Oct 27 (Reuters) – Centene raised its annual profit forecast after reporting better-than-expected third-quarter results, as cost control measures and higher premium revenues helped the health insurer offset the impact from a decline in membership.
Higher medical costs in recent years due to elevated healthcare demand have squeezed margins for health insurers and prompted them to improve pricing and tighten cost controls.
Centene lowered its forecast for full-year medical cost ratio, a measure of premiums spent on medical care, to 90.4% to 91.1%, from 90.5% to 91.3% previously.
Medical costs in the reported quarter, however, remained unchanged from last year at 92.7%. Analysts had expected a ratio of 92.84%, as per LSEG estimates.
The company said quarterly medical costs were better than its expectations, benefiting from improved pricing in its Obamacare plans, established under former President Barack Obama’s Affordable Care Act, as well as better performance in its Medicare Advantage plans for older Americans.
“Centene’s beat and guidance increase demonstrate continued progression toward the 2027/2028 profit improvement we think investors are looking for,” said J.P.Morgan analyst John Stansel.
The company now sees 2026 adjusted profit to be more than $5.20 per share, higher than its previous expectation of more than $4.80 per share. Analysts expect a profit of $4.88 per share.
“Investors may be bracing themselves for uncertainty around Centene’s 2027 outlook given the headwinds gathering for its Medicaid business next year, such as new work requirements,” said Morningstar analyst Julie Utterback.
The company has been facing Medicaid enrollment losses due to stricter eligibility rules, which have pushed some beneficiaries off coverage rolls, leaving insurers with a relatively sicker population that requires more medical care.
Centene, however, said its Medicaid plans were on track. Medicaid is a government-funded health insurance plan for low-income individuals.
Chief executive Sarah M. London sounded upbeat about the company’s performance and said the recovery in earnings trajectory had been faster than previously anticipated.
On an adjusted basis, the company earned third-quarter profit of 58 cents per share, higher than analysts’ average estimate of 10 cents.
(Reporting by Padmanabhan Ananthan and Sneha S K in Bengaluru; Editing by Shinjini Ganguli)
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