WellPoint Inc., the second largest health insurer in the country, posted first quarter earnings Wednesday that significantly beat analysts estimates largely based on continued light usage of health services.
First quarter 2013 net income was $885.2 million, or $2.89 per share, a 14 percent increase over income in the first quarter of 2012 which was $856.5 million, or $2.53 per share, and included $0.19 per share of net income related to certain items.
In a conference call announcing the earnings, new WellPoint CEO Joseph Swedish said "I am encouraged by the operating trends we experienced in the first quarter and the momentum we have as an enterprise."
As a result of its strong performance in the first quarter, the company raised its full year 2013 earnings forecast, but only modestly, despite significantly beating analysts' first quarter earnings predictions of $2.38 per share as published by Thomson Reuters. Despite its strong first quarter, company officials are remaining cautious as it anticipates pressure on earnings from implementation of various parts of the Affordable Care Act.
"We have modestly raised our full year EPS outlook as a reflection of our performance, but are still being prudent as many of the uncertainties inherent in our original guidance still exist," said Wayne DeVeydt, WellPoint executive vice president and CFO.
Overall, revenue for the insurer increased by 16 percent to $17.5 billion, up from $15.2 billion in the first quarter of 2012 and propelled largely by the insurer's December acquisition of Medicare Advantage insurer Amerigroup.
Swedish, who took the helm of the company just one month ago, gets a running start with his new company, which had been underperforming under the stewardship of former CEO Angela Braly. Braly was forced out of the top spot in August by investors due to the company's lagging performance.
For Swedish, who has spent much of his career on the provider side of the healthcare industry, the opportunity to take the reins at WellPoint presented a special opportunity.
"I joined this company because my experience from the provider side tells me there is an opportunity to better leverage the assets of the company and lift our valuation over time through more consistent execution against these opportunities," Swedish said.
In addition, he noted that throughout his 40-year career, the healthcare industry has undergone a number of different changes in reimbursement and payment methodologies. The one constant has been the need for the industry to better control costs, with mixed results.
"I believe the next decade will be different. We have reached an inflection point reflecting the convergence of challenges related to funding, regulatory changes, demographics, technology and data informatics," he said.
[See also: WellPoint blames senior business for its Q4 earnings miss]