WellPoint Lifts FY14 Forecast As Q1 Profit Tops Estimates

(RTTNews) - Health insurer WellPoint, Inc. (WLP) reported Wednesday lower profit in its first quarter mainly on margin pressure in its Commercial & Specialty Business, despite higher operating revenues. Adjusted earnings topped analysts' estimates. The company also lifted its earnings and revenue forecast for fiscal 2014, reflecting balanced enrollment growth across its served markets.

Net income was $701 million or $2.40 per share for the first quarter of 2014, lower than prior year's $885.2 million or $2.89 per share.

The latest results included net gains of approximately $0.10 per share, while the prior year results included net investment losses of about $0.05 per share. Adjusted net income, which excluded items, was $2.30 per share, compared to $2.94 per share a year ago.

On average, 22 analysts polled by Thomson Reuters expected earnings per share of $2.13 for the quarter. Analysts' estimates typically exclude one-time items.

Total revenues increased 1.6 percent to 17.86 billion from last year's $17.58 billion. Quarterly operating revenue came in at $17.64 billion, a 1.2 percent increase from $17.44 billion a year ago. Analysts estimated revenues of $17.96 billion for the quarter.

The revenue growth reflected premium increases as well as higher membership in the Medicaid, Commercial self-funded and FEP businesses, the company said.

Commercial & Specialty Business' revenues dropped 1.6 percent to $9.70 billion, while that of Government Business grew 4.9 percent to $7.94 billion.

Total operating margin dropped 150 basis points to 6.3 percent from 7.8 percent a year ago mainly due to lower margin at Commercial & Specialty Business.

In the quarter, the benefit expense ratio was 82.7 percent, a decrease of 100 basis points, primarily due to an improvement in the Medicaid business.

Medical enrollment totaled approximately 36.9 million members as of March 31, an increase of 3.6 percent sequentially. Commercial and Specialty Business segment enrollment increased.

Chief Executive Officer Joseph Swedish said, "Our better than expected first quarter results reflect our value proposition in the market .... We are off to a strong start, supporting an increase in our earnings guidance for the full year."

Further, the company said its Board of Directors declared second-quarter dividend of $0.4375 per share. On an annualized basis, this equates to a dividend of $1.75 per share.

Looking ahead for fiscal 2014, WellPoint now expects reported earnings to be greater than $8.50 per share, including $0.10 per share gain. Adjusted earnings per share are projected to be greater than $8.40 for 2014. Analysts project earnings of $8.40 per share for the year.

The company also expects operating revenue to be greater than $73.5 billion, while analysts estimate $73.18 billion.

WellPoint previously projected earnings per share to be greater than $8.20 on operating revenue of $73.0 billion.

Medical enrollment is now projected to grow by 1.3 million to 1.4 million members for the year, while previous estimate was for a growth of 1 to 1.3 million net new medical members.

On the NYSE, WellPoint shares closed Tuesday's trading at $95.39, up $0.43 or 0.45 percent.