PacifiCare’s Net Income Falls 15% in Quarter
PacifiCare Health Systems Inc. reported Thursday that fourth-quarter profit was down almost 15%, but the major Medicare provider predicted an upbeat outlook because of the historic overhaul of the federal government program last fall.
The Cypress-based insurer reported net income for the three months ended Dec. 31 of $31.5 million, or 36 cents a share, compared with $37 million, or 50 cents, a year earlier.
Excluding costs incurred in debt reduction, per-share earnings would have been 55 cents -- better than the Wall Street average estimate of 52 cents, the company said.
“Our fourth-quarter results were solid again as we beat the consensus,” Chief Executive Howard Phanstiel said.
Buoyed by premium hikes, fourth-quarter revenue was up 2% from a year earlier at $2.8 billion.
An early flu season pushed fourth-quarter physician and pharmacy costs about $14 million higher than a year earlier, Phanstiel said.
“The good news is admissions that are flu-related are down, so we do think that when you look at moving into ‘04, that will moderate,” Phanstiel said. “But the big improvement is we are pricing ahead of our cost trends.”
The insurer forecast net income for this year of $280 million to $290 million, up 15% to 19% from 2003 and reflecting a drive to increase membership.
The outlook includes the loss of 28,000 of the striking and locked out grocery workers whose benefits ran out a month ago.
Phanstiel said passage of the Medicare Prescription Drug, Improvement and Modernization Act gave the company enough certainty about future government prescription reimbursement rates to forecast that 2005 profit would be up 25%. About half of PacifiCare’s business is providing Medicare coverage.
PacifiCare membership declined 7% year over year, largely because of the previously reported loss of the California Public Employees’ Retirement System in January 2003. Compared with the third quarter, however, enrollment increased by 33,000, or 1.5%, for a total of about 3 million health plan members and about 9 million specialty plan members nationwide.
For the full year, PacifiCare posted profit of $242.7 million, or $3.04 a share. Unadjusted for an accounting change, earnings for the previous year were $757.8 million, while adjusted 2002 earnings were $141 million, or $3.92 a share.
PacifiCare released its earnings results after markets closed. Its shares closed at $31.49 on the New York Stock Exchange, up $2.36, and rose to $33.11 in after-hours trading.
