WellPoint Profit Rises 20% on Cost Controls
WellPoint Health Networks Inc. said Wednesday that third-quarter profit rose 20%, excluding the effect of a favorable tax ruling, as the managed-care company kept costs under control at a time when rising medical expenses are hurting competitors.
Profit excluding the tax benefit for California’s No. 2 health insurer rose to $66.7 million, or 95 cents a share, from $55.6 million, or 79 cents, a year earlier. The results matched the average estimate of analysts polled by First Call Corp.
WellPoint’s shares have gained 47% this year, while shares of competitors such as United HealthCare Corp. and Foundation Health Systems Inc. have tumbled as rising health-care costs and problems with Medicare caused them to report losses.
WellPoint has avoided such difficulties by instituting tight cost controls and avoiding business with Medicare, the federal government’s health insurance program for the elderly.
WellPoint shares fell $2.50 to close at $62.25 on the New York Stock Exchange.
The Woodland Hills-based company’s third-quarter revenue from premiums rose 13%, to $1.48 billion from $1.31 billion a year earlier. Total revenue rose 11%, to $1.63 billion from $1.47 billion.
The results included a benefit of $85.5 million, or $1.21 a share, under provisions for income taxes. That followed a favorable federal tax ruling related to its conversion from a nonprofit entity. After that adjustment, WellPoint reported net income of $152.2 million, or $2.16 a share.
The strong results come just three months after the company took $109 million in charges for the sale of its money-losing workers’ compensation unit as well as losses on shares it held in FPA Medical, an operator of physician practices.
At a Glance:
Sempra Energy reported an 11% decline in net income because of merger costs and losses from its relatively new, unregulated businesses.
The San Diego-based company said third-quarter unaudited consolidated net income was $91 million, or 38 cents per diluted share of common stock, down from consolidated net income of $102 million, or 43 cents per diluted share, a year ago.
Both quarters included merger-related costs of $4 million, or 2 cents per diluted share. Excluding nonrecurring costs, Sempra’s third-quarter earnings were $95 million, or 40 cents per diluted share.
Revenue rose to $1.4 billion in the third quarter from $1.3 billion in the same quarter last year.
Sempra was formed in June through the merger of San Diego-based Enova, parent of San Diego Gas & Electric, and Los Angeles-based Pacific Enterprises, parent of Southern California Gas.
“While most of our unregulated businesses are still in the start-up stage, they are beginning to make headway in the emerging competitive energy market,” Chief Executive Richard D. Farman said.
Non-utility operations, including Sempra Energy Solutions, Sempra Energy Trading, Sempra Energy International, Sempra Energy Resources and Sempra Energy Financial, recorded a net loss of $6 million in the third quarter, compared with a net loss of $4 million a year ago.
* Sanwa Bank California, citing continuing demand for fee-based products and services, reported a 21% increase in third-quarter net income to $28.4 million, compared with $23.5 million in the year-ago quarter.
The Los Angeles-based bank, which is a division of Japan’s Sanwa Bank Ltd., posted record return on assets of 1.37%, and return on equity of 13.45%. Net interest income for the period rose 4% to $95.7 million, compared with $91.9 million a year ago.
* Ingram Micro Inc., the world’s largest computer wholesaler, said its third-quarter net income grew 35% to $60 million, slightly ahead of Wall Street’s expectations.
Net income for the quarter ended Oct. 3 amounted to 40 cents per diluted share, compared with $44 million, or 31 cents, in the third quarter ended Sept. 27, 1997. The previous year’s results included a noncash compensation charge of $304,000, or 1 cent a share, to cover employee stock options.
Santa Ana-based Ingram said net sales surged to $5.71 billion, up 40% from the same quarter last year. The company generated nearly $21 billion in revenue in the last 12 months.
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* MORE EARNINGS: C3
