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UPDATE 3-Health insurer Centene sees higher COVID-19 costs in early 2021

(Adds company comment, details and analyst comment)

Feb 9 (Reuters) - Centene Corp expects higher coronavirus-related costs during the early part of the year to offset benefits from deferred procedures, the U.S. health insurer said on Tuesday, after the company posted a lower-than-expected quarterly profit.

The company, which incurred higher costs related to COVID-19 treatment and testing in the fourth quarter, said COVID expenses are highly dependent on the trajectory of the pandemic and vaccination rates.

For much of 2020, health insurers incurred higher pandemic-related costs as they try to support their customers to get tested and treated for the virus. This, in turn, offset benefits from people putting out elective medical procedures and hospital visits.

“COVID utilization is expected to be elevated during the early part of the year, particularly offsetting the impact of lower traditional utilization,” said Chief Financial Officer Jeffrey Schwaneke.

“The higher cost is not necessarily surprising given the COVID spike at year-end and commentary from peers,” said Citi analyst Ralph Giacobbe.

Bigger rival UnitedHealth Group Inc also saw COVID-19 treatment costs eclipsing benefits from such lower healthcare spending.

Centene’s health benefits ratio, the amount it spends on medical claims compared with its income from premiums, came in at 88.4% in the fourth quarter, in line with a year ago. Analysts on average had expected a ratio of 88%, according to Refinitiv IBES data.

The company, which agreed to buy Magellan Health Inc in a $2.2 billion deal last month, said it will cut about 3,000 positions that overlapped with those from acquisitions. The company had said in December it will eliminate 1,500 open positions.

The St. Louis, Missouri-based company maintained its full-year adjusted profit of between $5.00 and $5.30 per share. Analysts on average were expecting $5.24.

Centene reported adjusted earnings per share of 46 cents, below analysts’ estimates of 47 cents.

Shares of the company were trading 3.3% higher at $60. (Reporting by Dania Nadeem and Trisha Roy in Bengaluru; Editing by Maju Samuel and Sherry Jacob-Phillips)

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