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To: Johnny Canuck who wrote (36748)	4/13/2002 1:44:22 PM
From: Johnny Canuck	Respond to of 68279

Saturday April 13, 9:29 am Eastern Time Reuters Business Profits Seen for Most Health Insurers By Susan Kelly CHICAGO (Reuters) - Most major U.S. health insurers are expected to post strong profits in the first quarter, aided by premium hikes that have outpaced the rising cost of medical care. As tech companies issue profit warnings and drugmakers struggle with slowing product pipelines, health insurers are demanding and getting steep price increases from employers while keeping a tight rein on costs, analysts said. "These companies are going to have very robust quarterly comparisons in a market where such comparisons are difficult to find. It reflects the excellent fundamentals in the industry," said UBS Warburg analyst William McKeever. Investors have taken notice. The Morgan Stanley Healthcare Payor Index (^HMO - news), comprising most of the major managed care companies, is at all-time highs, after almost a 21 percent gain this year, and marching steadily higher into earnings season. "I think you've got people fleeing pharmaceuticals, looking to invest elsewhere, and this is a good place to park some money," said McKeever. He said managed care companies are raising health insurance premiums by 15 percent on average. Analysts believe most companies in the sector, with two prominent exceptions, will meet or beat earnings targets. Those seen as most likely to exceed consensus forecasts are WellPoint Health Networks Inc. (NYSE:WLP - news), UnitedHealth Group Inc. (NYSE:UNH - news), Trigon Healthcare Inc. (NYSE:TGH - news), Anthem Inc. (NYSE:ATH - news) and Health Net (NYSE:HNT - news). Insurers are clamping down on soaring health costs by trying to steer people to lower-priced drugs through higher co-payments for name-brand medications, disease management programs that promote healthier lifestyles and streamlining of claims payment systems. The first quarter tends to be strong for health insurers because many raise premiums in January. A clearer picture of whether the hikes are enough to cover higher medical costs going forward emerges in the second quarter, analysts said. "The second quarter is generally the true test of profitability for the year," said Goldman Sachs analyst Charles Boorady, who forecast first-quarter per-share earnings growth of 30 percent for the sector, including gains from a change in accounting for goodwill. AETNA IN DOUBT Analysts and investors are split on whether Aetna Inc. (NYSE:AET - news), the nation's largest health insurer, will post its first profit after losing almost $267 million, including charges, in 2001. First quarter estimates are all over the map, ranging from a profit of 26 cents to a loss of 24 cents. "I think we'll have steadily improving earnings throughout the year," said Aetna investor Richard Pzena of Pzena Investment Management, which oversees $3.3 billion in assets. A year into a major turnaround effort, the Hartford, Connecticut-based insurer faces a proxy contest from shareholder activist Herbert Denton for three board seats. Pzena and several analysts said a key to Aetna's quarter will be whether the company can contain its administrative costs after losing 1.6 million members last year. Aetna cut 6,000 jobs last year as part of its restructuring but may need to make further reductions in the next few years to bring costs in line with revenues, said McKeever. Forecasts also vary widely for Santa Ana, California-based PacifiCare Health Systems Inc. (NasdaqNM:PHSY - news), a company struggling with high medical costs and a shrinking membership base. Profit estimates range from 31 cents to 87 cents a share. UnitedHealth Group of Minneapolis, the second-largest managed care company behind Aetna, will kick off the season when it reports results on Thursday. The following is a list of managed care companies and average analysts' estimates for first-quarter per-share profits, according to Thomson Financial/First Call.