Wellpoint Inc. announced yesterday that second quarter net income totaled $701.6 million, including after tax investment gains of $21.5 million, a drop of 3 percent from the $722.4 million of income the company recorded in the second quarter of 2010.
The decrease in net income came as a result of higher-than-expected costs for its senior segment of business, primarily in its northern California Medicare Advantage plans, where the company has picked up market share in the past six months after the exit of a competing plan.
A number of analysts cut their 2011 earnings estimates and price projections for WellPoint stock on the news and the market reacted in kind trimming $4.86 off the price to close yesterday at $68.70, a 6.6 percent drop from its close of $73.56 on Tuesday.
In a conference call discussing second quarter results yesterday, WellPoint CEO Angela Braly said the company was "disappointed with our performance" in the Medicare Advantage segment of its business. In all, the company expects the higher expenses in the senior segment to provide a 30 cents per share drag on 2011 company earnings.
Despite the lower overall net income, the company did post an increase in per-share income to $1.83 per share compared to $1.67 in the second quarter last year,
"Our second quarter results exceeded our forecast and reflected the significant administrative cost savings we have been able to achieve through our continuous improvement and efficiency initiatives. This focus on execution has enabled us to exceed our goals through the first six months of the year," said Braly in a statement announcing earnings.
As a result of these savings, the company raised its 2011 per share earnings estimates and its operating cash flow estimates, based on what the company cited as strong performance in its commercial segment.