) reported second-quarter 2012 adjusted income of $2.04 per share,
lagging the Zacks Consensus Estimate by a penny but surpassing the
year-ago earnings of $1.83 per share.
Including expenses related to the settlement of litigation and
acquisition of 1-800 CONTACTS along with net investment gains, the
company posted net income of $643.6 million or $1.94 per share in
the reported quarter, compared with $701.6 million or $1.89 per
share in the second quarter of 2011. The year-ago quarter, however,
included net investment gains of 6 cents per share.
Operating revenues for the reported quarter were nearly $15.2
billion, reflecting a 2.0% increase from $14.9 billion in the
year-ago quarter. However, revenues marginally lagged the Zacks
Consensus Estimate of $15.3 billion. The increase in premium rate
designed to cover the overall cost trends and membership growth in
the Senior business fueled the overall improvement, partially
offset by a decline in Local Group membership.
Medical enrollment slipped 1.9% to 33.5 million as of June 30,
2012 from 34.2 million as of June 30, 2011. The decline resulted
from a membership fall of 0.59 million and 0.26 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 managed to offset the membership growth in the
Senior and State Sponsored businesses. While Senior membership
increased on the back of the CareMore acquisition and geographic
expansion, 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 lower than 85.7% in the second quarter of 2011, driven
by a decline in the benefit expense ratio of the Senior and Local
Group businesses, which were partially offset by higher benefit
expense ratio in the State Sponsored segment.
Operating revenue slipped 3.0% year over year to $8.4 billion in
the reported quarter. Operating gains in the segment, however,
increased 3.2% year over year to $771.2 million in the quarter,
primarily due to lower benefit cost ratio in the Local Group
business, partially offset by a decline in Commercial
Operating revenue surged 10.9% year over year to $4.8 billion in
the quarter under review. Operating gains in the segment amounted
to $211.1 million in the reported quarter, up 19.5% from $176.7
million in the year-ago quarter.
The improvement was primarily due to gains from the Senior
business and favorable changes in reserve development, which were
partially offset by lower operating gains in the State Sponsored
business due to increased medical costs and negative impact from
the provisions of the state budget.
Operating revenue in the quarter under review came in at $2.0
billion, up 4.2% year over year. Operating gains in this segment
were $9.4 million in the reported quarter, compared with $22.8
million in the year-ago quarter. The 58.8% decline resulted from
higher unallocated corporate expenses in the reported quarter.
WellPoint exited the quarter with cash and cash equivalents of
$1.95 billion, compared with $2.2 billion as of December 31, 2011.
Operating cash flow in the first half of 2012 stood at $1.7
billion, marginally lower than $1.9 billion in the prior-year
period. Payment of income tax negatively impacted the cash flows in
the second quarter of 2012.
Long-term debt increased to $10.1 billion as of June 30, 2012,
from $8.4 billion as of December 31, 2011. Shareholders' equity
increased marginally to $23.6 billion from $23.3 billion, while
total assets also increased to $54.5 billion from $52.1 billion at
the end of 2011.
WellPoint repurchased 7.2 million shares for $493.7 million in
the second quarter of 2012. As of June 30, 2012, the company had
approximately $3.2 billion worth of authorization remaining under
its share repurchase program.
On July 24, 2012, WellPoint declared a quarterly cash dividend
of 28.75 cents per share, payable on September 25, 2012, to the
shareholders of record at the close of business on September 10,
Outlook for Fiscal 2012
WellPoint lowered net income guidance to about $7.30-7.40 per
share from $7.84 guided earlier.
Year-end medical enrollment guidance was lowered marginally to
33.4 million from the previous projection of 33.6 million members.
The guidance encompasses 20.1 million self-funded members and 13.3
million fully insured members.
Furthermore, WellPoint expects operating revenue of
approximately $61.0 billion, down slightly from earlier guidance of
$61.2 billion, while operating cash flow guidance stands at $2.7
In addition, WellPoint expects benefit expense ratio to be
approximately 85.5%, higher than the earlier guidance of 85.1%,
while SG&A expense ratio is affirmed at 13.9%.
Full-year medical cost trend is expected to be around 7% plus or
minus 50 basis points. Additionally, WellPoint intends to spend
about $2.9 billion in aggregate on share repurchases and dividend
payments in the current year.
UnitedHealth Group Inc.
), a rival of WellPoint, declared second-quarter 2012 earnings of
$1.27 per share, up 9% over the year-ago quarter.
), will report its second-quarter 2012 results before the opening
bell on July 31, 2012.
Currently, WellPoint carries a Zacks #4 Rank (short-term Sell
rating) and a long-term Neutral recommendation.
AETNA INC-NEW (AET): Free Stock Analysis Report
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