WellCare Health Plans, Inc. (NYSE: WCG) today reported results for the second quarter and six months ended June 30, 2012. As determined under generally accepted accounting principles (“GAAP”), net income for the second quarter of 2012 was $46.4 million, or $1.06 per diluted share, compared with $69.6 million, or $1.61 per diluted share, for the second quarter of 2011. Adjusted net income for the second quarter of 2012 was $54.5 million, or $1.24 per diluted share, compared with $76.7 million, or $1.77 per diluted share, for the second quarter of 2011.
“Our second quarter results exhibited strong operating performance across many parts of our business, as well as the importance of our diversified approach to government programs,” said Alec Cunningham, WellCare’s chief executive officer. “We are continuing to invest in our quality, service, and growth initiatives and anticipate benefits from these investments during the remainder of 2012.”
Highlights of Recent Accomplishments
- Premium revenue in the second quarter of 2012 increased 22% year over year, driven by 31% growth in Medicaid and 25% growth in Medicare Advantage.
- The adjusted administrative expense ratio was 8.2% in the second quarter of 2012, a decrease of 100 basis points year over year, demonstrating sustained progress in the Company’s focus on ensuring a competitive cost structure.
- The Company’s Medicare Prescription Drug Plans (“PDPs”) segment delivered a strong first half performance, resulting in a 61% year over year increase in gross margin despite a 1% decrease in premium revenue.
- WellCare implemented a number of medical expense management initiatives for the Kentucky Medicaid program, targeting continued improvement in the performance of the program during the second half of 2012.
- Florida Healthy Kids, the state’s Children’s Health Insurance Program (“CHIP”), selected WellCare to serve 65 of Florida’s 67 counties, more than any other health plan. The program is expected to be effective October 2012.
- WellCare agreed to acquire certain assets of Arcadian Health’s Arizona Medicare Advantage plans in Mohave and Yavapai Counties, which currently have approximately 5,000 members, subject to regulatory approvals. The transaction is expected to close December 31, 2012.
- The Company’s ‘Ohana Health Plan successfully launched its participation in Hawaii’s QUEST Medicaid program, serving for the first time Temporary Assistance for Needy Families (“TANF”) and CHIP members across the islands.
- WellCare expanded its New York Medicaid managed long-term care service area by five counties, and entered the Florida Long-Term Care Community Diversion Pilot Project in two counties.
Second Quarter OperationsAdjusted net income for the second quarter of 2012 decreased compared with the second quarter of 2011 mainly due to favorable development of prior years’ medical benefits payable of $0.95 in net income per diluted share that was included in second quarter 2011 results. The increase in the Medicaid segment medical benefits ratio (“MBR”), driven by the Kentucky program, also contributed to the year over year reduction in second quarter adjusted net income. These factors were offset in part by higher premium revenue in our Medicaid and Medicare Advantage segments, the decrease in the Medicare Prescription Drug Plans segment MBR, and the decrease in our adjusted administrative expense ratio.