Earnings Preview: WellPoint reports 3Q Wednesday
WellPoint Inc., the nation's second-largest health insurer, will issue on Wednesday its first quarterly earnings report since Chairwoman and CEO Angela Braly abruptly resigned in August.
WHAT TO WATCH FOR: The Indianapolis company surprised Wall Street in July when it cut its 2012 forecast and reported earnings that both fell and missed expectations. The investment community will want to know if any more surprises await.
WellPoint is still making money, but its net income has decreased in every quarter, year over year, since the second quarter of 2011. The insurer's performance has frustrated several large shareholders.
Braly resigned Aug. 28, and WellPoint named John Cannon, its executive vice president and general counsel, to serve as interim CEO. Company shares have climbed about 5 percent since Braly stepped down, but the stock price is down more than 7 percent so far this year. Shares traded at $60.72 Monday morning.
Investors also will be looking for some sense of how the insurer expects to perform next year. Insurers typically start giving analysts a preview for 2013 in their third-quarter reports, even though many won't release specific guidance until December or later.
WellPoint Chief Financial Officer Wayne DeVeydt has said he expects the insurer's 2013 earnings to be stable next year, but net income could slip depending on, among other things, investments the insurer makes in its business to prepare for insurance exchanges that will start in 2014 as part of the health care overhaul.
The insurer also may provide analysts with an update on the progress of its $4.46 billion acquisition of fellow insurer Amerigroup Corp. WellPoint has said the deal gives it the opportunity for about $16 billion in potential revenue.
WellPoint will have a tough act to follow in the third quarter. Major insurers UnitedHealth Group Inc., Aetna Inc. and Cigna Corp. have already reported earnings growth in performances that beat analyst expectations.
WHY IT MATTERS: WellPoint runs Blue Cross Blue Shield plans in 14 states, including California, New York and Ohio. It covers about 33.6 million people.
WHAT'S EXPECTED: Analysts expect, on average, earnings of $1.84 per share on $15.32 billion in revenue, according to FactSet.
LAST YEAR'S QUARTER: WellPoint's 2011 third-quarter earnings fell more than 7 percent. The insurer earned $683.2 million, or $1.90 per share, as total revenue climbed 5.7 percent to about $15.4 billion.
Earnings fell in the quarter mainly because the 2010 quarter included a benefit of $110 million because claims left over from previous quarters came in lower than WellPoint expected. That allowed WellPoint to release money it held in reserve.