Health insurer Centene Corp (CNC.N) posted its first quarterly loss in more than five years on higher costs at its Texas and Kentucky health plans, but shares rose 11 percent as the company said it would return to a profit in the third quarter.
The loss, although wider than analysts were expecting, did not surprise the market as Centene had warned of a loss in June.
"The issues that caused the second-quarter loss were state specific, market or product related issues," Michael Neidorff, Centene's chief executive of 16 years, said on a conference call with analysts.
"We view these as episodic and correctable through a combination of rate increases, medical management initiatives and policy changes at the state regulatory level."
Centene maintained its full-year profit forecast and said it expects premium and service revenues of between $7.70 billion and $8.10 billion.
Analysts on average are expecting full-year revenue of $8.06 billion, according to Thomson Reuters I/B/E/S.
"The fact that Centene maintained its 2012 EPS outlook signals that trends improved enough in June, particularly in Texas, to support the management's view," Jefferies analyst David Windley said in a note to clients.
As the company begins operating in New Hampshire and Kansas -- regions that will start contributing to revenue in the fourth quarter and next year's first quarter, respectively -- it will see higher costs, analyst Windley said.
Despite this, Centene did not lower its full-year forecast, which is a positive, he added.
Centene posted a net loss of $35.0 million, or 68 cents per share, in the second quarter compared with a profit of $28.4 million, or 54 cents per share, a year earlier.
Excluding items, the company posted a loss of 16 cents per share, compared with analysts' estimates of a loss of 11 cents per share.
Premium and service revenue for the quarter rose 61 percent to $2.1 billion. Analysts expected revenue of $1.99 billion.
The St Louis, Missouri-based company's shares, which have risen about 4 percent since it cut its outlook in June, were up 7 percent at $37.1 on Monday afternoon. The stock was one of the top percentage gainers on the New York Stock Exchange.
(Reporting by Prateek Kumar and Zeba Siddiqui in Bangalore; Editing by Rodney Joyce, Roshni Menon)