Elevance forecasts strong 2024 profit, says medical costs to stay flat
By Khushi Mandowara and Puyaan Singh
(Reuters) -Elevance Health forecast 2024 profit above expectations on Wednesday after higher premiums in its commercial insurance business helped keep medical costs in check in the fourth quarter, sending its stock up nearly 4% in early morning trade.
The raised forecast comes after shares in the health insurance sector were pummeled after a warning from rival Humana last week, which said an increase in demand for medical care among older adults could hit its 2024 outlook.
Shares of rivals such as CVS and Cigna rose over 1% in morning trading.
While demand for some procedures such as knee and hip replacements among older adults was elevated in the fourth quarter, overall expenses were in line with Elevance's prior expectations, CFO Mark Kaye said.
The 2024 profit forecast is driven by the company's expectations that medical expenses will remain flat this year, and by the higher pricing of its commercial health insurance plans, Stephens analyst Scott Fidel said.
In comparison to Humana and UnitedHealth, both of which flagged an increase in medical procedures in the fourth quarter, Elevance has a lesser presence in the Medicare Advantage (MA) plans market, for people 65 and above.
Fidel said the lower exposure to MA plans likely helped keep Elevance's costs under control.
The health insurer's benefit expense ratio - the percentage of premiums it spent on medical care - was 89.2% in the fourth quarter, compared to analysts' average estimate of 89.4%, according to LSEG data.
Shares of the company, formerly known as Anthem, touched a nine-month high of $489.5.
(Reporting by Puyaan Singh and Khushi Mandowara in Bengaluru; Editing by Pooja Desai)
