Health insurance companies had a terrific 2023 on Wall Street—as investors.
Some of the largest publicly traded health insurers raked in the largest investment gains in at least a decade last year, according to a Modern Healthcare analysis of financial filings. These windfalls helped boost finances for insurers contending with headwinds such as higher-than-expected Medicare Advantage spending.
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UnitedHealth Group, Elevance Health, Centene, Molina Healthcare and Oscar Health recorded investment income that surpassed recent performances. Aetna parent company CVS Health and Humana earned more from investments last year than in 2022, but did not match highs from preceding years. Cigna's investment income was roughly flat from 2022 to 2023 and below recent highs.
Across those eight insurers, investment portfolio profits increased 53.2% from 2022. The companies mostly attributed this to high interest rates and broad trends in the capital markets. The Standard & Poor's 500 index grew 24% and returns on the S&P U.S. Aggregate Bond Index rose 5.3% in 2023.
“The benefit of having these investments is to provide an opportunity to diversify your revenue streams, and where you're making a profit,” said Rick Kes, senior healthcare industry analyst for the consulting company RSM. “You may not have had such a great year in your operating activities, but you had a good year in your investment returns. Net-net, you still increased equity in the business.”
Health insurance companies themselves mostly underperformed in the S&P 500 last year, however. Shares in Elevance Health, Centene, CVS Health, Cigna and Humana were worth less at the end of 2023 than at the beginning. UnitedHealth Group, Molina Healthcare and Oscar Health saw share values rise over the year. Only Oscar Health outpaced the S&P 500, as its stock price went up 266% from $2.50 to $9.15. All of these companies except Oscar Health are included in the S&P 500 index.
Oscar Health reported the largest yearly gains from its investments, which accrued more than five-fold to $155.4 million in 2023. The company’s investment income helped it achieve adjusted profitability in its insurance segment for the first time in its 12-year history, Chief Financial Officer Scott Blackley said during an earnings call Feb. 7.
Oscar Health anticipates investment income to continue to be a positive in 2024 and plans to gradually extend the duration of its investments. The company did not respond to an interview request.