Archive for April, 2010

WellPoint joins other insurers with big 1Q profit (AP)

Wednesday, April 28th, 2010 | Finance News

INDIANAPOLIS – Buoyed by a weak flu season and improving enrollment, several health insurers have reaped strong profits so far during the first quarter.

But uncertainty created by health care reform and political scrutiny of industry earnings has taken some of the edge off that buzz.

WellPoint Inc. said Wednesday its first-quarter profit soared 51 percent, as it soundly beat Wall Street expectations. But the Indianapolis insurer left its profit guidance for 2010 unchanged. It still expects earnings of at least $6 per share.

Analysts polled by Thomson Reuters forecast, on average, a profit of $6.14 per share.

That conservative outlook reflects, in part, "sensitivity to the Washington, D.C., focus on health plan profits," Goldman Sachs analyst Matthew Borsch said in a research note.

Stifel Nicolaus analyst Tom Carroll said in a separate note the guidance resulted directly from "the continued fragile health reform environment that exists in Washington, D.C."

Insurers have drawn heat from the Obama administration for hiking premiums despite reporting strong profits, a move the companies blame on rising medical costs. Congress is considering a federal review of future premium hikes.

Analysts and investors also have worried about the impact from complex health care reform legislation that aims to cover millions of uninsured people.

For instance, a provision starting next year will require insurers to meet a minimum medical loss ratio, which is the percentage of premiums an insurer pays in medical claims. Details of that provision have yet to be worked out.

But that overhang helped suppress the stock price for UnitedHealth Group Inc. last week, after the Minnetonka, Minn., insurer said its first-quarter profit rose 21 percent.

Outside the specter of health reform, analysts find much to like about insurer performances so far.

They say insurers have become more conservative in their pricing, meaning they're not dropping premiums too low to cover claims. They've also seen a very mild flu season.

"It's much weaker than what people had been expecting," Edward Jones analyst Steve Shubitz said.

WellPoint estimates that it saw a gain of between $35 million and $50 million in the quarter due to a weak flu season.

It also saw gains in part of its enrollment, although total membership dipped 2 percent to 33.8 million compared to the first quarter of 2009. WellPoint, the largest health insurer based on enrollment, runs Blue Cross Blue Shield plans in 14 states and Unicare plans in several others.

Insurers have struggled with declining enrollment as companies cut workers during the recession and reduced the number of people covered by insurance.

"It's still bad, meaning employers are still laying off, but it's slowing down quite a bit," WellPoint Chief Financial Officer Wayne DeVeydt said Wednesday.

WellPoint earned $876.8 million, or $1.96 per share, in the first quarter, up from $580.4 million, or $1.16 per share, one year ago. Excluding one-time costs and gains, WellPoint earned $1.95 per share.

Total revenue slipped to $15.1 billion from $15.14 billion, while the company's operating revenue fell nearly 3 percent to $14.86 billion.

Analysts expected a profit of $1.67 per share and $14.72 billion in operating revenue.

The insurer said it paid $11.38 billion in claims in the three months that ended March 31, a drop of nearly 3 percent — or $343 million — from the first quarter of last year, when WellPoint also took a $305 million hit due to investment losses.

The company's stock rose $2.12, or 3.8 percent, to $58.04 in Wednesday afternoon trading.

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Associated Press writer Marley Seaman in New York contributed to this report.

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Toyota to recall about 50,000 Sequoia SUVs (AP)

Wednesday, April 28th, 2010 | Finance News

WASHINGTON – Toyota Motor Corp. recalled about 50,000 Sequoia sport utility vehicles from the 2003 model year to fix an unexpected slowing of the vehicle in the latest recall issued by the Japanese automaker.

Toyota said Wednesday that the recall would address the vehicle's electronic stability control system, which helps maintain traction during turning. In some cases, the stability control could activate at low speed and prevent the SUV from accelerating as quickly as a driver expects, the company said.

The National Highway Traffic Safety Administration had been investigating the issue and Toyota said it decided to recall the vehicles to address the government's concerns. The automaker said they had no reports of accidents or injuries connected to the issue and about half of the vehicles had already been repaired under warranty.

"Toyota is committed to investigating customer complaints more aggressively and to responding quickly to issues we identify in our vehicles," said Steve St. Angelo, Toyota chief quality officer for North America.

