WellPoint 4Q Profit Growth Surprises Street as Medical Costs Wane

Led by lower-than-expected medical costs and steady membership growth, WellPoint (NYSE:WLP) revealed a 38% increase in fourth-quarter profit on Wednesday and matched sales expectations.

The Indianapolis-based health insurer posted net income of $464.2 million, or $1.51 a share, compared with a year-earlier $335.3 million, or 96 cents.

Excluding a positive impact of 48 cents a share related to special items, WellPoint said it earned $1.03 a share, trumping average analyst estimates of 95 cents in a Thomson Reuters poll.

Revenue for the three months ended Dec. 31 was $15.3 billion, up 0.6% from $15.2 billion, virtually matching the Street’s view. The results reflected lower medical costs than anticipated and stability in its membership base.

Medical enrollment climbed 5.5% during the period to 36.1 million members, with the acquisition of Amerigroup adding nearly 2.7 million state sponsored members. WellPoint bought Amerigroup last year for $4.9 billion in cash, looking to benefit from its robust Medicaid program.

“Our fourth quarter results were stronger than originally expected, reflecting improved operating performance, solid expense management and improving execution in our core operations,” said WellPoint CEO John Cannon.

The results were partially offset by declines in WellPoint’s local group and national businesses as a reflection of its product repositioning in New York and changes to its fee structure for certain national accounts.

The company, Cannon said, is nevertheless encouraged by the strong quarterly performance and believes it positions WellPoint well for 2013.

Looking toward the current fiscal year, WellPoint forecasts net income to be at least $7.60 a share, including integration costs related to the Amerigroup acquisition. Excluding those special items, the consensus is calling for full-year earnings of $7.98 billion.