2nd UPDATE: WellPoint 3Q Net Falls 11% But Tops Views
28 Octubre 2009 - 10:09AM
Noticias Dow Jones
WellPoint Inc.'s (WLP) third-quarter profit, down 11% on asset
writedowns, substantially exceeded Wall Street views as a key
measure of the health insurer's medical costs was lower than
anticipated.
Recession-driven layoffs helped drive further enrollment
declines at WellPoint, the nation's largest managed-care company by
membership, which maintained its full-year earnings guidance.
WellPoint's 2009 earnings outlook, which anticipates higher flu
and economic pressures in the fourth quarter, is now higher on an
operating basis, thanks to strength in the third quarter. The
company listed several headwinds it anticipates for next year and
declined to issue 2010 guidance for now.
For the quarter ended Sept. 30, WellPoint reported a profit of
$730.2 million, or $1.53 a share, compared with $820.7 million, or
$1.60 a share, a year earlier. Excluding a gain of 3 cents a share
from investments and a write-down of 28 cents a share for impaired
assets, WellPoint's per-share earnings were $1.78, exceeding the
average analyst estimate on Thomson Reuters of $1.37 a share.
Revenue rose 3.1% to $15.43 billion, also above the Thomson
Reuters estimate of $15.15 billion.
The upside was driven by better-than-expected medical costs as a
percentage of revenue, known as the medical cost ratio, which fell
to 81.1% from 82.5% a year ago, partly because of a favorable
release of claims reserves.
WellPoint executives said it would be imprudent to provide 2010
guidance now, given potential health reform changes and the wide
range of possible effects from the flu and insurance for laid-off
members. It plans to provide detailed 2010 guidance early next
year. Company executives previously said it would be difficult to
expand operating earnings next year.
"While the backdrop is challenging, we are encouraged by
stronger than expected Q3 results now posted by both [UnitedHealth
Group Inc. (UNH) and [WellPoint], the two biggest players," Morgan
Stanley analyst Doug Simpson said. UnitedHealth, the largest health
insurer by revenue, reported better-than-expected results last
week.
Even adjusting for 15 cents a share in favorable reserve
development, Oppenheimer analyst Carl McDonald said, "earnings were
still much better than expected," with the medical cost ratio more
than 100 basis points lower than his forecast. McDonald nonetheless
expects WellPoint's operating earnings to fall in 2010.
While WellPoint lowered its medical-cost-ratio forecast for this
year, it increased its outlook for the growth in medical costs,
citing the flu and members laid off from client companies who
become insured under COBRA plans. Those members generally cost the
company more than those in regular employer group plans.
"We are performing well as an organization in a difficult
economic environment," President and Chief Executive Angela Braly
said on a conference call.
Medical membership fell 4.2% to 33.9 million as of Sept. 30 from
a year earlier and dropped by 366,000, or 1.1% during the third
quarter, with commercial health plans accounting for most of the
decline. The company expects ongoing pressure in commercial
enrollment next year because of a weak economy, although it
anticipates adding a net 400,000 national members in January.
Ken Goulet, who heads WellPoint's commercial business, noted a
"significant decline in literally the size of the pie" of
membership in commercial health plans for which the insurer assumes
full risk. "Our market share continues to stay stable and grow,
meaning we're beating our competitors."
WellPoint is pricing its health plans with discipline and to
exceed growth in total costs, according to Braly, who said the
market remains competitive yet rational.
Chief Financial Officer Wayne DeVeydt said WellPoint expects
several headwinds next year--a weak economy, active flu season,
high levels of COBRA membership, Medicare Advantage reimbursement
cuts--many of which are extensions of this year's industry
pressures. The company also anticipates tailwinds, including
proceeds from the sale sometime this quarter of its pharmacy
benefits management operation and better operating efficiency.
WellPoint shares recently slid 44 cents to $46.26. Other major
managed-care stocks also were in the red Wednesday.
-By Dinah Wisenberg Brin, Dow Jones Newswires; 215-656-8285;
dinah.brin@dowjones.com