Elevance beats profit estimates on lower-than-expected medical costs

Bengaluru: Elevance beat Wall Street estimates for quarterly profit on Thursday, partly helped by lower-than-expected spending on medical care for its members, sending shares of the health insurer up nearly 4per cent before the bell.

Health insurers have been battling with higher medical costs over the past few quarters. Elevance is less exposed to government-backed Medicare Advantage plans for people aged 65 and older. It banks more on commercial and Medicaid health plans.

Elevance had indicated in November that it expects pressure associated with its Medicaid business to continue into 2025, a pain point over the past few quarters for insurers who offer plans to cover medical expenses for people with low income.

After the end of a pandemic era policy, states began the process of determining if people were still eligible. As states redetermined eligibility for their Medicaid plans, healthier members fell off the rolls, leaving behind those who require more medical services.

Elevance expects the medical loss ratio - the percentage of premiums spent on medical care - to be 89.1per cent, above or below 50 basis points for 2025. Analysts on average were expecting the ratio to be 88.73per cent. Companies aim for a ratio close to around 80per cent.

For the fourth quarter, Elevance's medical loss ratio, a closely watched metric, was 92.4per cent compared to estimates of 92.65per cent.

The company sees annual adjusted profit per share to be between $34.15 and $34.85, compared with analysts' estimates of $34.58 per share, according to LSEG data.

On an adjusted basis, Elevance reported a quarterly profit per share of $3.84, beating estimates of $3.80. (Reporting by Sriparna Roy and Sneha S K in Bengaluru; Editing by Maju Samuel)