WellPoint Says Net Income Nearly Doubled
WellPoint Health Networks Inc., one of the nation’s largest health insurers, said Wednesday that its third-quarter profit nearly doubled from a year earlier, thanks to investment gains, enrollment growth and lower administrative costs.
The results from the Thousand Oaks-based parent of Blue Cross of California exceeded expectations and reflected the financial strength in the managed-care industry, which has kept ahead of surging health costs with hefty premium increases.
Earlier this month, UnitedHealth Group Inc., the nation’s largest health insurer, reported a 53% jump in quarterly profit. And analysts at Merrill Lynch have predicted that the industry overall will show average earnings growth of 39% for the third quarter.
Analysts see an eventual easing in the growth rate, but various reports suggest that insurers will see even bigger premium increases from employers next year than this year’s 13%. “They haven’t been getting significant resistance from employers,” said Clifford Hewitt, a health analyst at Legg Mason, a Baltimore brokerage firm.
WellPoint’s profit for the latest quarter rose to $211.3 million, or $1.38 a share, from $108.4 million, or 82 cents a share, a year earlier.
The latest results included a pretax gain of $64.9 million from the company’s investment in Trigon Healthcare Inc., which was acquired by Anthem Inc., a close rival of WellPoint that has been vying to build a national network of Blue Cross and Blue Shield plans. Excluding that gain and other special items, WellPoint earned $1.17 a share, 4 cents ahead of analysts’ consensus estimate.
Revenue rose 39% to $4.52 billion.
WellPoint said its nationwide enrollment jumped 27% from a year ago, to 13.05 million at the end of September, largely because of acquisitions in Missouri and Texas. But total membership was essentially unchanged from the second quarter, despite good gains in California.
WellPoint’s medical loss ratio, or the cost of providing health-care services divided by the premiums it collected, held steady at 81.7%, one of the lowest in the industry.
At the same time, WellPoint said, it lowered its overhead and selling costs, to 16.3% of revenue from 16.7% in the second quarter and 17.5% a year earlier.
The company released its earnings after markets closed Tuesday. Its shares dropped $1.07 to $84.56 on the New York Stock Exchange. The stock is up 45% since the start of the year.
