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Earnings Preview: WellPoint details 4Q Wednesday

The Associated Press

Health insurer WellPoint Inc. will revisit a tumultuous 2012 that included a CEO resignation and choppy earnings when it releases results on Wednesday from last year's final quarter.

WHAT TO WATCH FOR: Signs that one of the nation's largest health insurers is stabilizing its business after a rough year in which it cut its annual earnings forecast and enrollment slipped during the first three quarters.

WellPoint, based in Indianapolis, took a big step toward future growth late last month, when it completed a $4.46 billion acquisition of Medicaid coverage provider Amerigroup Corp. Medicaid is the state-federal program that provides health coverage for the needy and disabled people.

Investors will want more details on how WellPoint is integrating the Amerigroup business, which will make it the biggest Medicaid coverage provider in the health insurance sector.

Investors also will look for any updates on the company's search for a new leader. CEO Angela Braly resigned in August as investor frustration started to surface over the insurer's performance. The company named John Cannon, its executive vice president and general counsel, to serve as interim CEO, and he has said he doesn't want the permanent role.

WellPoint shares fell 8 percent last year, while the Standard & Poor's 500 index rose more than 13 percent.

But there were some positive signals for the insurer's business in last year's July-September quarter, when it trumped analyst expectations and recorded its first quarterly increase in earnings — compared with the previous year — since the first quarter of 2011.

WellPoint has said it expects 2013 earnings to be "relatively stable" with 2012. The insurer has said it will focus this year on preparing for 2014, when the health care overhaul will expand coverage and provide subsidies or tax credits to help millions of people buy insurance.

WellPoint plans to spend as much as $300 million next year to prepare for those expansions. The company has yet to release a specific earnings forecast for the new year.

WellPoint competitor UnitedHealth Group Inc. started earnings season for health insurers last week. The Minnetonka, Minn., company said its net income fell 1 percent to $1.24 billion, as a rise in costs from medical claims countered revenue gains. The insurer's earnings per share climbed to $1.20 from $1.17 in the 2011 quarter, when the company had more shares outstanding.

WHY IT MATTERS: WellPoint runs Blue Cross Blue Shield plans in 14 states, including California, New York and Ohio. It covers more than 33 million people.

WHAT'S EXPECTED: Analysts expect, on average, earnings of 96 cents per share on $15.32 billion in revenue, according to FactSet.

2011 QUARTER: WellPoint's net income plunged 39 percent due mostly to a $50 million hit it took from its Medicare Advantage business. The insurer had problems with a plan in Northern California that attracted more customers with a higher risk profile than it expected because a competitor left the market.

Overall, WellPoint earned $335.3 million, or 96 cents per share, in the fourth quarter of 2011 on $15.18 billion in operating revenue, which excludes investment gains.