IBJNews

WellPoint profit continues health insurance rally

Back to TopCommentsE-mailPrintBookmark and Share

WellPoint Inc.’s better-than-expected profit in the first quarter continued a rally among health insurers this month.

Indianapolis-based WellPoint reported Wednesday that it earned $926.6 million, or $2.44 a share, in the three months ended March 31. Excluding investment gains and special items, WellPoint’s profit rose 2.2 percent, to $891 million, or $2.35 a share.

On that basis, Wall Street analysts were expecting $1.87 a share, according to a survey by Thomson Reuters.

WellPoint responded by boosting its full-year profit forecast by 40 cents a share.

On Tuesday, Louisville-based Humana Inc. reported quarterly earnings that soared 63 cents above analysts’ expectations. It raised its full-year profit forecast by 75 cents a share and announced it would begin paying a dividend,

And on April 21, Minnesota-based UnitedHealth Group reported first-quarter profit that was 33 cents a share higher than analysts had forecast.

Since UnitedHealth’s announcement, stocks of health insurers have surged in value. WellPoint shares had risen more than 5 percent since then, even before Wednesday’s earnings news. The company’s stock price rose another 1.7 percent on the news Wednesday morning.

The main factor driving the insurers’ healthy profits are that health care spending has been lower than expected and employment has improved slightly, putting more people on the rolls of employer-sponsored health plans. Also, the profit pressure of the 2010 Patient Protection and Affordable Care Act has not been as great as many expected.

“The company has more breathing room under the new rules than previously expected, more opportunity to improve margins,” Jason Gurda, an analyst at Leerink Swann & Co. in New York, told Bloomberg News. “I would not say reform was a big plus for insurers, just that its negative impact appears less than feared.”

A year ago, WellPoint earned $1.95 a share, excluding special charges. Much of the per-share profit increase this year is due to WellPoint’s share repurchase program, which reduced its shares outstanding by 15 percent in the past year.

First-quarter revenue fell 1.2 percent compared to a year ago, to $14.9 billion.

“Our membership and earnings results are higher than we originally anticipated and we are continuing to become a more efficient and effective company,”  WellPoint CEO Angela Braly said in a statement.

Indeed, WellPoint added 875,000 new members to its health plans in the first quarter, seeing growth across all business lines except individual policies.

The company had 34.2 million members on March 31, and now predicts it will hold on to more of them during the year, finishing 2011 with 33.9 million members.

For the year, WellPoint now expects earnings per share of $6.70, compared with a February forecast of $6.30 a share.

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. You are correct that Obamacare requires health insurance policies to include richer benefits and protects patients who get sick. That's what I was getting at when I wrote above, "That’s because Obamacare required insurers to take all customers, regardless of their health status, and also established a floor on how skimpy the benefits paid for by health plans could be." I think it's vital to know exactly how much the essential health benefits are costing over previous policies. Unless we know the cost of the law, we can't do a cost-benefit analysis. Taxes were raised in order to offset a 31% rise in health insurance premiums, an increase that paid for richer benefits. Are those richer benefits worth that much or not? That's the question we need to answer. This study at least gets us started on doing so.

  2. *5 employees per floor. Either way its ridiculous.

  3. Jim, thanks for always ready my stuff and providing thoughtful comments. I am sure that someone more familiar with research design and methods could take issue with Kowalski's study. I thought it was of considerable value, however, because so far we have been crediting Obamacare for all the gains in coverage and all price increases, neither of which is entirely fair. This is at least a rigorous attempt to sort things out. Maybe a quixotic attempt, but it's one of the first ones I've seen try to do it in a sophisticated way.

  4. In addition to rewriting history, the paper (or at least your summary of it) ignores that Obamacare policies now must provide "essential health benefits". Maybe Mr Wall has always been insured in a group plan but even group plans had holes you could drive a truck through, like the Colts defensive line last night. Individual plans were even worse. So, when you come up with a study that factors that in, let me know, otherwise the numbers are garbage.

  5. You guys are absolutely right: Cummins should build a massive 80-story high rise, and give each employee 5 floors. Or, I suppose they could always rent out the top floors if they wanted, since downtown office space is bursting at the seams (http://www.ibj.com/article?articleId=49481).

ADVERTISEMENT