Investing.com -- Shares of major health insurers like Cigna (NYSE:CI), CVS Health (NYSE:CVS), Humana (NYSE:HUM), Molina Healthcare (NYSE:MOH), and UnitedHealth Group (NYSE:UNH) saw an upswing following Elevance Health’s latest quarterly results. Elevance Health, formerly known as Anthem, reported a lower-than-expected medical-loss ratio (MLR), which is a key performance indicator in the health insurance industry.
The MLR is the percentage of premiums that insurers spend on claims and healthcare services. A lower MLR typically indicates better profitability for insurers. Elevance Health’s shares climbed 4% after the company disclosed a 110 basis point improvement in its 4Q MLR, which was below analyst expectations. This news has positively influenced sentiment across the sector, especially as it comes on the heels of UnitedHealth’s MLR miss reported last week.
Bloomberg Intelligence analyst Glen Losev commented on the significance of the results, stating, "Improvement in the 4Q medical loss ratio (MLR) may incrementally aid sentiment after UnitedHealth’s MLR miss last week."
In a press release, Elevance Health reported operating revenue of $45.0 billion for the fourth quarter of 2024, which represents a 6% increase over the same period the previous year. The full-year operating revenue was $175.2 billion, up 3% from the prior year. These results were driven by higher premium yields in their Health Benefits segment, strategic acquisitions, and growth in CarelonRx product revenue, although partially offset by membership attrition in Medicaid.
The company’s benefit expense ratio, which rose year-over-year both for the quarter and the full year, was primarily due to higher Medicaid medical cost trends. However, Elevance Health’s adjusted operating gain and margin showed improvement, reflecting disciplined cost management and enhanced efficiency.
Elevance Health’s financial outlook for FY 2025 anticipates GAAP diluted earnings per share (EPS) to be in the range of $30.40 to $31.10 and adjusted diluted EPS to be in the range of $34.15 to $34.85. The company also announced a 5% increase in its quarterly dividend to $1.71 per share.
The broader market response to Elevance Health’s report indicates a positive outlook for the industry, as lower MLRs suggest that insurers are managing their costs effectively amid the dynamic healthcare environment. As these companies continue to navigate the challenges and opportunities of the healthcare sector, investors will be watching closely for further signs of operational efficiency and profitability.
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