Centene's concerns over Medicare market dull Q1 profit beat

Centene CNC said on Friday its Medicare insurance business would face several challenges next year, taking the sheen off a strong first-quarter earnings report from the health insurer.

The U.S. government's lower-than-expected final rates for 2025 Medicare Advantage (MA) reimbursements and elevated medicals costs due to strong demand for healthcare among older adults are expected to hit insurers offering MA plans intended for people aged 65 and older.

"The Medicare Advantage macro landscape remains challenging. We see final 2025 funding levels as insufficient with respect to general medical cost trend expectations," CEO Sarah London said on the earnings conference call.

Rival Humana on Wednesday withdrew its already down-scaled 2025 profit forecast, citing similar fears.

CFO Andrew Asher said the company would make its decisions on premiums and benefits in 2025 with "our eyes wide open."

Shares of the insurer were down 3% in morning trade, giving back premarket gains after the company posted upbeat first-quarter profit and raised annual profit forecast on higher premiums from its commercial insurance plans.

Centene raised its full-year premium revenue forecast by $1 billion to $135.5 billion to $138.5 billion.

On an adjusted basis, the health insurer now expects annual profit of more than $6.80 per share, compared with its previous forecast of more than $6.70, and LSEG estimates of $6.78 per share.

The insurer earned $7.75 billion in revenue from its commercial plans in the first quarter, up 48% from a year earlier.

Its quarterly medical loss ratio, or the percentage of premiums paid out for medical services, ticked slightly higher at 87.1%, compared with analysts' estimate of 87.09%.

Centene earned an adjusted profit of $2.26 per share, above estimates of $2.08 per share.