NEW YORK WellPoint Inc WLP.N said on Wednesday first-quarter profit slumped a steeper-than-expected 25 percent on high medical costs, mainly in its Medicare plans for the elderly. The health insurer also further cut its 2008 forecast.
The largest U.S. health insurer by membership sharply lowered its outlook for the second time since March, projecting higher medical costs. Its first profit warning sparked a broad sell-off among health insurers and speculation by some analysts that the industry has entered a cyclical downturn.
First-quarter net income fell to $588.1 million, or $1.07 per share, from $783.1 million, or $1.26 per share, a year earlier. Analysts on average expected $1.18 per share, according to Reuters Estimates.
Revenue rose 3.5 percent to $15.4 billion.
The company's benefit expense ratio -- the percent of premiums spent on medical costs -- worsened to 85.1 percent from 83.1 percent a year ago. Most of that stemmed from costs under its Medicare plans.
WellPoint forecast full-year profit of $5.42 per share to $5.67 per share. Analysts had expected $5.74.
In March, the company had projected 2008 profit in the range of $5.76 to $6.01 per share. That forecast had been reduced from its prior view of $6.41 per share, so the company has now cut its forecast by as much 15 percent over that time.
Shares of the Indianapolis-based company are off about 47 percent in 2008, compared with a 36 percent drop for the Morgan Stanley Healthcare Payor index .HMO.