* Quarterly adj profit $2.09/share vs Street view $1.84
* WellPoint reaffirms profit forecast for full year
* Shares fall more th an 5 pct
By Toni Clarke
Nov 7 (Reuters) - Health insurer WellPoint Inc reported forecast-beating third-quarter earnings on Wednesday, but investors were disappointed that the company did not raise its guidance and said the higher earnings had a weak underside.
Shares of WellPoint, the second-largest U.S. health insurer by market value, slumped more than 5 percent, even as the company's chief financial officer tried to reassure investors over the outlook for the year.
The CFO, Wayne DeVeydt, told analysts on a conference call that the company's decision not to increase its full-year forecast, despite what it described as strong results, stemmed from a simple desire to maintain a "conservative and cautious outlook."
Analysts, however, remained unconvinced.
"Earnings per share beat consensus by 13 percent and was 'favorable' to management's expectations," said David Windley, an analyst at Jefferies & Company. "However, this benefit did not flow through to the year-end."
Jason Gurda, of Leerink Swann, said the results were not as compelling 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," Gurda said. "On the operating side, they were largely in line with expectations; however, most of their peers came in well ahead this quarter."
Net income rose 1.17 percent to $691.2 million, or $2.15 per share, helped by cost-cutting as well as a lower tax rate and share count. Excluding items, the company earned $2.09 a share, above the average estimate of $1.84 forecast by analysts polled by Thomson Reuters I/B/E/S.
WellPoint's effective income tax rate was 32.6 percent in the quarter, down from 34.6 percent a year ago.
The company repurchased 11.3 million shares during the third quarter. It said it bought back another 10.3 million shares during October.
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.
WellPoint said enrollment totaled 33.5 million members at the end of September, down 2.5 percent from a year earlier.
Shares of WellPoint, which has a market value of about $19.9 billion, fell 5.3 percent to $57.94 in midday trading on the New York Stock Exchange.
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.
Following the re-election of President Barack Obama on Tuesday, which puts Obama's healthcare reform act on course to be fully implemented, WellPoint said it expects to spend an incremental $200 million to $300 million in 2013 to get ready.
The law aims to provide coverage for 16 million more Americans through privately run health insurance exchanges. It will expand eligibility for Medicaid, the government's insurance program for the poor, to an additional 16 million people by raising limits on household income.
WellPoint said about half of its planned spending will go toward preparing for the exchanges, which are scheduled to be operational by Jan. 1, 2014. The other half of the planned spending will cover, among other things, ensuring WellPoint it is able to provide coverage for so-called dual-eligibles, or some 9 million Americans who meet the criteria to receive both Medicaid and Medicare, the federal health insurance program for the elderly.
Care for dual-eligibles is moving to the private sector and could generate billions of dollars in profit for insurance companies.
The reforms, which will give insurers millions of new customers, also imposes conditions under which patients may not be denied coverage due to pre-existing conditions.
On the conference call, Cannon congratulated Obama on his re-election.
"We look forward to continue to work with his administration on ways to improve our nation's healthcare system," he said. "Clearly, the need to improve access to, and affordability of, healthcare remains a critical issue."
The shifting health insurance market place, which is also characterized by a desire by government to curb reimbursement for Medicare and Medicaid, has spurred a number of deals in the sector as companies rush to gain scale and market share.
WellPoint in July announced a deal to buy rival Amerigroup Corp 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.