WellPoint Q3 Results Top Estimates, Lifts Earnings View

(RTTNews) - Health insurer WellPoint Inc. (WLP) reported Wednesday a decline in third-quarter profit, even as revenues climbed from last year on strong performance by Government Business as well as the acquisition of Amerigroup. Adjusted earnings per share as well as top line beat analysts' estimates.

Citing strong performance, continued preparation and the outlook for coming market changes under the Affordable Care Act, the company lifted its fiscal 2013 forecast for earnings and membership, while backed revenue forecast.

In pre-market activity, WellPoint shares gained $2.05 or 2.32 percent, and traded at $90.48.

Chief Executive Officer Joseph Swedish said, "Our third quarter results were driven primarily by lower than anticipated medical cost experience as well as favorable membership and revenue. Our results were also supported by strong operating cash flow generation."

For the third quarter, the company's net income declined 5.1 percent to $656.2 million from last year's $691.2 million. Earnings per share, however, edged up 0.5 percent to $2.16 from last year's $2.15, reflecting a 5.4 percent decline in share count.

Adjusted net income, which excluded certain items, was $2.10 per share, while last year's adjusted earnings were $2.09 per share.

On average, 17 analysts polled by Thomson Reuters expected earnings of $1.82 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues increased 17 percent to $17.97 billion from $15.35 billion last year. Total operating revenue in the quarter climbed 17.2 percent to $17.73 billion. Analysts expected revenues of $17.62 billion.

The company attributed the increase in revenues to the inclusion of Amerigroup business in the third quarter of 2013, partially offset by lower Medicare revenue due to the decline in membership.

Operating revenue in the Commercial segment edged up 0.4 percent, while revenues from Government Business climbed 47.6 percent. Total operating margin, however, edged down 90 basis points to 5.7 percent from last year's 6.6 percent.

Medical enrollment totaled 35.5 million members as of September 30, an increase of 6 percent from prior year's 33.5 million.

The benefit expense ratio, an operating metric used in the health insurance industry, was 84.9 percent, a decrease of 50 basis points from 85.4 percent last year, primarily due to improvements in the Medicare business.

Further, the company said its Board of Directors declared a fourth-quarter dividend of $0.375 per share, payable on December 23 to shareholders of record at the close of business on December 9.

Looking ahead, for the full year 2013, WellPoint now expects net income to be at least $8.45 per share, and adjusted net income to be at least $8.40 per share. Analysts expect the company to report earnings of $8.28 per share for fiscal 2013.

In September, the company had said that it continued to expect full-year net income of at least $7.89 per share, and adjusted net income of at least $8.00 per share.

For fiscal 2012, the company's reported earnings were $8.18 per share and adjusted earnings were $7.56 per share.

The company continues to expect operating revenue in the range of $70 to $72 billion. Year-end medical enrollment is now expected to be approximately 35.6 million, compared to previous estimate of 35.3 million to 35.5 million.