WellPoint beats expectations, lowers ’10 profit forecast

Indianapolis-based WellPoint Inc. posted a profit of $1.16 per share in the fourth quarter, excluding a big gain from its
sale of a pharmacy management subsidiary, easily beating analysts’ expectations.

Analysts
were expecting profits of $1.02 per share, according to a survey by Thomson Financial Network.

In the same quarter a year ago, WellPoint earned 65 cents per share as profits were depressed by heavy
investment losses.

The nation’s second-largest health insurer suffered as a result of
high unemployment last year, losing nearly 1.4 million insured members in its health plans. Small businesses
contributed most to those losses. In the fourth quarter, WellPoint lost 185,000 members, nearly all of them
in the employer-sponsored segment of its business.

WellPoint now insures 33.7 million Americans.

“We
performed well during 2009 in a challenging environment. Despite the impact of the recession on our Commercial enrollment
levels and medical cost trends, earnings per share increased as we significantly improved results in the Consumer segment,
controlled administrative costs and implemented successful capital management initiatives," WellPoint CEO Angela F. Braly
said in a statement.

Two worrisome trends in the fourth-quarter, however, were increasing
overhead and the growing percentage of premiums WellPoint spent on medical claims. The so-called medical loss ratio rose to
84.8 percent, up from 83.4 percent in the same quarter a year ago. Also, the company’s overhead
expenses rose to 17 percent of revenue, up from 15.1 percent in the same quarter last year.

For all of 2009, WellPoint earned $6.09 per share, excluding extraordinary gains and losses. It slightly
lowered its forecast for 2010, predicting profit of $6 per share.

WellPoint exceeded Wall Street’s expectations
in every quarter last year. In the third quarter of 2009, the company earned $1.53 per share, beating
analysts’ by 15 cents per share.

WellPoint scored an extra gain of $4.7 billion on Dec.
1 when it sold its NextRx pharmacy management unit to St. Louis-based Express Scripts Inc. The sale boosted
per-share profit in the fourth quarter by $4.79 to a total of $5.95 per share.

That sale spiked WellPoint’s
official fourth-quarter results. Revenue surged 26 percent to $19.0 billion. Profits skyrocketed by 727 percent to more than
$2.7 billion.

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