Friday, April 29, 2011

Investopedia: Fear And Uncertainty Still Keeping A Lid On WellPoint


It seems as though investors have made their peace with health insurance reform to some extent, as WellPoint (NYSE:WLP) shares have more than doubled off of their bottom in late 2008/early 2009. That said, major health insurance names like WellPoint, Unitedhealth (NYSE:UNH), Aetna (NYSE:AET) and Coventry (NYSE:CVH) still seem to be trading below their inherent earning power as investors try to digest the impact of upcoming regulation on their medical costs and membership expansion potential. 

A Surprisingly Strong First Quarter 
WellPoint's first quarter once again highlights the difference between absolute and relative performance. On an absolute basis, it would seem that revenue contraction of over 1% would be something of a disappointment. In this case, though, analysts were expecting a bigger decline and WLP's top line and profit performance were surprisingly strong.

While WellPoint did see a small increase in administrative fees, premium revenue dropped more than 1% (and that's more than 85% of the revenue base). Membership did grow over 1%, though, with strong performance in national and senior categories. (For more, see 5 Health Insurance Considerations.)

Looking at the profit picture, WellPoint saw operating profits rise almost 5% despite a small uptick in the medical loss ratio (up to 82.1). Especially noteworthy was the better than 5% year-on-year decline in general and administrative expenses, and it is impressive to consider that the company is still finding that amount of cost savings in the system. 




To read the full piece, click the link:
http://stocks.investopedia.com/stock-analysis/2011/Fear-And-Uncertainty-Still-Keeping-A-Lid-On-WellPoint-WLP-UNH-AET-CVH-CNC-MGLN-KV.A0429.aspx

No comments: