Pre-tax charge of $151.3 Million Related to 1997 Securities
Class Action Lawsuits
Expected EPS of $1.24 per Diluted Share Before Litigation Charge
TRUMBULL, Conn., Oct. 22 /PRNewswire-FirstCall/ -- Oxford Health Plans,
Inc. (NYSE: OHP) announced today that its results for the third quarter ended
September 30, 2002 will include a $151.3 million non-cash pretax charge, or
$0.98 per diluted share after tax, related to securities class action lawsuits
brought in 1997 following the October 27, 1997 decline in the price of the
Company's common stock. As a result of this charge, the Company expects to
report net income of approximately $0.26 per diluted share for the quarter.
Excluding the effect of the litigation charge, net income for the quarter
ended September 30, 2002 is expected to be $1.24 per diluted common share,
compared to $0.85 per diluted common share, for the same period last year.
Expected third quarter earnings for 2002 also include the benefit of
approximately $0.20 per share resulting from changes in estimates of prior
period reserves related to medical claims and NY market stabilization pools
for 1999 and 2001. The Company expects to report cash flow from operations of
over $115 million for the quarter and parent company cash balances of
approximately $242 million at September 30, 2002.
The securities class actions continue toward a trial. However, in view of
the inherent risks and uncertainties of litigation and in anticipation of a
settlement conference to be held in November 2002, the Company has
communicated to the plaintiffs and the insurance carriers its willingness to
pay $161.3 million. This offer reflects the full amount of the current
retention under the insurance carriers' interpretation of the $200 million
Excess Insurance policies that the Company purchased in 1999. As a result,
the Company will record a liability and pre-tax charge of $151.3 million
against earnings in the third quarter of 2002. This $151.3 million charge
represents the Company's settlement offer, less $10 million that the Company
estimates would be available and collectible under its primary Directors and
Officers insurance. At the present time, no total settlement amount
potentially payable by the Company beyond the $161.3 million can be reasonably
estimated. "We do not believe that future funding of the Company's current
offer would have a significant impact on our capital needs or existing share
repurchase program," said Kurt B. Thompson, Chief Financial Officer.
If a settlement is not reached, or if the Court does not approve any such
settlement, the securities class actions would continue to proceed to trial.
The Company, in the opinion of management with the advice of external counsel,
has substantial defenses to plaintiffs' claims and may ultimately prevail at
trial. Therefore, at the present time, no amount or range of loss from an
unfavorable judgment can be reasonably estimated. Accordingly, the Company
has not recorded a net liability for a potential unfavorable judgment or
settlement in excess of $151.3 million. There can be no assurance as to the
ultimate result in this litigation. A more detailed description of these
matters is contained in the Company's report on Form 8-K filed with the
Securities and Exchange Commission.
A review of the complete results for the third quarter and management's
outlook for the remainder of 2002, together with preliminary views on 2003,
will take place during the Company's previously scheduled third quarter
earnings call on October 29 at 10 a.m.
Founded in 1984, Oxford Health Plans, Inc. provides health plans to
employers and individuals primarily in New York, New Jersey and Connecticut,
through its direct sales force, independent insurance agents and brokers.
Oxford's services include traditional health maintenance organizations,
point-of-service plans, third party administration of employer-funded benefits
plans and Medicare plans.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, including statements concerning
the Company's estimated results for the quarter ended September 30, 2002,
estimated current and future potential securities class action litigation
settlement charges, the outcome of the securities class actions, future
capital needs, share repurchase program and other statements contained herein
regarding matters that are not historical facts, are forward-looking
statements as defined in the Securities Exchange Act of 1934; and because such
statements involve risks and uncertainties, actual results may differ
materially from those expressed or implied by such forward-looking statements.
Factors that could cause actual results to differ materially include, but are
not limited to:
* Changes in Federal or State regulation relating to health care and
health benefit plans, including proposed patient protection legislation
and mandated benefits.
* The state of the economy.
* The impact of the September 11, 2001 terrorist attacks, subsequent
cases of anthrax infection or exposure, and any future acts
of terrorism or war.
* Rising medical costs or higher utilization of medical services,
including higher out-of-network utilization under point-of-service
plans and new drugs and technologies.
* Competitive pressure on the pricing of the Company's products,
including acceptance of premium rate increases by the Company's
commercial groups.
* Higher than expected administrative costs in operating the Company's
business and the cost and impact on service of changing technologies.
* The ability of the Company to maintain risk transfer, risk sharing,
incentive and other provider arrangements and the resolution of
existing and future disputes over the reconciliations and performance
under such arrangements.
* Any changes in the Company's estimates of its medical costs and
expected cost trends.
* The impact of future developments in various litigation (including
pending class and derivative actions filed against the Company and
certain of its officers and directors, and other proceedings commenced
against the Company and several employees by certain healthcare
providers), class actions in Connecticut, New Jersey and New York and
related litigation by the Connecticut Attorney General, regulatory
proceedings and other governmental action (including the ongoing
examination, investigation and review of the Company by various Federal
and State authorities).
* The Company's ability to renew existing members and attract new
members.
* The Company's ability to develop processes and systems to support its
operations and any future growth and administer new health care benefit
designs.
* Those factors included in the discussion under the caption "Cautionary
Statement Regarding Forward-Looking Statements" in Part I, Item 1, of
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 and Part I, Item 2, of the Company's Quarterly
Reports on Form 10-Q for the periods ended March 31, 2002 and June 30,
2002.
SOURCE Oxford Health Plans, Inc.
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Related links:
http://www.oxfordhealth.com
CONTACT:
Investor - Gary Frazier, +1-203-459-7331, or
Deborah Abraham, +1-203-459-6674, or Media - Maria Gordon-Shydlo,
+1-203-459-7674, all of Oxford Health Plans
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