Investors on Wednesday morning largely shrugged at WellPoint Inc.’s third-quarter earnings report, which handily beat the expectations of Wall Street analysts.

WellPoint’s cautiousness about the impact of flu, high unemployment and higher-than-expected medical costs tamped down expectations about a quick turnaround this year or next.

Shares of the Indianapolis-based health insurer started the morning with a nearly 2-percent gain, but then dropped into negative territory as the broader markets also slipped. The company’s shares were trading at noon at $46.30, down 40 cents on the day.

WellPoint shares have trended down this month with investors becoming increasingly concerned that health reform under debate in Congress will hurt insurers. Still, they are up 11 percent for the year.

WellPoint earned $1.53 per share in the third quarter even after an accounting charge of 28 cents per share. Excluding that charge and small investment gains, WellPoint would have earned $1.78 per share, up from $1.62 per share, excluding special charges, a year ago.

Wall Street analysts were expecting profits of only $1.38 per share in the most recent quarter, which ended Sept. 30.

"It's a good, solid bottom-line number in the quarter," Collins Stewart analyst Brian Wright told the Reuters news service. "Commentary for the rest of the year, and pricing and cost trends seems a bit cautious from management."

WellPoint did not change its year-end profit forecast of $5.06 to $5.12 per share, which is a net improvement because of the 28-cent accounting charge. WellPoint took that charge because it wrote down the value of its pharmacy benefits assets, which it has agreed to sell to St. Louis-based Express Scripts Inc. Also, it wrote down the value of its UniCare health insurance subsidiary because of expected membership declines next year.

WellPoint’s overall profit totaled $730.2 million, down 11 percent from $820.7 million in the same period a year ago.
 
Total revenue for the third quarter was $15.25 billion, down slightly.
 
WellPoint CEO Angela Braly, in a statement, said the company is seeing higher medical usage due to a busier flu season and high numbers of unemployed workers using their COBRA insurance benefits.

Job reductions at its employer customers also cost WellPoint 366,000 health plan members during the quarter. Its total customer base has shrunk by 4 percent in the past year.

“We are performing well as an organization in a difficult economic environment,” Braly said. She told analysts that the company has signed up several new national employers, which will add a net gain of 400,000 members to WellPoint’s rolls on Jan. 1.

However, Braly also said she does not expect employment to recover until late in 2010, meaning WellPoint must muddle through another year of depressed returns from its commercial business.