WellPoint net profit falls, but results beat views

By Lewis Krauskopf

NEW YORK (Reuters) - U.S. health insurer WellPoint Inc (WLP.N) posted an 11 percent drop in profit as Americans losing their jobs also lost insurance coverage, but results crushed estimates on favorable medical costs, changes to its Medicare plans and shedding of unprofitable Medicaid contracts.

Still, WellPoint warned that it expected higher medical costs for the full year, owing in part to expenses tied to the flu and Cobra coverage for workers who lost their jobs.

It also forecast lower operating earnings next year, repeating its bearish view for 2010, although it put off giving details until early next year.

"It's a good, solid bottom-line number in the quarter," Collins Stewart analyst Brian Wright said. "Commentary for the rest of the year and pricing and cost trends seems a bit cautious from management."

Shares of WellPoint, the largest health insurer by membership, were 0.5 percent lower, but the decline was less than rivals on an overall down day for the stock market.

WellPoint's net income fell to $730.2 million, or $1.53 per share, from $820.7 million, or $1.60 per share, a year earlier. The latest results included a charge of 28 cents per share for impairment of intangible assets.

Excluding the charge and investment gains, the company earned $1.78 per share, well ahead of the analysts' average estimate of $1.37, according to Thomson Reuters I/B/E/S.

Revenue slipped 0.7 percent to $15.21 billion but was higher than the $15.15 billion expected by analysts.

WellPoint followed UnitedHealth Group Inc (UNH.N) in reporting better-than-expected third-quarter results while expressing caution about 2010.

Shares of health insurers are trading at historic lows over concerns that the healthcare overhaul under debate in Congress will dramatically undercut their business.

WellPoint executives said they want more clarity on reform, in particular a potential industry-wide fee of $6.7 billion, as well as the severity of the H1N1 swine flu season before providing Wall Street with a more detailed 2010 outlook.

"There are a number of moving pieces right now, and we thought it wouldn't be really the right thing to do to come forward with guidance with all the caveats that we'd be describing," WellPoint Chief Executive Officer Angela Braly said in an interview.

WellPoint reported enrollment of 33.9 million as of September 30, down 4.2 percent from a year earlier.

Operating profit in the consumer business more than doubled to $520 million. Results were bolstered by product changes in the company's Medicare business and withdrawal from unprofitable contracts in its Medicaid business.

Profit fell 31 percent to $628 million in its commercial unit serving employers, hurt by lower enrollment. Higher administrative costs, from an increase in compensation and spending for technology and customer service, hurt results.