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WellPoint's 3Q profit climbs 1 percent

Wed, 11/03/2010 - 3:45am
TOM MURPHY - AP Business Writer - Associated Press

WellPoint Inc.'s net income inched up 1 percent in the third quarter, as the insurer cut expenses and saw gains from a reduction in health care use and leftover claims that came in lower than expected.

The Indianapolis insurer also raised its 2010 earnings forecast, following a third-quarter pattern established by competitors UnitedHealth Group Inc., Cigna Corp. and Humana Inc.

WellPoint said Wednesday it earned $739.1 million, or $1.84 per share, in the three months that ended Sept. 30. That's up from the $730.2 million, or $1.53 per share, in the same period last year.

But operating revenue dropped nearly 6 percent to $14.33 billion, partly because of a decline in enrollment for fully insured plans, which involve WellPoint providing the insurance. Those plans brings in more money for insurers than group coverage they just administer.

The company reported adjusted earnings, which exclude one-time items, of $1.74 per share, Those earnings topped Wall Street expectations.

Analysts forecast earnings of $1.57 per share on $14.21 billion in revenue.

WellPoint is the largest commercial health insurer based on membership. It operates Blue Cross Blue Shield plans in 14 states and Unicare plans in several others.

The insurer said its medical enrollment fell 1 percent to 33.5 million people compared with the same quarter last year, as WellPoint transferred 590,000 Unicare individual and group customers to another insurer that bought the business.

The company said its commercial insurance business is stabilizing, and it now expects to have 33.3 million members by the end of the year, which would reflect a drop of about 1 percent compared to 2009.

WellPoint recognized a $110 million benefit in the third quarter as claims from previous quarters came in lower than expected. This also helped the insurer's second-quarter performance, partly because last year's flu season turned out to be weaker than expected.

Last year, WellPoint saw a $20 million increase in flu-related claims toward the end of the third quarter, but the insurer reported a drop in several expenses this year.

Its benefit expense — what the insurer pays in medical claims — fell 3 percent to $11.2 billion. Selling, general and administrative expenses also sank more than 7 percent to about $2.1 billion.

WellPoint raised its 2010 adjusted profit expectation to $6.45 per share, from a previous forecast of $6.25 per share.

Analysts expect $6.39 per share.

WellPoint's competitors also saw benefits from a drop in health care use, as they reported better-than-expected third-quarter earnings.

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