Tuesday, July 27, 2004 | 10:45 a.m.
SUN STAFF AND WIRE REPORTS
INDIANAPOLIS -- Anthem Inc. today posted a 34 percent rise in second-quarter profit and raised its outlook for the year. The health insurance provider also said it will go to court to overturn the California insurance commissioner's rejection of its $16.4 billion merger with WellPoint Health Systems Inc.
Anthem earned $237.9 million, or $1.66 per share, during the three months ended June 30, compared with $177.3 million, or $1.25 per share, for the second quarter of 2003. Revenue rose 12 percent to $4.53 billion from $4.06 billion for the licensee for Blue plans in Indiana, Kentucky, Ohio, Connecticut, New Hampshire, Colorado, Nevada and Maine, and part of Virginia.
The number of members enrolled in its medical plans rose 8 percent, or 891,000, to more than 12.6 million, Anthem said.
Nevada's membership increased, but Anthem declined to say how many members it gained until the company files a report with the Nevada Division of Insurance. At the end of the first quarter, Anthem insured more than 72,700 Nevadans.
"We're growing in the market place because our products are designed to meet the needs of a variety of consumer audiences and because they're quite competitively priced," said Dr. William Bannen, Anthem's vice president of health care management for Nevada. Anthem reduced its Nevada premiums by 14 percent in November on its small-group employer plans and by 5 percent this month on large-group employer plans to be more competitive.
Las Vegas and Reno are two of Anthem's target markets and Anthem has increased the number of small-group employers it insures, Bannen said.
The earnings, released before the stock market opened, came in at the high end of the range of expectations among industry analysts surveyed by Thomson First Call.
Anthem increased its net income expectations for the year to $6.95 to $7.05 per share from $6.90 to $7 per share. It was the second straight quarter the company raised its earnings expectation.
But its stock dropped nearly 5 percent to $83.82 per share in mid-morning trading.
The cash-and-stock merger with Thousand Oaks, Calif.-based WellPoint, announced last October, would create the nation's largest health insurance company. It would bring together the nation's two largest Blue Cross Blue Shield companies.
California's Department of Insurance withheld approval of the merger Friday, saying the deal would pull millions of dollars out of California, lower health care quality for consumers and give too much severance pay to executives while 6 million state residents lacked health insurance.
"We have reviewed the DOI's written decision and will promptly initiate legal proceedings to challenge it," David Frick, Anthem's executive vice president and chief legal officer, said in a company news release. "In addition, we will consider other options that may be available to us in order to complete the merger."
In a news conference Friday anticipating rejection of the deal, Anthem Chairman and Chief Executive Larry Glasscock said he believed the merger partners eventually would complete the deal, even if the setback created an uncertain timetable for doing so.
Nine other affected states, the U.S. Department of Justice and Puerto Rico have approved the deal.
Nevada was not among the states that had to approve the deal because neither Anthem nor WellPoint are based in Nevada, but the Nevada Division of Insurance said it is monitoring the situation to make sure the company does not increase its costs and reduce its benefits.
The merger could affect Anthem's more than 72,700 insured Nevadans and WellPoint's 54,000 Nevada policyholders.
Anthem says Nevada members will not be hurt by the deal.
"We have maintained that our member premiums will not go up as a result of this merger," Bannen said. "The reality is that we conduct business in a free market -- our pricing must be competitive or else we wouldn't be able to sell our products."
Business writer
Michelle Swafford contributed to this report.
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