WellPoint Profit Beats Estimates on Lower Medical Spending
WellPoint Inc. (WLP), the second-biggest U.S. health insurer, reported fourth-quarter profit that beat analyst estimates on lower-than-expected medical costs and an enrollment boost from its Amerigroup Corp. acquisition.
Earnings excluding a tax settlement and investment gains were $1.03 a share, nine cents higher than the average of 16 analyst estimates compiled by Bloomberg. Medical-plan membership increased to 36.1 million with last year’s $4.9 billion Amerigroup purchase, Indianapolis-based WellPoint said in a statement today.
WellPoint forecast 2013 profit will rise to at least $7.60 a share, less than the average analyst estimate of $7.93. The company is being cautious in its outlook while searching for a new chief executive officer, said Chris Rigg, a Susquehanna Financial Group analyst in New York.
“It’s rational to offer a conservative outlook,” Rigg said in a phone interview. “You wouldn’t want to back the new CEO, whoever she or he may be, into the corner.”
WellPoint is seeking a new leader to replace former CEO Angela Braly, who resigned in August amid complaints about the company’s performance. Interim CEO John Cannon repeated on a conference call today that the search is expected to be completed by the end of this quarter. He declined to say more about the topic.
WellPoint rose 1.6 percent to $64.83 at the close of New York trading. The shares have fallen 8.9 percent in the past year.
The 2013 forecast reflects “uncertainties” that include a flu outbreak, U.S. budget negotiations and implementation of President Barack Obama’s health-care overhaul, said Kristin Binns, a WellPoint spokeswoman, in an e-mail. It also includes integration costs for the Amerigroup purchase.
“Certainly, our intention is to grow and we are positioning the company to do that,” Cannon said on the call. He said it would be “premature to project” when asked about 2014 earnings.
Fourth-quarter net income surged 38 percent to $464.2 million, or $1.51 a share, from $335.3 million, or 96 cents, a year earlier, according to WellPoint’s statement. Revenue climbed to $15.3 billion from $15.2 billion a year earlier.
The results were buoyed by WellPoint’s purchase last month of Amerigroup, the largest insurer specializing in government-sponsored Medicaid plans for the poor. Adding Amerigroup’s 2.7 million members, total enrollment increased about 5 percent.
Medical costs for WellPoint’s employer-sponsored plans also came in below expectations, helping earnings. That followed a Jan. 17 report by Minnetonka, Minnesota-based UnitedHealth Group Inc. (UNH), the largest U.S. medical insurer, that Americans hadn’t used medical services as much as expected last year.
“In terms of an uptick in utilization, we haven’t seen that at all,” Thomas Carroll, a Stifel Nicolaus & Co. analyst in Baltimore, said in a telephone interview before the announcement.
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