WellPoint Beats Wall Street Expectations as Customers Grow

WellPoint Inc on Wednesday reported third-quarter profit that beat Wall Street expectations as the company’s customers increased in its Medicaid business and in new subsidized individual health plans under the national healthcare reform law.

The U.S. health insurer, which operates Blue Cross Blue Shield plans in 14 states, raised its earnings per share outlook for 2014 and said that its estimate for medical cost increases remains in the range of 6.5%, plus or minus 50 basis points.

Investors are closely watching medical cost trends this quarter as they look for indications that years of restrained spending on care have begun to end. On Tuesday, Aetna said that it was seeing higher costs in some areas and raised its outlook for medical spending, pushing insurer shares lower, including those of WellPoint.

WellPoint said that it spent 82.5% of premiums on medical claims, down from 84.9% in the year-earlier quarter. Analysts carefully watch this medical benefit ratio as one indicator of cost trends.

WellPoint reported net profit of $630.9 million, or $2.22 per share. Revenue rose to $18.6 billion from $17.9 billion a year earlier.

It said that earnings excluding losses and gains on investments and asset write-downs were $2.36 per share, up 12% from a year earlier. Analysts were expecting earnings of $2.27 per share, according to ThomsonReuters I/B/E/S.

The company had 37.5 million members at the end of the quarter, up 2 million members from a year earlier. During the quarter, the company added 259,000 new members, primarily due to Medicaid and group plan growth. Individual customers declined from the second quarter.

It expects to end the year with 37.2 million to 37.3 million customers.

The company raised its outlook for this year to $8.75 to $8.85 per share, above analyst expectations for $8.72 per share.

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