WellPoint 3Q profit climbs 1 pct, revenue falls
Wednesday, November 3, 2010
INDIANAPOLIS (AP) — WellPoint Inc.’s net income inched up 1 percent in the third quarter, as the insurer cut expenses and saw gains from a reduction in health care use and leftover claims that came in lower than expected.
The Indianapolis insurer also raised its 2010 earnings forecast on Wednesday, following a third-quarter pattern established by other big insurers like UnitedHealth Group Inc., Cigna Corp. and Humana Inc. Aetna Inc. also bumped up its 2010 earnings forecast Wednesday.
WellPoint said Wednesday it earned $739.1 million, or $1.84 per share, in the three months that ended Sept. 30. That’s up from the $730.2 million, or $1.53 per share, in the same period last year.
But operating revenue dropped nearly 6 percent to $14.33 billion, partly because of a decline in enrollment for fully insured plans. Those plans bring in more money for insurers than group coverage that they just administer.
WellPoint reported adjusted earnings, which exclude one-time items, of $1.74 per share.
Analysts polled by Thomson Reuters forecast, on average, earnings of $1.57 per share on $14.21 billion in revenue.
Other big insurers also reported better-than-expected results from the quarter, as they benefited from a drop in health care use. Analysts have said these declines can be common during and after a recession, as people put off care to save money.
Goldman Sachs analyst Matthew Borsch called WellPoint’s performance “strong across the board.” But he said in a research note that market reaction probably will be muted because good results were expected and this year’s “upside” is seen as unlikely to be repeated partly because of a provision in the new health care overhaul law.
Starting next year,insurers will be required to meet certain percentages of premiums spent on medical claims or offer refunds to customers. Details of that provision are still being worked out, and investors worry about how that will affect individual insurance markets.
WellPoint is the largest commercial health insurer based on membership. It operates Blue Cross Blue Shield plans in 14 states and Unicare plans in several others.
The insurer said its medical enrollment fell 1 percent to 33.5 million people compared with the same quarter last year, as it transferred 590,000 Unicare individual and group customers to another insurer that bought the business.
The company expects to have 33.3 million members by the end of the year, which would reflect a drop of about 1 percent compared with 2009.
Insurers struggled during the recession with sliding enrollment, as employers cut jobs and trimmed the number of people covered by their insurance.
WellPoint Chairwoman and CEO Angela Braly said Wednesday she does not expect a “meaningful” employment increase next year, but she does foresee growth in Medicaid and Medicare Advantage business and in large national accounts the insurer administers for big employers.
WellPoint recognized a $110 million benefit in the third quarter as claims from previous quarters came in lower than expected. This also helped the insurer’s second-quarter performance, partly because last year’s flu season turned out to be weaker than expected.
The insurer’s total expenses fell 6 percent to $13.46 billion, led by a 3 percent drop in the amount it paid in medical claims.
WellPoint raised its 2010 adjusted profit expectation to $6.45 per share, from a previous forecast of $6.25 per share.
Analysts expect $6.39 per share.
Company shares rose 19 cents to $55.94 in midmorning Wednesday trading after initially falling 99 cents at the start of the day.
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