WellPoint stock ascends to a record $110 per share
By Wall, J K | |
Proquest LLC |
But the 30-percent run-up has just managed to bring the giant health insurer back into the pack of its peers.
Its rise during that period has been roughly three times faster than the Standard & Poor's 500 index and faster than all other major health insurers other than
But even with that surge, investors are paying less for WellPoint's stock - measured against its expected profits - than for its peers'. A share of WellPoint stock costs 12 times the earnings per share
"WellPoint shares trade at a discount to long-term sustainable earnings power," wrote
The reason? Obamacare is proving to be a boon to the company, not the bust that many investors feared.
WellPoint's business is concentrated in the small-employer and individual-insurance markets - far more so than its big insurer peers. Many investors feared Obamacare would lure many of those customers to buy on exchanges, where the company must compete with numerous other health plans for business.
But things have gone well so far. WellPoint CEO
"Enrollment has been, I think, a very strong success story for us," Swedish said.
Wright, the Sterne Agee analyst, expects WellPoint's individual health insurance plans to enroll 2.3 million this year versus 1.8 million last year. He expects individual enrollment to rise to nearly 4 million in 2016.
That growth has been fueled by the generous tax credits Obamacare makes available to buyers in the exchanges. According to data released by the Obama administration, 87 percent of enrollees in the federally run exchanges qualified for tax credits, which averaged nearly
All WellPoint has to do to capitalize on this "new pipeline of growth" is to hold on to the market share it had before Obamacare, WellPoint Chief Financial Officer
"That would translate into 3 million new lives in the next five years and
It has worked out that way in
The federal government is also paying to expand coverage under the
Profits margins on publicly subsidized coverage are smaller than traditional commercial health insurance.
Even so, Wright expects WellPoint's income from operations to surge from less than
WellPoint executives have been bullish on Obamacare for at least a year. But the company's performance in the first quarter finally convinced some skeptics. WellPoint's health plans signed up 962,000 new members among employers and 121,000 new
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