WellPoint Inc., the largest U.S. health insurer by enrollment, declined the most since August after its earnings forecast was less than analyst estimates.
WellPoint fell 4.8 percent to $66.10 at 4 p.m. New York time. Profit excluding items for 2012 probably will be at least $7.60 a share, the Indianapolis-based insurer said in a statement today. The forecast was 16 cents less than the average of 21 analyst estimates compiled by Bloomberg.
The insurer is leaving markets for senior citizen plans in California that caused losses and is now well positioned in that state, Chief Executive Officer Angela Braly said on a conference call. With about 60 percent of revenue coming from its employer-provided insurance business, though, the company also is more exposed to health-care spending trends than its rivals, said Sarah James, a Wedbush Securities Inc. analyst in Los Angeles.
“Management credibility is a concern at this point,” Chris Rigg, an analyst with Susquehanna Financial Group in New York, said in a telephone interview. He said the company also reported higher costs for California than expected in 2011’s second quarter. “It may take a while to regain investor trust. They misjudged market trends whereas others have not.”
Fourth-quarter earnings excluding investment gains and losses were 99 cents a share, missing the average analyst estimate of $1.11.
“There’s an issue of controlling costs,” David Windley, an analyst at Jefferies & Co. in Nashville, Tennessee, in a telephone interview. “There’s some questioning of their ability to implement care management programs on top of that.”
WellPoint said it expects to lose 600,000 members in 2012. Fourth-quarter net income fell 39 percent to $335.3 million, or 96 cents a share, from $548.8 million, or $1.40, a year earlier, WellPoint said.
“This was definitely worse than what we expected to see,” said Jason Gurda, an analyst with Leerink Swann & Co. in Boston, by telephone. Medicare Advantage plans contributed to the higher costs, he said. Medicare Advantage is a U.S.-supported program in which managed-care health plans are sold by commercial insurers.
UnitedHealth Group Inc., the largest U.S. insurer by sales, last week said its first-quarter results won’t be as good as the fourth quarter’s as people use the medical system more. United also expects to invest money to comply with the health-care overhaul as reimbursements for medical care come under pressure, Stephen Hemsley, that company’s chief executive, said on a Jan. 19 conference call.