WellCare Health Plans, Inc. ( WCG ) reported
fourth-quarter 2012 earnings of $1.32 per share, in line with the
Zacks Consensus Estimate but falling significantly from $2.15
earned in the year-ago quarter. Adjusted earnings of $57.6 million
plunged almost 38% from $93.4 million recorded in the fourth
quarter of 2011.
The decline resulted from higher medical benefit ratio (MBR) in
the Medicaid and Medicare Advantage segments, which more than
offset higher premium revenue in both the segments, lower MBR in
the prescription drugs plan segment and a decline in adjusted
administrative expense ratio.
Including all non-recurring items, the company reported net
income of $48.8 million or $1.11 per share, down from $85.1 million
or $1.96 per share recorded in the prior-year quarter.
During the quarter under review, total revenue of WellCare
grossed $1.99 billion, surging 24% from $1.60 billion in the
year-ago quarter on the back of higher premiums and investment
income. Top line also surpassed the Zacks Consensus Estimate of
Premium revenue during the quarter amounted to $2.0 billion, up
24% year over year due to improved premiums from all segments.
Total expenses for the fourth quarter amounted to $1.91 billion;
increasing 29% from the prior-year quarter, primarily due to an
increase in medical benefits expenses, selling general and
administrative expenses, depreciation and amortization and Medicaid
premium taxes, partially offset by a decline in interest
The company's adjusted administrative expense ratio plunged 150
basis points to 9.1% in the reported quarter. Total membership for
the company increased 4% to about 2.7 million.
total premium revenue of $1.2 billion, up 22% over the prior-year
quarter. However, its MBR deteriorated 490 basis points (bps) to
88.7% over the fourth quarter of 2011, primarily due to the
Kentucky Medicaid program.
MedicareAdvantageSegment reported total premium revenue of $571.9
million, up 49% over the prior-year quarter. MBR deteriorated by
710 bps to 86.9% over the fourth quarter of 2011.
Prescription Drug Plan Segment reported a 9%
year-over-year decline in premium revenues to $212.0 million. MBR
improved 20 bps to 66.9% due to lower pharmacy costs.
Full Year Results
For full-year 2012, WellCare's core earnings came in at $215.6
million or $4.92 per share, missing the Zacks Consensus Estimate of
$4.96. Results also lagged the prior-year earnings of $291.4
million or $6.73 per share.
WellCare reported net income of $184.7 million or $4.22 per
share, declining from $264.2 million or $6.10 per share in 2011.
Total revenue for 2012 was $7.41 billion, improving from $6.12
billion in 2011.
WellCare exited 2012 with cash and cash equivalents of $1.10
billion compared with $1.33 billion as of 2011-end. Total assets
for the company were valued at $2.68 billion compared with $2.49
billion as of Dec 31, 2011.
Long-term debt obligation in the company's books amounted to
$120 million, declining from $135 million as on Dec 31, 2011. As of
Dec 31, 2012, WellCare's stockholders' equity totaled $1.32 billion
versus $1.12 billion as of 2011-end.
Outlook for 2013
WellCare announced its adjusted net income per share guidance of
$4.50-$4.85 for 2013. The company expects premium revenue between
$8.7 billion and $8.8 billion
The company expects administrative expense ratio in the band of
WellCare's Kentucky Medicaid Program Agreement was recently
amended by the commonwealth of Kentucky, leading to a 7% hike in
Medicaid premium rate from the state, in effect from Jan 1, 2013.
Moreover, the state also preponed the 3% rate increase scheduled
for Oct 2013 to Jul 1, 2013.
On Feb 12, 2013, WellCare expanded its senior secured credit
agreement by $230 million. Additionally, the company raised $230
million under its term-loan facility.
Results at Other HMOs
Coventry Health Care Inc. ( CVH ) reported
fourth-quarter 2012 operating earnings per share of 88 cents, which
surpassed the Zacks Consensus Estimate of 67 cents as well as the
prior-year earnings of 60 cents. Coventry reported net income of
$119.3 million compared with $85.7 million in the prior-year
Another health maintenance organization (HMO), WellPoint
Inc. ( WLP
) reported fourth-quarter 2012 adjusted income of $1.03 per share,
beating the Zacks Consensus Estimate of 95 cents. Adjusted income
also surpassed the year-ago earnings of 99 cents per share by
UnitedHealth Group Inc. ( UNH ) reported
fourth-quarter 2012 earnings of $1.20 per share, in line with the
Zacks Consensus Estimate. Earnings, however, increased 2.6% on a
WellCare carries a Zacks Rank #4 (Sell).COVENTRY HLTHCR (CVH): Free Stock Analysis
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