(Reuters) - Health insurer Centene Corp’s (CNC.N) fourth-quarter results were hurt by a severe flu season in the United States, but the company backed its 2013 forecasts, suggesting it was on the mend after setbacks in its key markets.
Shares of the company closed up 6 percent at $44.99 on Tuesday on the New York Stock Exchange.
The company reiterated its current-year profit forecast of between $2.60 to $2.90 per share, saying the flu costs would be absorbed within the range of its guidance.
“Centene did not change its 2013 EPS (earnings per share) guidance, which assumes a sharp recovery from 2012 due to rate increases, quitting Kentucky, and new markets (such as) Kansas and Illinois,” Cantor Fitzgerald analyst Joseph France said in a note.
The company was hit by weak performance by its Medicaid contracts in Texas and Kentucky in the fourth quarter. Centene had cut its profit estimate for 2012 in December, citing high medical costs in the two states.
The insurer intends to exit Kentucky from July 5.
Several health insurers providing Medicaid services in Texas and Kentucky have experienced higher utilization of their services in these states, thereby eating into profits.
Centene’s net profit fell 70 percent to $9.1 million, or 17 cents per share, for the quarter ended December 31 from a year earlier.
Analysts on average had expected earnings of 32 cents per share, according to Thomson Reuters I/B/E/S.
Centene said the per-share net earnings included medical costs related to the flu, which were 30 cents higher than the previous year and 11 cents above the company’s expectations.
Michael Neidorff, chief executive of Centene, said the company’s 2013 guidance remained unchanged as recent data from the Centre for Disease Control and Prevention suggested that the flu season peaked in mid-January.
On a conference call with analysts, Neidorff said first-quarter results could be slightly hurt by a higher level of flu costs.
Insurers take a hit from the flu because of an increase in claims related to visits to doctors and hospitals.
Peer Humana Inc (HUM.N) reported a drop in fourth-quarter profit on Monday and said it was experiencing the worst flu season in a decade that would cost $75 million for added healthcare services such as hospitalizations.
Centene’s total quarterly revenue, including premium and services revenue, rose 59 percent to $2.4 billion, in line with analysts’ estimates.
Health benefits ratio, a measure of medical expenses expressed as a percentage of premium revenue, rose to 91.3 percent from 85.9 percent a year earlier.
Reporting By Vrinda Manocha in Bangalore; Editing by Roshni Menon, Maju Samuel