(Reuters) - Health insurer WellPoint Inc WLP.N reported better-than expected third-quarter earnings on Wednesday, but the results were weaker than those of its peers and it did not raise its forecast for the year, sending the company's shares down 4 percent in early trading.
The earnings were helped by cost-cutting as well as a lower tax rate and share count. Net income rose to $691.2 million, or $2.15 per share, in the third quarter, from $683.2 million, or $1.90 per share, a year earlier.
Excluding one-time items, the company earned $2.09 a share, topping analysts' average forecast of $1.84, according to Thomson Reuters I/B/E/S.
The company's chief financial officer, Wayne DeVeydt, told analysts on a conference call that WellPoint's decision not to increase its full-year forecast, even in the face of better-than-expected third-quarter results, stemmed from a simple desire to maintain a "conservative and cautious outlook."
Jason Gurda, an analyst at Leerink Swann, said the results were not as strong as those of most WellPoint peers.
"Earnings were ahead of expectations but it was largely due to a lower-than-expected tax rate and share count," he said. "On the operating side, they were largely in line with expectations, however, most of their peers came in well ahead this quarter."
WellPoint's effective income tax rate was 32.6 percent in the quarter, down from 34.6 percent a year ago.
Operating revenue topped $15.1 billion, little changed from a year ago. Premium revenue declined 1 percent, and the health benefit-to-expense ratio was 85.4 percent, up from 85.1 percent a year earlier.
The second-largest U.S. health insurer by market value said enrollment totaled 33.5 million members at the end of September, down 2.5 percent from a year earlier.
WellPoint is currently being run by an interim chief executive, John Cannon, who took over following the abrupt resignation of Angela Braly in August. Cannon said it would be "inappropriate" to comment in detail on the company's search for a new CEO. But he said the search could extend into the first quarter of 2013.
WellPoint, which warned last summer of intensifying competition and rising medical costs, said it still expects year-end enrollment of about 33.4 million members. It also reiterated its full-year profit forecast.
The re-election of President Barack Obama puts his healthcare reform act on course to be fully implemented; key provisions kick in 2014.
The reforms, which will add millions of new customers to the rolls of health insurers, also impose conditions under which patients may not be denied coverage due to pre-existing conditions.
The federal governments is also trying to put a clamp on reimbursement for Medicare and Medicaid as part of its wider effort to bridge a growing budget deficit.
This has prompted a string of deals in the health insurance sector as companies rush to gain scale and market share.
WellPoint in July announced a deal to buy rival Amerigroup Corp AGP.N for $4.46 billion to focus on its Medicaid business. This was closely followed by Aetna announcing the $5.6 billion purchase of Coventry Health Care Inc CVH.N.
Shares of WellPoint, which has a market value of about $19.9 billion, fell 4.9 percent to $58.18 in early trading on the New York Stock Exchange.