Centene long-term forecast allays concerns over Medicare Advantage segment

Bengaluru: Centene Corp on Tuesday maintained its long-term profit growth targets allaying investor concerns over a blow to its business from competition in the fast-growing Medicare Advantage segment, sending the health insurer's shares up 4 per cent.

Centene received a lower "Star Rating" for its Medicare Advantage health offerings in October, raising concerns that people could favour plans with better ratings as competition heats up in this space.

Health insurers also face challenges to earnings in 2024 due to lower government payments for Medicare Advantage, while low-income people could shift out of Medicaid as COVID relief measures that had allowed them to remain on these plans are revoked.

Centene on Tuesday cut its 2024 adjusted profit outlook to above $6.60 per share from at least $7.15 per share forecast earlier, signaling that it would take most of the hit from challenges to the government-backed health plans this year.

A "more realistic view of 2024 should be comforting" to Wall Street, Oppenheimer analyst Michael Wiederhorn said in a note.

The company said it remained confident of achieving annual earnings growth of 12-15 per cent in the second half of the decade, adding that it was confident it could be competitive in the Medicare market in the long term.

The reaffirmed forecast suggests "that the 2024 weakness may merely represent a reset year rather than an ongoing growth trend", Morningstar analyst Julie Utterback said.

The company raised its profit outlook for this year to at least $6.40 per share from $6.25 to $6.40 forecast earlier. Excluding items, Centene earned $2.11 per share in the reported quarter, above Refinitiv IBES estimates of $2.09.