WellCare Health Plans, Inc.
) reported second quarter earnings of $1.24 per share, beating the
Zacks Consensus Estimate by a penny but falling significantly from
$1.77 earned in the year-ago quarter. Earnings of $54.5 million in
the reported quarter plunged almost 29% from $76.7 million recorded
in the second quarter of 2011.
The reported quarter experienced higher premium revenue in
Medicaid and Medicare Advantage segments, lower medical benefit
ratio (MBR) in Medicare Prescription Drug Plans, and a decline in
adjusted administrative expense ratio. However, favorable
development of prior years' medical benefits of 95 cents in year
ago earnings jeopardized the year-over-year comparison during the
Including administrative expenses related to government
investigations and related litigation of $11.7 million and expenses
related to resolution of litigation of $0.8 million, the company
reported a net income of $46.4 million or $1.06 per share compared
to $69.6 million or $1.61 per share recorded in the prior-year
During the quarter under review, total revenue of WellCare
grossed $1.81 billion, surging 21.7% from $1.49 billion in the
year-ago quarter on the back of higher premiums. Top line also
surpassed the Zacks Consensus Estimate of $1.79 billion.
Premium revenue during the quarter amounted to $1.8 billion
increasing 22% year over year mainly contributed by its
Total expenses for the second quarter amounted to $1.73 billion;
swelling 26.4% from the prior-year quarter, primarily due to an
increase in medical benefits, administrative expenses and interest
The company's adjusted administrative expense ratio plunged 100
basis points to 8.2% in the reported quarter, pursuing its constant
efforts to have a competitive cost structure.
Total memberships for the company increased 7% to about 2.6
million, primarily due to an increase in memberships in all its
segments, partially offset by a decrease in Prescription Drug Plans
WellCare reports its earnings through its two operating
segments, namely: Medicaid and Medicare Advantage.
reported total premium revenue of $1.09 billion increasing 30.1%
over the prior-year quarter. However, its MBR deteriorated 930
basis points to 89.2% over the quarter ended 2011. This was
primarily due to the Kentucky program.
reported total premium revenue of $711.8 million increasing 10.9%
over the prior-year quarter. Under this segment the MBR for
Medicare Advantage slightly deteriorated by 50 basis points to
83.3% over the quarter ended 2011 and MBR for Prescription Drug
Plans improved 640 basis points to 80.4% in the reported
WellCare exited the second quarter with cash and cash
equivalents of $1.15 billion compared to $1.33 billion as on
2011-end. Total assets for the company were valued at $2.69 billion
compared to $2.49 billion as on December 31, 2011.
Total debt obligation in the company's books amounted to $127.5
million, declining from $135 million as on December 31, 2011. As of
June 30, WellCare's stockholders' equity totaled $1.23 billion
versus $1.12 billion as of 2011-end.
Outlook for 2012
WellCare revised its previous guidance. It raised adjusted net
income per share expectation to $5.25 and $5.45 from $5.20 and
$5.40. The company now expects its premium revenue to be $7.1
billion, increasing from its previous outlook which ranged between
an approximate of $7.0 and $7.1 billion. The Prescription Drug
Plans segment's MBR is expected to reduce shifting from its
previous guidance where the company expected it to increase.
The company reaffirmed the rest of the guidance wherein the
administrative expense ratio is expected to be in the band of
8.7%-8.9% and the MBR of Medicaid and Medicare Advantage segments
will increase relative to the respective 2011 segment MBRs.
WellCareentered into a definitive agreement with
) to buy some of the assets of Arcadian Health Plan, Inc.'s Desert
Canyon Community Care Medicare Advantage. If approved by the
regulatory bodies, the deal is expected to consummate by the end of
this year. No other terms of the deal were disclosed. Per the
agreement, starting January 1, next year, members of Desert Canyon
in Mohave and Yavapai will become a part of WellCare in the Arizona
Starting October this year, WllCare will be catering to 65
countries in Florida. Also, it will be outdoing any other health
plan on being selected by Florida Healthy Kids, pursuant to the
state's Children's Health Insurance Program ("CHIP").
The company also increased its footprints in five counties to
provide Medicaid managed long-term care service and entered the
Florida Long-Term Care Community Diversion Pilot Project in two
The company competes closely with
Coventry Health Care Inc.
) that reported second-quarter 2012 operating earnings per share of
68 cents, which surpassed the Zacks Consensus Estimate of 64 cents
but was lower than the prior-year earnings of 83 cents. Operating
income amounted to $99.4 million in the reported quarter.
Operating revenues in the reported quarter surged 16% year over
year to $3.5 billion, at par with the Zacks Consensus Estimate.
WellCare carries a Zacks #3 Rank, implying a short-term Hold
rating. Its peer, Coventry Health, also shares the same Zacks #3
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