Tags: US | Earns | WellPoint

WellPoint Profit Rises 51 Percent as Medical Costs Fall

Wednesday, 28 Apr 2010 11:03 AM

 

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Health insurer WellPoint Inc. said Wednesday its first-quarter profit jumped 51 percent as a weaker-than-expected flu season helped lower medical costs.

The Indianapolis insurer said it paid $11.38 billion in claims in the three months that ended March 31, a drop of nearly 3 percent — or $343 million — from the first quarter of last year, when WellPoint also took a $305 million hit due to investment losses.

WellPoint, the largest commercial health insurer based on enrollment, said it saw significant growth in large national accounts, which involve big companies that provide their own insurance. But total enrollment dipped 2 percent to 33.8 million compared to the first quarter of 2009.

The company earned $876.8 million, or $1.96 per share, up from $580.4 million, or $1.16 per share, one year ago. Excluding one-time costs and gains, WellPoint earned $1.95 per share.

Total revenue slipped to $15.1 billion from $15.14 billion, while the company's operating revenue fell nearly 3 percent to $14.86 billion.

Analysts polled by Thomson Reuters expected a profit of $1.67 per share and $14.72 billion in operating revenue.

The company backed its annual profit forecast of at least $6 per share. Analysts expect a profit of $6.14 per share, on average.

Stifel Nicolaus analyst Tom Carroll noted that WellPoint did not raise its guidance despite beating average analyst expectations.

"We believe this is directly a result of the continued fragile health reform environment that exists in Washington, D.C.," he said in a research note.

Analysts and investors have worried about the impact health care reform legislation will have on managed care companies. For instance, a provision starting next year will require insurers to meet a minimum medical loss ratio, which is the percentage of premiums an insurer pays in medical claims. Details of that provision have yet to be worked out.

WellPoint said it spent 81.8 percent of its premiums on medical expenses in the first quarter, a drop from 82.5 percent last year due mostly to the weaker flu season.

In addition to reform, Congress also may consider a federal review of premium increases.

"We think it's an unnecessary requirement," WellPoint CEO Angela Braly said Wednesday during a conference call with analysts.

Braly noted that states already monitor the solvency of insurers to make sure they have enough money to pay claims, and reform creates another layer of accountability by measuring the percentage of premiums insurers pay toward claims.

WellPoint runs Blue Cross Blue Shield plans in 14 states and Unicare plans in several others. Its national accounts climbed 2 percent to 12.1 million people compared to last year.

But its local group membership, which consists largely of small businesses that are fully insured, fell nearly 5 percent to 15.3 million.

Health insurers have struggled with enrollment during the recession, as employers cut jobs and reduced the number of people covered by their private health insurance plans. But WellPoint said Wednesday most of its membership decline compared to last year was due to its Unicare business leaving markets in Texas and Illinois.

Goldman Sachs analyst Matthew Borsch said in a research note the company's "very solid" first quarter was consistent with positive, managed care sector trends that include enrollment stabilization.

WellPoint now expects enrollment to fall by about 600,000 this year, giving it 33.1 million members at year-end. That's below a prior forecast of 33.3 million.

The company's stock climbed 38 cents to $56.30 in Wednesday morning trading.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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