WellPoint Health Profit Up 14% in 4th Quarter
WellPoint Health Networks Inc., one of California’s biggest health insurers, on Tuesday said its fourth-quarter profit rose 14% as it added customers in California.
Net income rose to $89.5 million, or $1.37 a share, from profit on operations of $78.8 million, or $1.20, a year earlier, WellPoint said in a news release after U.S. markets had closed. Revenue rose 24% to $2.4 billion from $2 billion.
Thousand Oaks-based WellPoint, the parent of Blue Cross of California, said it had 7.9 million customers as of Dec. 31, up about 8% from 7.3 million a year earlier. Its membership in California, where it has 70% of its customers, rose 8.4% to 5.6 million in the quarter.
“They’ve found the right mix of what people will pay for,” Fox-Pitt, Kelton Inc. analyst Greg Crawford said before earnings were announced.
WellPoint had been expected to earn $1.35 a share, the average estimate of analysts surveyed by First Call/Thomson Financial.
WellPoint shares rose 17 cents to close at $100.32 on the New York Stock Exchange.
WellPoint said growth in its individual health coverage and small-employer plans outside California and its acquisition of Chicago-based Rush Prudential Health Plans last year contributed to the customer increase.
The company said it added customers by offering health plans that offer them a choice of doctors and flexible co-payments when they get care.
The cost of health care and other benefits rose to $1.8 billion from $1.4 billion a year earlier, WellPoint said, though it didn’t disclose its medical-loss ratio. The figure, closely watched by analysts, represents the portion of every premium dollar that pays for medical costs.
The ratio was expected to rise to about 80.6% from 78.9%, Lehman Bros. Inc. analyst Larry Marsh said in a report. Marsh said WellPoint had lower-than-expected medical costs a year ago.
In the quarter, WellPoint won a bidding war for closely held Cerulean Cos., Georgia’s biggest health insurer, with a $700-million cash offer. WellPoint had offered $500 million in cash and stock in July 1998 and raised the bid after Trigon Healthcare Inc. made a surprise bid of $675 million for the Blue Cross & Blue Shield company.
The acquisition, which will add 1.6 million customers outside California, is expected to close by March 31.
WellPoint said Jan. 3 the transaction won’t hurt earnings in 2001 and will add 10 cents to 15 cents a share in 2002. The company said Cerulean will save it $7 million this year in administrative costs and $15 million a year once the Atlanta-based business is integrated.
Cerulean said Monday its fourth-quarter profit rose to $15.5 million from $8.5 million a year earlier. For the year, profit rose to $57 million on revenue of $1.8 billion from $32.8 million in 1999.
In the year-earlier quarter, WellPoint had a gain of $1.89 million, or 3 cents, related to the early payment of debt, which made net income $80.7 million, or $1.23 a share. There were no gains or charges in the most recent quarter.
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Looking Well
Shares of WellPoint Health Networks have risen 70% in the last year. The managed-care company has added customers by offering less-restrictive health plans.
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WellPoint Health Networks, monthly closes and latest, on the New York Stock Exchange
Tuesday: $100.32, up 17 cents
Source: Bloomberg News
