FHP Posts 31% Increase in Net Income for Fiscal Year

Citing membership growth and premium increases, FHP International Corp. on Friday reported net income of $28.8 million for the fiscal year ended June 30, up 31% from $22 million a year ago, despite a drop in fourth-quarter earnings.

The Fountain Valley-based health maintenance organization posted income of $6.4 million for the fourth quarter ended June 30, down from $7.7 million for the same period in fiscal 1989. The decline stemmed from the addition of $8.3 million to a reserve to cover medical malpractice claims against FHP from 1975-83, a period when the company was self-insured.

FHP announced last month that it would increase the reserve in response to a Los Angeles County Superior Court jury’s July 27 finding that the company was guilty of negligence in the premature birth of a baby boy in 1983.

The jury’s award of $10 million in damages to the boy and his mother was the largest malpractice judgment ever against FHP.

FHP’s revenue for the 1990 fiscal year rose 40% to $980.4 million, up from $699.05 million, while fourth-quarter revenue increased 41% to $281.35 million from $199.32 million for the same quarter the previous year.

“Growth in revenue and earnings reflects the company’s continued membership growth along with premium increases in both its Senior Plan and commercial plans,” said Michael A. Montevideo, FHP associate vice president.

During fiscal 1990, membership in the company’s health plans increased 18% to 548,000 from 466,000. That includes a 13% increase in commercial plans for a total of 381,000 members and 30% growth in FHP’s Senior Plan for Medicare recipients for a total of 167,000 members.

The company’s stock closed at $14.50 Friday, unchanged in trading on the New York Stock Exchange.