WellPoint Inc. yesterday announced it earned $2.53 per share in the first quarter of 2012, a drop of 8 percent compared to the same period last year, though it beat analyst projections by seven cents a share.
WellPoint also said that as a result of improving results in its Medicare segment – which has been a drag of late on company earnings – that it was raising its 2012 earnings estimates to at least $7.65 a share, roughly in line Wall St. estimates.
"Our first quarter results exceeded our expectations and were driven by improved performance in the Senior business and continued strong operating results in our Commercial segment. We also executed well in the capital management areas of our company," said Angela F. Braly, chair, president and CEO in yesterday's earnings release. "We are moving forward with our initiatives to create a lower cost operating model, both in terms of medical costs and administrative expense, with best-in-class service for our customers, and we believe this strategy will drive long-term growth and success as the health care system evolves over time."
But the markets didn't react as favorably to the news, sending WellPoint stock down $1.10 to $70.40 per share, a loss of 1.5 percent; today the stock was off another $1.14 per share, or 1.68 percent.
Much of the disappointment from the markets is based on ongoing troubles WellPoint has experienced with one Medicare plan it operates in California, where the company has seen medical costs that are much higher than expected.
WellPoint is actively working to correct its rates in that particular region, though its efforts may be a bit slower than the market would like.
During a conference call yesterday, Braly admitted that its senior business has underperformed in recent years, but the company is also bullish on that market segment.
In the just-completed quarter, WellPoint added more than 165,000 new members to its seniors segment – that despite a total net loss of more than 525,000 members over the course of the year.
But improvement in the troubled Medicare segment may take some time, and Wall St. isn't showing a lot of patience. That said, the company announced that it had hired a new executive to help lead the Medicare segment and it should also benefit more over time of its acquisition late last year of Medicare company CareMore.
In an interview with Reuters, CFO Wayne DeVeydt said improving the performance of its Medicare business may take another couple of years.
"We see this as a multi-year fix," he said. "But we are confident about the actions we've taken."