In an occurrence very similar to that of competitor UnitedHealth Group
On a per-share basis, the company recorded a 15.4% increase in net income as operating revenue rose 7.5% compared with the year-ago quarter. Company management attributed the improvement in both metrics to premium-rate increases and membership growth. Other positive trends during the quarter for WellPoint shareholders were the company's repurchase of $1.3 billion of common stock and an upward revision of full-year results to $5.55 per share.
Nonetheless, shareholders of WellPoint felt the heat of a 60-basis-point increase in the organization's benefit expense ratio, which rose to 81.8%, versus 81.2% in the prior-year quarter. This trend itself was the driving force behind the dip in the company's stock price. The rising benefit-expense ratio stems from rising claims in WellPoint's state-sponsored programs, as well as the growth of its Medicare Part D business, which has traditionally seen a notably higher benefit-expense ratio in the early stages of the year.
Shares of WellPoint have remained relatively flat year-to-date, and it now appears that the market is waiting to see whether these mega-cap insurers will be able to continue to maintain their history of strong earnings growth in the wake of rising benefit expense ratios. It will be interesting to see whether Aetna's