WellCare Health Plans announces financial results for the third quarter of 2009

WellCare Health Plans, Inc. (NYSE: WCG) today reported results for the third quarter and nine months ended September 30, 2009. As determined under generally accepted accounting principles (“GAAP”), the Company reported net income of $28.7 million, or $0.68 per diluted share, for the third quarter 2009, compared with a net loss of $18.2 million, or $0.44 per diluted share, for the third quarter 2008. Adjusted net income for the third quarter 2009 was $34.7 million, or $0.82 per adjusted diluted earnings per share, as compared with $48.4 million, or $1.15, for the third quarter 2008.

Adjusted net income for the third quarter 2009 was unfavorable to the third quarter 2008 principally due to the performance of Medicare Prescription Drug Plans (“PDPs”), the increase in the Medicaid segment medical benefits ratio (“MBR”) due primarily to premium rate changes below medical cost trend as well as the addition of the Hawaii program, and the decrease in investment and other income. Partially offsetting these unfavorable results were the growth in membership and premium revenue in the Company’s Medicare Advantage and Medicaid plans, and decreased selling, general, and administrative (“SG&A”) expense resulting mainly from lower sales and marketing costs.

“Our investments in infrastructure are strengthening service to our members, providers, and government clients,” said Heath Schiesser, WellCare’s president and chief executive officer. “Nevertheless, our financial outlook for 2010 remains challenging, as we face declining membership in our Medicare segment and continue substantial investments to improve our capabilities and cost structure.”

Operating results described in this news release are adjusted to exclude certain medical benefits and SG&A expenses for investigation-related matters that management believes are not indicative of longer-term business operations. Management believes adjusted amounts provide useful information for investors. Where applicable, adjusted results are reconciled to the most directly comparable results determined under GAAP. In addition, please also refer to the schedules in this news release that provide supplemental information reconciling historical results determined under GAAP to historical adjusted results.

Highlights of Operations for the Third Quarter

Membership as of September 30, 2009, decreased to 2.3 million compared with 2.5 million members as of September 30, 2008. Medicaid segment membership increased 2% year-over-year to 1.3 million, driven by growth in several markets and the addition of the Hawaii aged blind, and disabled (“ABD”) program earlier this year. Medicare Advantage membership of 240,000 on September 30, 2009, was unchanged from the prior year. Medicare stand-alone PDP membership decreased 22% year-over-year.

Premium revenue for the third quarter 2009 increased 2% year-over-year to $1.7 billion. The growth is attributable to increased Medicare Advantage and Medicaid plan premium revenue, offset in part by a decrease in Medicare PDP premium revenue.

Investment and other income was less than $2 million in the third quarter 2009, a decrease of 80% year-over-year, primarily due to reduced market interest rates and, to a lesser extent, lower average investment and cash balances.

Medical benefits expense of $1.4 billion increased 5% from adjusted medical benefits expense in the third quarter of 2008. The medical benefits ratio was 85.2% in the third quarter 2009, compared with an adjusted 82.9% in 2008. The 230 basis point increase in the MBR was driven by the performance of the Medicaid segment and Medicare Advantage private fee-for-service plans.

Adjusted SG&A expense was $186 million, or 11.1% of total revenues, compared with $206 million, or 12.6% of total revenues, for the same period last year. The decrease in expense resulted principally from lower sales and marketing costs, as well as improved operating efficiencies.