Centene Reports Strong Q3 Earnings

By: Sriparna Roy and Unnamalai L
(Reuters)

Centene has surpassed Wall Street estimates for its third-quarter earnings, driven by robust performance in its commercial health insurance plans. The company has sustained its annual profit forecast, alleviating investor concerns that arose after disappointing targets from competitors last week.

In early trading on Friday, shares of the health insurer soared nearly 12% to $68.92, recovering from a 16% drop in the past week due to warnings from rivals Elevance and UnitedHealth (NYSE: UNH) regarding high costs associated with government-backed insurance plans.

Insurers offering Medicaid plans have faced increased costs following the cessation of a federal policy that mandated the enrollment of low-income Americans in health plans during the COVID-19 pandemic, resulting in a rise in patients with health issues.

Baird analyst Michael Ha noted that the quarter was significantly better than expected, calling it a surprise given the unprecedented Medicaid pressures reported by peers last week.

Centene (NYSE: CNC) indicated that it anticipates a reduction in costs next year as the disparity between state payments to insurers for Medicaid coverage and the expenditures by insurers for member care narrows.

CFO Drew Asher stated, "It is not a matter of if, but when, we get back to equilibrium," during an analyst call.

For the entire year, Centene projects a medical loss ratio (the percentage of premiums allocated to medical care) of 88.3% to 88.5%, surpassing analysts' average estimate of 87.93%. The reported ratio for the quarter ending on September 30 was 89.2%, exceeding analysts' expectations of 88.03%.

Despite the elevated costs, the company has upheld its annual profit forecast, projecting earnings of greater than $6.80 per share, compared to the analysts' expectation of $6.73. Investors had braced for a potential reduction in Centene's forecast, according to Stephens analyst Scott Fidel.

Centene disclosed a quarterly profit of $1.62 per share, exceeding the analysts' average estimate of $1.33.