Elevance Health Reports Third Quarter 2024 Results

Elevance Health, Inc. (NYSE: ELV) reported third quarter 2024 results.

“We remain confident in the long-term earnings potential of our diverse businesses as we navigate a dynamic operating environment and unprecedented challenges in the Medicaid business. We expect Medicaid rates will align with the needs of our members in time, and are taking proactive actions to enhance operational efficiencies that will ensure we emerge from this period even stronger.”

Gail K. Boudreaux

President and Chief Executive Officer

Given third quarter results and the timing mismatch between Medicaid rates and acuity, Elevance Health now expects 2024 GAAP net income per diluted share to be approximately $26.50 and adjusted net income per diluted share to be approximately $33.00.

Operating revenue was $44.7 billion in the third quarter of 2024, an increase of $2.2 billion compared to the prior year quarter. This was driven by higher premium yields in our Health Benefits segment and growth in CarelonRx product revenue, partially offset by membership attrition in our Medicaid business.

The benefit expense ratio was 89.5 percent, an increase of 270 basis points, driven primarily by the timing mismatch between Medicaid rates and the higher acuity of our members. Days in Claims Payable was 42.8 days as of September 30, 2024, a decrease of 2.5 days from June 30, 2024, and a decrease of 5.8 days compared to September 30, 2023 due to increases in average benefit expense per day.

The operating expense ratio was 11.8 percent, an improvement of 110 basis points. Excluding adjustment items, the operating expense ratio was 9.6 percent, an improvement of 150 basis points, reflecting disciplined cost management to enhance operating efficiency.

Cash Flow & Balance Sheet

Operating cash flow was $2.7 billion in the quarter, an increase of approximately $0.1 billion year-over-year. As of September 30, 2024, cash and investments at the parent company totaled approximately $2.6 billion.

During the third quarter of 2024, the Company repurchased 0.1 million shares of its common stock for $60 million, at a weighted average price of $511.01, and paid a quarterly dividend of $1.63 per share, representing a distribution of cash totaling $378 million. As of September 30, 2024, the Company had approximately $3.1 billion of Board approved share repurchase authorization remaining. On October 15, 2024, our Audit Committee, pursuant to authorization granted by the Board of Directors, authorized an $8.0 billion increase to the common stock repurchase program. The Company intends to utilize this authorization over a multi-year period, subject to market and industry conditions.

Health Benefits is comprised of Individual, Employer Group risk-based, Employer Group fee-based, BlueCard^®, Medicare, Medicaid, and Federal Health Products & Services businesses.

Health Benefits segment operating revenue was $38.3 billion in the third quarter of 2024, an increase of $1.5 billion compared to the prior year quarter, driven primarily by higher premium yields, partially offset by membership attrition in our Medicaid business.

Operating gain totaled $1.6 billion, impacted primarily by the unfavorable mix shift in Medicaid membership related to eligibility redeterminations, partially offset by premium rate increases, focused medical management, and the proactive actions we are taking to enhance operating efficiency.

Medical membership totaled approximately 45.8 million as of September 30, 2024, a decrease of 1.5 million, or 3 percent, driven by attrition in our Medicaid business associated with eligibility redeterminations and footprint adjustments in certain Medicaid states. These losses were partially offset by growth in Employer Group fee-based and Affordable Care Act health plan membership.

Carelon is comprised of CarelonRx and Carelon Services.

Operating revenue for Carelon was $13.8 billion in the third quarter of 2024, an increase of $1.8 billion, or 15 percent compared to the prior year quarter. This was driven by the launch and growth of risk-based capabilities in Carelon Services and growth in CarelonRx product revenue, related to the acquisition of Paragon Healthcare in the first quarter and increases in external members served.

Operating gain for Carelon totaled $0.8 billion, an increase of $134 million, or 20 percent, primarily driven by growth in product revenue and a one-time favorable intra-year true up in CarelonRx, partially offset by results in our Carelon Health businesses.

Quarterly Dividend

On October 15, 2024, the Audit Committee of the Company's Board of Directors declared a fourth quarter 2024 dividend to shareholders of $1.63 per share. The fourth quarter dividend is payable on December 20, 2024, to shareholders of record at the close of business on December 5, 2024.

About Elevance Health

Elevance Health is a lifetime, trusted health partner whose purpose is to improve the health of humanity. The company supports consumers, families, and communities across the entire healthcare journey – connecting them to the care, support, and resources they need to lead better lives. Elevance Health’s companies serve approximately 113 million consumers through a diverse portfolio of industry-leading medical, pharmacy, behavioral, clinical, and complex care solutions. For more information, please visit www.elevancehealth.com or follow us @ElevanceHealth on X and Elevance Health on LinkedIn.

Conference Call and Webcast

Management will host a conference call and webcast today at 8:30 a.m. Eastern Daylight Time (“EDT”) to discuss the company’s third quarter results and outlook. The conference call should be accessed at least 15 minutes prior to the start of the call with the following numbers:

The access code for today's conference call is 3972058. There is no access code for the replay. The replay will be available from 11:30 a.m. EDT today, until the end of the day on November 15, 2024. The call will also be available through a live webcast at www.elevancehealth.com under the “Investors” link. A webcast replay will be available following the call.

Basis of Presentation

1. Operating revenue and operating gain/loss are the key measures used by management to evaluate performance in each of its reporting segments, allocate resources, set incentive compensation targets and to forecast future operating performance. Operating gain/loss is calculated as total operating revenue less benefit expense, cost of products sold and operating expense. It does not include net investment income, net gains/losses on financial instruments, interest expense, amortization of other intangible assets, gains/losses on extinguishment of debt or income taxes, as these items are managed in a corporate shared service environment and are not the responsibility of operating segment management. Refer to the GAAP reconciliation tables.
2. Operating margin is defined as operating gain divided by operating revenue.

