Health insurer Centene's upbeat quarterly profit forecast fails to impress

By Christy Santhosh

(Reuters) - Centene forecast second-quarter adjusted profit above Wall Street estimates, saying it does not have to make a previously expected payment under a "risk adjustment" program related to its government-backed Medicaid plans.

The company forecast an adjusted profit of $2.42 per share for the quarter, including the impact of the favorable adjustment, compared with analysts' average estimate of $1.98, according to LSEG data.

But shares of the Missouri-based company, which is due to report second-quarter results on Friday, fell 3% as analysts questioned if the forecast would have been better than estimates had it not been for the benefit.

Centene had expected to pay $1.3 billion under the program previously, but the U.S. Centers for Medicare & Medicaid Services said the company does not have to make any payment towards the program for 2023.

Oppenheimer analyst Michael Wiederhorn said while Centene's quarterly profit expectation clearly benefits from the gain related to the risk adjustment calculation, he estimated an adjusted profit of $1.44 per share for the quarter, below the average analyst estimate, without the adjustment.

He said Centene is facing significant headwinds.

A decrease in the number of Medicaid-eligible people this year due to the end of a pandemic-era policy has resulted in rising costs for insurers, with more sick people making up a large portion of members.

The company maintained its annual adjusted profit forecast of more than $6.80 per share for 2024, compared with expectations of $6.84.

In a regulatory filing on Tuesday, Centene also said it would have to make a payment in 2024 towards the government's risk adjustment program, for spending less than the regulatory minimum on patient medical services in 2023, in comparison to premiums collected.

The program distributes money from insurers who have relatively healthy enrollees to those with sicker patients and higher costs.

(Reporting by Christy Santhosh and Sriparna Roy in Bengaluru; Editing by Shinjini Ganguli)