WELLPOINT: Posts Second-Quarter Losses, Sells Workers’ Comp Division
Woodland Hills-based Wellpoint Health Networks Inc., California's second-largest managed care company, yesterday announced that "charges of $108.6 million ... resulted in a second-quarter loss," Bloomberg News/Los Angeles Times reports (7/31). Overall, Wellpoint posted a loss of $46.8 million. The $108.6 million in charges were related to the company's investment in FPA Medical Management Inc. and to the "writedown of goodwill on its workers' compensation business." Wellpoint's losses amounted to 67 cents a share. However, the extra charges aside, the company "had earnings of $61.7 million, or 86 cents a diluted share," the Wall Street Journal reports. After Wellpoint announced the losses, investors "unloaded" the company's shares, which dropped $7.625 to close at $64 on the NYSE. Most analysts "cheered" Wellpoint's decision to sell its workers' comp business. Others voiced concern about Wellpoint's long-term financial outlook, citing rising medical costs and declining profit from "core health-insurance operations." Still other analysts blamed Wellpoint's drop on "a jittery market."
A Strategic Sale
Fremont General Corp., a Santa Monica-based insurance company, said it has agreed to buy Wellpoint's workers' comp business for about $100 million. The Wall Street Journal reports that the "deal is to close by the end of September" (Rundle, 7/31). Leonard Schaeffer, chair and CEO of Wellpoint, said, "The sale of our workers' compensation business enables us to redeploy capital to our core health operations that offer the opportunity for more attractive returns on our capital base." He also said the agreement with Fremont "includes a multiyear commitment to offer [the product] to the small group market on a joint basis" (release, 7/29). Click Wellpoint to read past California Healthline coverage of the managed care company.