WellPoint Net Rises in First Results Since Braly’s Exit
WellPoint Inc. (WLP), the second-biggest U.S. health insurer, said profit rose 1.2 percent, in its first earnings report since former chief executive officer Angela Braly left amid complaints about the company’s performance.
Net income increased to $691.2 million, or $2.15 a share, in the third quarter, from $683.2 million, or $1.90, a year earlier, the Indianapolis-based carrier said in a statement today. Earnings excluding one-time items topped by 26 cents the $1.83 average of 15 analyst estimates compiled by Bloomberg.
Braly resigned Aug. 28 amid investor unrest about disappointing profits and a stock that lagged behind competitors like UnitedHealth Group Inc. (UNH), the biggest health plan. The company nonetheless benefited in the quarter from acquisitions she orchestrated, gaining revenue from its new eye wear retailer 1-800-Contacts and new members from CareMore Health Group, an insurer for elderly Medicare patients.
“It looks very much like the CareMore deal, as well as 1-800 Contacts, continue to support earnings,” said Thomas A. Carroll, a Stifel Nicolaus & Co. analyst in Baltimore, in a phone interview. “And that comes against the backdrop of medical cost trends that remain relatively stable.
Revenue was $15.4 billion, including $130.6 million from the 1-800 Contacts unit the company bought in June for $900 million. That was unchanged from a year earlier. Enrollment in WellPoint’s medical plans fell to 33.5 million from 34.4 million, as increases in Medicare and Medicaid membership couldn’t balance a loss in commercial enrollment.
Medicare is the U.S.-backed program for the elderly and disabled, while Medicaid is a joint state-federal program covering the poor. In July, WellPoint announced the $4.9 billion acquisition of Amerigroup Corp. (AGP) that will make it the biggest private provider of Medicaid plans once the deal closes this year.
WellPoint, owner of 14 state Blue Cross plans, was the last major health insurer to report earnings for the quarter. It followed rivals like Minnetonka, Minnesota-based UnitedHealth and Aetna Inc. (AET) of Hartford, Connecticut in beating analyst estimates partly on the strength of health-care costs that stayed moderate.
WellPoint’s numbers were also helped by a lower-than- expected tax rate benefit, lower compensation costs and a share repurchase plan that bought back $2.5 billion through October, Carroll said.
The earnings may matter less to investors in the near term than the results of yesterday’s election, Carroll said. President Barack Obama’s victory over Mitt Romney keeps alive his 2010 health-care law, which is expected to cut profit margins for insurers even as it produces millions of new customers for the industry.
The company fell 5.5 percent to $57.85 at the close in New York. The shares have fallen 13 percent this year. Other insurers also declined. UnitedHealth, based in Minnetonka, Minnesota, dropped 3.8 percent to $54.26. Humana Inc. (HUM), based in Louisville, Kentucky fell 7.9 percent to $70.16.
Large insurers like WellPoint ‘‘likely would have preferred a victory by Romney, who would have made significant changes to health reform,” said Michael Wiederhorn, an Oppenheimer & Co. analyst in New York, in a note to clients today. “Nevertheless, we would be buyers on any weakness in the group as we believe fears about the impact of reform have been overblown.”
WellPoint directors named General Counsel John Cannon as interim CEO in August and said he wasn’t interested in the full- time job. The company said in September that it expected to pick a permanent replacement in three to six months.
The company is still conducting an “internal and external” search for a CEO and that it may stretch into the first quarter, Cannon said today during a conference call with analysts.
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