Health insurer WellPoint Inc has agreed to pay $90 million to settle a class-action lawsuit against its Anthem unit over accusations the company did not fairly compensate former members when Anthem was converted from a mutual company into a stock company.
If approved by a U.S. federal judge in Indiana, the settlement would resolve all claims asserted by the class, according to court documents filed on Friday.
Following news of the settlement WellPoint, in a regulatory filing, lowered its full-year profit forecast by 8 cents per share.
The settlement would avoid a jury trial stemming from the complaint over the 2001 conversion. The trial had been scheduled to begin on Monday in federal court in Indianapolis.
The No. 2 health insurer by market value now expects to post 2012 earnings of at least $7.57 per share. That is down from its prior forecast of at least $7.65 per share.
The average Wall Street estimate is $7.78, according to Thomson Reuters I/B/E/S.
The revised forecast includes net investment gains of 19 cents per share from the first quarter, the company said.
The lawsuit was filed in 2005 on behalf of former owners/members of Anthem Insurance, a mutual insurer that demutualized in 2001.
"While Anthem was prepared to vigorously defend itself at trial, we are pleased that we have reached an agreement to settle this dispute," Anthem spokeswoman Kristin Binns said in an e-mailed statement.
"We continue to believe that in all ways the company acted appropriately and in the best interests of its former members," she said. "The Indiana Department of Insurance reviewed every aspect of the transaction and found it to be fair, reasonable and equitable to Anthem's former members."
In court filings, the plaintiffs proposed to send settlement notices to class members, with checks to be mailed to class members starting as soon as the settlement becomes final and fully in effect.
The class represented in the suit consisted of more than 700,000 residents of Indiana, Ohio, Kentucky and Connecticut, according to attorneys for the plaintiffs.
"Our clients were the owners of Anthem before it demutualized in 2001, and they were entitled to receive cash compensation equal to the fair value of their ownership interests when the company converted from a mutual company to a stock corporation," Eric Zagrans, one of the attorneys representing the class said in a statement.
(Reporting By Bill Berkrot in New York; editing by Andre Grenon and Richard Chang)