LIVE MARKETS-US health insurers had "best quarter on record," analysts say

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US HEALTH INSURERS HAD "BEST QUARTER ON RECORD," ANALYSTS SAY

Heath insurers have had one of their "best quarter's on record," outperforming expectations on profit and medical cost control, to a magnitude that was "only topped by the COVID-era volatility," analysts at Oppenheimer say.

Major health insurers such as UnitedHealth Group UNH.N, Cigna CI.N, CVS CVS.N, Humana HUM.N and Elevance Health ELV.N all beat profit expectations in the first quarter, with medical costs coming in lower than expected.

This added to investors' relief after more than two years of the industry's struggle with higher medical costs that pressured margins.

Adjusted profit guidance for 2026 also came in meaningfully better for the group in the first-quarter, with most payers raising outlooks, reflecting improved visibility into medical utilization trends and better alignment between pricing and medical costs, analysts at Everocre ISI said.

Investors and analysts were keen for updates on Medicare Advantage reimbursement rates heading into the quarter.

The U.S. government in April said it would raise payments to private insurers offering Medicare Advantage plans to older adults in 2027 by 2.48% on average, which would result in more than $13 billion in additional payments in 2027.

Analysts said the insurers were optimistic about the rates, while also acknowledging that they are still insufficient to cover costs.

Insurers who offer Medicaid plans said they continued to see 2026 as the trough year for Medicaid earnings, as costs may be stabilizing, with analysts saying early signs show pricing and medical cost trends were in line or better than expectations.

Performance in Obamacare plans worried investors going into the quarter due to the expiration of federal subsidies, but bigger insurers still did OK after adjusting their plans and pricing, the Oppenheimer analysts said.

"Despite the healthy earnings beats and strong fundamentals, the majority of companies raised guidance by less than the beat. This has led to Street expectations coming down across-the-board," Oppenheimer analyst Michael Wiederhorn said.

"This sets up the sector very well for rest of the year," he added.

We believe valuations are still attractive, but the bigger catalyst going forward is the earnings upside, analysts said.

"Overall, the group is in a more attractive position exiting Q1and could very well be at an inflection point. We are increasingly optimistic around the prospects for the group going forward," the brokerage said.

(Sneha S K )

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