(Bloomberg) -- WellPoint Inc., the second-biggest U.S. health insurer, reported profit that beat analysts’ estimates and raised its forecast, fueled by the addition of Amerigroup Corp. and slower growth in medical costs.

First-quarter earnings excluding one-time items were $2.94 a share, 56 cents higher than the average of 19 analysts’ estimates compiled by Bloomberg. Full-year profit is now forecast to be at least $7.80 a share, the Indianapolis-based health plan today said in a statement.

The results marked a good start for new Chief Executive Officer Joseph R. Swedish, who took over in March, six months after ex-CEO Angela Braly left amid investor complaints over earnings. The quarter was helped by one of Braly’s last decisions, the $4.9 billion purchase of Amerigroup, which made WellPoint the biggest provider of government-backed Medicaid plans for poor Americans.

“WellPoint looks like a case of underpromise and overdeliver,” said Thomas Carroll, a Stifel Nicolaus & Co. analyst based in Baltimore. “It’s nice to see a large beat with WellPoint, having not seen that from the company for a while.”

WellPoint shares jumped as much as 7.4 percent to $73.90, their biggest intraday gain since Aug. 29, the day after Braly’s resignation. The insurer climbed to $73.41 at 12:06 p.m. New York time.


Swedish Review

Swedish, 61, told analysts on a conference call that he was reviewing WellPoint’s assets and strategies. So far, “the overarching strategic framework seems reasonable,” he said.

The company faces major changes next year under President Barack Obama’s Affordable Care Act, which will open new online insurance markets for small businesses and people who buy their own insurance. The law also expands Medicaid. WellPoint, the biggest provider of small-business and individual coverage in the U.S., has said it plans to invest $400 million this year on integrating Amerigroup, preparing for the health law and expanding coverage for elderly Medicare patients.

Swedish, the former head of Catholic hospital system Trinity Health Corp., said his background will help the company in collaborating with physicians and hospitals. Still, he said he had no plans for big acquisitions of providers. He said he recognized WellPoint investors want more consistent performance.


CEO’s Emphasis

“I’m going to drive WellPoint forward with an emphasis on performance, transparency and accountability,” he said. “We need to be nimble and proactive.”

Amerigroup added about 2.7 million Medicaid customers after the deal closed in December, helping to offset declines in private-sector plans. Total medical expenses, while higher in the quarter, came in lower than anticipated, WellPoint said.

A lower-than-projected tax rate -- another benefit from the Amerigroup deal -- and share repurchases that totaled $340 million also propelled earnings, the company said. WellPoint said total enrollment rose 6.3 percent to 35.8 million members.

The quarter “should cheer investors given the anxiety around the execution in this name with a new CEO at the helm,” said Ana Gupte, a Dowling & Partners analyst in Farmington, Connecticut, in a note to clients today.

WellPoint said first-quarter net income rose 3.4 percent to $885.2 million, or $2.89 a share, from $856.5 million, or $2.53, a year earlier, Revenue gained 15 percent to $17.7 billion.


Guidance Raised

The insurer in January had forecast full-year profit of at least $7.60 a share and affirmed that outlook in March.

UnitedHealth Group Inc., the biggest medical insurer, announced first-quarter profit April 18 that also beat analyst estimates. The Minnetonka, Minnesota-based company fell in New York trading that day after it warned that its profit outlook for 2014 was endangered by cuts to Medicare, the government health program for the elderly and disabled.

Swedish, on today’s call, said WellPoint was re-evaluating its outlook for Medicare as well. The company may choose to defer $150 million in spending it planned to expand its Medicare business, he said.

While still predicting growth in Medicare, “we’re taking a closer look at where we might better spend our $150 million,” he said.

The program represents about 10 percent of WellPoint’s revenue, Swedish said.

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