* No. 2 U.S. health insurer also boosts 2013 earnings
* 1st-quarter EPS of $2.94 beats Wall Street view of $2.39
* Revenue rises 16 pct to $17.5 billion
* Shares up 5 pct in afternoon
(Adds CFO and analyst comments, industry details, updates stock
By Caroline Humer
April 24 WellPoint Inc's quarterly
profit came in far above Wall Street expectations, helped by
expansion of individual health insurance plans and Medicaid
membership, as well as lower medical costs from plans sold to
Shares of WellPoint, the second-largest U.S. health insurer,
were up 5 percent on Wednesday afternoon, leading increases for
the sector. The Morgan Stanley Healthcare Payor Index was
up 1.2 percent.
WellPoint and its rivals are bracing for a transformation of
the U.S. healthcare system under President Barack Obama's reform
law that takes full effect in January.
It will participate in the expansion of insurance coverage
to more than 30 million additional Americans, through broader
government Medicaid coverage for the poor and private health
insurance exchanges to be sold in individual U.S. states.
The company said it is still planning to sell products on
health exchanges in the 14 states where it operates now, but
that it is waiting for details of how they will be set up in the
next few months. State exchanges will have to be ready to enroll
new members on Oct. 1 to provide benefits as of Jan. 1, 2014.
"We are planning and assuming in our guidance that it rolls
out on Oct. 1," Chief Financial Officer Wayne DeVeydt said in an
While insurers stand to gain more members under the new
health law, they also face regulations that may restrict profit
margins, tighter controls on reimbursement for
government-sponsored insurance plans and requirements to cover
more health services fully.
WellPoint, which provides insurance under Blue Cross and
Blue Shield licenses, raised its 2013 earnings outlook because
of the better-than-expected operating results.
However, WellPoint is "still being prudent as many of the
uncertainties inherent in our original guidance still exist,"
Chief Executive Officer Joseph Swedish said in a statement, such
as the effects of government budget cuts, or sequestration, on
Swedish, a former hospital executive, took over as CEO in
the first quarter, replacing longtime chief Angela Braly who had
come under investor pressure over WellPoint's repeatedly
disappointing financial results.
AMERIGROUP PURCHASE PROVIDES A BOOST
WellPoint reported a profit of $885.2 million, or $2.89 per
share, up from $856.5 million, or $2.53 per share, a year
Excluding items such as investment losses, the company
earned $2.94 per share. On that basis, analysts were expecting
$2.39, up from $2.34 a year earlier, according to Thomson
Revenue rose 16 percent to $17.5 billion, helped by the
company's December acquisition of Amerigroup and the addition of
its individual and Medicaid memberships.
WellPoint said the Amerigroup business had higher average
benefit costs than the company as a whole. It was partly offset
by lower-than-expected medical costs in its plans for small
businesses that typically have between two and 50 employees.
WellPoint forecast 2013 net income of at least $7.75 per
share or $7.80 excluding items, compared with a prior forecast
of $7.60 per share.
"When I looked at the numbers I saw the beat as primarily
being driven by lower taxes and a larger share repurchase, which
has always been a big part of their story," said Wedbush
Securities analyst Sarah James.
Looking ahead, WellPoint faces lower reimbursement rates
next year from the government for its management of Medicare
health plans for the elderly, Swedish said. As a result, the
company is re-evaluating where it will invest the $150 million
it has designated for the sector, he told analysts on a
While the entire industry will be affected by reimbursement
changes to these privately administered Medicare Advantage
plans, WellPoint's Medicare business in California, CareMore, is
expected to take an even greater hit because it has many
patients with multiple diseases for which it will receive lower
reimbursements under the changes. CareMore accounts for about 10
percent of WellPoint's Medicare Advantage portfolio.
WellPoint shares were up 4.9 percent at $72.70 on the New
York Stock Exchange on Wednesday afternoon, off an earlier high
(Reporting by Caroline Humer in New York; editing by Michele
Gershberg, Lisa Von Ahn and Matthew Lewis)