Oct 21 (Reuters) – Elevance Health on Wednesday raised its annual profit forecast after posting better-than-expected quarterly results due to higher premiums and lower medical costs, driving the health insurer’s shares 2.1% higher in premarket trading.
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.
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’s upbeat quarterly performance reflects “stronger execution across our diversified portfolio and underscore the earnings power of the business,” CEO Gail K. Boudreaux said.
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%, lower than analysts’ expectations of 91.17%.
The company said lower costs were due to better performance in its Medicare Advantage plans for older Americans and those with disabilities as well as Obamacare plans compared to the prior year.
The company also said it plans to deliver at least 12% growth in 2027 adjusted profit from an earnings baseline of at least $26.75 per share.
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.
On an adjusted basis, the company earned a profit of $6.99 per share, compared with analysts’ average estimate of $4.68 per share.
(Reporting by Kamal Choudhury and Sneha S K in Bengaluru; Editing by Leroy Leo)
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