IBJNews

Concluding the worst is over, investors warm to WellPoint

Back to TopCommentsE-mailPrintBookmark and Share

Investors warmed to the financial news from Indianapolis-based WellPoint Inc. on Wednesday morning, bidding the company’s stock up in late-morning trading.

Shares of the health insurer surged as much as 2.3 percent, to $65.33 apiece. Investors were heartened after analysts interpreted WellPoint’s fourth-quarter results as a sign the health insurance market is stabilizing.

WellPoint posted a profit of $1.16 per share in the fourth quarter, excluding a big gain from its sale of a pharmacy-management subsidiary, easily beating analysts’ expectations.

Analysts were expecting profits of $1.02 per share, according to a survey by Thomson Financial Network. In the same quarter a year ago, WellPoint earned 65 cents per share as profits were depressed by heavy investment losses.

Matthew Borsch, an analyst with Goldman Sachs in New York, told his clients that WellPoint’s results support “the theme of stabilization in industry trends even as we also believe the downside risk from health care legislation has diminished significantly.”

WellPoint, which is the nation’s second-largest health insurer behind UnitedHealth, suffered as a result of high unemployment last year, losing nearly 1.4 million insured members in its health plans. Small businesses contributed most to those losses. In the fourth quarter, WellPoint lost 185,000 members, nearly all of them in the employer-sponsored segment of its business.

WellPoint now insures 33.7 million Americans.

“WellPoint had solid performance in 2009 amidst a challenging economy,” CEO Angela Braly told investors and analysts on a morning conference call.

However, she gave a grim outlook for employment and WellPoint’s ability to grow its employer-sponsored business, which is its largest segment.

“We do not expect the employment situation to improve until late this year,” she said, adding, “We should see membership and top-line revenue growth in 2011 and beyond.”

Two worrisome trends in the fourth quarter were increasing overhead and the growing percentage of premiums WellPoint spent on medical claims. The so-called medical-loss ratio rose to 84.8 percent, up from 83.4 percent in the same quarter a year ago. Also, the company’s overhead expenses rose to 17 percent of revenue, up from 15.1 percent in the same quarter last year.

For all of 2009, WellPoint earned $6.09 per share, excluding extraordinary gains and losses. It slightly lowered its forecast for 2010, predicting profit of $6 per share.

WellPoint exceeded Wall Street’s expectations in every quarter last year. In the third quarter of 2009, the company earned $1.53 per share, beating analysts’ predictions by 15 cents per share.

WellPoint scored an extra gain of $4.7 billion on Dec. 1 when it sold its NextRx pharmacy-management unit to St. Louis-based Express Scripts Inc. The sale boosted per-share profit in the fourth quarter by $4.79, to a total of $5.95 per share.

That sale spiked WellPoint’s official fourth-quarter results. Revenue surged 26 percent, to $19 billion. Profit skyrocketed by 727 percent, to more than $2.7 billion.

Bloomberg News contributed to this report.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Can your dog sign a marriage license or personally state that he wishes to join you in a legal union? If not then no, you cannot marry him. When you teach him to read, write, and speak a discernible language, then maybe you'll have a reasonable argument. Thanks for playing!

  2. Look no further than Mike Rowe, the former host of dirty jobs, who was also a classically trained singer.

  3. Current law states income taxes are paid to the county of residence not county of income source. The most likely scenario would be some alteration of the income tax distribution formula so money earned in Marion co. would go to Marion Co by residents of other counties would partially be distributed to Marion co. as opposed to now where the entirety is held by the resident's county.

  4. This is more same-old, same-old from a new generation of non-progressive 'progressives and fear mongers. One only needs to look at the economic havoc being experienced in California to understand the effect of drought on economies and people's lives. The same mindset in California turned a blind eye to the growth of population and water needs in California, defeating proposal after proposal to build reservoirs, improve water storage and delivery infrastructure...and the price now being paid for putting the demands of a raucous minority ahead of the needs of many. Some people never, never learn..

  5. I wonder if I can marry him too? Considering we are both males, wouldn't that be a same sex marriage as well? If they don't honor it, I'll scream discrimination just like all these people have....

ADVERTISEMENT