IBJNews

WellPoint shares droop despite profitable quarter

Back to TopCommentsE-mailPrintBookmark and Share

WellPoint Inc.'s third-quarter earnings trumped Wall Street expectations, but the health insurer's stock tumbled Wednesday after President Barack Obama won re-election, a victory that could help cement the future of his health care overhaul.

The overhaul aims to cover millions of uninsured people starting mostly in 2014, which means more business for insurers. But it also imposes fees and restrictions on the sector that are expected to squeeze profits for companies like WellPoint, which focuses large portions of its business on covering individuals and employees of small businesses.

Shares of WellPoint dropped 5.5 percent, or $3.35, to close at $57.85 Wednesday.

Citi analyst Carl McDonald said in a research note the company's results would be viewed "quite favorably" without the election's impact.

"There's been an undercurrent of concern among many regarding the potential for bad news out of WellPoint's third quarter earnings, but the trepidation wasn't warranted," McDonald wrote, noting that the insurer easily beat expectations.

WellPoint earned $691.2 million, or $2.15 per share, in the three months that ended Sept. 30. That's up 1 percent from $683.2 million, or $1.90 per share, a year ago.

Excluding investment gains, adjusted earnings were $2.09 per share.

Analysts expected $1.83 per share, according to FactSet.

The insurer's revenue, also excluding investments, was $15.13 billion, which fell short of analyst expectations for $15.3 billion in revenue.

WellPoint said its enrollment slid more than 2 percent to about 33.5 million people compared to last year. Losses in individual and employer-sponsored health coverage more than offset gains the insurer made in its Medicaid and Medicare businesses.

The company operates Blue Cross Blue Shield plans in 14 states, including California, New York and Ohio.

WellPoint had not recorded a quarterly increase in earnings compared to the previous year since the first quarter of 2011, and the insurer's performance had frustrated several large shareholders. Chairwoman and CEO Angela Braly abruptly resigned with about a month left in the third quarter, and the company named John Cannon, its executive vice president and general counsel, to serve as interim CEO.

Wednesday morning's stock decline blunted the 5-percent growth shares had seen since Braly left.

While the overhaul is expected to give insurers millions of new customers, the industry will pay a hefty price for that additional business.

Insurers will start paying annual fees in 2014 that total $8 billion that year and rise after that. The law also restricts how much insurers can vary their pricing based on things like age and health, key tools they use to ensure that they have enough money to pay medical claims.

The overhaul also will require them to cover everyone who applies starting in 2014, even those already sick with expensive conditions such as diabetes. Additionally, the law stipulates that insurers spend certain percentages of the premiums they collect on care or pay rebates to customers.

Analysts have said that insurers like WellPoint will see their profit margins squeezed the most by these limitations and premium spending rules.

But Morningstar analyst Matt Coffina said Wednesday he thinks WellPoint is positioned well for the overhaul. He said the company has experience selling individual policies and a well-recognized brand that should help when coverage expands.

In July, WellPoint lowered its 2012 forecast to adjusted earnings ranging from $7.30 to $7.40 per share. It reaffirmed that forecast on Wednesday.

Analysts expect, on average, earnings of $7.38 per share.

ADVERTISEMENT

  • Agreed...
    For-profit health insurance only cost to healthcare as they function as unnecessary middleman. The federal government could do it much more cost effectively and we could utilize the private sector to process the claims. Hopefully, people wake-up one day and realize there IS a better way.
  • What is Wellpoint profiting on anyway?
    Wellpoint does not provide health care to anyone. What exactly are investors "investing" in? The virtual certainty that people need health care for preventive reasons, to cure an ailment, to avoid early death and to minimize human suffering? Why should anyone who does not offer health services profit from the provision of health care by others? The profit motive drives up everyone's costs, and hurts small businesses that want to offer health coverage to employees.

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. I had read earlier this spring that Noodles & Co was going to open in the Fishers Marketplace (which is SR 37 and 131st St, not 141st St, just FYI). Any word on that? Also, do you happen to know what is being built in Carmel at Pennsylvania and Old Meridian? May just be an office building but I'm not sure.

  2. I'm sorry, but you are flat out wrong. There are few tracks in the world with the history of IMS and probably NO OTHER as widely known and recognized. I don't care what you think about the stat of Indy Car racing, these are pretty hard things to dispute.

  3. Also wondering if there is an update on the Brockway Pub-Danny Boy restaurant/taproom that was planned for the village as well?

  4. Why does the majority get to trample on the rights of the minority? You do realize that banning gay marriage does not rid the world of gay people, right? They are still going to be around and they are still going to continue to exist. The best way to get it all out of the spotlight? LEGALIZE IT! If gay marriage is legal, they will get to stop trying to push for it and you will get to stop seeing it all over the news. Why do Christians get to decide what is moral?? Why do you get to push your religion on others? How would legalizing gay marriage expose their lifestyle to your children? By the way, their lifestyle is going to continue whether gay marriage is legalized or not. It's been legal in Canada for quite a while now and they seem to be doing just fine. What about actual rules handed down by God? What about not working on Sundays? What about obeying your parents? What about adultery? These are in the 10 Commandments, the most important of God's rules. Yet they are all perfectly legal. What about divorce? Only God is allowed to dissolve a marriage so why don't you work hard to get divorce banned? Why do you get to pick and choose the parts of the Bible you care about?

  5. Look at the bright side. With the new Lowe's call center, that means 1000 jobs at $10 bucks an hour. IMS has to be drooling over all that disposable income. If those employees can save all their extra money after bills, in five years they can go to the race LIVE. Can you say attendance boost?

ADVERTISEMENT