Elevance's higher premiums keep costs under control, boost quarterly profit

By Mariam Sunny and Bhanvi Satija

(Reuters) - Elevance Health on Thursday reported quarterly profit above Wall Street estimates and slightly raised its annual earnings forecast, as higher premiums from commercial insurance plans helped keep medical costs in check.

The industry has struggled in recent quarters with high medical costs, as demand from older adults for medical care remains robust. Elevance said that demand trends were in line with the company's expectations, echoing comments from UnitedHealth earlier this week.

Shares of Elevance rose over 5% and lifted those of rivals UnitedHealth, Centene Corp and Humana between 2% and 4%.

Compared to UnitedHealth and Humana, Elevance has a smaller presence in the government-backed Medicare Advantage (MA) market for older adults, helping keep the Indianapolis-based insurer's costs under control.

Medicare members make up only 6.3% of Elevance's total memberships as of March 2024.

Elevance banks more on commercial plans and state government-backed Medicaid health plans, which cover medical care costs for people with limited income.

Commercial plan memberships grew 2.1% to 27.45 million at the end of March and helped partially cushion impact from a drop in Medicaid plan members.

Morningstar analyst Julie Utterback said the membership shift to its profit-yielding commercial plans helped drive Elevance's earnings beat, and that the company is likely to benefit from the shift through 2025.

Elevance's quarterly revenues from premiums was $35.7 billion, above analysts' expectations of $35.54 billion.

A recent cyberattack at UnitedHealth's technology unit Change Healthcare also raised uncertainty around insurance claims processing. However, Elevance's chief financial officer, Mark Kaye, said the hack did not have "any discernible impact" on medical costs for the insurer.

Elevance reported a medical loss ratio, the percentage of claims paid to premiums collected, of 85.6% for the first quarter - better than the 85.97% ratio expected by analysts, according to LSEG data.

It raised its annual adjusted profit forecast by 10 cents and now expects it to be greater than $37.20 per share.

"We're intentionally remaining thoughtful and prudent in our outlook," said Kaye, citing variability around medical costs.

On an adjusted basis, Elevance made a profit of $10.64 per share for the quarter, above analysts' estimates of $10.53 per share.

(Reporting by Mariam Sunny and Bhanvi Satija in Bengaluru; Editing by Maju Samuel)