Updated version 4 - Benefiting from strict cost controls, Elevance has raised its profit forecast for 2026.

Paragraph 4 adds CEO statements from the conference call, paragraph 8 supplements share price information, paragraph 16 includes investor commentary

Sneha S K/Kamal Choudhury

Reuters, October 21 - Elevance Health (ELV.N) reported better-than-expected quarterly results on Wednesday, benefiting from lower medical costs, and raised its annual earnings outlook.

The health insurance company has faced challenges from declining membership and rising costs of government-backed programs. Like other health insurers, Elevance has adjusted pricing to reflect increased medical expenses.

Regarding the third quarter, the company said higher premium yields and service fees offset the impact of fewer insured members, helping its insurance business revenue rise by $1.1 billion compared to a year ago.

Elevance forecasts full-year adjusted earnings per share to reach at least $29, up from a previous expectation of at least $27. According to data compiled by LSEG, analysts on average expect full-year EPS of $27.23.

“Our earnings base is more resilient, and we are entering 2027 with greater clarity and stronger momentum,” CEO Gail Boudreaux said during a call with analysts .

For 2027, the company expects adjusted profit to grow by at least 12%, with an earnings baseline of at least $26.75 per share.

This quarter, the company’s adjusted earnings per share came to $6.99, above market expectations of $4.68.

Baird Securities analyst Michael Ha said that despite Elevance posting results that were well above expectations and raising its outlook, the small increase in recurring earnings leaves the stock at risk for a pullback.

The stock fell 1.3% in early trading, after rising about 2% in pre-market trade following the earnings announcement.

Declining medical costs

The health insurer reported that its medical loss ratio (the percentage of premiums spent on medical care) for the third quarter was 90.6%, beating analyst expectations of 91.17%.

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The company said costs fell due to better performance in its government-supported insurance plans compared to a year earlier.

The company expects that, as reimbursement rates become more aligned with rising cost trends, the profit margin of its Medicaid business will improve by 2027.

Meanwhile, the company said the number of insured members in its insurance division fell by 487,000 as of September 30 compared to a year earlier, dropping to roughly 44.9 million.

The company also appointed Jeff Park as president of its health services division, Carelon, effective December 1.

“Carelon’s pharmacy and services business is driving earnings growth while taking on a larger share of medical spending in health plans, supporting management’s integration strategy and easing pressure on insurance profits,” said Gabelli Funds portfolio manager Daniel Barasa.

The division reported operating income of $19.3 billion, $1 billion higher than a year ago.

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