OKLAHOMA CITY -- For investors pained by UnitedHealth's ( UNH) weak forecast, WellPoint ( WLP) offered little comfort.

Unlike its struggling rival -- which last week lowered its long-term growth rate -- WellPoint has promised to keep increasing annual profits by at least 15% next year. But the company has reported mixed results for the third quarter, sending its shares modestly lower.

Revenue rose just 5.2% to $15 billion, missing Wall Street targets, as enrollment gains remained weak. But profits jumped 7.1% to $868 million, with earnings per share of $1.45 topping the consensus estimate by a penny. Cost controls and share repurchases offset rising medical expenses, leading to that upside.

WellPoint's all-important medical loss ratio ticked up to 81.8% in the latest quarter, disappointing those who had been looking for a decline. The company - which had forecasted possible improvements in this metric itself - blamed a special Medicare-related charge for much of the deterioration.

Specifically, WellPoint underestimated the risk it shared under the Medicare Part D program and suffered a negative prior-period reserve development as a result.

"We are surprised that the company misestimated this amount by such a wide margin," Credit Suisse analyst Gregory Nersessian fretted on Wednesday. "While we understand the Medicare true-up is a one-time item related to 2006 and 2007 claims experience, it is an uncharacteristic mistake for a company that prides itself on its actuarial discipline."

WellPoint's other key metric, enrollment, proved disappointing as well. All told, the company added just 38,000 members in the latest quarter. Some experts had been looking for enrollment gains of almost 200,000 instead.

As a result, WellPoint has once again lowered its enrollment targets for the full year.

Still, despite these setbacks, WellPoint has managed to raise its 2007 earnings guidance by a penny to $5.56 a share. But Nersessian, for one, felt less than impressed in the end.

"Overall, we view the quarterly result as disappointing from a quality standpoint," wrote Nersessian, whose firm has investment banking ties to the company. "For the second consecutive quarter, WellPoint reported an in-line result and added a penny to its full-year EPS forecast despite a weaker-than-expected top line and higher MLR."

Furthermore, he added, "the company's guidance points reflected the shift in earnings drivers from top-line growth and MLR improvement to admin efficiency and share buybacks. With respect to guidance, results were also mixed."

For now, at least, Nersessian feels like staying on the sidelines. Following Wednesday's update, he reiterated his neutral rating and $82 price target on WellPoint's stock. The shares slipped 88 cents to $78.20 on Wednesday morning but still remain in the upper half of their 52-week range.

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