Savvy Trades and Investments

[researcher59]

CNC +1.01 to 27.77, rebounding sharply in premarket after hitting a low of 22.35 .... evidently the conference call is going well.

briefing -

Centene slashes 2025 EPS outlook on $2.4 bln Marketplace hit; full repricing planned for 2026 (26.76 ) :
Mgmt addressed a significant shortfall in projected 2025 risk adjustment transfer revenue.
The shortfall created a $1.2 billion pre-tax drag on the Marketplace segment.
2025 earnings headwind increased to $2.4 billion, up from $1.8 billion previously disclosed.
Aiming to reprice 100% of its Marketplace book for 2026.
Management is taking actions to mitigate financial impact and return the Marketplace book to profitability by 2026.
Q2 Medicaid Health Benefit Ratio (HBR) was negatively affected by elevated medical cost trends.
In Medicare Advantage the company is on track for breakeven in 2027, with profitability beyond that.
Despite topline growth, risk adjustment issues significantly weighed on segment profitability.
More healthy/low-utilization individuals left the marketplace during open enrollment, likely due to new program integrity rules applied post-2024 pricing.
Broader increase in healthcare usage and more aggressive provider coding raised in-year documented morbidity.
Said market morbidity rose 16%-17% yr/yr in some states, and the company's pricing did not adequately reflect this shift.
Marketplace products are now expected to run slightly below breakeven for the rest of 2025, missing the target margin range of 5%-7.5%.
Now sees full year adjusted EPS of $1.75 (from prior $7.25) vs. $2.88 FactSet Consensus.
Guidance reflects certain updated projections:
$2.4 billion headwind from worse-than-expected 2025 marketplace risk adjustment due to morbidity shifts.
Additional $200 million pre-tax pressure from elevated utilization in H2 2025.
Rate increases for July 1 and Sept. 1 cohorts reflected, but assumptions for October 1 rates are conservative.
Medicaid HBR expected at ~93.5% in H2, driving a $2.1 billion pre-tax earnings headwind versus previous forecast.
From Medicare, expects $700 million pre-tax favorability.
Sees $500 mln pre-tax benefit from SG&A leverage.