If giant health benefits company WellPoint
For WellPoint at least, so far, so good. Total reported revenue increased almost 68% for the fourth quarter, with operating revenue up a similar amount and comparable-basis revenue up almost 6%. (That's adjusting for the impact of the Anthem-WellPoint merger in late November of 2004.) Premium revenue was strong (up more than 5% on a comparable basis) and expense growth was not out of line.
Other metrics of note also looked favorable. Enrollment was up 22% as reported, and up more than 4% on an organic basis. Medical costs also looked pretty good, with the rolling 12-month trend dipping below 8.5%.
There's certainly plenty to like about WellPoint. It's got the most customers of any company in the business, which gives it a great deal of clout with both customers (be they individuals or companies) and health-care providers. In addition, its relationship with Blue Cross Blue Shield gives it an advantage in brand value and an exceptional provider network. Last but not least, I think you can at least float the argument that larger companies are less likely to endanger their own near-monopolies with price competition, so that may not be quite the threat it once was.
If you think that WellPoint can continue to grow its cash flow by low- to mid-teen percentages, you should seriously consider owning this stock. While I consider rival UnitedHealth a fine company (same goes for smaller rival Coventry
Check up on further Foolishness:
- UnitedHealth Staying Fit
- Is American Healthways Gaining Strength?
- Investors Break Faith With Coventry
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).