Shares of Centene Corp. dropped sharply on Friday morning after the health insurer reported a surprise quarterly loss, driven by rising medical costs and a significantly higher-than-expected health benefits ratio.
The results underscored the mounting challenges facing the health insurance industry, which has been grappling with elevated care utilization and regulatory uncertainty.
The company’s stock sank nearly 10% in premarket trading to $23.99, even as futures for the broader S&P 500 index edged up 0.1%.
Investors were rattled by Centene’s second-quarter adjusted loss of 16 cents per share, a far cry from the 11-cent profit analysts had projected, according to a FactSet survey.
Revenue, meanwhile, rose 22% year-over-year to $48.7 billion, well ahead of expectations.
Soaring health costs eat into margins
The earnings miss was attributed in large part to a jump in the company’s health benefits ratio—the proportion of premiums paid out for medical care—which surged to 93% from 87.6% a year ago.
Analysts had expected that figure to land at 91.3%. A higher ratio indicates greater costs for insurers and is a key metric watched closely by investors.
Centene swung to a net loss of $253 million, or 51 cents per share, compared with earnings of $1.15 billion, or $2.16 a share, in the same period last year.
While the company blamed rising medical expenses in Medicaid and its Affordable Care Act (ACA) exchange business, it also flagged mounting costs related to behavioral health, home healthcare services, and high-priced prescription drugs.
Bleak 2025 outlook adds to investor worries
Earlier this month, Centene had withdrawn its financial guidance, citing deteriorating performance in its ACA marketplace segment.
The company now expects its 2025 adjusted profit per share to be just $1.75—down sharply from earlier guidance of more than $7.25 and well below Wall Street’s current estimate of $4.65, based on LSEG data.
The disappointing results follow similar warnings across the health insurance sector.
Molina Healthcare recently cut its 2025 forecast for the second time in a month, and Elevance Health also reported cost pressures.
On Thursday, UnitedHealth Group revealed it was cooperating with formal criminal and civil investigations from the Department of Justice, triggering a selloff in its shares as well
Regulatory risks and demographic shifts weigh on insurers
The sector’s turbulence is being compounded by regulatory shifts and demographic changes.
With the Republican-backed tax-and-spending bill poised to curb Medicaid enrollment in the coming years and federal subsidies for ACA plans set to expire in 2026, insurers are finding it increasingly difficult to predict risk and manage costs.
For Centene, the outlook remains uncertain.
Though it has grown revenue and maintained market presence, the combination of surging medical costs and regulatory volatility has sharply reduced its earnings potential—leaving investors wary of what lies ahead.
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