PACIFICARE: Posts Robust Q4 Profits

      Pacificare Health Systems Inc. announced yesterday that its fourth-quarter profits more than tripled from a year ago, and its financial outlook remains rosy. Bloomberg News/Los Angeles Times reports that the HMO's profits rose to $55 million in the fourth quarter, up from $15 million a year earlier. An expected $4 million payment from the government "to cover higher-than-expected medical costs for insuring government employees" boosted net income to $59 million for the period. Revenue fell slightly from the year-earlier period, from $2.36 billion to $2.34 billion. While the company lost 7% of its members last year, resulting in a loss of $144 million in the fourth quarter, many were enrolled in unprofitable subsidiary plans that PacifiCare has since shed. Meanwhile, Pacificare has been gaining members in profitable plans such as Secure Horizons, its Medicare HMO. "These guys are very experienced Medicare players. They do understand the business," said BancBoston Robertson Stephens analyst John Rex. Further, losses related to its troubled 1997 acquisition of FHP International Inc. now have been largely stemmed. For the year, the company posted a profit of $202.4 million on $9.5 billion in revenue. Shares rose $4.63 to close yesterday at $73.69 on heavy Nasdaq trading (2/24). "By nearly every measure, 1998 was an excellent year for PacifiCare," said CEO Alan Hoops.

Only the Beginning?
      PacifiCare also announced that its tax rate will come down about three to five percentage points this year, which "should raise 1999 earnings 20 cents to 25 cents a share," according to ING Baring Furman Selz LLC analyst Robert Hoehn. The company expects earnings this year to grow about 30% from last year's. PacifiCare's board also renewed plans to buy back as much as 10% of its stock (Rundle, Wall Street Journal, 2/24).