WellPoint Profit Rises Sharply

WellPoint Inc., the nation’s largest health insurer, said Wednesday that profit rose sharply in the fourth quarter and boosted its 2006 profit outlook, although by less than analysts had expected.

Its net income more than tripled to $652 million, or $1.04 a share, from $184.5 million, or 46 cents, in the year-earlier quarter, when the Indianapolis-based company took 39 cents a share in charges related to its merger and repurchased debt.

The company was formed in November 2004 when Anthem Inc. bought Thousand Oaks-based WellPoint Health Networks Inc. and adopted the WellPoint name.

Excluding 1 cent related to net realized investment losses, WellPoint reported earnings of $1.05 a share, a penny ahead of the average estimate of analysts, according to Reuters Estimates.

Patrick Hojlo, an analyst at Credit Suisse First Boston, called it “another solid WellPoint quarter.”

Shares of WellPoint fell 33 cents, or 0.5%, to $72.86.

The company said medical costs continued to grow at a declining rate, rising less than 8.5% during 2005. It said medical cost growth would continue to fall in 2006, dropping below 8%.

WellPoint said benefit expenses as a percentage of premiums -- a common industry barometer -- fell to 80.1% from 81.5% in the year-earlier period.

Chief Financial Officer Dave Colby said trends in pharmaceuticals and outpatient services were driving the moderation of medical cost growth.

The company also increased its enrollment by nearly 1.2 million members during 2005, excluding acquisitions. Colby said such membership growth represented a big achievement for the company amid fusing Anthem and WellPoint.

WellPoint forecast net income of $4.54 a share for 2006, 3 cents higher than its prior view. The new forecast assumes that the company completes $2 billion in share repurchases this year and includes costs of 20 cents a share for expensing stock options, WellPoint said.

The average estimate of 22 analysts was for profit of $4.61 a share for 2006, according to Reuters Estimates. Excluding estimates from two analysts who did not account for expensing stock options, the average estimate was $4.59 a share.

Hojlo said WellPoint was being conservative about its 2006 profit forecast because of the potential gains from continued lower medical costs as well as the number of share repurchases the company probably will make.

WellPoint also forecast 1 million net new members in 2006, excluding acquisitions.