WellCare Misses Earnings Est, Sales Beat
WellCare Health Plans, Inc. (
) reported first-quarter 2013 adjusted operating earnings of 63
cents per share, falling significantly from $1.32 earned in the
year-ago quarter. Results also lagged the Zacks Consensus
Estimate of 69 cents per share.
The year-over-year decline was due to higher medical benefit
ratio (MBR). The year over year increase in MBR resulted from
lower favorable development of prior years' medical benefits
payable recognized in the reported quarter of 2013 relative to
the prior-year period. Additionally, higher Medicare segment MBR
and change in the seasonal pattern of the Medicare Prescription
Drug Plan (PDP) segment MBR and increased flu occurrence in 2013
more than offset the growth in premium revenue.
Including all non-recurring one-time items, WellCare reported net
income of $21.5 million or 49 cents per share, down from $51.2
million or $1.18 per share recorded in the prior-year quarter.
During the quarter under review, total revenue of WellCare
grossed $2.3 billion, surging 26% from $1.8 billion in the
year-ago quarter on the back of higher premiums, and investment
and other income. Top line also surpassed the Zacks Consensus
Estimate of $2.2 billion. Premium revenue during the quarter
amounted to $2.2 billion, up 26% year over year.
Total expenses for the first quarter amounted to $2.2 billion;
increasing 30.5% from the prior-year quarter, primarily due to an
increase in medical benefits expenses, selling general and
administrative expenses, Medicaid premium taxes, and interest
expense. Medical benefits expense for the first quarter increased
31% year over year to $2 billion.
WellCare's adjusted administrative expense ratio increased 20
basis points year over year to 8.6% in the reported quarter. The
year-over-year increase was mainly due to growth initiatives
which include acquisition integration costs and also service and
technology investments. Total membership for WellCare increased
7% year over year to about 2.7 million.
Medicaid Segment reported total premium revenue of $1.3 billion,
up 22% over the prior-year quarter owing to membership growth.
However, its MBR increased 200 basis points (bps) to 87.7% in the
first quarter of 2013.
Medicare Advantage Segment reported total premium revenue of $719
million, up 64% over the prior-year quarter. Results were driven
by acquisitions by WellCare in California and Arizona and also
from organic sales activity. MBR increased 820 bps year over year
to 87% in the first quarter of 2013.
Prescription Drug Plan Segment reported a 19% year over year
decline in premium revenues to $223 million due to a decline in
memberships and due to the effect of the 2013 bids. MBR increased
470 basis points to 103.6% in the quarter due to the enhanced
Prescription Drug Plan and greater than expected memberships in
WellCare exited the quarter with cash and cash equivalents of
$1.38 billion compared with $1.10 billion as of Dec 31, 2012.
Total assets for the company were valued at $2.99 billion
compared with $2.68 billion as of Dec 31, 2012. Net cash
from operations increased 275.4% year over year to $31.1 million
in the first quarter.
Long-term debt obligation in WellCare's books amounted to $317.5
million, up 164.6% from $120 million as of Dec 31, 2012. As of
Mar 31, 2013, WellCare's stockholders' equity totaled $1.35
billion versus $1.32 billion as of 2012-end.
Outlook for 2013
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WellCare announced its adjusted net income per share guidance of
$4.60-$4.90 for 2013. The company expects premium revenue between
$8.9 billion and $9 billion. WellCare expects adjusted
administrative expense ratio in the band of 8.7%-8.9%.
Results at Other Healthcare Companies
UnitedHealth Group Inc.
) reported its first-quarter 2013 earnings of $1.16 per share, in
line with the Zacks Consensus Estimate. Earnings, however,
declined 11.4% on a year-over-year basis.
Coventry Health Care Inc.
) reported first-quarter 2013 operating earnings per share of
$1.00, which surpassed the Zacks Consensus Estimate of 79 cents
as well as the prior-year earnings of 62 cents.
) reported first-quarter 2013 adjusted income of $2.94 per share,
beating the Zacks Consensus Estimate of $2.37. Adjusted income
also surpassed the year-ago earnings of $2.34 per share by 25.6%.
WellCare carries a Zacks Rank #3 (Hold).