Pacificare Posts 20% Profit Rise for 2nd Quarter
Just weeks after agreeing to an $8.1-billion deal to be acquired by America’s second-largest health insurer, Orange County-based PacifiCare Health Systems Inc. said Thursday that second-quarter profit rose 20% as it gained members, raised premiums and cut medical costs.
“We are very pleased with the year-over-year increase in our earnings,” which were ahead of analysts’ expectations, said Howard Phanstiel, chief executive of PacifiCare.
Phanstiel, 58, has said he will take an executive role with UnitedHealth Group Inc. of Minnetonka, Minn., when the company’s acquisition of PacifiCare is final, possibly this year if regulatory approvals are met.
Cypress-based PacifiCare reported net income for the quarter ended June 30 of $92.6 million, or 96 cents a share, compared with $76 million, or 80 cents, for the same period last year. Revenue grew 18% to $3.6 billion.
The company, which has about 3.3 million members in its health plans and an additional 11.3 million in dental and other specialty plans, added members through sales to seniors of its Secure Horizons insurance brand during the last three months. Total senior membership increased 8,000, or about 1%, in the second quarter from the first quarter and increased 6% from the previous year.
During the second quarter, the company added members in its commercial lines of business, such as managed care and preferred provider plans, or PPOs, for a 5% increase from the first quarter.
In addition, PacifiCare said an average 6% increase in monthly premium dollars per commercial member also helped boost the bottom line.
“We’re pleased with the growth the company has shown and look forward to UnitedHealth realizing the value from PacifiCare,” said Sheryl Skolnick, an analyst at Fulcrum Global Partners in New York.
The positive results came despite $4 million in acquisition-related costs in the quarter and $7.6 million in costs related to preparations to administer the new prescription drug benefit for seniors on Medicare, which goes into effect Jan. 1.
PacifiCare shares rose $1.98 to $76.88.
