Finance & Business World

WellPoint Inc.’s decision to cut 2008 guidance cast an ominous shadow over the health insurance industry Tuesday, as Wall Street worried about the wider impact of higher medical costs and a weak economy.

Shares of Indianapolis-based WellPoint Inc. plunged $17.11, or 26%, to $48.72 in afternoon trading, following its announcement late Monday that it would slash profit expectations. The company cited several factors, including medical costs, lower fully insured enrollment and a weak economy.

Its peers felt the weight of that decision, as several stocks tumbled 10% or more. The sector’s decline was in sharp contract to the overall market, with the Dow Jones industrials surging nearly 230 points. Standard & Poor’s 500 index and the Nasdaq composite index also posted gains.

"Following WellPoint’s sharp downward revision to its earnings outlook, we believe the company’s view of higher medical costs is likely systemic, and we expect other managed care plans to report similar issues," said J.P. Morgan analyst William D. Georges, in a note to investors.

Other issues, including election year concerns and credit risks will likely weigh down the sector for most of the year, he added.

Hartford, Conn.-based Aetna Inc., early Tuesday, reaffirmed that 2008 profit is expected to fall short of Wall Street forecasts. Shares fell $4.76, or 10.2%, to $41.75.

Goldman Sachs’ Matthew Borsch downgraded his view of the managed care sector to "Neutral" from "Attractive."

"WellPoint’s problems reflect company-specific underwriting error, but also reflect industry-wide pricing pressures that are now combined with upward pressure on underlying medical cost trends, substantially increasing the risk that the current cyclical slowdown in managed care becomes an outright downturn," he wrote.

Likewise, Bear Stearns analyst John Rex lowered his outlook on the sector to "Market Weight" from "Market Perform", saying he had already factored in political fears, less state funding and a light flu season.

"Yesterday, however, WellPoint opened up what we consider to be the ultimate managed care earnings fear: rising medical costs," he said, in a note to investors pay day loans. A health insurer’s medical cost ratio measures the percentage of each dollar in premiums health insurers spend on patient care. Higher ratios mean higher costs.

Citi analyst Charles Boorady, meanwhile, said the issues cited by WellPoint are most likely company-specific. He reaffirmed a "Buy" rating for the company, but lowered his price target to $81 from $100. He reaffirmed "Buy" ratings for several other companies.

Shares of Louisville, Ky.-based Humana Inc. fell $11.91, or 19%, to $50.79, while shares of Minnetonka, Minn.-based Unitedhealth Group Inc. fell $4.53, or 10.1%, to $40.52 and shares of Bethesda, Md.-based Coventry fell $9.08, or 18.4% to $40.32.

Philadelphia-based Cigna Corp. fell $4.05, or 9.5%, to $38.88 and Woodland Hills, Calif.-based Health Net Inc. fell $5.78, or 13.4%, to $37.28. 

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Texas Instruments Inc. lowered its expectations for first-quarter profits and revenue, citing lower-than-expected sales of its chips used in wireless devices.

The Dallas-based chipmaker said it now expects earnings for the quarter ending March 31 to be 41 cents to 45 cents a share, down from a previously expected 43 cents to 49 cents a share.

TI (NYSE: TXN) said first-quarter revenue will likely be between $3.21 billion and $3.35 billion for the quarter, compared with an earlier expected range of $3.27 billion to $3.55 billion.

The company expects semiconductor revenue for the quarter to reach $3.14 billion to $3.26 billion, rather than its prior expectation of $3.2 billion to $3.46 billion payday loan cash advance loan. Education Technology revenue will likely be $70 million to $90 million, unchanged from prior expectations, the company said.

TI's announcement came after the close of New York markets on Monday. The company's stock ended at $29.65 a share Monday, up 35 cents from its previous close.

Web site: www.ti.com.

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The number of homes under contract for sale was unchanged in January, leaving that measure of the battered real estate market just barely above the record low, according to the latest reading from the National Association of Realtors.

The Realtors’ Pending Home Sales Index came in at 85.9 in the month, the same as in December, which was the second-lowest reading on record.

The worst came last August at a revised reading of 85.8. That was when a collapse in the market for mortgage-backed securities put a squeeze on financing available for prospective home buyers.

The Pending Home Sales Index is considered a more forward-looking indicator of home sales than the same group’s more closely followed existing home sales report, which tracks sales at the time of closing, typically a month or two after a sales contract is signed.

The Pending Home Sales index was started in 2001, and a reading of 100 is equal to results that first year. Going into this year, the record low had been in September 2001, when the 9/11 terrorist attack rattled buyer confidence and sent the index down to 89.8.

But the problems in the mortgage markets and the decline in home values have hit buyer confidence even harder, with the last six months seeing readings at or below that previous record low.

The Realtors also released an updated economic and sales outlook that now sees the sales pace and prices for existing homes during the first half of this year slightly worse than in its February estimate. But it is still sticking with a forecast of a modest turnaround in the second half of the year.

