Elevance Health stock slides after outlook cut amid rising medical expenses

Shares of Elevance Health (NYSE:ELV) fell 12% Thursday morning after the health insurer lowered its forecast for full-year earnings amid higher-than-expected medical expenses in the third quarter.

The managed care player expects full year adjusted profit per share of around $33 (vs. prior guidance of at least $37.20), below consensus of $37.26.

On Tuesday, industry bellwether UnitedHealth (UNH) beat Wall Street estimates with its Q3 results, but cost concerns in its insurance unit unnerved Wall Street.

Elevance (ELV) reported adjusted profit of $8.37 per share for the third quarter, missing analysts’ expectations by $1.28, while its operating revenue of $44.7B grew +5.2% Y/Y and topped estimates.

The increase in revenue was “driven by higher premium yields in Health Benefits segment and growth in CarelonRx product revenue, partially offset by membership attrition in our Medicaid business.”

The company reported benefit expense ratio of 89.5% (estimate 87.6%), an improvement of 270 basis points, driven primarily by the timing mismatch between Medicaid rates and the higher acuity of its members. Total expenses surged 6.2% Y/Y to $43.73M.

CEO update: “We remain confident in the long-term earnings potential of our diverse businesses as we navigate a dynamic operating environment and unprecedented challenges in the Medicaid business. We expect Medicaid rates will align with the needs of our members in time, and are taking proactive actions to enhance operational efficiencies that will ensure we emerge from this period even stronger.”

Shares of peer insurers also dropped premarket: Molina Healthcare (MOH) -11.18%, Centene (CNC) -8%, CVS Health (CVS) -1.68%, Humana (HUM) -2.18%.