It’s going to be a year of shrinkage for WellPoint Inc.
The Indianapolis-based health insurer expects to lose 400,000 insured members from its health plans during the year and spend
a higher percentage of its premium revenue on paying medical claims.
In fact, WellPoint predicts all of its key growth and profit metrics will decline in 2010 compared with the previous year,
according to information filed Wednesday morning with the U.S. Securities & Exchange Commission.
The current year will be a “challenging” one with U.S. unemployment remaining around 10 percent before improving
near the end of 2010, Chief Financial Officer Wayne DeVeydt said on a conference call with analysts.
With more Americans losing health benefits, WellPoint will have to meet its earnings goals largely on the strength of share
buybacks, said Jason Nogueira, an analyst at T. Rowe Price Group Inc. of Baltimore.
“It’s a tough backdrop,” Nogueira, whose company owned $865 million in WellPoint shares as of Dec. 31,
said. “I think eventually it gets better. Hopefully, the economy gets better and WellPoint should bounce back.”
The forecast doesn’t include the possible impact of federal health care reform, DeVeydt said on the call. The U.S.
House may vote this week on an almost $1 trillion overhaul of the health-care system that would place new restrictions on
WellPoint’s board in January authorized as much as $3.5 billion in share repurchases on top of $2.6 billion bought
last year, the company said in its fourth-quarter earnings statement. DeVeydt said the company expects to buy back the full
amount in 2010.
The loss of customers stems primarily from WellPoint's employer customers cutting workers and not being quick to rehire
them. Those factors chopped 1.4 million people from WellPoint's customers rolls last year. The projected cuts in 2010
would bring WellPoint’s total customer pool down to 33.3 million, which would also slice 3 percent from WellPoint’s
operating revenue, to $59 billion.
The company expects net income per share of $6 for the year, compared with $6.09 per share last year. The 2009 total does
not include one-time profit WellPoint earned from selling its pharmaceutical benefit management arm, as well as other extraordinary
WellPoint’s profit will be squeezed by a rising benefit-expense ratio. The company expects to pay out 84.3 percent
of its premium revenue to cover medical claims. Last year, that ratio was 82.6 percent.
The 2010 number now includes money WellPoint spends on nurse hotlines, health and wellness programs, including disease management
and medical management, and clinical health policy work.