UPDATE 2-CVS cuts 2024 profit forecast as medical procedures drive costs higher

(Adds analyst quote in paragraph 6, updates shares)

By Sriparna Roy

Feb 7 (Reuters) - CVS Health lowered its adjusted profit forecast for 2024 on Wednesday after an increase in medical care among older adults fueled costs in its insurance business in the fourth quarter.

The company, however, beat Wall Street estimates for fourth-quarter profit on strength in its drugstores and its pharmacy benefits management (PBM) unit, which negotiates drug prices between insurers and manufacturers.

Shares of CVS rose marginally to $74.32 in premarket trading.

The healthcare conglomerate, like rival Humana earlier, cited a late-year rise in medical care in the United States, including outpatient procedures among those enrolled in Medicare Advantage plans, under which insurers are paid a set rate to manage healthcare for people 65 and older, or those with disabilities.

Humana cut its 2024 and 2025 profit forecasts because of the increased costs.

Investors might be relieved that CVS's 2024 outlook was only trimmed, rather than cut substantially like Humana's, said Morningstar analyst Julie Utterback. She said this was probably because the company has a more diversified business than Medicare-focused Humana.

The new forecast of at least $8.30 per share, from at least $8.50 per share it had forecast in December, factors in the potential for medical costs being elevated in 2024, CVS said.

Aetna, its insurance business, recorded a medical benefit ratio - the percentage of premiums spent on medical care - of 88.5% in the fourth quarter ended Dec. 31, from 85.8% a year ago.

CVS earned $2.12 per share on an adjusted basis in the fourth quarter, beating Wall Street estimates of $1.99 per share.

Revenue in its health services business, under which CVS operates the PBM, rose 12%, to $49.15 billion, helped by growth in specialty pharmacy and higher branded drug prices. (Reporting by Sriparna Roy and Leroy Leo in Bengaluru; Editing by Pooja Desai)