Insurance and Investing and WellPoint and Health Care & Life Sciences and Health Care & Insurance

WellPoint's 3rd-quarter profit falls, but beats analyst estimates

October 26, 2011

Third-quarter profit fell nearly 8 percent at WellPoint Inc. but exceeded the expectations of Wall Street analysts.

And the Indianapolis-based health insurer raised its profit forecast for the rest of the year, the company announced Wednesday morning.

WellPoint earned $683.2 million, down 7.6 percent from the same quarter a year ago, when WellPoint earned $739.1 million.

On a per-share basis, the results appear better because WellPoint has repurchased nearly 42 million shares in the past year, a 10-percent reduction of its shares outstanding.

In the third quarter, the company recorded per-share profit of $1.90. Excluding investment gains, the company would have earned $1.77 per share, 3 cents higher than the in third quarter last year.

Analysts were expecting $1.68 per share, according to a survey by Thomson Reuters.

WellPoint’s operating revenue in the quarter rose nearly 6 percent, to $15.16 billion, narrowly topping analysts’ forecast of $15.12 billion.

The company's stock was up nearly 2 percent in late-morning trading, to $68.30 per share.

"We added 169,000 medical members during the third quarter and have now grown by more than one million members on a year-to-date basis, while reducing selling, general and administrative expenses by $185 million, or nearly 3 percent,” noted CEO Angela Braly in a prepared statement.

WellPoint now provides health benefits for 34.4 million people, more than any other U.S. company.

Excluding investment gains, WellPoint expects to report full-year profit of at least $6.90 per share and as much as $7.00 per share. In July, the company set its profit forecast in a range of $6.75 to $6.90.

WellPoint’s stock price has risen 18 percent this year, with another 1-percent return from dividends.

WellPoint reported its second-strongest quarter of enrollment growth in the last three years, benefiting from the $800 million acquisition of CareMore Health Group and increases in its smaller business and senior market, said Jason Gurda, an analyst at Leerink Swann in New York.

Braly said the company was happy with the growth in its senior market and is looking to make more investment in it through acquisitions and expanding its CareMore clinics. She said WellPoint will add a dozen facilities in 2012.

“The senior business is where we’re looking to make investment, growing it both organically and through acquisition,” Braly said on the analyst conference call.

The enrollment gains include a jump of 99,000 in small-business membership, mostly from companies with fewer than a 1,000 employees, said Sarah James, an analyst at Wedbush Securities Inc. in Los Angeles. The enrollment also was boosted by 89,000 in new seniors, including 57,000 that came from CareMore, WellPoint said. The insurer bought the senior-focused clinic network in June.

“We began to get hints of enrollment gains last year,” said Thomas A. Carroll, an analyst at Stifel Nicolaus & Co. in Baltimore. “I think it’s a reflection that the economy may be improving as employers begin to hire again. It looks like a good, clean quarter for WellPoint.”

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