- The Washington Times - Monday, April 22, 2002

Shares of Mid Atlantic Medical Services Inc., the Rockville-based health insurer, continued to surge last week on a wave of strong earnings and weakness among key local competitors.
The stock closed at $32.86 Friday on the New York Stock Exchange. By comparison, six months ago the stock was trading at about $17.
"Right now the company has been delivering very good earnings and the market has been rewarding them," says William McKeever, analyst with UBS Warburg, who rates the stock a strong buy. "So they've scored well on two fronts: they've made their customers happy as well as their shareholders."
Mid Atlantic Medical Services Inc., also known as MAMSI, was rated the No. 1 health insurer by federal employees this year. The company has posted growing earnings for six consecutive quarters.
MAMSI has numerous subsidiaries through which it provides health care. Among them are MD-Individual Practice Association Inc., Optimum Choice Inc. and Optimum Choice of the Carolinas Inc.
For its last quarter last year MAMSI reported net income rose 38 percent to $17.29 million (43 cents per share) from $12.52 million (31 cents). Sales rose 23 percent to $469.51 million from $380.69 million.
For the year the company reported net income grew 45 percent to $57.2 million ($1.41) from $39.41 million ($1) in 2000.
MAMSI has not yet released first-quarter earnings, but analysts expect those to be higher than last year's first-quarter earnings of $12.88 million (32 cents) on sales of $421.11 million.
Although the health insurance industry as a whole has done well in recent times, MAMSI's local competitors have struggled with internal troubles such as legal disputes and attempted mergers. This has helped MAMSI gain more clients and stand out locally, analysts say.
"No company or industry can do this forever and ever, but right now MAMSI appears to be firing at all cylinders, so to speak," says David Shove, analyst with Prudential Securities Research, who rates the stock a buy.
The only overhang with the company is that it's in arbitration with Merck MedCo, its pharmacy benefits subcontractor. The two companies entered an agreement where Merck guaranteed MAMSI that its pharmacy costs for a year would be a specific, undisclosed amount. But the costs were much higher and MAMSI filed suit against Merck in August.
"If this were to go against Mid Atlantic Medical, they could possibly have to take a one-time charge to their earnings," says Mr. Shove, who estimates the amount to be about $40 million.
But Mr. McKeever isn't worried.
"My personal belief is that this will get resolved I don't see it as a major threat," he says. "I don't expect it to impact earnings going forward."
MAMSI spokesmen were unavailable for comment Friday.

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