WellPoint (WLP) reported Wednesday its second-quarter net income rose 4% due to favorable reserve development, which offset a decline in commercial enrollment caused by the tough economy. WellPoint raised its 2010 earnings guidance, and shares ticked higher in premarket trading.
The health insurer said it earned $722.4 million, or $1.71 per share, in the second quarter, up from $693.5 million, or $1.43 a share, in the year-ago period. Excluding investment gains, earnings per share were $1.67, beating analysts' estimates for earnings of $1.55 per share. Per-share results were boosted by the fact that there were 50 million fewer outstanding shares following a stock repurchase by the company.
Operating revenue fell 7% to $14.22 billion, below analyst estimates for revenue of $14.61 billion, according to Thomson Reuters.
"Our quarterly results exceeded our expectation primarily due to higher-than-anticipated favorable reserve development and continued strong performance in our capital management areas. We are also seeing positive results in our core operations from many of the strategic initiatives we put in place over the last two years," said Chairwoman and CEO Angela Braly.
CFO Wayne DeVeydt added, "Based on our year-to-date results, we have raised full year 2010 guidance for EPS and operating cash flow, and we are optimistic about our future growth prospects."
The company now expects 2010 earnings per share of at least $6.30 per share, or $6.22 per share excluding investment gains, on operating revenue of approximately $58 billion. Analysts have been predicting 2010 EPS of $6.26, according to FactSet.
WellPoint said its medical enrollment slipped 2% to 33.5 million during the quarter because of the loss of the company's UniCare individual and group businesses in Texas and Illinois, and because of the weak economy and high unemployment levels.
The health care reform law passed earlier this year will require insurers to spend at least 85% of their premium revenue on medical care for large group coverage and 80% for individual and small group coverage. "It is our goal to make health care reform work for our customers and the country," said Braly.
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