By Dave Sebastian and Anna Wilde Mathews
Centene Corp. said its fourth-quarter profit fell as expenses increased, though revenue rose.
A key measure of spending came in worse than analysts expected, pushed up by results in the company's Affordable Care Act exchange business and health-care costs tied to the flu. The medical-loss ratio, which represents the share of premiums paid out in claims, was 88.4%, compared with analysts' projected 87.6%.
Anthem Inc. also missed projections on the ratio in the fourth quarter, and it flagged the same two general causes. Across the industry, the ratios were higher in 2019 due to the suspension of a health-insurance tax.
Centene said during a call with analysts that margins on its exchange business remained in line with its target, and said it expected to maintain that range.
"It's still solidly in the 5 to 10% range," said Chief Executive Michael Neidorff. He also said the company had seen higher costs due to billing issues with some hospitals that weren't in its network, but that it had now signed contracts with them, which should reduce costs in the future.
Centene shares were down 1% Tuesday morning.
The St. Louis-based insurance company posted net income of $209 million, or 49 cents a share, compared with $241 million, or 57 cents a share, in the same period a year prior. Adjusted earnings were 73 cents a share.
Analysts expected earnings of 54 cents a share, or 73 cents a share on an adjusted basis, according to FactSet.
Revenue rose to $18.86 billion from $16.56 billion in the prior year, driven by its health insurance marketplace business and expansions in states such as Arkansas, Illinois, Iowa, New Mexico and Pennsylvania. Analysts were looking for $18.44 billion.
Centene had $18.59 billion in operating expenses for the quarter, compared with $16.17 billion in the year earlier.
The company had 15.24 million members as of Dec. 31, compared with 14.17 million in the prior year.
Centene plans to put out its 2020 guidance on March 3, with a conference call the following day at 8:30 a.m. ET.
Write to Dave Sebastian at firstname.lastname@example.org and Anna Wilde Mathews at email@example.com