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Despite Solid Profit, WellPoint Shares Fall

Although net income and revenue more than double, investors worry about the big health insurer's 2006 outlook.

October 27, 2005|From Associated Press

INDIANAPOLIS — WellPoint Inc.'s profit and revenue more than doubled in the third quarter as the nation's largest health insurer continued to reap the benefits of last year's merger.

The company was formed in November when Indianapolis-based Anthem Inc. bought Thousand Oaks-based WellPoint Health Networks Inc. and adopted the WellPoint name.

Despite the solid earnings report Wednesday, WellPoint's shares fell as nervous investors worried that the company's 2006 outlook wasn't as robust as analysts had hoped because of lower-than-expected revenue from the Medicare prescription drug program.

The stock dropped $4.37, or 5.7%, to $71.72.

"I think there are many people who look at Medicare as a real opportunity for the industry to resume its growth," said Banc of America Securities analyst Joseph France. "And WellPoint is saying it will only add a few cents. I think there are a lot more optimistic forecasts for what Medicare Part D will do."

For 2006, WellPoint said it remained committed to its goal of achieving 15% growth in earnings per share, not taking into account any effect from its pending acquisition of New York-based WellChoice Inc., or from expensing stock options. That figure does include revenue from the company's participation in the Medicare drug benefit, which begins Jan. 1.

Although WellPoint executives declined to provide more information about their financial projections for next year, officials said the company expected $1 billion in revenue from its Medicare drug program.

WellPoint Chief Executive Larry C. Glasscock said start-up costs for the program would be $40 million, $10 million more than earlier estimates.

The company's third-quarter net income rose to $640.7 million, or $1.02 a share, from $242.1 million, or 85 cents, a year earlier.

Analysts surveyed by Thomson Financial were expecting a profit of $1.01 a share.

WellPoint said third-quarter revenue rose to $11.3 billion from last year's $4.8-billion revenue of Anthem alone.

On a comparable basis, looking at results as if the combined company was in place at the beginning of last year's third quarter, revenue rose 5.6%. Analysts expected the company to post revenue of $11.39 billion.

WellPoint also raised its full-year profit outlook to $3.93 a share, up 2 cents a share from the company's previous forecast.

That projection includes items that will reduce earnings by 6 cents a share. Revenue for the year is expected to total $44.5 billion.

Analysts on average are predicting earnings of $3.99 a share on revenue of $45.12 billion.

WellPoint is the nation's largest provider of Blue Cross and Blue Shield health plans, with operations in 13 states.

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