DATE: Thursday, August 7, 1997              TAG: 9708070445

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY TOM SHEAN, STAFF WRITER 

                                            LENGTH:   48 lines

QUARTERLY INCOME DIPS 36 PERCENT AT TRIGON HEALTH-CARE CONCERN CITES INCREASED COSTS

Squeezed by higher-than-expected medical costs, managed-care provider Trigon Healthcare Inc. said Wednesday that its second-quarter net income fell 36 percent from the year-earlier period.

Trigon, which converted in January from a nonprofit insurer to a publicly traded company, said it earned $15.34 million for the three months ended June 30.

That was down from $24.04 million in the April-through-June period of 1996.

Per-share earnings fell to 36 cents from the 41 cents that the company would have earned had its shares been publicly traded last year.

However, the Richmond-based parent of Trigon Blue Cross Blue Shield said its operating income rose to 32 cents a share from 22 cents a share in the 1996 second quarter.

Analysts said Trigon's earnings were in line with their expectations, but the price of Trigon shares retreated 37.5 cents in heavy trading Thursday.

Comments by Trigon's management about better controls of medical costs and recent rate increases prompted the securities firm Scott & Stringfellow Inc. to raise its estimates of earnings for the third and fourth quarters, said Adam Bergman, an analyst with the Richmond-based firm.

Trigon's management reported that the company had raised its rates between 6 percent and 8 percent on policy renewals during July, Bergman said.

Earlier this week, Trigon began distributing 24.5 million shares to policyholders who accepted stock instead of cash payments when the health insurer was converted to a publicly traded company. Individuals, companies and municipalities that receive the shares will be free to sell them.

``I think that's putting a damper on the stock for the next couple of weeks'' while some new shareholders decide whether to sell the stock, Bergman said.

Trigon said its second-quarter revenues rose almost 5 percent to $510.04 million, due partly to higher premiums and fees from its commercial and federal-employee programs. In the second quarter of 1996, its revenues were $487.02 million.

Trigon, the largest managed-care company in Virginia, said it benefited during the recent quarter from a 7 percent reduction in its overhead and higher enrollments in its health maintenance organizations.

Fully insured membership in its health maintenance organization rose 25 percent to 250,136, while enrollment in its Medicaid HMO climbed 21 percent to 33,505. Total enrollment in Trigon programs at the end of June stood at 1.85 million.

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