Elevance Health

Earnings Release Financial Schedules and Supplementary Information

Quarter & Year-to-Date Ended September 30, 2024

• Membership and Other Metrics
• Quarterly & Year-to-Date Consolidated Statements of Income
• Condensed Consolidated Balance Sheet
• Condensed Consolidated Statement of Cash Flows
• Supplemental Financial Information - Reportable Segments
• Supplemental Financial Information - Reconciliation of Medical Claims Payable
• Reconciliation of Non-GAAP Financial Measures

REPORTABLE SEGMENTS

Elevance Health has four reportable segments: Health Benefits (comprised of Individual, Employer Group risk-based, Employer Group fee-based, BlueCard^®, Medicare, Medicaid, and Federal Health Products & Services businesses); CarelonRx; Carelon Services; and Corporate & Other (comprised of businesses that do not individually meet the quantitative thresholds for an operating division as well as corporate expenses not allocated to our other reportable segments).

This document references non-GAAP measures, including “Adjusted Shareholders’ Net Income,” “Adjusted Shareholders’ Net Income Per Share,” “Adjusted EPS,” “Adjusted Operating Gain,” “Adjusted Operating Expense” and “Adjusted Operating Expense Ratio,” which are non-GAAP measures. These non-GAAP measures are intended to aid investors when comparing Elevance Health’s financial results among periods and are not intended to be alternatives to any measure calculated in accordance with GAAP. Reconciliations of these non-GAAP measures to the most directly comparable measures calculated in accordance with GAAP are available below. In addition to these non-GAAP measures, references are made to the measures “Operating Revenue” and “Operating Gain/Loss,” “Operating Margin” and “Adjusted EPS”. Operating revenue and operating gain/loss are the key measures used by management to evaluate performance in each of its reportable segments, allocate resources, set incentive compensation targets and to forecast future operating performance. Operating gain/loss is calculated as total operating revenue less benefit expense, cost of products sold and operating expense. It does not include net investment income, net gains/losses on financial instruments, interest expense, amortization of other intangible assets and gains/losses on extinguishment of debt or income taxes, as these items are managed in a corporate shared service environment and are not the responsibility of operating segment management. Each of these measures is provided to further aid investors in understanding and analyzing Elevance Health’s operating and financial results. A reconciliation of Operating Revenue to Total Revenue is set forth in the Consolidated Statements of Income herein. A reconciliation of the non-GAAP measures to the most directly comparable measures calculated in accordance with GAAP, together with a reconciliation of reportable segments operating gain to income before income tax expense, is provided below. Prior amounts may be grouped differently to conform to the current presentation. Net adjustment items per share may not sum due to rounding. A reconciliation of Operating Revenue to Total Revenue is set forth in the Consolidated Statements of Income herein.

Forward-Looking Statements

This document contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our views about future events and financial performance and are generally not historical facts. Words such as “expect,” “feel,” “believe,” “will,” “may,” “should,” “anticipate,” “intend,” “estimate,” “project,” “forecast,” “plan” and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to: financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. You are also urged to carefully review and consider the various risks and other disclosures discussed in our reports filed with the U.S. Securities and Exchange Commission from time to time, which attempt to advise interested parties of the factors that affect our business. Except to the extent required by law, we do not update or revise any forward-looking statements to reflect events or circumstances occurring after the date hereof. These risks and uncertainties include, but are not limited to: trends in healthcare costs and utilization rates; reduced enrollment; our ability to secure and implement sufficient premium rates; the impact of large scale medical emergencies, such as public health epidemics and pandemics, and other catastrophes; the impact of new or changes in existing federal, state and international laws or regulations, including laws and regulations impacting healthcare, insurance, pharmacy services and other diversified products and services, or their enforcement or application; the impact of cyber-attacks or other privacy or data security incidents or our failure to comply with any privacy, data or security laws or regulations, including any investigations, claims or litigation related thereto; failure to effectively maintain and modernize our information systems or failure of our information systems or technology, including artificial intelligence, to operate as intended; failure to effectively maintain the availability and integrity of our data; changes in economic and market conditions, as well as regulations that may negatively affect our liquidity and investment portfolios; competitive pressures and our ability to adapt to changes in the industry and develop and implement strategic growth opportunities; risks and uncertainties regarding Medicare and Medicaid programs, including those related to non-compliance with the complex regulations imposed thereon; our ability to maintain and achieve improvement in Centers for Medicare and Medicaid Services Star ratings and other quality scores and funding risks with respect to revenue received from participation therein; a negative change in our healthcare product mix; costs and other liabilities associated with litigation, government investigations, audits or reviews; our ability to contract with providers on cost-effective and competitive terms; risks associated with providing healthcare, pharmacy and other diversified products and services, including medical malpractice or professional liability claims and non-compliance by any party with the pharmacy services agreement between us and CaremarkPCS Health, L.L.C.; risks associated with mergers, acquisitions, joint ventures and strategic alliances; possible impairment of the value of our intangible assets if future results do not adequately support goodwill and other intangible assets; possible restrictions in the payment of dividends from our subsidiaries and increases in required minimum levels of capital; our ability to repurchase shares of our common stock and pay dividends on our common stock due to the adequacy of our cash flow and earnings and other considerations; the potential negative effect from our substantial amount of outstanding indebtedness and the risk that increased interest rates or market volatility could impact our access to or further increase the cost of financing; a downgrade in our financial strength ratings; the effects of any negative publicity related to the health benefits industry in general or us in particular; events that may negatively affect our licenses with the Blue Cross and Blue Shield Association; intense competition to attract and retain employees; risks associated with our international operations; and various laws and provisions in our governing documents that may prevent or discourage takeovers and business combinations.

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