PacifiCare’s Earnings Climb 34%

Times Staff Writer

Profit at health insurer PacifiCare Health Systems Inc. rose 34% during the third quarter, driven by lower healthcare costs, tax settlements and growing membership and premiums, the Cypress-based company said Thursday.

PacifiCare, which is being acquired for $8 billion by UnitedHealth Group Inc., reported $9 million of costs related to the deal. If approved by regulators and shareholders, the acquisition could close by early next year.

“We feel very good about our merger,” said PacifiCare Chief Executive Howard Phanstiel. He is expected to take an executive role with UnitedHealth, the nation’s No. 2 health insurer, if the deal goes through.


Beating Wall Street expectations, PacifiCare reported net income for the quarter ended Sept. 30 of $118 million, or $1.21 a share, compared with $88 million, or 94 cents, a year earlier. Revenue grew 21% to $3.8 billion.

For 2005, the company raised its earnings-per-share projection to a range of $3.86 to $3.91 from $3.70 to $3.85.

The company, which has about 3.3 million members in its health plans and an additional 12 million in dental and other specialty plans, increased senior membership by 7%, adding about 50,000 members to its Secure Horizons program during the last three months.

Still, the company said commercial membership in its other plans, such as managed care and preferred provider plans, would be flat for the year, about the same as 2004.

Analysts blamed the lack of growth on trends in the HMO industry, which is seeing a slowdown in membership growth, and the pending acquisition, which they said might discourage some employers from offering PacifiCare to their workers.

“Until the merger is ratified, larger clients don’t want to have problems if anything goes awry with this deal,” said analyst Mark Van Der Pluyn with Fulcrum Global Partners in New York.

PacifiCare shares rose 57 cents Thursday to $78.70.