(Reuters) -CVS Health Corp on Wednesday raised its annual profit forecast after topping quarterly estimates on strong performance at its health insurance and pharmacy benefit management businesses.
CVS’ health insurance business as well as peers Elevance Health and UnitedHealth have benefited from a slow recovery in elective procedures and a fall in COVID cases that has kept costs in check.
The insurance business’ medical benefit ratio, or spending on claims against premiums earned, was 83.5%, compared with 85.8% a year earlier when COVID cases had surged due to the Delta wave.
Revenue from the insurance and pharmacy benefit management businesses rose around 10% each, while retail and pharmacy sales gained about 7%.
Pharmacy benefits managers serve as intermediaries among drug manufacturers, health insurers and pharmacies, and help negotiate prescription drug prices.
The company forecast sales of over-the-counter COVID-19 test kits to exceed 65 million units in 2022, and said it expects to administer 28 million vaccinations, with about 70% of that target already achieved through the third quarter.
It now expects 2022 adjusted earnings per share between $8.55 and $8.65, compared with $8.40 to $8.60 forecast earlier.
Excluding some one-off items, CVS Health reported a profit of $2.09 per share, compared with analysts’ average estimate of $1.99 per share.
In the third quarter, the company also recorded a pre-tax charge of $5.2 billion related to the estimated liability for opioid-related claims settlement. The proposed settlement calls for CVS to pay the amount over 10 years.
Including the charge, it reported a net loss of $3.42 billion, or $2.60 per share, compared to a profit of $1.60 billion, or $1.20 per share, a year earlier.
It removes an “overhang” on CVS and is lower than investor expectations, Evercore ISI analyst Elizabeth Anderson said in a note.
Shares in the company were up 1% in premarket trade.
(Reporting by Leroy Leo and Nandhini Srinivasan in Bengaluru;Editing by Vinay Dwivedi)