Toyota has recalled more than 8 million vehicles worldwide since October because of acceleration problems in multiple models and braking issues in the Prius hybrid. The company recently agreed to pay a record $16.4 million fine to the government for a slow response to problems with sticking gas pedals.

In the Sequoia case, Toyota said it issued a production change during the 2003 model year to address the stability control problem and published a technical service bulletin to dealers in fall 2003. Owners who have complained about the problem since then have had the skid control engine control unit replaced by dealers and the company said about half have been repaired under warranty.

Toyota said owners who paid to have the work done will be reimbursed.

NHTSA spokeswoman Julia Piscitelli said Toyota was "cooperating with NHTSA's request to issue a safety recall" of the 2003 Sequoia. During the past 1 1/2 years, she said NHTSA and Toyota have received 163 complaints about the problem.

Separately, Sen. Barbara Boxer, D-Calif., introduced legislation that would bar NHTSA officials from working for an automobile company for three years if the job required communicating with the agency.

Some lawmakers have accused carmakers of benefiting from a "revolving door" of former NHTSA officials who work for automakers. Two key safety officials with Toyota worked for NHTSA previously.

Toyota owners will receive letters about the recall in late May. The company said owners who paid for the fix should mail a copy of their repair order to the company's U.S. headquarters in Torrance, Calif., for reimbursement consideration.

Owners can call (800) 331-4331 for more information.

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On the Net:

Toyota recall: http://www.toyota.com/recall

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Comcast 1Q profit up 12 pct, advertising rebounds (AP)

Wednesday, April 28th, 2010 | Finance News

PHILADELPHIA – Consumers signing up for digital cable TV and high-speed Internet services led to a 12 percent increase in first-quarter profit for Comcast Corp. The company also said advertising on its cable channels rebounded in the quarter, indicating that an economic upturn is taking hold.

The nation's largest cable TV provider still sounded cautious notes Wednesday, as the jobless rate remains high and the housing market still is under duress. Cable companies often consider the construction of new homes to be prime opportunities to sign up new customers as they move.

"While it's not clear whether we're entirely out of the woods on the economy, we are cautiously optimistic, and are clearly executing better in this environment and against the competition," CEO Brian Roberts said in a conference call with analysts.

The quarter also showed how competition in the TV business is taking a toll. Comcast's overall video revenue fell, in part because the company wasn't able to raise cable TV rates as much as it had a year earlier.

Comcast earned $866 million, or 31 cents per share, from January through March. That compares with $772 million, or 27 cents per share, in the same quarter in the prior year.

Revenue rose 3.8 percent to $9.2 billion from $8.9 billion in the first quarter of 2009.

The results beat the forecasts of analysts polled by Thomson Reuters, who on average expected Comcast to earn 30 cents per share on revenue of $9.15 billion.

Free cash flow — a key metric for cable TV companies that manage high amounts of debt — rose 38 percent to $1.89 billion as Comcast spent 20 percent less on capital expenditures.

Advertising revenue rebounded in the quarter, rising 23.5 percent to $360 million. Comcast said the recovery came across the board, from different types of advertisers, including automotive companies. Comcast sells national, local and regional ads on its cable channels such as E! Entertainment Television, Style Network and the Golf Channel, as well as on other cable networks.

But Comcast's core video business continues to be under pressure. The company lost 82,000 video customers, a slight increase from the first quarter of 2009, although that was better than what some analysts expected. Cable, with two-thirds of the pay-TV market, has been steadily losing video customers to satellite TV and phone companies that offer video.

Accordingly, video revenue fell nearly 2 percent to $4.84 billion. Contributing to the decline: a lower increase in cable TV rates. Comcast was able to raise rates by an average of 2.4 percent compared to more than 5 percent in the same quarter last year.

However, more of the video customers who remain are signing up for digital cable TV packages, which are pricier for them and more profitable for Comcast. It signed up 427,000 households to digital service, a 48 percent increase from a year ago.

The company added 399,000 high-speed Internet customers, up 21 percent. Cable companies are gaining share from phone companies in the broadband market, said Pivotal Research Group analyst Jeffrey Wlodarczak.

But growth in the number of phone customers slowed. Comcast added 275,000 new phone subscribers in the quarter compared with 298,000 in the same period of the prior year.

Shares of Comcast, based in Philadelphia, rose 29 cents, 1.6 percent to $18.75 in morning trading.

The company, which plans to acquire a controlling stake in NBC Universal from General Electric Co., said it still expects the regulatory review of the deal to end this year.

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