Elevance raises 2023 profit forecast on easing fears over medical costs

(Reuters) -Health insurer Elevance Health raised its annual adjusted profit outlook and beat Wall Street estimates for third-quarter profit on Wednesday, on the back of lower-than-expected medical costs, sending shares over 2% higher.

Elevance, however, took a nearly $700 million charge due to job cuts and write-offs from some technology assets after a strategic review in the third quarter to shield itself against several hits to its business next year.

The company expects to generate operating expense savings of about $750 million per year from measures taken following the review, Elevance Chief Financial Officer John Gallina said on a conference call with investors.

Health insurers have been hurt by a decline in Medicaid memberships following the withdrawal of pandemic-related relief measures, as many who had signed up for the government-aided plans were deemed ineligible from April 1 of this year.

Elevance had said in July it expects to retain 40% to 45% of its Medicaid members by the end of the first cycle of those re-determinations.

“By the time the dust settles in the third quarter of 2024, we feel good about that estimate. It’s just going to be a little bumpier or rockier along the way because of the gaps in coverage and because of the administrative churn,” Gallina said.

Elevance’s medical memberships fell by 664,000 in the third quarter due to attrition in Medicaid.

Rival Centene said last month it will lay off about 2,000 employees amid major revenue loss from the fall in Medicaid memberships.

Elevance’s medical loss ratio, the percentage of claims paid to premiums collected, was 86.8% for the third quarter compared with expectations of 87.32%.

The health insurer expects adjusted full-year profit of more than $33 per share compared with analyst expectations of $32.93 per share.

The company’s adjusted profit per share of $8.99 beat LSEG estimates of $8.44.

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