Wellpoint Profit Falls After Anthem Merger

WellPoint Inc. (WLP) said Monday its fourth-quarter profit dropped nearly 12 percent primarily due to expenses related to debt retirement and the merger that created the nation's largest health insurance company.

For the three months ending Dec. 31, profit fell to $184.5 million, or 92 cents a share, compared with $208.8 million, or $1.47 a share, a year ago. Revenue rose to $6.7 billion from $4.2 billion a year ago.

It was the company's first earnings report since the $16.5 billion merger between Anthem Inc. (search) and WellPoint Health Networks Inc. The quarter included just one month of joint earnings since the Nov. 30 merger. Year-ago figures were based on Anthem's 2003 results.

Wellpoint shares fell $3.74 to $121.15 on the New York Stock Exchange (search). The stock has traded in a 52-week range of 72.20 to 124.95.

For all of 2004, the company reported net income of $960 million, or $6.10 per share, on revenue of $20.8 billion, compared with profits of $774 million, or $5.45 a share, on revenue of $16.8 billion for 2003.

Wellpoint said it anticipated profits for the coming year of $7.75 per share for 2005, at the high end of its previous estimate of $7.65 to $7.75 per share.

Executives said they intend to broaden the base of Wellpoint's market share in a dozen states where the company already is the top insurer while going after new business, particularly uninsured middle-class couples and seniors on Medicare, and offering some lower-cost alternative coverage packages.

But the company's chief financial officer said Wellpoint had no intention of turning itself into a discount insurance provider.

"We are not interested in underpricing our business to increase market share," Wellpoint CFO David C. Colby said during a conference call. "We do not chase business that we believe is priced unprofitably."

Anthem, the nation's second-largest Blue Cross provider, bought Thousand Oaks, Calif.-based WellPoint, the largest, in November, after promising hundreds of millions of dollars to improve health care in California and Georgia to overcome state regulators' misgivings.

Anthem paid the old company's stockholders $23.80 in cash and one share of Anthem common stock for each WellPoint share, and renamed itself WellPoint Inc.

The new company insures some 28 million people in 13 states, about a quarter of whom live in California. It has Blue Cross operations in California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, Ohio, Virginia and Wisconsin. It also provides insurance through HealthLink and UniCare.