Oct 21 (Reuters) – Elevance Health on Wednesday raised its annual profit forecast after posting better-than-expected quarterly results, helped by lower medical costs.
Health insurers have been grappling with declining membership, as well as rising costs from elevated demand for behavioral health services and specialty drugs in government-backed plans.
Elevance, like other health insurers, has adjusted its pricing to reflect higher medical costs. For the third quarter, the company said higher premium yields and service fees offset lower membership, helping the company’s insurance business post a $1.1 billion rise in revenue from a year earlier.
“We view this quarter as solid, and it illustrates that Elevance is on the path to margin recovery in key business segments,” Mizuho analysts said in a note.
For 2027, the company expects to deliver at least 12% growth in adjusted profit when compared to its earnings baseline of at least $26.75 per share, which excludes certain non-recurring items such as net investment income.
Last week, larger rival UnitedHealth Group also raised its full-year profit forecast, attributing the improvement to plan design and new pricing on products.
Elevance forecast full-year adjusted profit to be at least $29 per share, compared with its previous outlook of at least $27 per share. Analysts on average estimate an annual profit of $27.23 per share, according to data compiled by LSEG.
LOWER MEDICAL COSTS, MEMBERSHIP
Third-quarter medical membership of about 44.9 million as of September 30 decreased by 487,000 compared to the prior year, the company said.
For the third quarter, the health insurer reported a medical loss ratio, the percentage of premiums spent on medical care, of 90.6%, better than analysts’ expectations of 91.17%.
The company said lower costs were due to better performance in its Medicare Advantage and Obamacare plans compared to the prior year.
On an adjusted basis, the company earned a profit of $6.99 per share that included a non-operating benefit of about $1.85, Elevance said. Analysts were expecting a profit of $4.68 per share.
Cantor Fitzgerald analyst Sarah James said the stock reaction could be muted as the earnings beat was largely driven by non-operating items.
The company also named Jeff Park as president of Carelon, its health services business, effective December 1.
(Reporting by Kamal Choudhury and Sneha S K in Bengaluru; Editing by Leroy Leo)
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