For Immediate Release (2004)Full Document 

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For Immediate Release  

5995 Plaza Drive

Cypress, California 90630

Tel. (800) 631-0969


News Release


Tyler Mason

Media Relations

(714) 226-3530


Dan Yarbrough

Investor Relations

(714) 226-3540


PacifiCare Health Systems Announces 3rd Quarter 2004 Results


  · EPS totaled $0.94 per diluted share
  · Net income up 31% year-over-year
  · Total revenue up 13% from prior year
  · Cash Flow from Operations two times net income at $187 million
  · 2004 EPS guidance raised to $3.15-$3.20


CYPRESS, Calif., November 3, 2004 — PacifiCare Health Systems, Inc. (NYSE: PHS), today announced that reported net income for the third quarter ended September 30, 2004 was $88 million, or $0.94 per diluted share. This compares with reported net income of $67 million, or $0.86 per diluted share, for the third quarter of last year. All EPS and share numbers in this release have been adjusted to reflect the 2-for-1 stock split that was effective January 20, 2004.


“The strength of the third quarter’s earnings is evident by the fact that we exceeded analysts’ expectations even after including $10 million of pretax severance and software charges in SG&A,” said Chairman and Chief Executive Officer Howard Phanstiel. “Additionally, as a result of the company’s stock repurchase program, we now expect a lower average outstanding share count for 2004 and are increasing our full-year EPS guidance from $3.07 to $3.17 to a range of $3.15 to $3.20.”



Revenue and Membership

Third quarter 2004 total revenue of $3.1 billion was 13% higher than the same quarter a year ago. Commercial revenue rose 12%, driven by premium increases of 8.4% per member per month (PMPM) and a 4% growth in membership. Senior revenue grew 11% over the third quarter of last year as the result of a premium increase of 9.3% PMPM and a 2% rise in membership.


Specialty and Other revenue grew 42% over the third quarter last year, primarily due to increased revenue at the company’s pharmacy benefit management subsidiary, Prescription Solutions. This revenue growth was driven by an increase in total membership, which rose by 595,000 or 12% year-over-year, and a focused marketing initiative resulting in a year-over-year increase in the mail order prescription fulfillment rate from 22.9% to 26.8%.


Health Care Costs

The third quarter consolidated medical loss ratio (MLR) of 84.1% increased 50 basis points from the third quarter of 2003, but improved by 100 basis points sequentially.


The year-over-year increase in the consolidated MLR was driven by a 50 basis point rise in the private sector commercial MLR to 83.5%, and a 30 basis point rise in the government sector senior MLR, to 84.9%.


On a year-to-date basis, the consolidated MLR of 84.7% was 60 basis points higher than the previous year’s MLR of 84.1%. However, consolidated MLR through nine months in 2003 included the benefit of favorable prior period developments equal to 70 basis points.


The private sector commercial MLR was down 20 basis points, to 83.8%, and the government sector MLR was up 150 basis points to 85.9%, on a year-to-date basis when compared to 2003. However, the favorable prior period developments through three quarters in 2003 benefited the private sector commercial MLR by 50 basis points and the government sector MLR by 90 basis points.

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