Updated version 3 - Thanks to strict cost management, Elevance has raised its profit forecast for 2026.

Analyst commentary added in paragraphs 4 and 14

Reuters, Oct 21 - Elevance Health (ELV.N) on Wednesday reported quarterly results that beat expectations, thanks to a decline in medical costs, prompting the company to raise its annual profit forecast.

Health insurers have been grappling with a decline in membership, while increased demand for behavioral health services and specialty drugs in government-backed insurance programs has also driven up costs.

Like other health insurers, Elevance has adjusted its pricing to reflect rising medical costs. The company said higher premium yield and service fees in the third quarter offset the impact of reduced membership, helping its insurance business revenue rise by $1.1 billion year-over-year.

“We consider the performance this quarter to be solid, which indicates Elevance is making steady progress toward margin recovery in its key business segments,” Mizuho Securities analysts said in a research note.

For 2027, the company expects adjusted profit to grow by at least 12%, with a profit benchmark of at least $26.75 per share, which excludes certain non-recurring items such as net investment income.

Last week, larger rival UnitedHealth Group (UNH.N) also raised its full-year profit forecast, attributing the improved outlook to optimized insurance plan design and product pricing adjustments.

Elevance expects its full-year adjusted earnings per share will reach at least $29, up from a prior forecast of at least $27. According to LSEG data, analysts on average expected full-year earnings per share of $27.23.

Medical costs decline, membership falls

The company said that as of September 30, medical membership for the third quarter was about 44.9 million, a decrease of 487,000 from the same period last year.

The insurer reported that its third-quarter medical loss ratio—the proportion of premiums spent on medical care—was 90.6%, better than the analyst estimate of 91.17%.

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The company said the cost reduction was due to improved performance in its “Medicare Advantage” and “Obamacare” plans compared with last year.

Elevance said adjusted earnings per share were $6.99, which included about $1.85 in non-operating gains. Analysts had previously expected earnings per share of $4.68.

Cantor Fitzgerald analyst Sarah James said that because the earnings beat was mainly driven by non-operating items, the market’s reaction to the stock might be more muted.

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

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