WellPoint's 4Q profits drop 39 percent

INDIANAPOLIS (AP) - WellPoint Inc.'s fourth-quarter profit sank 39 percent as investment income fell and the amount it paid in medical claims soared, but the health insurer raised its quarterly dividend and said it expects earnings growth in 2012.

The largest health insurer based on enrollment said Wednesday it earned $335.3 million, or 96 cents per share, in the three months that ended Dec. 31. That's down from $548.8 million, or $1.40 per share, in the final quarter of 2010. Adjusted net income, which excludes investment gains and losses, was 99 cents per share.

Operating revenue, which also excludes investment income or gains, climbed 5.5 percent to $15.18 billion.

The performance led to a rare miss of Wall Street expectations. Analysts surveyed by FactSet expected, on average, earnings of $1.12 per share on $15.46 billion in revenue.

The Indianapolis company said medical claims, its largest expense, climbed nearly 10 percent in the quarter to $12.43 billion. In contrast, that expense fell 5 percent in the 2010 quarter. The change was driven largely by expenses tied to a California Medicare Advantage plan, WellPoint spokeswoman Kristin Binns said.

Binns also said the insurer recorded a benefit of $350 million in the 2010 quarter because claims left over from previous quarters came in lower than expected. It had no gain like that in the 2011 quarter.

Managed care companies also have been buoyed by health care use that has grown at lower-than-expected rates for the past few quarters. This trend, which may be driven by a lingering pullback on consumer spending from the recession, has helped companies consistently beat analyst expectations. Analysts have said they expect this trend to continue, but insurers say they see signs that health care use is picking up.

WellPoint competitor UnitedHealth Group Inc. said last week that growth rates still remained slower than what the industry saw before the recession, but it expects use of health care to increase steadily throughout 2012.

WellPoint said Wednesday its board approved a quarterly dividend of 28.7 cents per share that will be paid March 23 to shareholders of record on March 9.

The insurer also said expects to earn at least $7.60 per share in 2012, which would represent growth of more than 8 percent over 2011.

WellPoint operates Blue Cross Blue Shield plans in 14 states, including California, New York and Ohio.