WellCare Health Plans (WCG) to Take Reserve Charge on Iowa Contract; Leerink Partners Would Buy on Weakness

Leerink Partners reiterated an Outperform rating on WellCare Health Plans (NYSE: WCG) after the company decided that it will take a Premium Deficiency Reserve charge in anticipation of losses in the first 18 months of the Iowa contract. This is prudent given several new State Managed Medicaid contracts across OH, TX, CA, KY, and FL have resulted in losses for the health plans for the first 12 months. Analyst Ana Gupte would buy on current weakness.

Gupte commented, "WCG is taking a Premium Deficiency Reserve charge in anticipation of losses in the first 18 months of the Iowa contract. We think this is a prudent and conservative decision that will help them with earnings volatility that is inevitable in the first year of a new Managed Medicaid contract. They fully expect to be profitable after 18 months and will be likely sooner than that. All players have gotten the same rate so this is not WCG specific; however, they are smaller and have been conservative on their reserving practices as a consequence. In our view, the stock will recover; it is an overreaction."

For an analyst ratings summary and ratings history on WellCare Health Plans click here. For more ratings news on WellCare Health Plans click here.

Shares of WellCare Health Plans closed at $89.24 yesterday.

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