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Earnings Preview: Wellpoint to Report 2Q Results

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WellPoint Inc., the nation’s second-largest health insurer, will report second-quarter results on Wednesday, nearly a week after competitor UnitedHealth Group Inc. saw its stock price slip despite posting a 5 percent increase in quarterly profit.

What to watch for

WellPoint, based in Indianapolis, took a $150-million hit last year when a Medicare Advantage plan it has since discontinued attracted more customers with a higher risk profile than the insurer expected. The insurer has said it expects more growth from the Medicare Advantage business this year, but investors also will be looking for more signs of trouble.

Medicare Advantage plans are privately run versions of the government’s Medicare program for the elderly and disabled people.

WellPoint saw its first-quarter earnings drop 8 percent earlier this year and said rising prices for care was the biggest factor driving up its expenses. Investors also will be looking for signs that expense growth is picking up steam.

UnitedHealth said Thursday its second-quarter net income climbed to $1.34 billion, or $1.27 per share, which beat Wall Street expectations, as enrollment gains helped revenue growth. But the insurer’s stock price fell more than 2 percent the day it released earnings.

Analysts largely chalked up the drop to a cautious tone delivered by UnitedHealth executives in a conference call after the earnings report was released. UnitedHealth leaders said they are seeing growing pressure on their Medicaid programs. Medicaid is the state-federal program that provides coverage for the needy, aged and disabled.

They also noted that job creation remains weak, and that can impact their enrollment growth.

UnitedHealth also said health care utilization continues to climb “modestly.” For several quarters, a lower-than-expected increase in use helped health insurers turn in strong performance. Managed care companies have said utilization is picking up, but UnitedHealth said inpatient hospital care — which is generally more expensive than outpatient procedures — remains restrained.

The price of WellPoint shares has fallen more than 5 percent since the Supreme Court issued a ruling late last month that largely upheld President Barack Obama’s health care overhaul. The law aims to provide coverage to millions of uninsured people, but it also imposes fees and restrictions on insurers, especially those like WellPoint that have a heavy emphasis in the individual insurance market and employer-sponsored coverage through small businesses.

Why it matters: WellPoint runs Blue Cross Blue Shield plans in 14 states, including California, New York and Ohio. It covers about 33.7 million people.

What’s expected: Analysts surveyed by FactSet expect, on average, earnings of $2.08 per share on $15.31 billion in revenue.

Last year’s quarter: Second-quarter earnings fell 3 percent last year as WellPoint took the hit from its Medicare Advantage business. The insurer earned $701.6 million, or $1.89 per share. Operating revenue, which excludes investment gains or losses, climbed nearly 5 percent to $14.88 billion.

See also: Listening to the Whisper Numbers


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