Josh Nathan-Kazis

Shares of health insurer Centene fell on Friday on concerns about medical costs in the company's Medicaid plans, amid what has been an exceedingly rocky earnings season for the managed-care firms.

Centene's first-quarter earnings, released Friday, beat expectations.

The company reported revenue of $46.6 billion for the first quarter, better than the $42.8 billion consensus estimate, according to FactSet. Adjusted diluted earnings per share were $2.90, beating the $2.52 consensus estimate.

The guidance for the rest of the year, however, was mixed. Centene maintained its full-year earnings guidance, and raised revenue guidance.

But it pushed up its anticipated medical loss ratio, the key metric that tracks the proportion of its premiums it pays out to cover medical expenses. A higher medical loss ratio means more costs and fewer potential profits.

Centene said it expects a medical loss ratio, which it calls a health benefits ratio, of 88.9% to 89.5%, up from the company's prior guidance of 88.4% to 89%. Analysts had been expecting a medical loss ratio of 88.7%, well below the new guidance midpoint of 89.2%.

Shares were down 7.3% on Friday. The dip points to deep investor anxieties over Medicaid costs, amid broader struggles by the larger insurers to get a handle on medical spending.

Centene earnings come just over a week after shares of UnitedHealth Group crashed by more than 20% as the company cut earnings guidance for the year amid growing worries about its Medicare Advantage business. On Thursday, the insurer Molina Healthcare fell 5.5% on its own first-quarter earnings.

Centene specializes in managing Medicaid plans, which are jointly funded by states and the federal government, and which offer health and long-term care insurance to more than 80 million low-income people in the U.S.

Of the 28.9 million people on Centene's plans as of March 31, 11.4 million were in traditional Medicare plans. The rest of Centene's members are in a mix of commercial plans, Medicare plans, and individual plans offered through the marketplaces created by the Affordable Care Act.

In the first quarter, the medical loss ratio for the company's Medicaid business was 93.6%, up sharply from 90.9% in the same quarter last year. That was worse than expectations, according to Jefferies analyst David Windley, who wrote that the consensus had been 92.5%.

"Bottom-line, [Medicaid] MLR was above expectations and understanding the cadence of trend changes and [management] commentary is important," Windley wrote.

The raised revenue guidance was due to better-than-expected performance in enrollment in the individual marketplace plans, and in Medicare member retention, the company said.

Centene increased 2025 premium and service revenue guidance by $6 billion, which helped push total revenue guidance to range from $178.5 billion to $181.5 billion. The company had previously said to expect total revenue of $166.5 billion to $169.5 billion.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

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April 25, 2025 10:26 ET (14:26 GMT)

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