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 4%.
Including expenses related to acquisitions, along with net
investment and favorable income tax settlement, the company posted
net income of $464.2 million or $1.51 per share in the reported
quarter, compared with $335.3 million or 96 cents per share in the
fourth quarter of 2011. The year-ago quarter included net
investment losses of 3 cents per share.
Operating revenues for the reported quarter were $15.3 billion,
up 0.6% from the year-ago quarter level. Revenues were in line with
the Zacks Consensus Estimate of $15.27 billion. The increase in
revenues resulted from the acquisition of Amerigroup and 1-800
Premium revenues declined 0.2% year over year, offset by a 3.4%
increase in administrative fees and a 691.0% surge in other
revenues. Meanwhile, total expenses increased 1.5% to $15.1
Medical enrollment improved 5.5% to 36.1 million as of Dec 31,
2012 from 34.3 million as of Dec 31, 2011. The increase resulted
from membership hike in the Senior and State Sponsored businesses.
While Senior membership increased on the back of geographic
expansion into new Medicare Advantage service areas, surge in State
Sponsored enrollment was attributable to the Amerigroup
These improvements offset the membership fall of 0.58 million
and 0.32 million in the Local Group and National businesses,
respectively, due to changes in the National Accounts'
administrative fee structure, increased competition in some Local
Group markets, alterations in the product offerings in the New York
small group market and in-group membership attrition due to the
present economic scenario.
WellPoint posted a benefit expense ratio (benefit expenses as a
percentage of premium revenue) of 87.3% in the reported quarter,
marginally lower than 87.6% in the fourth quarter of 2011. The
decline was driven by lower benefit expense ratio in the Commercial
business, which offset the higher benefit expense ratio in the
Senior and State Sponsored businesses.
Commercial Business: Operating revenue
slipped 3.8% year over year to $8.30 billion in the reported
quarter. Operating gains in the segment, however, increased 22.0%
year over year to $618.1 million in the quarter, primarily due to
lower benefit expense ratio in the Local Group business, partially
offset by increased selling, general & administrative expenses
and a decline in the fully-insured Local Group membership.
Consumer Business: Operating revenue
climbed 7.6% year over year to $4.97 billion in the quarter under
review. Operating loss in the segment widened to $173.3 million in
the reported quarter from $4.6 million in the year-ago quarter. The
downfall was primarily due to weak results in the Senior and State
Sponsored businesses, costs related to the Amerigroup acquisition
and other severance and impairment expenses.
Other: Operating revenue in the
quarter under review came in at $2.0 billion, up 4% year over year.
Operating loss in this segment amounted to $13.7, compared with
operating gains of $10.4 million in the year-ago quarter. The
decline resulted from higher unallocated corporate expenses in the
quarter under review.
For 2012, WellPoint generated adjusted income of $7.56 per
share, up 8% from $7.00 per share in 2011. Earnings per share also
exceeded the Zacks Consensus Estimate of $7.41.
Including expenses related to acquisitions, along with net
investment and favorable income tax settlement, reported net income
came in at $2.7 billion or $8.18 per share in 2012, against $2.6
billion or $7.25 per share in 2011. Net investment gains of 25
cents per share were included in the 2011 results.
Operating revenues for 2012 was $60.7 billion, up 1.4% year over
year from $59.9 billion in 2011. Revenues were in line with the
Zacks Consensus Estimate. Meanwhile, total expenses also increased
1.9% over 2010 to $57.8 billion.
WellPoint exited the quarter with cash and cash equivalents of
$2.48 billion, compared with $2.20 billion as of Dec 31, 2011.
Operating cash flow in the fourth quarter of 2012 amounted to
$759.8 million. WellPoint generated operating cash flows of over
$2.7 billion in 2012, plunging from $3.4 billion in 2011.
Long-term debt increased to $14.2 billion as of Dec 31, 2012,
from $8.47 billion as of Dec 31, 2011. Shareholders' equity inched
up to $23.8 billion from $23.3 billion, while total assets
increased to $58.96 billion from $52.16 billion at the end of
WellPoint repurchased 11.0 million shares for $668.0 million in
the reported quarter. The company spent $2.5 billion for
repurchasing 39.7 million shares in 2012. As of Dec 31, 2012, the
company had approximately $1.8 billion worth of authorization
remaining under its share repurchase program.
During the reported quarter, WellPoint paid a quarterly cash
dividend of 28.75 cents per share. This resulted in a cash
distribution of $87.1 million. Total amount spent on dividend
payment in 2012 was $367.1 million.
Outlook for 2013
WellPoint expects net income, including integration costs
related to the Amerigroup acquisition to come above $7.60 per
share. Furthermore, operating revenue is expected to range between
$71.5 billion and $73.0 billion.
Year-end medical enrollment is expected between 35.3-35.5
million. Meanwhile, operating cash flow is projected to be above
$2.6 billion. In addition, WellPoint expects SG&A expense ratio
to be approximately 13%-14%, while the guidance for the benefit
expense ratio stands at 86.0%, plus or minus 0.5%.
UnitedHealth Group Inc. ( UNH ) reported its
fourth-quarter 2012 earnings of $1.20 per share, in line with the
Zacks Consensus Estimate. Earnings, however, increased 2.6% on a
Other peers such as CIGNA Corp. ( CI ) and Humana
Inc. ( HUM
) are expected to release their third-quarter earnings shortly.
Currently, WellPoint carries a Zacks Rank #3 (Hold).CIGNA CORP (CI): Free Stock Analysis ReportHUMANA INC NEW (HUM): Free Stock Analysis
ReportUNITEDHEALTH GP (UNH): Free Stock Analysis
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