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WellPoint profit falls but exceeds Wall Street expectations

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Second-quarter profit fell 3 percent at WellPoint Inc. but exceeded analysts expectations, leading the health insurer to raise its forecast for the rest of the year.

Indianapolis-based WellPoint earned $702 million, or $1.89 per share, in the three months ended June 30. In the same period last year, the company earned $722 million, or $1.71 per share.

The rise in per-share profit stems from WellPoint aggressively buying its own shares, reducing the total number of them floating in the market.

Excluding investment gains, which totaled 6 cents per share in the quarter, WellPoint would have earned $1.83 per share. On that basis, Wall Street analysts were expecting $1.80 per share, according to a survey by Thomson Reuters.

Despite exceeding expectations, the company's stock fell more than 5 percent Wednesday, falling $3.93 per share to $69.63.

Revenue in the quarter grew nearly 5 percent, to $15.1 billion, also exceeding analysts' predictions of $14.7 billion.

"Our second-quarter results exceeded our forecast and reflected the significant administrative cost savings we have been able to achieve through our continuous improvement and efficiency initiatives,” WellPoint CEO Angela Braly said in a prepared statement. “This focus on execution has enabled us to exceed our goals through the first six months of the year.”

WellPoint’s selling and administrative costs dropped to 13.5 percent of revenue in the quarter, from 15.2 percent in the second quarter last year

But WellPoint also reported a lot more in claims, spending an unusually high 85.7 percent of premiums on claims, up from 82.9 percent in the same period last year. WellPoint now expects its claims expenses to exceed 85 percent for the entire year.

However, WellPoint expects per-share profit to keep rising. Excluding investment gains, the company expects to earn between a range of $6.75 and $6.95 per share. In April, WellPoint predicted it would earn at least $6.60 per share, excluding investment gains.

WellPoint’s share price has risen nearly 30 percent so far this year.

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  1. I took Bruce's comments to highlight a glaring issue when it comes to a state's image, and therefore its overall branding. An example is Michigan vs. Indiana. Michigan has done an excellent job of following through on its branding strategy around "Pure Michigan", even down to the detail of the rest stops. Since a state's branding is often targeted to visitors, it makes sense that rest stops, being that point of first impression, should be significant. It is clear that Indiana doesn't care as much about the impression it gives visitors even though our branding as the Crossroads of America does place importance on travel. Bruce's point is quite logical and accurate.

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  4. Community Hospital is the only system to not have layoffs? That is not true. Because I was one of the people who was laid off from East. And all of the LPN's have been laid off. Just because their layoffs were not announced or done all together does not mean people did not lose their jobs. They cherry-picked people from departments one by one. But you add them all up and it's several hundred. And East has had a dramatic drop I in patient beds from 800 to around 125. I know because I worked there for 30 years.

  5. I have obtained my 6 gallon badge for my donation of A Positive blood. I'm sorry to hear that my donation was nothing but a profit center for the Indiana Blood Center.

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