- The Washington Times - Monday, May 14, 2001

Trigon Healthcare Inc., Virginia's largest in-state health insurer that operates solely in that state, met analysts' high expectations with its quarterly earnings report released on Friday, news that sent its shares higher.

The Richmond company said sales grew 18 percent to $700.45 million from $593.67 million a year ago. Meanwhile, income rose 14.8 percent to $32.4 million (84 cents per diluted share) from $28.22 million (73 cents). Diluted shares reflect the value of options, warrants and other securities convertible into common stock.

Shares of the company closed at $56.81 Friday, on the New York Stock Exchange, up $1.33 from the day before.

"They have not only been profitable, but reported numbers that are normally above what people were expecting," says Samuel Levitt, an analyst with Conning & Co., in Hartford, Conn. "Part of it is that they are in one state and have been for years. And it helps in the insurance business to have a high degree of penetration."

As a licensee of Blue Cross Blue Shield, Trigon provides health and wellness services to approximately 2 million Virginians.

The company's earnings per share were 96 cents, about 10 cents higher than analysts had expected. The rise resulted from realized gains and losses on investments and for the one-time $3.5 million gain from the sale of Trigon Administrators Inc., a property and casualty firm.

"We are probably one of the most unique companies in the country in that we have 35 percent of the market share in a very fragmented market," says Chris Drake, vice president of investor relations for Trigon. "We are growing margins and enrollment together so that we have beat [Wall Street] expectations every quarter since we went public."

Now 65 years old, Trigon went public in January of 1997, when it became a for-profit company.

Greg Crawford, an analyst with San Francisco's Kelton Fox-Pitt, says the company has done well thanks to its large market share in Virginia.

"You can use [that] to get better discounts from the hospitals and physicians. So you really turn it into a better cost structure than anyone else," he says.

"But it's a double-edged sword because you are very focused geographically … and investors look at this as a bet on the Virginia economy … the company doesn't have the geographic diversity of a United HealthCare, Cigna, or one of those companies."

Aware of this restriction, Trigon's management has been trying to expand the company. Last year Trigon tried to buy Cerulean Companies Inc., Georgia's largest health insurer, for $675 million in cash. But Cerulean was swallowed up by WellPoint Health Networks instead, for $700 million.

"The discussion on Trigon is, typically, can they continue to grow within Virginia or do they need to merge with or acquire something in a larger area," says Mr. Levitt. "But I think they are well positioned for next couple of years."

Analysts predict Trigon will enter a new market within three to five years.

"Our long-term strategy is to become a regional health plan," Mr. Drake said. "We believe that we have to be very strong in local markets. We have no aspirations to be national or outside, really, of the Mid-Atlantic and Southeast."

He said Trigon will most likely expand "through selective acquisitions."

Sign up for Daily Newsletters

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide