) reported fourth-quarter 2013 adjusted income of 87 cents per
share, beating the Zacks Consensus Estimate by a penny. However,
adjusted income declined from the year-ago earnings of $1.03 per
Including net realized gains, other than temporary impairment
losses on investments and impairment of intangible assets of 38
cents, WellPoint posted net income of 49 cents per share in the
reported quarter compared with $1.51 per share in the fourth
quarter of 2012. The year-ago quarter included some non-recurring
items of 48 cents per share.
The year-over-year decline can be attributed to the 1-800
CONTACTS deal that included an impairment charge.
Operating revenues of WellPoint for the reported quarter were
$17.6 billion that missed the Zacks Consensus Estimate of $17.8
billion. However, revenues rose 16.3% from the year-ago quarter.
The improvement resulted from the integration of the Amerigroup
business into the business model and higher Commercial and
Specialty segment revenues, partly offset by a decline in
Medicare revenues due to lower membership.
WellPoint's premium revenues increased 17.3% year over year,
administrative fees improved 2.0% and other revenues increased
29.3%. Meanwhile, total expenses increased 16.5% to $17.4
Medical enrollment of WellPoint decreased 1.3% to 35.7 million
as of Dec 31, 2013, from 36.1 million as of Dec 31, 2012. The
downside resulted from lower Commercial enrollment due to
attrition in the National and Individual markets and decline in
Medicaid and Medicare membership. However, growth in the Local
Group business partially mitigated the decline.
WellPoint posted a benefit expense ratio (benefit expenses as
a percentage of premium revenues) of 87.8% in the reported
quarter, deteriorating 50 basis points from 87.3% in the fourth
quarter of 2012. The deterioration was mainly due to higher
benefit expense ratio in the Commercial & Specialty segment
attributable to increasing usage of Individual products prior to
the Affordable Care Act implementation, partially offset by an
improvement in the Government segment that was fueled by enhanced
California Medicaid operations and the repositioning programs at
the Medicare Advantage.
Commercial & Specialty Business:
This segment covers the Local Group, National Accounts,
Individual and Specialty businesses. Operating revenues improved
1.9% year over year to $9.8 billion in the reported quarter.
Operating gains in the segment, however, declined 48.9% year
over year to $250.1 million in the quarter, mainly due to higher
SG&A expenses to accommodate changes related to the ACA
implementation in the ongoing quarter
This segment consists of the Medicaid and Medicare businesses,
National Government Services, and the Federal Employee Program
(FEP). Operating revenues climbed 40.9% year over year to $7.9
billion in the quarter under review.
Operating gains in the segment stood at $169.5 million in the
reported quarter, rebounding from a loss of $40 million in the
year-ago quarter. The improvement was due to the integration of
the Amerigroup business and positive earnings momentum in the
Amerigroup markets. Moreover, the improvement was driven by the
absence of non-recurrent costs related to the Amerigroup
acquisition in the fourth quarter of 2012.
This segment comprises the unallocated corporate expenses as well
as some businesses, which are not covered by the other two
segments. Operating revenues in the quarter under review came in
at $10.3 million, up 13.2% year over year.
Operating loss in this segment amounted to $0.2 million,
narrowing from $24.7 million loss in the year-ago quarter. The
improvement resulted from a decline in the unallocated corporate
Full Year Highlights
For full-year 2013, WellPoint recorded adjusted earnings per
share of $8.52, up 12.7% from $7.56 in 2012. Full-year earnings
were in line with the Zacks Consensus Estimate.
Operating Revenues increased 16% year-over-year to $70.2
billion. Total expenses on the other hand increased 16.6% year
over year to $67.2 billion.
WellPoint exited 2013 with cash and cash equivalents of $1.6
billion, compared with $2.5 billion as of Dec 31, 2012. Operating
cash flow in 2013 amounted to $3.1 billion, compared with $2.7
billion in 2012.
Long-term debt of WellPoint decreased to $13.6 billion as of
Dec 31, 2013, from $14.17 billion as of Dec 31, 2012. Shareholder
equity inched up to $24.8 billion from $23.8 billion, while total
assets increased to $59.6 billion from $58.96 billion at the end
WellPoint repurchased approximately 5.1 million shares for
$449.8 million in the reported quarter. This amounted to an
aggregate repurchase of 20.7 million shares for $1.6 billion or
$78.08 per share in full-year 2013. As of Dec 31, 2013, WellPoint
had approximately $3.7 billion worth of authorization remaining
under its share repurchase program.
During the reported quarter, WellPoint paid a quarterly cash
dividend of 37.5 cents per share. This resulted in cash
distribution of $110.5 million. For full-year 2013, the company
paid cash dividends worth $448 million.
On Jan 28, 2013, WellPoint increased its quarterly cash
dividend by 16.7% to 43.75 cents per share. This translates into
an annual dividend of $1.75 per share. This increased dividend
reflects a dividend yield of nearly 2%. Additionally, the company
declared first-quarter 2014 dividend of 43.75 cents per share
that will be paid on Mar 25, 2014, to shareholders of record as
of Mar 10, 2014.
Outlook for 2014
WellPoint expects net income for 2014 to exceed $8.00 per
share. Operating revenues are expected to increase to around $73
WellPoint currently carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Investors interested in the healthcare services industry may also
consider stocks like
VCA Antech Inc.
). While LCA-Vision carries a Zacks Rank #1 (Strong Buy), VCA
Antech and MEDNAX hold the same Zacks Rank as WellPoint.
LCA-VISION INC (LCAV): Free Stock Analysis
MEDNAX INC (MD): Free Stock Analysis Report
WELLPOINT INC (WLP): Free Stock Analysis
VCA ANTECH INC (WOOF): Free Stock Analysis
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