CVS Health 2021 forecast takes a hit as non-urgent surgeries resume - Reuters

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By Reuters Staff

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(Reuters) - CVS Health Corp on Tuesday forecast full-year earnings largely below estimates as the pharmacy chain operator’s health insurance business grapples with costs related to the resumption of non-urgent surgeries that were halted during the pandemic.

FILE PHOTO: CVS Pharmacy staff members prepare as COVID-19 vaccinations begin at Life Care Center of Kirkland, a long term seniors care facility which was the focus of attention at the start of the U.S. coronavirus disease outbreaks in March 2020, in Kirkland, Washington, U.S. December 28, 2020.  REUTERS/David Ryder/File Photo

Last year, as people avoided visiting hospitals for scheduled procedures due to the coronavirus outbreak, health insurers benefited from lower costs.

Now with COVID-19 vaccinations underway, non-urgent procedures are expected to bounce back to normal levels, leading to higher costs for health insurers.

CVS operates a large health insurance business, acquired through its $69 billion purchase of Aetna in 2018. The unit took a hit in the fourth quarter due to higher costs related to coronavirus testing and treatments.

The company’s medical benefit ratio (MBR), the percentage of premiums paid for medical services, rose to 86.7% from 85.7% last year, hurt by higher costs related to COVID-19 treatments and tests.

A lower MBR is better for health insurers as it signals a tight rein on medical costs.

Sales at the company’s pharmacy unit was boosted by COVID-19 testing at its retail locations, with CVS also expected to benefit from distributing COVID-19 vaccines across the country.

The company said it had administered over three million vaccines across the United States.

CVS expects 2021 adjusted profit between $7.39 and $7.55 per share, compared with analysts’ estimates of $7.54 per share, according to IBES data from Refinitiv.

On an adjusted basis, the company earned $1.30 per share in the reported quarter, beating estimates of $1.24 per share.

Sales rose to $69.55 billion from $66.89 billion.

Reporting by Manas Mishra and Trisha Roy in Bengaluru; Editing by Shounak Dasgupta

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