WellPoint profits fall 7.6% in 2nd qtr.

INDIANAPOLIS (AP) - Shares of WellPoint Inc. tumbled Wednesday after the health insurer reported a second-quarter profit drop and enrollment that slid further than analysts expected.

Total medical enrollment fell by 1.1 million people, or 3 percent, to 34.2 million compared to the same quarter last year. The company attributed most of that loss to rising unemployment.

WellPoint, the nation's largest health insurer based on membership, said it expects year-end medical enrollment to fall to about 33.6 million members, a 4 percent drop.

Nonetheless, the company reaffirmed its full-year guidance.

"Given all the circumstances, most notably the unemployment rate, we really believe now is not the time to change our guidance," CEO Angela Braly said during a conference call with analysts.

The Indianapolis company, which operates Blue Cross Blue Shield plans in 14 states, earned $693.5 million, or $1.43 per share, down 7.6 percent from $750.5 million, or $1.44 per share, a year ago. Revenue fell nearly 2 percent to $15.41 billion from $15.67 billion a year ago.

WellPoint said its adjusted earnings came to $1.50 per share, excluding 7 cents per share in investment losses.

Analysts expected, on average, earnings of $1.43 per share on $15.4 billion in revenue, according to Thomson Reuters. Analysts typically exclude one-time items from earnings estimates.

Shares fell nearly 6 percent, or $3.14, to $51.24 in morning trading Wednesday.

Fully insured membership fell 6 percent to 15.7 million compared to last year. Fully insured plans are more lucrative for insurers than self-funded coverage that they administer.

WellPoint was hit particularly hard in its local group business, which consists largely of small businesses that are fully insured. Enrollment there fell by 734,000 people.

"We're going through this period where enrollments and employment is going down, well when is it going to rebound?" said Edward Jones analyst Steve Shubitz.

Wells Fargo analyst Matt Perry said in a research note the enrollment declines were slightly larger than expected.

"While the quarter was strong, the underlying results look mixed," he wrote. "The pressure in commercial fully insured margins is more severe than we expected, even after assuming some seasonality in results."

Premiums dropped 1.5 percent to $14.1 billion, and pretax investment losses totaled $58.3 million.

The company also said its benefit expense ratio fell to 82.9 percent from 83.3 percent last year. That ratio measures the percentage of premiums paid to cover medical claims. WellPoint cited a favorable prior year reserve development and Medicare Advantage plan design and pricing changes.

The company also said it withdrew from some Medicaid programs because reimbursement rates fell too low. Its Medicaid business declined by 300,000 members.

WellPoint said it reaffirmed its adjusted profit outlook for 2009. The insurer expects a full-year profit of $5.06 to $5.12 per share. That includes net investment losses of 54 cents per share, but it also includes no more investment gains or losses beyond what it recorded so far this year.

WellPoint is the largest health insurer based on membership. Competitor UnitedHealth Group Inc. said last week its second-quarter profit more than doubled compared to the same quarter last year, when legal charges weighed down the Minnetonka, Minn. insurer's performance.

On Monday, Hartford, Conn.-based Aetna Inc. said its quarterly profit sank 28 percent as it saw higher-than-expected medical costs. It cut its 2009 profit outlook for the second time since June.