WellPoint falls on cut forecast, rivals also drop

By Ransdell Pierson

NEW YORK (Reuters) - Health insurer WellPoint Inc (WLP.N: Quote, Profile, Research) on Monday cut its 2008 profit outlook due to unexpectedly high costs, disappointing enrollment and worsening economic conditions, and its shares sold off along with those of rival insurers.

WellPoint, the largest U.S. health insurer by membership, fell 18 percent in after-hours electronic trading. Aetna Inc (AET.N: Quote, Profile, Research), UnitedHealth Group Inc (UNH.N: Quote, Profile, Research) and Humana Inc (HUM.N: Quote, Profile, Research) dropped 10 percent, 9 percent and 11 percent, respectively. Cigna Inc (CI.N: Quote, Profile, Research) was little changed, after having briefly fallen almost 8 percent.

Collectively, the five U.S. insurers lost $15.6 billion in market capitalization.

WellPoint said it now expects to earn $5.76 to $6.01 a share for the year. That compares with its previous forecast of $6.41 a share. The revised forecast would reflect profit growth of 4 to 8 percent over net income of $5.56 per share reported for the year ended December 31, 2007.

"Clearly we missed trends," Chief Executive Angela Braly told analysts in a conference call. "We've identified it. We think it's an issue we can fix."

For the first quarter, WellPoint cut its profit forecast to between $1.16 and $1.26 per share, from an earlier view of $1.44 per share and the $1.26 per share reported for the first quarter of 2007.

The Indianapolis-based company, which operates Blue Cross Blue Shield plans, forecast year-end membership of 35.3 million. That is about 300,000 lower than the forecast it gave in late January, which itself was about 200,000 lower than a previous estimate.

WellPoint said its benefit expense ratio -- the percentage of premiums spent on medical costs -- would be 82.8 to 83.1 percent this year. When such ratios rise, that typically signals dwindling profitability.