Rising unemployment and higher investment losses led WellPoint’s (WLP) second-quarter profit to fall 7.6%. The company lowered its full-year 2009 earnings forecast to reflect first-half investment losses and cut its membership projections to reflect layoffs among its corporate clients.
More importantly the medical-loss ratio – the percentage of premium revenue used to pay patient bills – was higher than expected at 82.9%. Analysts consider the ratio a predictor of a health plan’s profitability.
Management noted medical expense growth would be at the higher end of the guidance range for the year due to slight increases in member use of medical services, unit-cost increases, and higher-than-usual flu activity. The company now expects a higher full-year medical cost ratio than it previously predicted.
WLP shares finished the day -5.70%
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Peter J. Lazaroff, Investment Analyst
Wednesday, July 29, 2009
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