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WellPoint earnings beat estimates

WellPoint Inc., the second largest health insurer in the country, today reported fourth quarter and 2012 earnings that beat analysts' estimates, driven primarily by medical expenditures that were lower than the company expected.

For the fourth quarter, the company posted earnings of $1.03 per share, nine cents higher than the estimates of industry analysts surveyed by Bloomberg. Earnings were also four percent higher than the $0.99 profit the company reported for the fourth quarter of 2011. For the full year, 2012 net income totaled roughly $2.7 billion or an adjusted net income of $7.56 per share, 8 percent higher than 2011 earnings of $7.00 per share.

"Our fourth quarter results were stronger than originally expected, reflecting improved operating performance, solid expense management and improving execution in our core operations," said John Cannon, WellPoint's interim president and CEO, in a press release. "We are optimistic about our company's long-term positioning and believe the alignment of our core businesses, leadership and 2013 investments prepare us well for the emerging opportunities in health care."

Many of those emerging opportunities are in the government-sponsored business and via the coming changes in the insurance market as dictated by health reform. WellPoint closed on its $4.9 billion acquisition of managed care company Amerigroup on Dec. 24 as one pillar in its strategy to address this market.

The company also issued a conservative earnings guidance for 2013, saying it expected net earnings for the year to be at least $7.60 per share. The conservative estimates are due to the company's ongoing integration costs related to the Amerigroup purchase, as well as other investments it will be making related to positioning it for the changes due in the insurance market.

"2013 will be a year of investing for growth," said Cannon in the company's earnings teleconference. "It is incumbent upon us to monitor and pace those investments to ensure we are maximizing the productivity of our capital."

While these ongoing investments might be one reason for a conservative earnings guidance, which came in well below the $7.93 forecast by industry analysts, there may be another factor at play: the continued search for a new CEO, a position that has been open since Angela Braly resigned the post in late August.

"It's rational to offer a conservative outlook," said Chris Rigg an analyst with Susquehanna Financial Group in a Bloomberg News story. "You wouldn't want to back the new CEO, whoever she or he may be, into the corner."

Cannon reiterated in the earnings call that the company expected to have a new CEO in place by the end of the first quarter, but did not go into further details.

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