WellPoint Profit Declines 12% on Merger Expenses

WellPoint Inc. said Monday that its fourth-quarter profit dropped nearly 12%, primarily because of expenses related to debt retirement and the acquisition that created the nation’s largest health insurance company.

For the three months ended Dec. 31, profit fell to $184.5 million, or 92 cents a share, compared with $208.8 million, or $1.47, a year earlier. Revenue rose 59% to $6.7 billion.

It was the company’s first earnings report since the $16.5-billion purchase by Anthem Inc. of Thousand Oaks-based WellPoint Health Networks Inc. The quarter included just one month of joint earnings since the Nov. 30 merger. Year-earlier figures were based on Anthem’s 2003 results.

Excluding one-time charges of $146 million in debt-reduction expenses and $61.5 million in merger-related costs in California and Georgia, the new company earned $1.69 a share -- a penny higher than the $1.68 a share analysts surveyed by Thomson First Call had forecast.

Wall Street was not impressed, however. WellPoint shares fell $4.04, or 3.2%, to $120.85 on the New York Stock Exchange.

For all of 2004, the company reported net income of $960 million, or $6.10 a share, on revenue of $20.8 billion, compared with profit of $774 million, or $5.45 a share, on revenue of $16.8 billion for 2003.

WellPoint said it anticipated profit for the coming year of $7.75 a share for 2005, at the high end of its previous estimate of $7.65 to $7.75 a share.

Executives said they intended to broaden the base of WellPoint’s market share in a dozen states where the company already is the top insurer while going after new business, particularly uninsured middle-class couples and seniors on Medicare, and offering some lower-cost alternative coverage packages.

But the company’s chief financial officer said WellPoint had no intention of turning itself into a discount insurance provider.

“We are not interested in underpricing our business to increase market share,” WellPoint CFO David C. Colby said. “We do not chase business that we believe is priced unprofitably.”

Anthem, the nation’s second-largest Blue Cross provider, bought WellPoint, the largest, in November, after promising hundreds of millions of dollars to improve healthcare in California and Georgia to overcome state regulators’ misgivings.

The new company insures about 28 million people in 13 states, about a quarter of whom live in California. It has Blue Cross operations in California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, Ohio, Virginia and Wisconsin. It also provides insurance through HealthLink and UniCare.