Elevance (ELV, Financial) experienced a significant decline in its stock price after releasing its third-quarter earnings report, which fell short of Wall Street's expectations due to insufficient Medicaid payments. The pre-market trading saw a decrease of 11.04%, with shares priced at $442.10.
The insurance company's revenue for the third quarter was reported at $44.7 billion, marking a 5.2% year-over-year growth and exceeding market predictions. However, the adjusted earnings per share (EPS) came in at $8.37, below the anticipated $9.66 per share by analysts surveyed by Bloomberg. Moreover, Elevance lowered its full-year adjusted profit forecast to approximately $33 per share, compared to the earlier estimate of $37.20 per share.
A key performance indicator, the company's medical loss ratio, stood at 89.5%, falling short of Wall Street's expectations. For the quarter ending September 30, 2024, the days payable for claims were 42.8, which is 5.8 days fewer than the same period last year due to an increase in average daily benefit expenses.
Elevance highlighted the unprecedented challenges faced by its Medicaid business, which provides safety-net healthcare plans for low-income Americans. Since the end of the COVID-19 pandemic, states have removed millions from Medicaid plans, and insurers claim that current payments are insufficient to address the healthcare needs of the remaining members.
This situation suggests potential broader issues in the industry, with rising medical costs and reduced government health plan payments squeezing profits. Elevance is the second insurance company to lower its earnings forecast this year, following UnitedHealth's announcement that also disappointed investors.
