WellPoint Health Networks Reports 28% Increase in Third-Quarter Earnings

Thousand Oaks-based WellPoint Health Networks on Monday announced that "[s]welling membership" in several markets had contributed to a 28% increase in third-quarter profit, the Los Angeles Times reports.

The company posted a profit of $315.1 million, or $1.97 per share, for the quarter, compared with $246.2 million, or $1.63 per share, in the year-earlier period. According to Thompson First Call, analysts had predicted that the company would post a per-share profit of $1.91 for the third quarter. WellPoint's revenue increased 16% to $5.85 billion, compared with $5.05 billion a year earlier. WellPoint's purchase of Cobalt Corp. in Sept. 2003 contributed $15.4 million in third-quarter profit.

WellPoint officials said medical membership, including physician and hospital coverage, increased to 15.6 million as of Sept. 30, a 4% increase from the 15 million members reported a year earlier. WellPoint also reported that its specialty memberships, covering pharmacy, dental and vision and other services, had a year-over-year increase of 4.7%, to 46.8 million. According to the Times, WellPoint's membership growth was fueled in part by the company's behavioral health business and pharmacy benefit management.

The company also announced that it had authorized an additional 2.7 million common shares for its stock repurchase program, bringing the total number of shares available for repurchase to 7.5 million.

The earnings report did not include any mention of WellPoint's potential sale to Indianapolis-based Anthem, which has been delayed by insurance regulators in California and three other states (Tamaki, Los Angeles Times, 10/26). The proposed merger, announced in October 2003, would combine the companies under the name WellPoint and establish headquarters in Indiana.

Insurance Commissioner John Garamendi (D) in July rejected part of the proposed merger because he said Anthem would use as much as $400 million annually in health insurance premiums paid by California residents to finance the proposed merger in the first three years and an unlimited amount after that time (California Healthline, 8/4). The 10 other states with direct regulatory authority, the federal government and WellPoint and Anthem shareholders initially approved the proposed merger, but regulators in Georgia, Missouri and Texas have since raised new concerns about WellPoint's solvency (Girion, Los Angeles Times,
10/21).

Williams Capital analyst Adam Miller said the companies need to complete the deal without losing executives. "They were pretty close to getting this deal done and winners and losers among management were identified," Miller said, adding, "Now you have to step back and say, 'We love all you guys and don't leave'" (Los Angeles Times, 10/26).