For the full year it sees a 1.2% decline in median home prices, unchanged from its earlier estimate and nearly matching the 1.4% decline posted in 2007, the first year on record that the group has seen a full-year drop in the value of existing homes sold.

The group is forecasting a steeper 6.1% drop in new home prices for the year, wider than its earlier estimate of a 4.3% decline payday advance. The glut of new homes for sale on the market, and weak prices, have hit the results of the leading homebuilders.

Luxury homebuilder Toll Brothers (TOL, Fortune 500), the No. 7 builder by revenue, reported a sharp drop in revenue when it reported its second straight quarterly loss a week ago, its only two periods of red ink as a public company.

Earlier in February D.R. Horton (DHI, Fortune 500), the No. 2 homebuilder by revenue, reported a much steeper-than-expected loss in the fourth quarter. That followed a report last month from No. 3 Lennar (LEN, Fortune 500) that showed a $1.25 billion fourth-quarter loss, the largest in the company’s history.

In addition No. 1 Centex (CTX, Fortune 500), No. 4 Pulte Homes (PHM, Fortune 500) and No. 5 KB Home (KBH, Fortune 500) all reported fiscal fourth-quarter losses far worse than forecasts in January, as did No. 6 Hovnanian Enterprises (HOV, Fortune 500) when it reported fiscal fourth-quarter results in December.  

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Drug developer Barr Pharmaceuticals Inc. said Wednesday it has filed a lawsuit against branded and generic drug maker Watson Pharmaceuticals Inc. for infringement of its patent on birth-control pill Seasonique.

Barr received the patent for the extended-cycle oral contraceptive on Jan. 22 and subsequently submitted the patent to the U.S. Food and Drug Administration for inclusion in the Orange Book, a listing of patents.

On the same day, Watson notified the company that it had filed an abbreviated new drug application that included a paragraph IV certification with the FDA to make a generic version of Seasonique.

Barr has filed the lawsuit to enforce the patent and prevent Watson from marketing a competing product before the patent’s expiration in January 2024, the company said http://payday-faxless.com. Barr also has new-product regulatory exclusivity for Seasonique until 2009.

Barr (BRL) shares tumbled 4.4% on the New York Stock Exchange Wednesday. Shares have traded between $45.41 and $58.38 in the past 12 months. Watson (WPI) shares gained 1.6%. 

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U.S. auto sales fell in February, as worse-than-expected reports issued by carmakers Monday showed continuing weakness in the face of a troubled economy.

In anticipation of further sales declines, both Ford Motor Co. and General Motors said they plan to cut second-quarter production - Ford by 10% and GM by 5%. First-quarter manufacturing will remain unchanged.

"We’re in a recession, at least as far as car sales are concerned," said analyst David Healy of Burnham Securities. "You can blame it on the state of the economy, not on any particular automaker."

Automobile sales from domestic carmakers, fell 11% in February compared with a year ago, according to sales tracker Autodata, but they managed to hold on to 51.2% of the market compared to foreign manufacturers.

American automakers took the biggest sales hits in February.

General Motors, the world’s largest automaker, saw a 12.9% drop in the sales of cars and light trucks in February, worse than Edmunds.com’s predicted decline of 9.5%. The February numbers were unadjusted for the extra day this year.

GM blamed the percentage drop on unusually strong sales in February 2007, when there was a 3.7% increase.

"If it hadn’t been such a tough comparison, the decline would’ve been more in-line with the industry," said Healy.

GM reported strong sales of its fuel-efficient models. Sales of the Chevrolet Cobalt were up 56%, and sales of the Pontiac G6 were up 50%.

Sales of light GM (GM, Fortune 500) trucks fell 19.2%.

Ford said total vehicle sales fell 6.9% compared to a year earlier, with about 60% of the declines coming from sales to rental companies cash advance in one hour. Edmunds.com predicted a decline of about 6.7%.

The company reported a 36% increase in sales of its re-designed Ford Focus cars, aimed at younger consumers. Buyers in the 16-to-35 age group made up 32% of Focus sales.

Crossover SUV sales grew 10% as traditional SUV sales fell 22%.

Overall Ford (F, Fortune 500) truck sales fell 5.6%.

Chrysler reported a sales decline of 14% as it cut back on sales to rental companies, missing the Edmunds.com prediction of a 6.7% decline. Total car sales rose 8.6%, but were unable to offset a 22.4% decline in truck sales.

Sales of Asian and European brands were both lower in February, according to Autodata, with Toyota Motor Co., the number one foreign automaker posting the sharpest decline.

Toyota reported a sales decline of 2.8% over the previous year, with the largest decline coming from its Lexus division. Edmunds.com had expected Toyota’s sales to grow 7.9%.

Sales of the Prius hybrid fell 10.9%.

Sales of Toyota’s (TM) light trucks fell 0.8% overall, but the company’s Tundra full-size pickup reported a sales jump of 48.9%.

