WellPoint Posts Higher Earnings in Q3 on Slightly Lower Revenue

Andrew Klips  |

WellPoint Inc. (WLP), the second largest U.S. health insurer by membership, reported Wednesday that its third quarter earnings increased 1.2 percent and reiterated its 2012 adjusted earnings forecast of $7.30 to $7.40 per share. For the full year, WellPoint forecasts operating revenue of $60.7 billion, a mild decrease from July predictions of $61 billion.

The Indianapolis-based company said that net income rose to $691.2 million, or $2.15 per share, in the latest quarter, compared to $683.2 million, or $1.90 per share, in the year prior quarter. Excluding items such as acquisition costs, earnings rose 18.1 percent to $2.09 per share in Q3 2012 from $1.77 per share in Q3 2011.

Revenue was relatively flat compared to the year prior, tallying $15.1 billion in the recent quarter, down from $15.33 billion in the 2011 quarter.

Analysts were expecting earnings of $1.84 per share and revenue of $15.31 billion. WellPoint’s 2012 guidance is basically in line with Wall Street expectations of $7.37 per share earnings and $61.12 billion in revenue.

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“Our third quarter results compared favorably to our expectations and reflected more consistent execution across our businesses. We are preparing for a successful Amerigroup integration and have recently taken steps to better align business level leadership to execute on the growth opportunities before us,” said John Cannon, interim president and chief executive officer.

The WellPoint chief is in part referencing last month’s deal to buy Medicaid-focused insurer Amerigroup (AGP) in a deal valued at $4.46 billion and the company’s acquisition in June of contact lens and eyewear retailer 1-800-Contacts, Inc. for about $900 million. WellPoint’s acquisition moves are in attempt to compete with UnitedHealth Group Inc. (UNH), the U.S.’s biggest health plan.

This was the first earnings report for Cannon after former CEO Angela Braly resigned in August amidst shareholder discontent about less-than-expected profits compared to peers. Accepting the position, Cannon said that he wasn’t interested in more than an interim role. A new CEO is expected within the next six months.

Notably, medical enrollment drifted lower by 2.5 percent to 33.5 million members through the end of the third quarter. The re-election of Barrack Obama to a second term as President is expected to create additional members for insurers like WellPoint through ObamaCare, although it is also widely anticipated to carve-away at profit margins.

Shares of WLP closed trading Tuesday at $61.20 each and are down about 7.5 percent to date in 2012.

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