WellPoint 4th Qtr Profits Drop 12%

WellPoint 4th-Qtr Profit Drops 12 Percent on Expenses (Update1)Feb. 7 (Bloomberg) -- WellPoint Inc., the biggest U.S. health insurer, said fourth-quarter profit fell 12 percent because of expenses from a debt buyback and the merger that formed the company.Net income declined to $184.5 million, or 92 cents a share, from $208.8 million, or $1.47, a year earlier, the Indianapolis- based company said in a statement. Revenue rose 59 percent to $6.83 billion, driven by Anthem Inc.'s $20 billion purchase of WellPoint Health Networks Inc. in November.A greater-than-expected response to a December offer to repurchase notes shaved per-share earnings by 47 cents, while acquisition costs cut profit by 31 cents. Chief Executive Officer Larry Glasscock, seeking to reduce expenses by paring duplicate operations, forecast a 4 percent increase in medical enrollment for this year and a rise in profit to $7.75 a share.``Good quarter - folks should be happy,'' Patrick Hojlo, an analyst at New York-based Credit Suisse First Boston, said today in a telephone interview. ``Their guidance -- in terms of membership and earnings growth for the year and for the synergies of the merger as a whole -- is conservative.'' Hojlo has an ``outperform'' rating on WellPoint and doesn't own the stock.Excluding the debt buyback and costs associated with concessions Anthem and WellPoint had to make to win approval for their combination in California and Georgia, profit was $1.70 a share, WellPoint said. The average estimate of 17 analysts surveyed by Thomson Financial was $1.68.Shares of WellPoint rose $1.73, or 1.4 percent, to $124.89 in New York Stock Exchange composite trading Feb. 4. They gained 53 percent last year.Membership GainsWellPoint ended the year with more than 27.7 million members, an increase of about 15.8 million from a year earlier, mainly because of the acquisition. On a comparable basis, the company added 1.7 million members, a 6.4 percent gain.Its benefit expense ratio increased to 81.5 percent from 79.5 percent, reflecting lower-than-expected medical costs a year earlier, the company said.WellPoint provides health insurance and services through Blue Cross or Blue Shield operations in 13 states and non-Blue Cross operations in other states. WellPoint health plans include about one in every three Blue Cross and Blue Shield members in the U.S.Beginning in 2006, the trimming of overlapping operations should lead to annual savings of about $250 million, WellPoint has said. Broader use of computer technology also may produce savings as the merged company tries to build on efforts by WellPoint Health Networks to give desktop computers and hand-held devices to doctors to transmit prescriptions.``WellPoint tends to be strong in a couple of areas,'' including controlling costs, said Tim Allen, a portfolio manager at Wentworth Hauser & Violich, a Seattle based firm with $5.5 billion under management, including health-care stocks. ``They've always been competitors in those places.''