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Spike in health care claims wipes out CTG's third-quarter profits

A spike in claims in Computer Task Group's self-insured health insurance plan for its employees wiped out nearly all of the Buffalo information technology company's profits during the third quarter.

The spike in claims, which caught CTG executives by surprise, caused the company to roughly break even during the quarter, rather than report earnings that would have been comfortably within the guidance it had issued earlier this year.

CTG said it earned $40,000, or less than a penny per share, during the quarter, compared with a loss of $16.2 million, or $1.03 per share, a year ago, when the company had a one-time charge of nearly $16 million for an accounting write-down.

Without the spike in claims on its self-insurance plan, stemming from what CEO Bud Crumlish described as "unusually high critical illness claims," CTG would have earned 5 cents per share.

CTG's sales fell by 5 percent to $74 million from $78.1 million, mainly because of lower revenues from its biggest IT staffing clients, IBM and Lenovo. Excluding its three biggest clients, CTG's staffing revenues rose by 7 percent, a sign that the company's efforts to win new customers is starting to pay off, Crumlish said during a conference call.

CTG said it expects to earn between 5 cents and 7 cents per share during the fourth quarter, compared with 7 cents per share a year ago. It predicted that its sales would range between $72 million and $75 million, down from $77.5 million a year ago, mainly because of soft demand in its staffing business, which accounts for about 70 percent of CTG's revenues.

CTG, which this summer scrapped plans to sell the Knox Mansion that currently serves as its headquarters, continues to try to sell its three-story office building at 700 Delaware Ave. Crumlish said consolidating all of CTG from the two buildings into the Knox Mansion would add about 2 cents per year to the company's operating profits.

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