Honda Motor Co. (HMC) showed sales growth. They were up 4.9%, still below the Edmunds.com forecast of 7.4%.

Overall, automobile industry sales fell 6.3% in February, according to Autodata. 

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McGrath & Associates was named the design-build contractor for Sev-Rend Corp.’s new $3.6 million, 45,000-square-foot manufacturing facility and corporate headquarters in Collinsville, Ill., McGrath said Monday.

The building will provide office space, manufacturing facilities and expansion room for Sev-Rend, a St. Louis-based manufacturer of high-performance packaging products.

The company will move from its current home at 1920 Kingshighway Blvd. in St. Louis to 5301 Horseshoe Lake Road in Collinsville. Sev-Rend has been in St. Louis for 112 years and currently has 15 employees low rates payday advance. The company plans to expand to 18 employees by time it moves. Sev-Rend will receive tax increment financing for relocating to Collinsville, according to a release.

Oates Associates is the civil engineer and Dial is the architect. The project is financed by Commerce Bank and is scheduled for completion in July 2008.

McGrath & Associates Inc. is a St. Louis-based general contractor and construction manager.

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Media giant Time Warner Inc. said Thursday its Warner Bros. Entertainment studio would absorb its New Line Cinema unit, an independent studio that redistributed quirky films like "Reefer Madness" and went on to make blockbusters like "The Lord of the Rings" trilogy.

New Line founder Robert Shaye and his co-chief executive, Michael Lynne, decided to leave the 40-year-old studio but were discussing possible future business deals with the conglomerate.

"New Line has been our respective life’s work as well as our second family," Shaye and Lynne said in a joint statement. "While we’re sad to be leaving, we’re enormously proud to have overseen its extraordinary growth."

New Line will maintain separate development, production and marketing departments but will integrate those functions with its new parent division to cut costs and improve profitability, Time Warner (TWX, Fortune 500), the parent company of CNNMoney.com, said.

The new alignment also will help the two companies coordinate film releases and let New Line benefit from the international and digital distribution contracts of Warner Bros., the company said.

As an example of lost revenue opportunities, New Line’s "The Golden Compass" made $70 million domestically through Feb. 24 but raked in $261 million abroad, from which the studio saw limited benefit because it had to sell those distribution rights to various other companies.

The Warner Bros. international network will allow Time Warner to reap such sales directly.

The move marks the first major restructuring effort by Time Warner President and CEO Jeff Bewkes since he took over as chief executive Jan http://payday-nofax.com. 1.

Bewkes is under pressure to boost Time Warner’s share price, which stagnated during the tenure of Dick Parsons, who took over as CEO in 2002 after a difficult merger with AOL.

Shares fell 51 cents, or 3.1 percent, Thursday to close at $16.02 but rose 11 cents in after-hours trading.

Media analyst Howard Vogel called the New Line move "a relatively easy and simple step to improve efficiency" at Time Warner.

But he said it signaled the departure of two industry veterans who had established New Line’s edgy lineup with hits such as "A Nightmare on Elm Street" in 1984.

New Line was bought in 1994 by Ted Turner’s Turner Broadcasting System, which was acquired by Time Warner two years later.

"They never intended to be part of Time Warner and Warner Bros.," Vogel said of Shaye and Lynne.

New Line has several potential hits in production, such as the next film in the "Rings" series, "The Hobbit," which is set for release in 2010, and "Sex and the City: The Movie" due to hit theaters in May.

Among Warner Bros.’ franchises are the "Harry Potter" series. It also made the recent movies "Sweeney Todd: The Demon Barber of Fleet Street" and "I Am Legend."

Time Warner’s other divisions include AOL, Time Inc., Time Warner Cable, Home Box Office, Turner Broadcasting System and Warner Bros. Entertainment. 

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Credit rating agency Moody’s Investors Service on Thursday said it put Fannie Mae’s "B+" bank financial strength rating on review for possible downgrade.

Fannie (FNM), the largest buyer and backer of U.S. home loans, said Wednesday it lost nearly $3.6 billion in the fourth quarter of 2007, and $2.1 billion for the year, amid mounting home-loan delinquencies and soured bets on interest rates.

"This loss exceeded our expectations and represents a significant deterioration of surplus regulatory capital," Moody’s said in a statement. Moody’s said it expects Fannie to have sizable losses in the first half of 2008 and possibly a net loss for the year due to the continued deterioration in the residential mortgage sector.

Moody’s affirmed Fannie’s "Aaa" senior debt, "Prime-1" short-term debt, "Aa2" subordinated debt and "Aa3" preferred stock ratings with "Stable" outlooks pay day loan.

Mortgage volume has fallen rapidly as banks tighten lending standards in response to rising delinquencies and defaults.

Fannie Mae could get relief from its dwindling capital surplus requirements if its federal regulator decreases the requirement, something it said it would discuss with Fannie Mae.

Moody’s financial strength rating measures a financial institution’s likelihood of requiring financial assistance from third parties to continue operating normally. 

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