Health insurer Centene's profit beats as medical costs fall

(Reuters) - U.S. health insurer Centene Corp CNC.N reported a better-than-expected quarterly profit, helped by lower medical costs in certain patient populations and the acquisition of rival Health Net.

The company’s health benefits ratio, or the amount it spends on medical claims compared with its income from premiums, improved to 88.7 percent in the first quarter from 89.9 percent a year earlier.

This decrease was driven by lower medical expenses in higher acuity patients, who need more care, the company said.

The ratio, which is closely watched by investors for increased medical costs and usage, was 80 basis points below what Susquehanna Financial analysts were expecting.

The company’s membership increased by 7.1 million to 11.5 million, primarily due to the Health Net acquisition.

Centene has benefited from the expansion of Medicaid under the Affordable Care Act, like other health insurers who focus on government-sponsored plans for the under-insured or uninsured.

The company served 984,900 members in Medicaid expansion programs in nine U.S. states in the first quarter ended March 31, compared with 331,800 in seven states in the year-earlier quarter.

Centene, which closed the Health Net acquisition last month, cut its full-year adjusted earnings forecast to $4.00-$4.35 per share from $4.05-$4.40.

The forecast was updated to account for a later close of the Health Net acquisition.

Centene’s revenue rose to $6.95 billion in the first quarter from $5.13 billion a year earlier.

It posted a net loss of $17 million, or 14 cents per share, due to acquisition-related expenses. The company earned $63 million, or 51 cents per share, a year earlier.

On an adjusted basis, Centene earned 74 cents per share.

Analysts on average were expecting a profit of 73 cents per share on revenue of $7.28 billion, according to Thomson Reuters I/B/E/S.

Reporting by Amrutha Penumudi in Bengaluru; Editing by Savio D’Souza and Don Sebastian