Centene lifts profit forecast on cost control benefits

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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