Centene Slashes 2025 Guidance and Posts Surprise Loss
The company now expects adjusted earnings of $1.75 a share in 2025, far less than the more than $7.25 a share it projected earlier in the year. The figure could fall even further, to $1.25 a share, depending on the progress Centene makes in its Medicaid business.
Centene had pulled its 2025 guidance earlier this month, citing precipitously rising risks in the ACA business. Since then, the company's struggles seem to have heightened. At the time it said insurance market trends that veered from its assumptions threatened $1.8 billion in revenue, while Friday it increased that figure to $2.4 billion based on more data.
Shares dropped as much as 16% before markets opened in New York Friday though later pared losses. They had fallen 56% since the start of the year through Thursday's close.
The insurer chalked up the second-quarter loss to a miscalculation in its Affordable Care Act, or ACA, business — the same reason it pulled its outlook earlier this year. Insurers receive compensation for taking on sicker patients in that program and Centene said it would receive less of that money than previously expected.
For the second quarter, Centene announced an adjusted loss per share of 16 cents. Wall Street analysts expected a profit of 55 cents per share.
'We are disappointed by our second-quarter results, but we have a clear understanding of the trends that have impacted our performance, and are working with urgency and focus to restore our earnings trajectory,' Sarah London, chief executive officer of Centene, said in the company's earnings statement.
In the second quarter, Centene spent 93% of premium revenues of medical costs, higher than the average analyst expectation of 91.6%. Investors prefer a lower number.
The insurer said its health benefits ratio, the percentage of premium revenues spent on medical costs, rose from last year, largely because of the ACA revenue issue. Centene said it also saw higher medical costs in ACA plans, as well as increased costs in Medicaid, which mostly came from behavioral health, home health, and expensive drugs.
Because of various government programs that are likely to reduce health care coverage, patients may be seeking more medical care now while they still can, boosting medical spending, the company said in a regulatory filing Friday.
--With assistance from John Tozzi.
(Updates with guidance starting in first paragraph.)
More stories like this are available on bloomberg.com
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