By Josh Nathan-Kazis and Elsa Ohlen

Health insurer earnings got off to a grim start on Thursday, as Elevance Health slashed its full-year earnings guidance, citing higher medical spending.

The company's second quarter results weren't all that bad. Adjusted diluted earnings came in at $8.84 per share, a bit below the FactSet consensus estimate of $8.91 per share. Elevance's medical cost ratio, which tracks the proportion of premiums paid out to cover medical expenses, was 88.9%, roughly in line with the 88.8% consensus estimate, but up from 86.3% for the same quarter last year.

The full year guidance cut, though, was dramatic. Elevance now expects 2025 adjusted net income per diluted share of $30, down from its prior guidance of between $34.15 and $34.85 per share -- a 13% pullback at the midpoint.

Elevance shares were down 11.3% on Thursday. The stock had been down 31.7% over the past 12 months as of the end of the day on Wednesday.

The outlook, which was the first report of the season from a major insurer, wasn't much of a shock.

Managed care has been in an enduring funk that's only gotten worse this year. UnitedHealth Group, the giant of the health insurance industry, had a major blowup in April after a disastrous earnings report, and canned its CEO in May. Early in July, the insurer Centene pulled its guidance over problems with its marketplace plans, and its shares fell 40% in a single day.

Unexpected earnings misses are getting to be the norm in managed care. Companies blame higher-than-expected spending on medical services, often among seniors on Medicare Advantage. However, the real problems may be deeper, and more systemic. The enormous complexity of these businesses -- and the healthcare system they serve -- seems to be making it almost impossible for these companies to tell investors what to expect with any reliability.

The Elevance results were expected to be disappointing, and shares had already fallen early this month after Centene's guidance pull.

Elevance's results come just days after President Donald Trump signed a sweeping bill that will cut dramatically cut federal spending on Medicaid and the health insurance marketplaces. "While the external environment continues to evolve, we are focused on the areas within our control," the company's CEO, Gail Boudreaux said in a statement.

In laying out its guidance cut, the company cited the "ongoing and industry-wide impact of elevated cost trends in ACA and Medicaid."

ACA refers to plans sold on the health insurance marketplaces created under the Affordable Care Act. Medicaid is the insurance program for low-income Americans, paid for by state governments and the federal government.

Elevance revenues for the quarter were $49.4 billion. Analysts polled by FactSet had expected revenue of $48.2 billion.

The "results were weak but probably in line with the very low expectations heading into the quarter," Leerink Partners analyst Whit Mayo wrote in an early morning note. "The updated guide of $30 EPS... now hopefully provides a better reset for the company, however we remain generally cautious on the sector given the challenging operating environment and further risks in 2H."

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com and Elsa Ohlen at elsa.ohlen@barrons.com

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July 17, 2025 10:25 ET (14:25 GMT)

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