Fortunately, investors saw it coming. The stock actually ended up 4% on the day.
The $350.5 million after-tax investment loss hurt, but the damage is done, and the company is still above its required level of capitalization. Aetna
WellPoint's membership dropped 1% in the quarter as people lost jobs and couldn't pay for COBRA. Completing the trifecta, medical care ratio -- medical costs divided by premiums -- was up to 83.4% from 82.9% a year earlier. Those higher costs are cutting directly into the bottom line.
Fortunately, premiums reset eventually, and the company should be able to get the cost issue under control this year. Investors will have to wait until the end of next month at the company's investor day to get the full details, but management did say they expect to see earnings in the "low single digits." Not great, but at least it's headed in the right direction.
WellPoint and the rest of the health insurance industry -- UnitedHealth Group
The only thing WellPoint can do is hope that the economy recovers, hope Washington doesn't dilly-daddle, and keep costs under control while it rides this out.
WellPoint and UnitedHealth are Motley Fool Inside Value recommendations. If you're interested in picking through the wreckage for possible turnaround candidates, you should have the Inside Value team on your side. Check it out for free with a 30-day trial.
Fool contributor Brian Orelli, Ph.D., hit a trifecta at his only trip to the Kentucky Derby. He doesn't own shares of any company mentioned in this article. The Fool owns shares of UnitedHealth, which is a Motley Fool Stock Advisor selection. The Fool's disclosure policy is free insurance from us.