HMOs’ Profits Meet Projections
Foundation Health Systems Inc., one of California’s biggest health insurers, on Thursday said third-quarter profit rose after it exited markets and raised premiums. Separately, health insurer Humana Inc. said earnings fell as medical expenses got ahead of premium increases.
Both were in line with expectations. Foundation’s net income, which rose 22%, matched the average estimate of analysts polled by First Call Corp. Humana’s profit from operations fell 69%, in line with analyst estimates according to First Call.
Woodland Hills-based Foundation said net income rose to $35.1 million, or 29 cents a share, from profit from continuing operations of $28.7 million, or 24 cents, in the year-earlier period. Revenue rose to $2.16 billion from $2.14 billion.
The company’s total medical membership fell by almost 4% to 5.49 million from 5.7 million in the year-earlier period as it sold some plans and raised premiums.
Foundation struggled after it was set up in 1997 through the $1.3-billion merger of Foundation Health Corp. and Health Systems International Inc. as medical costs grew faster than forecast, even as it lost members to rivals. The company last year, though, appointed new executives who unloaded unprofitable businesses, boosted premiums and moved to control cost increases.
In the second quarter, Foundation finished selling health plans in Louisiana, Oklahoma and Texas, and made plans to sell others.
Shares of Foundation fell 69 cents to close at $8.75 on the New York Stock Exchange. Analysts said the share drop may stem from concern that Foundation met expectations by reporting higher-than-expected investment income, rather than just by improving its operations.
Louisville-based Humana continues to be one of the few laggards of the improving group of health insurers, analysts said. Profit from operations fell to about $16.5 million, or 10 cents a share, from $54 million, or 32 cents, in the year-earlier period. Humana was expected to earn 11 cents, the average estimate of analysts according to First Call. Revenue rose about 3.8% to $2.56 billion from $2.46 billion. Shares fell 19 cents to close at $8 on the NYSE.
