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Byline: Chris Sieroty Staff Writer

Foundation Health Systems Inc., one of the nation's largest publicly traded managed care companies, reported a 24 percent rise in its third-quarter earnings.

Profits rose to $44.7 million, or 36 cents per share, on revenues of $2.29 billion, compared with $35.1 million, or 29 cents per share, on revenues of $2.16 billion for the same period a year ago, the health insurer reported Wednesday. The results top a consensus estimate of 34 cents per share from analysts surveyed by First Call/Thomson Financial.

``We are very pleased with these results, as they again demonstrate our commitment to growing profitably and enhancing our financial status,'' said Jay M. Gellert, Foundation's president and chief executive officer. ``We are adding enrollment in health plans, seeing stable medical cost trends and becoming more administratively efficient with each successive quarter.''

The Woodland Hills-based company said results in the quarter were characterized by the second sequential quarter of enrollment growth in the company's health plan and lower selling, general and administrative expenses.

Foundation also experienced an $85 million increase in claims reserves and brought its debt below $950 million at quarter-end.

``This is a company that stumbled after a large acquisition in 1998 and has been trying to turn things around ever since,'' said Larry Marsh, an analyst with Lehman Brothers in New York. ``We believe that they are further along than many believe.''

Marsh recently rated Foundation Health's stock a ``buy'' and set a price target of $24 per share.

Shares of Foundation Health Systems closed unchanged Tuesday at $20.1875 on heavy volume of 695,900 on the New York Stock Exchange.

Marsh said the managed-care company is in a much better position after a cycle of divestitures and market exits. Additionally, Foundation Health has adequate and sustainable market share in the regions where it remains.

In its largest market, California, the company ranks third in overall membership, and company officials believe they possess the largest network as measured by the number of providers.

At the same time, the company faces significant challenges with its Arizona health plan, Intergroup of Arizona.

Marsh said there were several reasons for the troubles in Arizona, including the loss of market share over the past two years. Intergroup has slipped from the largest health plan in the state to second place behind United Healthcare.

``We are addressing our challenges in Arizona and Florida and pursuing the divestiture of our Florida operations,'' said Gellert.

Foundation's Arizona plan is expected to lose more than $20 million this year, with the company expecting to break even in 2001, said Marsh.

``The company is well-positioned to benefit from any slowdown in the overall economy that would, in turn, cause employers to move employees to lower-cost products,'' he said. ``Also, I'm impressed with the new management, a clearer operational focus and increased accountability.''

Foundation Health Systems offers a number of health plans to about 5.5 million customers in 18 states. The company also owns health and life insurance companies licensed to sell insurance in 33 states and the District of Columbia.
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Article Details
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Title Annotation:Business
Publication:Daily News (Los Angeles, CA)
Article Type:Statistical Data Included
Geographic Code:1USA
Date:Nov 2, 2000

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