* Q1 EPS $2.34 vs $2.27 Wall Street view
* Sees full year earnings "at least" $7.65/share
* Membership fell 1.5 percent to about 33.7 million
* Insurers, investors watch utilization rates carefully
* Shares rise 0.6 percent
By Lewis Krauskopf and Debra Sherman
April 25 WellPoint Inc reported a lower
quarterly profit as membership fell, but the results topped Wall
Street's target, and the health insurer raised its outlook.
The No. 2 health insurer by market value also said the
performance of its Medicare business had improved after problems
with such plans dragged down results in 2011.
After posting disappointing results in recent periods,
WellPoint's first-quarter report should prove reassuring to
investors, analysts said. Shares were up 0.6 percent in midday
"Results more or less as we expected. I'd say mediocre,"
Morningstar analyst Matthew Coffina said. "The first quarter
doesn't tell you that much because claims are still evolving and
we might not get a better picture of what healthcare utilization
is until the second quarter."
WellPoint Chief Executive Angela Braly told analysts on a
conference call that the company has made some operational
changes to improve the company's performance, including naming
one new executive to lead the Medicare business and another to
oversee operations across the company.
"I really feel great about our team," Braly said on the
Health insurers largely posted higher-than-expected profits
in 2011 because of Americans' low use of medical services in the
weak economy, leading their shares to far outperform the broader
stock market. Wall Street is eager to see if the trend has
continued this year.
Last week, UnitedHealth Group Inc, the largest U.S.
health insurer by market value, raised its profit outlook after
posting a higher-than-expected 3 percent rise in earnings, and
said medical utilization trends remained moderate.
In an interview, WellPoint Chief Financial Officer Wayne
DeVeydt said the company saw a small increase in the utilization
of healthcare services in the latest quarter, but that was
driven by the extra day because of the leap year and an
unseasonable warm winter, which meant more people could get to
DeVeydt said he does not expect a significant increase in
utilization until the nation creates more jobs.
"This has been a jobless (economic) recovery," he said.
"Until we start seeing more people getting jobs, we won't see a
First-quarter net income fell to $856.5 million, or $2.53
per share, from $926.6 million, or $2.44 per share, a year
Excluding items, earnings per share of $2.34 topped the
analysts' average estimate by 7 cents, according to Thomson
Revenue rose 3.5 percent to $15.4 billion, helped by
WellPoint's acquisition of Medicare specialist CareMore and rate
Membership fell 1.5 percent to about 33.7 million, hurt by
declines in businesses serving large and small employers.
Wells Fargo analyst Peter Costa said the declines in
commercial membership were larger than expected.
Earnings in WellPoint's consumer business rose nearly 6
percent to $217.7 million, reflecting improvement in the
company's Medicare Advantage plans.
WellPoint warned last July that surprisingly high claims
from a Medicare plan in California would hurt earnings in 2011.
Those losses ended up weighing on 2011 results more than the
company initially expected.
Citigroup analyst Carl McDonald said it was unclear whether
WellPoint had enough information about its claims trends this
early in the year "to know exactly how the Medicare business is
performing, particularly given all the new members added this
"Last year, for example, WellPoint thought its Medicare
business was fine right now, and it wasn't until the second
quarter report that it became clear the product was
underpriced," McDonald said in a research note.
DeVeydt said he feels confident about the actions the
company has taken to improve the Medicare business, but stressed
that management does not expect to see full results for a few
"We see this as a multi-year fix. But we are confident about
the actions we've taken," he said.
WellPoint forecast 2012 earnings of at least $7.65 per share,
excluding items. It previously said it had expected at least
$7.60. Analysts have been looking for $7.74.
WellPoint shares were up 0.6 percent to $71.19 in early
afternoon trading on the New York Stock Exchange. Through
Tuesday, the shares were up nearly 7 percent this year, compared
with a nearly 14 percent rise for the Morgan Stanley Healthcare
Payor index of health insurers.