Aug 7 (Reuters) - CVS Health Corp on Wednesday cut its 2024 profit forecast, hit by increased medical costs at its health insurance unit as demand for healthcare services remained elevated.
CVS shares slumped over 5% in premarket trading.
The healthcare conglomerate also announced a multi-year plan to save $2 billion in costs after recording a sharp decline in its second-quarter profit.
The company's Aetna insurance unit, along with peers, has been struggling with high costs from increased use of medical services by members of Medicare Advantage plans for adults aged 65 and older or for those with disabilities.
CVS said Brian Kane, chief of the health care benefits unit that runs Aetna, is leaving the company effective immediately. Karen Lynch, who was president of Aetna before becoming CVS's CEO, will assume direct leadership of the unit, the company said.
Lynch and CFO Tom Cowhey will oversee day-to-day management of this business, while Aetna veteran and Chief Strategy Officer Katerina Guerraz has been made chief operating officer of the unit.
CVS' adjusted profit dropped to $1.83 per share in the quarter ended June 30, from $2.21 last year, but was still ahead of LSEG estimates by 10 cents. The estimates have come down sharply in the past month.
The company's healthcare benefit ratio - the percentage of premiums spent on medical care - also rose more than 3 percentage points to 89.6%, but was still lower than estimates of 90.5%.
Aetna also offers Medicaid plans for lower income people, where costs have also been high due to sicker patients gaining coverage.
CVS cut its annual profit forecast to a range of $6.40 to $6.65 from at least $7.00 earlier, marking at least its fourth cut of the outlook.
The company recorded total quarterly revenue of $91.2 billion, missing analysts' estimates of $91.5 billion.
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