WellPoint to post 3rd-quarter results Wednesday, following competitor UnitedHealth

Earnings Preview: WellPoint to post 3Q results

INDIANAPOLIS — WellPoint Inc., the nation’s largest insurer as measured by enrollment, reports its third-quarter results Wednesday before the market opens. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Sliding enrollment over the past couple quarters has been a growing concern for investors and analysts who follow big managed care companies. This includes WellPoint, which operates Blue Cross Blue Shield plans in 14 states.

The recession has hurt health insurers because employers have cut jobs and reduced the number of people covered by employer-sponsored group health insurance. Some companies, especially small businesses, have dropped health coverage entirely.

WellPoint competitor UnitedHealth Group Inc. said last week enrollment in plans sold to employers fell 6 percent for the second-straight quarter.

In the second quarter, WellPoint said its total medical enrollment fell 3 percent, or by 1.1 million people. That total included individual insurance and Medicaid plans, aside from just employer-sponsored business.

WellPoint said in July it expects medical enrollment to fall 4 percent, to 33.6 million members by the end of the year.

UnitedHealth, which is considered by many to be a bellwether for managed care companies, also said it saw rising costs from swine flu in the third quarter and an enrollment increase of people who continue their employer-based health insurance under the federal law known as COBRA after they leave their jobs.

Health insurance stock prices have zigzagged for several months in reaction to the health care reform debate in Washington, D.C. Investors and analysts are particularly worried about the creation of a government option to help cover the uninsured and compete with private insurers like WellPoint.

Analysts say the stocks will likely remain volatile until the debate ends.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect, on average, earnings of $1.37 per share on $15.15 billion in revenue.

ANALYST TAKE: Goldman Sachs analyst Matthew Borsch forecast third-quarter earnings of $1.40 per share for WellPoint. He said in a recent research note the company’s “very strong free cash profile” is a key positive in the near term.

“We project at least $6 (billion) in deployable free cash by year-end 2010 after consideration for interest payments, debt repayment, and other corporate purposes,” Borsch wrote.

WHAT’S AHEAD: WellPoint competitor Aetna Inc. of Hartford, Conn., reports its third-quarter earnings Thursday. Louisville, Ky.-based Humana Inc. reports earnings Nov. 2, and Cigna Corp., Philadelphia, reports Nov. 5.

STOCK PERFORMANCE: The price of WellPoint’s shares fell 8 percent in the quarter to close at $47.36. Meanwhile, the Standard & Poor’s 500 index rose 14 percent over the same time.