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WellPoint beats analysts' estimates with 4th-quarter profit surge

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WellPoint Inc. ended the year on a high note, posting sales and profit that exceeded Wall Street’s expectations during the fourth quarter, the insurer announced Wednesday morning.

The Indianapolis-based health insurer earned $464 million, or $1.51 per share, in the three months ended Dec. 31, a 38-percent leap from the same quarter a year ago.

Excluding investment gains and one-time charges, WellPoint would have earned $1.03 per share. On that basis, analysts were expecting 95 cents per share, according to a survey by Thomson Reuters.

Revenue for the fourth quarter totaled $15.36 billion, exceeding analysts' expectations of $15.28 billion.

WellPoint stock rose $1 a share, or 1.5 percent, by early afternoon, to $64.80.

Membership in WellPoint’s health plans shot up nearly 8 percent in the fourth quarter to more than 36 million nationwide. That represented a net gain of  more than 2.6 million customers. The increase was entirely attributable to WellPoint’s $4.9 billion acquisition of Virginia-based Amerigroup Corp., which added 2.7 million members in Medicaid plans.

But the Blue Cross Blue Shield insurer gave analysts on Wednesday a conservative forecast for 2013, due in part to a daunting list of expenses it could face.

WellPoint will spend roughly $300 million this year preparing for coverage expansions under the health care overhaul coverage and changes to its Medicare Advantage business.

The overhaul aims to help millions of people buy health care coverage, and it will take a big step toward that goal this fall, when state-based insurance exchanges begin operating to sell policies on the individual market and to people with coverage through a small employer. Income-based tax credits are expected to help many people buy coverage.

WellPoint and other insurers are preparing to sell policies on those exchanges and, in some cases, to keep business they could lose once their customers have the option of an exchange. Currently, it can be difficult for individual insurance customers to switch insurers, especially if they have a costly medical condition.

The insurer also expects to spend as much as $125 million integrating recently acquired Amerigroup Corp. into its business, and it says it could take hits from flu claims, possible cuts to Medicare funding and an increase in health care use.

Counting those expenses, WellPoint expects to earn at least $7.60 per share in 2013, compared to the $8.18 per share it earned last year.

Analysts forecast, on average, earnings of $7.94 per share, according to FactSet.

Interim CEO John Cannon told analysts that company leaders were pleased with WellPoint's performance over the last six months, but they wanted to keep an "appropriately prudent stance" regarding the new year due to the additional costs. He expects WellPoint's adjusted earnings to grow at a modest pace next year, not counting one-time items like investment income and some of the expenses.

The insurer's bottom line was helped in the fourth quarter, in part, by $243 million in investment gains and an income tax settlement.

In the final quarter of 2011, WellPoint took a $50 million hit from its Medicare Advantage business, which involves privately run versions of the government's Medicare program that covers the elderly and disabled people. It reported no such problem in the most recent fourth quarter, but the insurer did say it saw a decline in its Medicare and Medicaid-related business.

WellPoint is the nation's second-largest insurer, trailing only UnitedHealth Group Inc. The company is still searching for a new leader following Angela Braly's departure last August. Cannon told analysts WellPoint's board is moving as quickly as possible, and they expect to reach a decision in this quarter.

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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.

  2. I appreciated the article. I guess I have become so accustomed to making my "pit stops" at places where I can ALSO get gasoline and something hot to eat, that I hardly even notice public rest stops anymore. That said, I do concur with the rationale that our rest stops (if we are to have them at all) can and should be both fiscally-responsible AND designed to make a positive impression about our state.

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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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