) reported third-quarter 2012 adjusted income of $2.09 per share,
substantially beating the Zacks Consensus Estimate of $1.84.
Adjusted income also surpassed the year-ago earnings of $1.77 per
share by 18.1%.
Including expenses related to acquisitions, along with net
investment gains of 6 cents per share, the company posted net
income of $691.2 million or $2.15 per share in the reported
quarter, compared with $683.2 million or $1.90 per share in the
third quarter of 2011. The year-ago quarter included net
investment gains of 13 cents per share.
Operating revenues for the reported quarter were nearly $15.1
billion, at par with the year-ago quarter level. However,
revenues marginally lagged the Zacks Consensus Estimate of $15.29
Premium revenues declined 1% year over year. The dip was due
to a decline in the fully-insured Local Group membership, which
was partially offset by an increase in premium rate designed to
cover the overall cost trends and membership growth in the Senior
business. Growth in other revenues, mainly driven by the
acquisition of 1-800-CONTACTS Inc., offset the decline in premium
Medical enrollment slipped 2.5% to 33.5 million as of
September 30, 2012 from 34.4 million as of September 30, 2011.
The decline resulted from a membership fall of 0.69 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.
These declines effectively offset membership growth in the
Senior and State Sponsored businesses. While Senior membership
increased on the back of geographic expansion into new Medicare
Advantage service areas, growth in State Sponsored enrollment was
attributable to expansion of existing programs.
WellPoint posted a benefit expense ratio (benefit expenses as
a percentage of premium revenue) of 85.4% in the reported
quarter, marginally higher than 85.1% in the third quarter of
2011. The increase came on the back of higher benefit expense
ratio in the Consumer business, which was somewhat offset by
lower benefit expense ratio in the Commercial business. The
increased ratio in the Consumer business was due to an increase
in the benefit expense ratio of the Senior and State Sponsored
Operating revenue slipped 3.4% year over year to $8.36 billion in
the reported quarter. Operating gains in the segment, however,
increased 15.1% year over year to $818.6 million in the quarter,
primarily due to a decline in selling, general &
administrative expenses and lower benefit expense ratio in the
Local Group business, partially offset by a decline in the
fully-insured Local Group membership.
Operating revenue climbed 6.6% year over year to $4.88 billion in
the quarter under review. Operating gains in the segment amounted
to $184.7 million in the reported quarter, plunging 24.7% from
$245.2 million in the year-ago quarter. The downfall was
primarily due to lower risk score revenue in the Senior
Operating revenue in the quarter under review came in at $1.89
billion, down 1.4% year over year. Operating gains in this
segment deteriorated to $0.5 million in the reported quarter,
compared with $15.9 million in the year-ago quarter. The 96.9%
decline resulted from higher unallocated corporate expenses in
the quarter under review.
WellPoint exited the quarter with cash and cash equivalents of
$2.44 billion, compared with $2.20 billion as of December 31,
2011. Operating cash flow in the third quarter of 2012 stood at
$240.2 million, plummeting from $1.43 billion in the prior-year
The plunge in operating cash flow was chiefly due to advance
receipt of a $711.7 million monthly payment from Centers for
Medicare & Medicaid Services (CMS) in the second quarter for
the month of July. Moreover, the prior-year quarter was
positively affected by a $596.5 million advance receipt of CMS
payment related to the month of October 2011. Excluding the
impact of these payments, operating cash flow was recorded at
$951.9 million in the reported quarter, indicating a substantial
improvement from $833.3 million in the year-ago quarter.
Long-term debt increased to $13.40 billion as of September 30,
2012, from $8.42 billion as of December 31, 2011. Shareholders'
equity increased marginally to $23.82 billion from $23.29
billion, while total assets increased to $55.82 billion from
$52.12 billion at the end of 2011.
WellPoint repurchased 11.3 million shares for $655.3 million
in the reported quarter. Another 10.4 million shares were bought
back in October 2012 for $634.3 million. As of October 31, 2012,
the company had approximately $1.9 billion worth of authorization
remaining under its share repurchase program.
On November 6, 2012, WellPoint declared a quarterly cash
dividend of 28.75 cents per share, payable on December 21, 2012,
to shareholders of record at the close of business on December 7,
Outlook for 2012
WellPoint expects adjusted income of $7.30-$7.40 per share in
2012 and net income in the range of $7.37-$7.47 per share.
Year-end medical enrollment guidance was affirmed at 33.4
million. The guidance encompasses 20.1 million self-funded
members and 13.3 million fully insured members.
Furthermore, WellPoint expects operating revenue of
approximately $60.7 billion, slightly down from the earlier
guidance of $61.0 billion, while operating cash flow guidance
stands at $2.7 billion.
In addition, WellPoint expects SG&A expense ratio to be
approximately 14.0%, slightly up from the earlier guidance of
13.9%, while the guidance for the benefit expense ratio was
affirmed at 85.5%.
UnitedHealth Group Inc.
) reported its third quarter 2012 earnings of $1.50 per share,
significantly ahead of the Zacks Consensus Estimate of $1.31 per
share. Higher revenue across the board and strong enrollment
growth, partially offset by higher operating costs, were
responsible for the better-than-expected results. Also, share
repurchases boosted the bottom-line earnings.
) reported its third quarter 2012 earnings of $1.55 per share,
way ahead of the Zacks Consensus Estimate of $1.34 per share.
Earnings also increased 11% year over year. The
better-than-expected earnings of the company were the result of
revenue growth, higher underwriting margins, increased membership
along with lower operating costs.
Currently, WellPoint carries a Zacks #3 Rank (short-term Hold
rating) and a long-term 'Neutral' recommendation.
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