WellPoint, Inc. (NYSE: WLP) today announced that first quarter 2014 net income was $701.0 million, or $2.40 per share. These results included net gains of approximately $0.10 per share. Net income in the first quarter of 2013 was $885.2 million, or $2.89 per share, which included net investment losses of approximately $0.05 per share.
Excluding the items noted in each period, adjusted net income was $2.30 per share in the first quarter of 2014, a decrease of 21.8 percent compared with adjusted net income of $2.94 per share in the prior year quarter (refer to GAAP reconciliation table for a reconciliation to the most directly comparable measure calculated in accordance with U.S. generally accepted accounting principles, or “GAAP”).
“Our better than expected first quarter results reflect our value proposition in the market, the benefits we are seeing from our strategic investments and our intense focus on execution. Our membership is growing across our platforms and we are pleased with the progress we have seen in the exchanges. Provider collaboration remains a focus for us and we are working closely with all types of healthcare providers to drive value for consumers. We are off to a strong start, supporting an increase in our earnings guidance for the full year,” said Joseph Swedish, chief executive officer.
“First quarter adjusted earnings per share of $2.30 exceeded our expectations and we are pleased with how 2014 has progressed so far,” said Wayne DeVeydt, executive vice president and chief financial officer. “Looking ahead, we now project adjusted earnings per share to be greater than $8.40 for 2014, reflecting balanced enrollment growth across our served markets.”
Medical enrollment totaled approximately 36.9 million members at March 31, 2014, an increase of approximately 1.3 million members, or 3.6 percent, from 35.7 million at December 31, 2013. Commercial and Specialty Business segment enrollment increased by 1.2 million members, as the company experienced growth in the National, Local Group, and Individual markets. Membership also grew in the Medicaid and FEP business by 121,000 and 16,000 members, respectively, partially offset by a decline in the Medicare business of 62,000 members.
Operating revenue exceeded $17.6 billion in the first quarter of 2014, an increase of approximately $210 million, or 1.2 percent, compared with approximately $17.4 billion in the prior year quarter. The growth in revenue reflected premium increases to cover overall cost trends and new fees associated with Health Care Reform, as well as higher membership in the Medicaid, Commercial self-funded and FEP businesses. These increases were partially offset by a decline in the Local Group business due to the State of New York contract conversion to a self-funded arrangement, as previously disclosed, and a decline in Medicare revenue reflecting lower enrollment as the company repositioned its Medicare Advantage product offerings.
Benefit Expense Ratio:
The benefit expense ratio was 82.7 percent in the first quarter of 2014, a decrease of 100 basis points from 83.7 percent in the prior year quarter. The decline was primarily due to an improvement in the Medicaid business. The Commercial and Specialty Business segment benefit expense ratio was stable versus the first quarter of 2013, as an increase resulting from the change in the mix of the product portfolio, predominantly due to the implementation of Health Care Reform product offerings, was largely offset by the impact of higher premium revenue designed to help cover new Health Care Reform fees.
Medical claims reserves established at December 31, 2013, developed modestly better than the Company’s expectation during the first quarter of 2014.