Health Net Sees Profit Rise 25% in 1st Quarter
Health Net Inc. said Tuesday that first-quarter profit rose 25% as the Woodland Hills-based managed-care company attracted more customers.
Net income rose to $42.4 million, or 34 cents a share, from $34.1 million, or 28 cents, a year earlier, Health Net said. Revenue rose 13% to $2.5 billion.
Health Net has raised premiums faster than medical costs have increased, and it has controlled other expenses. The company said its plans, which offer lower premiums than some competitors, may be attractive as health-care costs rise. Health Net said it hasn’t been hurt as California employers cut jobs in a slowing economy.
The earnings matched the average 34-cent estimate of analysts surveyed by First Call/Thomson Financial.
Shares fell 11 cents to close at $21.44 on the New York Stock Exchange. The shares have more than doubled in the last 12 months.
Health Net said it added 104,000 customers in the most recent quarter, with most of the growth in California and New York. Health Net, which has about 5.5 million customers, changed its name from Foundation Health Systems in November.
Chief Executive Jay Gellert said the slowing California economy hasn’t hurt the company because most technology businesses didn’t use health maintenance organizations such as the ones Health Net offers.
Health Net has said it could benefit from a slowdown if employers turn to HMOs to control rising health-care costs.
“This recession isn’t an employment recession,” Gellert said in a conference call with investors. “What we’re seeing in this recession is a movement of people from the ‘new economy’ to the ‘old economy’. They really move people more toward the kinds of products we’ve traditionally offered.”
Gellert said employers will shift more of the cost of health care to workers through higher co-payments and deductibles. Last month, the California Public Employees’ Retirement System cut 2002 premium increases to 6% by raising co-payments for members.
That trend may slow the rise in health-care costs, though it doesn’t threaten health insurers’ profits because premium increases are likely to stay in the high single digits even if benefits are cut, Gellert said.
Premiums grew by about 10% for customers in employer health plans, Health Net said.
The medical cost ratio--the share of premium dollars that pays for medical care--was unchanged from a year ago at 85.2% as costs rose in Arizona and Florida, the company said. Health-care costs rose 10.4% per member in the quarter.
At a Glance
Other Southern California company earnings, excluding one-time gains and charges unless noted:
* Arden Realty Inc., a Los Angeles-based office real estate investment trust, reported first-quarter net income of $24 million, or 38 cents per share, compared with $23.5 million, or 37 cents, a year ago. Revenue rose to $104 million from $90.5 million.
* Glendale-based restaurant operator IHOP Corp. said first-quarter net income rose 3% to $7.5 million, or 37 cents per share, compared with net income of $7.2 million, or 36 cents, a year ago. Sales rose 11% to $330.7 million.
* Discount and online broker JB Oxford Holdings Inc. of Los Angeles reported a first-quarter loss of $803,000, or 6 cents per share, compared with a year-ago profit of $4.6 million, or 19 cents. The company also said it cut 15% of its salaried work force, or 22 employees, becoming the latest brokerage to reduce staff amid weak stock markets. Revenue dropped to $13.27 million from $34.49 million last year.
