WellPoint Inc. (WLP) on Wednesday posted a 7.6 percent decline in first-quarter profit, reflecting higher benefit expenses and lower medical memberships, despite the health insurer earning higher premiums. Earnings per share topped analysts' estimates, but the top line missed. The company also lifted its 2012 earnings forecast, but lowered the revenue view.
Benefit expense ratio, which compares an insurer's expenses for providing health care with the premiums it earns, increased 120 basis points to 83.3 percent. For the year as a whole, the company expects benefit expense ratio to be about 85.1 percent.
WellPoint's first-quarter net income declined to $856.5 million from last year's $926.6 million. Earnings per share grew 3.7 percent to $2.53 from $2.44 in the prior year, reflecting a 10.6 percent decline in total share count.
Adjusted net income, which excluded net investment gains, 11 percent to $794.1 million. Adjusted earnings per share edged down 0.4 percent to $2.34. On average, 20 analysts polled by Thomson Reuters expected earnings of $2.27 per share. Analysts' estimates typically exclude one-time items.
Total operating revenue rose 3.4 percent to $15.15 billion, but missed Wall Street analysts' consensus estimate of $15.26 billion.
CEO Angela Braly said, "Our first quarter results exceeded our expectations and were driven by improved performance in the Senior business and continued strong operating results in our Commercial segment."
The company attributed the revenue growth to the inclusion of CareMore business and to rate increases designed to cover overall cost trends and growth in Senior membership. These were partially offset by the decline in Local Group membership.
Premiums grew 3.3 percent and administrative fees increased 3.5 percent. As of March 31, medical enrollment totaled about 33.7 million members, down 1.5 percent from the previous year.
Membership in both Local Group and National businesses declined, while the company experienced growth in the Senior and State Sponsored businesses.
Total expenses rose 4.7 percent to $14.11 billion, mainly on higher benefit expense as well as selling, general and administrative expenses.
Looking ahead, for fiscal 2012, WellPoint now expects net income to be at least $7.84 per share. Adjusted net income is currently anticipated to be at least $7.65 per share, higher than previous forecast of at least $7.60 per share.
Meanwhile, the company expects full-year operating revenue to total about $61.2 billion, lower than previous guidance of about $62.1 billion. Analysts project earnings of $7.74 per share on revenue of $62.15 billion for 2012.
In fiscal 2011, the company earned $2.647 billion or $7.25 per share on operating revenues of $59.865 billion.
Year-end medical enrollment is now expected to be about 33.6 million members, compared to previous estimate of around 33.7 million members.
In pre-market activity, shares are currently trading at $71, up $0.24 or 0.34 percent.
by RTT Staff Writer
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