21st Century moves to change grading of insurance policies: Woodland Hills firm to exit from ZIP code ratings.

The push by California Insurance Commissioner John Garamendi to have auto insurance premiums based less on where someone lives and more on how someone drives is putting some of the state's auto insurance companies on edge.

The mandatory change--which Garamendi calls "Good Driver Reforms"--puts more of an emphasis on driving record, general driving experience and how much someone drives versus ZIP codes and marital status.

So far, State Farm, Auto Club of Southern California and USAA Insurance have agreed to the new policies.

Woodland Hills-based 21st Century Insurance Co. plans to lower its rates, which will be submitted to file state before the Sept. 14 deadline, said Larry Krutchik, a spokesman for the company.

"We're a California company and we are complying with the regulations" Krutchik said.

"We're committed to being fully complied," he said. "We're going to do what we need to do."

Krutchik would not elaborate about the difficulties the changes have presented.

The insurance industry has been critical of the move and filed an unsuccessful suit to block it.

In a note to investors, Meyer Shields, an analyst for Stifel Nicolaus, said insurance companies use ZIP codes to base premiums because history indicates certain factors impact whether a person is likely to submit claims. Taking that trend analysis away means premiums will not be as effective, he said.

"Whenever the link between loss costs and rate levels is weakened, it becomes more difficult to manage underwriting profitability." Shields wrote. "Territorial differences explain a lot of the variation in loss costs, meaning that restrictions on the use of territory will impede ratemaking precision."

Sales Up for Hemacare

HemaCare Corp., a Woodland Hills developer of blood collection devices used in hospitals and clinics, reported its 11th straight profitable quarter for the second quarter ended June 30.

Revenue for the company jumped $8.4 million from the same 2005 period and the boost drew net income to $360,000, or $0.04 per diluted share.

Robert S. Chilton, executive vice president and CFO said the company's 12 percent increase in revenues for the second quarter are a result of a restructuring of the business last year, which closed six underperforming divisions and refocused operations.

The company also credited the jump in revenue to a 16 percent increase in sales of its blood products, which tallied $6.8 million in the quarter. Blood products revenue topped $1.7 million, or 15 percent, mainly due to sales growth in the California market.

"We've been finding that our California customers have been receptive to our business model," Chilton said.

For the first six months of the year, HemaCare reported $16.6 million in revenue, up 14 percent from the same period in 2005.

The first six months did see income drop 38 percent to $445,000 compared to last year, which the company credited to the recognition of $361,000 in non-cash share-base compensation expenses.

The blood services sector also took a hit due to a 3 percent increase in the cost of albumin, used in certain therapeutic procedures. Overall, the division's profit slipped $190,000, about 42 percent from last year. the company reported.

The next phase is for HemaCare to enter the researching side of business, Chilton said.

Help for CHAD?

It was a rough first fiscal quarter for CHAD Therapeutics, the Chatsworth developer of oxygen and respiratory care devices.

The company reported that revenue dropped to $5.5 million from $5.9 million a year ago. Losses continued with the quarterly loss posted at $116,000, or $0.01 per diluted share, from a net loss of $42,000, or $0.0 per diluted share during the same 2005 period.

Revenue suffered from a 7 percent drop in sales of CHAD oxygen conservers and therapeutic devices. Domestic sales also suffered a 17 percent decline, with international sales faring worse, decreasing 42 percent.

The bleak outlook, however, could turn around with an upcoming change in Medicare reimbursement procedures, which will give patients automatic ownership of equipment after 36 months.

The change could mean healthcare companies will have to buy more equipment, said CHAD President and CEO Earl Yager.

"By intensifying pressure on homecare providers to reduce operating and equipment costs, we continue to believe that this policy ultimately will stimulate demand for CHAD's TOTAL 0(2) home oxygen filling system ...," Yager said in a statement.

CHAD also hopes to bring a new product to treat sleep disorders to market next spring.

More Trouble for Cheesecake

Nasdaq issued a letter last week to Calabasas Hills restaurateur Cheesecake Factory telling the company that it did not meet listing standards because of tardy second quarter financial reports.

The company hasn't submitted the reports because it is investigating how stock options have been issued.

The problem meant that Cheesecake's once high-flying ticker symbol was grounded as it appeals the ruling.

Meantime the U.S. Securities and Exchange Commission is looking into Cheesecake's stock options practices. At the same time, a group of shareholders are suing the company for abuse of control, waste of corporate assets and gross mismanagement.

Staff Reporter Chris Coates can be reached at [phone] or at ccoates@sfi,bj.com.