WellPoint's Growth Is Coming From the Uninsured

Tickers in this article: AET CNC HUM UNH WLP

NEW YORK (TheStreet) -- Even though WellPoint experienced a fourth-quarter plunge of 68% in its profits, it is not because the company is performing poorly. It is due to impairment costs.

Revenue improved in the fourth quarter of 2013, as they should since most health insurers are posting strong financial positions in 2013 because patients are staying away from doctor's offices and hospitals trying to keep their medical bills at a minimum while the economy struggles along to improve.

There may be a big discrepancy in fourth-quarter (year-over-year) production numbers, but don't be deceived it's not as bad as it looks.

  • 4Q 2012-- $464.2 million profit/$1.51 per share
  • 4Q 2013-- $148.2 million profit/49 cents per share

These numbers look like the company did very poorly the fourth quarter of 2013, but there are two things to keep in mind.

  • In 2012 the fourth quarter benefited from a 46 cents per share tax settlement gain.
  • In 2013 the fourth quarter struggled with a 55 cents per share impairment of intangible assets.

Operating revenue rose more than 15% in the fourth quarter of 2013, barely missing analyst's expectations of $17.78 billion.

WLP has done well in 2013 and should continue to do well in 2014 because of the changes taking place in health care.

The Affordable Care Act is still expected to drive this company's success. It may take a little longer than expected as the government continues to iron out some problems it has with the website, but WellPoint is expected to benefit significantly with increased revenues.

In fact, WellPoint said enrollment in its health care plans under ACA is ahead of expectations. For 2014, the company's goal is to add over one million new customers across a number of landscapes including individual plans and government plans.