Medical expenses decreased, CVS Health (CVS.US) Q4 profits exceeded expectations.

Notice that, driven by the insurance subsidiary Aetna and the pharmacy network operation department, CVS Health (CVS.US) exceeded Wall Street expectations in the fourth quarter. The financial report shows that the company's fourth-quarter revenue was $97.7 billion, an increase of about 4% year-on-year, exceeding expectations by $830 million, with revenue from the medical benefits department increasing by about $32.9 billion, a year-on-year increase of about 23%. The company's adjusted earnings per share for the fourth quarter were $1.19, higher than analysts' average expectation of $0.92. After the performance announcement, the stock rose by 11% before the US market opened. Lower costs in the Aetna insurance department than expected drove CVS's profit growth, as the proportion of insurance premiums used for medical expenses by the company was lower than analysts' expectations. The company had already accounted for some expected losses in the fourth quarter in the third quarter. CVS is working to turnaround its struggling pharmacy chain and Aetna insurance business, both of which have been impacted by underpricing plans and quality rating downgrades, with quality ratings helping to determine the reimbursement rates for US health plans. CEO David Joyner, who took office in October last year, stated that the recovery will take several years. Medical expenses decrease In the insurance department, CVS used 94.8% of insurance premiums for healthcare this quarter, lower than analysts' expectations. Investors prefer lower numbers. However, CVS indicated in another document that high utilization of medical services will continue to put pressure on the business. The company specifically pointed out that the high cost of managing care for Medicaid patients is high. Since the outbreak of the epidemic, states have been cutting Medicaid eligibility, often eliminating healthier patients from the program and leaving sicker patients behind. CVS predicts adjusted earnings per share for 2025 to be between $5.75 and $6, while analysts' average expectation is $6. Activist investor Glenview Capital Management is also pushing for reform at the company. CEO Larry Robbins, one of four new members joining the CVS board, stated that the company should reduce debt.