Health insurer Centene eases investor fears with better-than-expected profit

By Sriparna Roy and Unnamalai L

October 25, 20249:40 PM GMT+7

Source

A sign for Fidelis Care, part of the Centene Corporation, is seen in Queens, New York, U.S., November 16, 2021. REUTERS/Andrew Kelly/File Photo Purchase Licensing Rights

Summary

• Company maintains annual profit forecast despite higher medical costs

• Analysts surprised by better-than-expected quarter amid Medicaid pressure

• Centene shares jump nearly 12% after earnings beat

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Oct 25 (Reuters) - Centene (CNC.N), opens new tab beat Wall Street estimates for third-quarter earnings on strength in its commercial health insurance plans and maintained its annual profit forecast, easing investor fears after dour targets from rivals last week.

Shares of the health insurer jumped nearly 12% to $68.92 in early trading on Friday. They fell 16% in the last week after rivals Elevance (ELV.N), opens new tab and UnitedHealth (UNH.N), opens new tab warned of high costs in government-backed insurance plans.

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Costs for insurers providing Medicaid plans have been elevated after a federal policy that required insurers to keep low-income Americans enrolled in health plans during the COVID-19 pandemic ended last year, and left the insurers with more sick patients.

The quarter was "much better than expected", said Baird analyst Michael Ha, adding that it was a "surprise" after peers reported "unprecedented levels" of Medicaid pressure last week.

Centene said it expects costs to ease next year as the 'mismatch' between what states pay insurers to cover Medicaid members and the amount the insurers spend on care for the members minimizes.

It is "not a matter of if, but when, we get back to equilibrium", CFO Drew Asher said in a call with analysts.

For the full year, Centene expects a medical loss ratio — the percentage of premiums spent on medical care — of 88.3% to 88.5%, compared with analysts' average estimate of 87.93%, according to data compiled by LSEG.

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Reporting by Amina Niasse in New York City, Sriparna Roy and Unnamalai L in Bengaluru; Editing by Shilpi Majumdar and Shinjini Ganguli

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