WellCare Health Plans, Inc
) will purchase Windsor Health Group Inc. from German insurer
Munich Re AG. Atlanta, Ga.-based Windsor Health Group provides
Medicare Advantage, Prescription Drug Plan (PDP), and Medicare
Supplement products in the U.S, through its subsidiaries.
Windsor Health presently offers Medicare Advantage plans in
297 counties primarily in the states of Mississippi, Tennessee,
Arkansas, and South Carolina, and serves approximately 59,000
members. Its PDPs serve approximately 164,000 members. One of
Windsor's subsidiaries also offers Medicare Supplement insurance
policies, thereby serving approximately 52,000 members across 40
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Windsor Health focuses on lower income Medicare beneficiaries and
those with dual eligibility for Medicare and Medicaid. Therefore,
Windsor Health acquisition will compliment WellCare Health's
Medicare and government health care plans. Addition of Windsor
Health to its portfolio will thus enlarge its membership base and
amplify premium revenues.
On the other hand, Munich Re divested Windsor Health in an effort
to augment its health division's focus on business with corporate
The transaction is expected to culminate in the fourth quarter of
2013, pending regulatory approvals. There will, however, be no
alteration in plan benefits and coverage for members and
policyholders following the acquisition. Financial terms of the
acquisition remain undisclosed.
Nevertheless, the company expects the acquisition to be accretive
to net earnings in 2014. The Zacks Consensus estimate for the
2014 is currently pegged at $5.47, translating to a
year-over-year improvement of 11.7%. With optimism surrounding
the recent acquisition, we expect analysts to raise their
WellCare Health has always adopted inorganic routes to ramp up
its growth profile. In April, the company closed the acquisition
of Missouri Care, Incorporated, a subsidiary of
) for an undisclosed amount. In February, WellCare Health closed
the acquisition of
UnitedHealth Group Inc
) Medicaid business in South Carolina. The company's strong cash
position well supports its acquisition strategies.
In the second quarter, WellCare Health reported second-quarter
2013 adjusted operating earnings of $1.35 per share, which
surpassed both the Zacks Consensus Estimate and year-ago earnings
by nearly 9%. The year-over-year increase was due to higher
premium revenues and lower adjusted administrative expense ratio,
partly offset by the increase in WellCare Health's medical
benefit ratio. Concurrently, WellCare Health raised the lower end
of its guidance by 10 cents, and revised operating earnings
expectation to $4.70-$4.90 for 2013. The Zacks Consensus Estimate
currently stands at $4.89, near the top end of company guidance.
Among others in the same space, recently
Magellan Health Services Inc
) announced its plans to acquire pharmacy benefits manager,
Partners Rx for $100 million.
WellCare Health carries a Zacks Rank #2 (Buy).