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

WellPoint's profit falls, but beats analyst expectations

April 25, 2012

First-quarter profit declined nearly 8 percent at WellPoint Inc., but the health insurer beat analysts’ expectations and raised its full-year profit forecast by a nickel per share.

The Indianapolis-based company posted earnings of $857 million, or $2.53 per share, down from $927 million, or $2.44 per share in the same period a year ago. The per-share profits increased because WellPoint has been reducing its total shares through a buyback program.

Investment gains in the most recent quarter were 19 cents per share, a dime per share higher than a year ago.

Excluding investment gains, WellPoint would have earned $2.34 per share. On that basis, Wall Street analysts were expecting $2.27 per share, according to a survey by Thomson Reuters.

“Our first quarter results exceeded our expectations and were driven by improved performance in the senior business and continued strong operating results in our commercial segment. We also executed well in the capital management areas of our company,” said WellPoint CEO Angela Braly in a prepared statement.

Revenue during the quarter totaled $15.42 billion, also beating analysts’ expectations of $15.26 billion.

WellPoint said gains from its senior business improved, as the company recovered from mispricing some of its Medicare Advantage policies last year.

But overall membership in its health plans declined in the quarter by 600,000. WellPoint expects that total to drop by another 100,000 during the rest of the year.

WellPoint could also benefit from muted spending on health care by consumers. WellPoint now expects to spend 85.1 percent of customers’ premiums on medical care in 2012, down from a prediction of 85.3 percent issued in January.

During all of 2012, WellPoint now expects to earn at least $7.84 per share. Excluding first-quarter investment gains, that forecast would be $7.65 per share—a nickel higher than the prediction of $7.60 per share WellPoint gave in January.

WellPoint shares closed Tuesday at $70.76 apiece. The stock price has risen nearly 7 percent so far this year, but has lagged the broader markets and WellPoint’s key competitors.

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