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Investing.com - CVS Health lifted its annual profit outlook, but flagged a $5.7 billion charge linked to an impairment test which showed that the fair value of its struggling health care delivery division was below its carrying value.
In a statement, the firm, which operates one of the largest pharmacy chains in the United States, said the unit has "continued to experience challenges which have impacted its ability to grow the business" at a previously-anticipated pace.
Restructuring costs related to primary care provider Oak Street Health, including the planned closure of certain existing clinics next year and related severance and employee expenses, contributed to the writedown. The value of its Signify Health business, which offers at-home services, dropped as well, factoring into the charge.
Both Oak Street and Signify have been grappling, like other health insurers, with higher medical services spending and shifts in government reimbursement practices. CVS’s total quarterly medical loss ratio stood at 89.9%.
For the quarter ended on September 30, the firm, which also oversees the CVS Caremark pharmacy benefit manager and Aetna insurance, posted a net loss per share of $3.13.
Yet net revenue grew by 7.8% versus a year ago to $102.87 billion, surpassing Bloomberg consensus expectations of $98.89 billion.
CVS said it now expects adjusted profit to be between $6.55 and $6.65 per share, compared to previous projections of $6.30 and $6.40 per share. Analysts had seen the figure at $6.38 a piece.
Shares of CVS dipped by more than 2% in premarket U.S. trading on Wednesday.