.

In Nevada, the number of people PacifiCare insured on its commercial plans rose to 38,900 people in the third quarter from 30,800 in the year-ago quarter.

PacifiCare attributes much of the increase in members to the company's new point-of-service plans that were launched in July, said Mike Clark, vice president of commercial sales in Nevada and Arizona.

"Our growth in small group (plans) quadrupled because of the POS plans," he said, adding that the plans were launched for large employers Oct. 1 and good results are anticipated.

PacifiCare's pending merger of American Medical Security Group Inc., based in Green Bay, Wis., would increase the number of people it insures by about 314,000 people, 4,000 of which reside in Nevada.

PacifiCare announced in September its plans to buy American Medical for $502 million, but the deal is still awaiting regulatory approval in a few states. It is not likely to be finalized until the first part of next year.

The number of people insured on PacifiCare's Secure Horizons private Medicare plan, which provides more benefits than traditional fee-for-service Medicare, rose 2 percent to 693,300 people during the third quarter from 682,300 in the year-ago quarter.

In Nevada, the number of people insured through Secure Horizons fell to about 25,500 people in the third quarter from 25,700 in the year-ago quarter.

Cigna attributed its financial results to robust growth at its indemnity business and a gain from the sale of a retirement-benefits business.

Results in the latest quarter included a gain of $79 million from the sale of the company's retirement-benefits business and a charge of $9 million because of derivative accounting associated with that sale. The company also booked a gain of $8 million from realized investments.

Excluding items in both quarters, the company's earnings from continuing operations rose 19 percent to $242 million, or $1.77 a share, from $204 million, or $1.45 a share, a year earlier. Analysts surveyed by Thomson Financial had expected Cigna to earn an average of $1.36 per share.

Cigna said adjusted earnings for its health-care segment, which consists of the HMO and indemnity businesses, soared 78 percent to $206 million, due primarily to a surge in indemnity earnings. The company said its indemnity unit benefited from stronger underwriting and medical cost results in its experience-rated and guaranteed-cost businesses.

The company's third-quarter revenue fell 6.2 percent to $4.48 billion from $4.77 billion a year earlier.

Health-care segment earnings increased despite a drop in membership. Total medical membership declined 16 percent to 9.9 million, hurt by case cancellations and lower sales.

Cigna insured 51,424 Nevadans during the third quarter. Year-ago numbers were unavailable.

The number of Nevadans insured through Cigna dental plans increased to 48,174 people in the third quarter from 40,286 in the year-ago quarter.

"Nevada is a very important marketplace for Cigna," company spokeswoman Whitney Anderson said. "Cigna has maintained a business presence in the Las Vegas Valley for decades and as a national company that does business across the country, many of our sales successes in other markets include a location in Las Vegas."

On Tuesday Cigna announced it plans to launch new segments that will focus on government-employees health plans and senior health plans.

Cigna raised its full-year 2004 estimates for earnings from continuing operations to $925 million to $950 million, or $6.65 to $6.85 a share, excluding items. In August, the company had boosted its 2004 earnings outlook to $835 million to $875 million, or $5.95 to $6.25 a share, excluding items. Analysts on average currently expect earnings of $6.23 a share, according to First Call.

In 2003 the company reported net income of $4.75 a share, and earnings before items of $5.69 a share.

Bloomberg News

and Sun business writer Michelle Swafford contributed to this report.

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