Membership Spurt Boosts FHP Profits 10%, or 20 Cents a Share, in Quarter : Health care: The health maintenance organization has had flat enrollment in the recession but it saw a 15% jump.

FOUNTAIN VALLEY — FHP International Corp. reported Monday that a spate of new memberships drove an increase of nearly 10% in its quarterly profit.

The health-maintenance organization, which has had flat enrollment for the last year because of the recession, saw a 15% increase in those enrolled in its various HMO programs. The majority of those new members are in Arizona, where membership has grown by 36%.

“That was by far the most significant factor in our (earnings) growth,” said William R. Benz, chief financial officer.

For its first fiscal quarter, which ended Sept. 30, FHP posted earnings of $6.4 million, or 20 cents a share. That compared with a profit of $5.9 million, or 18 cents a share, for the same period last year. First-quarter revenue for the Fountain Valley company was $444.2 million, up 22% from $364.2 million a year earlier.

The increase in profit is a turnaround from FHP’s year-end results. The company in September blamed recession-related layoffs and settlement of a class-action suit for lower annual earnings. Year-end profit of $32.9 million was down 18% from earnings for the previous 12 months.

Revenue has continued to grow, however. For its latest fiscal year, which ended June 30, FHP posted revenue of $1.6 billion, up 22% from $1.3 billion for the year before.

Benz said that, in addition to a 15% yearly increase in membership--from 643,000 to 742,000 in September--a cut in administrative expenses from 14.9% of revenue to 13.3% of revenue has helped to boost the bottom line.

“We are literally trying to keep a cap on expenses,” Benz said.

Robert Hoehn, a New York analyst for Bear Stearns & Co., agreed that FHP has been successful in holding down costs while increasing its membership. Although the company did not do as well as he had anticipated, Hoehn said, it is doing well at controlling expenses and is able to post profits while medical costs continue to increase.

Hoehn also said that the pending acquisition of Great States Financial Corp., an Anaheim insurance company, to administer FHP’s 24-hour workers’ compensation program will cut expenses from the 21-month-old program by about 9% a year.

In addition, Hoehn said, he expects membership to increase to 800,000 by the end of the next fiscal year.

He also said that the presidential campaign, which has focused on managed care, has made HMOs generally more popular.

“The cry on Wall Street is that, no matter who wins the election, the HMOs will come out ahead,” Hoehn said.

A day before the election, that did not immediately translate into a gain for FHP’s stock. In Monday’s trading on the NASDAQ market, the stock fell $1 a share to close at $17.75.

FHP’s 1st Quarter

With presidential candidates talking about the need for managed health care, FHP International Corp. has reason to be optimistic. The company reported first-quarter revenue of $444.2 million, up $80.01 million from a year earlier. Figures in thousands of dollars, except per-share data:

Percent 1991 1992 change Total revenue $364,154 $444,167 +22.0 Net earnings 5,880 6,444 +9.6 Earnings per share 0.18 0.20 +11.1

Source: FHP International Corp.