Health Insurer WellPoint Posts a 21% Rise in Profit
WellPoint Health Networks, one of California’s biggest health insurers, said Wednesday that first-quarter profit rose 21% as it added more than 2 million customers.
Net income rose to $96.5 million, or $1.48 a share, from $79.6 million, or $1.23, a year earlier, the Thousand Oaks-based company said in a statement after U.S. markets closed. Revenue rose 22% to $2.6 billion.
WellPoint, parent of Blue Cross of California, added customers mainly in California and Georgia, where it bought Cerulean Cos. in March for $700 million. WellPoint, which has 9.8 million customers, has attracted clients with health plans that offer a choice of doctors and flexible co-payments for medical care.
“These guys are really good underwriters, and they have some of the best management information systems in the business,” Prudential Securities Inc. analyst David Shove said before earnings were released. “That keeps them on top of cost trends.”
WellPoint had been expected to earn $1.45, the average estimate of analysts surveyed by First Call/Thomson Financial.
The company said costs for medical care, other benefits and administrative expenses rose 22% to $2.4 billion in the quarter, partly because of costs related to assuming Cerulean’s operations.
WellPoint said its medical loss ratio--the portion of every premium dollar that pays for medical care--fell to 80.8% in the quarter from 81% a year ago. The ratio would have been 80.7% excluding Cerulean, the company said.
Analysts said WellPoint has a record of setting premiums high enough to keep ahead of medical costs.
Shares of WellPoint rose $5.94, or 7%, to close at $94.15 on the New York Stock Exchange.
About 60% of WellPoint’s profit comes from California. That has raised concern among investors that the company could be hurt as the California economy slows, driving its shares lower in the quarter. The shares fell 17% in the first quarter.
At a Glance
Other Southern California company earnings, excluding one-time gains and charges unless noted:
* Callaway Golf Co., Carlsbad-based maker of clubs and golf balls, said first-quarter net income rose 18% to $34.1 million, or 47 cents a share, compared with $12.1 million, or 17 cents, a year ago. Revenue was a record $261.4 million.
* Homestore.com, a Westlake Village-based online real estate concern, said its first-quarter loss widened, partly on the cost of acquiring Cendant Corp.’s Move.com Internet unit. Its net loss was $67.1 million, or 71 cents a share, up from $29.2 million, or 39 cents, a year earlier. Revenue jumped more than 100% to $105.5 million.
Excluding acquisition-related charges and other items, the company said it would have earned $4 million, or 4 cents a share. On that basis, it was expected to break even, the average estimate of analysts polled by First Call/Thomson Financial.
* Hilton Hotels Corp., operator of Doubletree and Hilton hotels, said first-quarter profit rose 31% and revenue growth would slow this year as businesses cut back on travel.
Profit from operations rose to $55 million, or 15 cents a share, from $42 million, or 12 cents, a year earlier. Revenue rose 5% to $833 million. Revenue per available room, an industry measure of profit growth, rose 4.2%.
Beverly Hills-based Hilton said growth in revenue per available room would slow to 2% to 3% for 2001 from 7.8% in 2000.
