Increase in Membership Helps U.S. Healthcare's Net Rise 5.3%
March 29, 2011
BLUE BELL, Pa. -- U.S. Healthcare Inc. posted a 5.3% increase in second-quarter net income, partly because of a 23% membership increase in its health-care programs. Results nearly matched analysts' estimates, bucking a trend of disappointing earnings in the health-insurance industry. Aetna Life & Casualty Co. shareholders are scheduled to vote Thursday on whether to approve a proposed acquisition of U.S. Healthcare for $8.13 billion in cash and stock. Since the companies agreed on the transaction in April, earnings forecasts for several managed-care companies have been lowered. Noting that trend, some Aetna shareholders have balked at the merger, apparently suspecting U.S. Healthcare shares might have been overvalued. Separately, Standard & Poor's Ratings Group lowered the claims-paying ability rating of Aetna Life Insurance Co. to single-A from single-A-plus, reflecting decreased capital strength. The credit-rating and information-services unit of McGrawHill Inc. also lowered the claims-paying ability rating of Aetna Life Insurance & Annuity Co. to double-A-minus from double-A, ``because of decreased capital strength and additional pressure that may be placed on this entity as a result of overall weaker capitalization of the consolidated enterprise.'' U.S. Healthcare's net income totaled $98 million, or 63 cents a share, compared with $93.1 million, or 59 cents a share, a year earlier. Revenue rose 30% to $1.09 billion from $840.5 million. Results for the recent quarter included a charge of $4.4 million, or three cents a share, for costs related to the proposed merger. The company said that excluding the charge, earnings would have been 66 cents a share, a penny below a First Call consensus of analysts' estimates. In Nasdaq Stock Market trading Tuesday, U.S. Healthcare gained 62.5 cents to $50.875 while shares of Aetna, a Hartford, Conn.-based insurer, fell 50 cents to $60.375 in New York Stock Exchange composite trading. For the six months, U.S. Healthcare's net income fell 4.3% to $179.6 million, or $1.16 a share, from $187.6 million, or $1.18 a share. The six months includes merger expenses of $24.9 million, or 16 cents a share. Revenue rose 30% to $2.14 billion from $1.65 billion.
