WellPoint profit beats analysts' view due to low medical costs


WellPoint Inc reported a much higher-than-expected quarterly profit on Wednesday, helped by lower-than-forecast medical costs in its employer-based insurance business and improvements in Medicaid operations after the purchase of Amerigroup in December.

The second-largest U.S. insurer also raised its full-year earnings forecast to at least $8 per share, up from the $7.75 it had affirmed in June.

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WellPoint said its improved 2013 outlook was based on the better first-half results and that it remained "prudent" about the second half of the year.

The company and its rivals are bracing for a transformation of the U.S. healthcare system under President Barack Obama's reform law, which aims to expand insurance coverage to more than 30 million more Americans through larger Medicaid programs for the poor and subsidized health insurance exchanges that goes on sale October 1.

WellPoint, which plans to sell exchange-based insurance in the 14 states where it operates the Blue Cross Blue Shield license, said second-quarter net income rose to $800.1 million, or $2.64 per share, from $643.6 million, or $1.94 per share, a year earlier.

Excluding investment gains and acquisition-related costs, WellPoint said earnings were $2.60 per share. That compares with analysts' expectations of $2.11, according to Thomson Reuters I/B/E/S.

The report comes on the back of stronger-than-expected results from UnitedHealth Group Inc last week.

This was WellPoint's first full quarter under new Chief Executive Officer Joseph Swedish. He took over the top spot at the company from Angela Braly, who left after coming under investor pressure one year ago over disappointing financial results.

WellPoint said it expected medical costs to rise in 2013, but low utilization of medical services by consumers continued during the first six months and was beyond expectations. That trend has helped all insurers during the past few years as their claim costs fell.

The company said it had 35.7 million members at the end of June, a slight drop from the end of March as declines in the employer-based and Medicare businesses outpaced increases in Medicaid from the Amerigroup acquisition.

(Reporting by Caroline Humer; Editing by Lisa Von Ahn)