Elevance Health(ELV)2024-10-17 21:01Membership and Market Expansion - Elevance Health serves nearly 46 million medical members as of September 30, 2024, making it one of the largest health insurers in the U.S.[131] - The company expanded its participation in the Individual Public Exchange market, offering products in 141 of 143 rating regions for 2024, up from 138 in 2023[135] - Total medical membership declined by 3.3% to 45,760 thousand as of September 30, 2024, primarily due to Medicaid membership attrition and lapses exceeding sales in Employer Group risk-based and Medicare businesses[157][165] - Medicaid membership decreased by 19.0% to 8,926 thousand as of September 30, 2024, driven by eligibility redeterminations and market exits[165] - Individual medical membership increased by 30.0% to 1,299 thousand as of September 30, 2024, driven by sales exceeding lapses[165] - Dental membership increased by 3.6% to 7,021 thousand as of September 30, 2024, driven by favorable sales in Individual, Employer Group fee-based, and FEHB businesses[166] - Vision membership increased by 5.3% to 10,382 thousand as of September 30, 2024, driven by sales exceeding lapses in Employer Group fee-based and Individual businesses[166] Financial Performance - Operating revenue for the three months ended September 30, 2024 increased by 5.3% to $44,719 million, driven by premium rate increases and higher product revenue from CarelonRx[158] - Net income for the three months ended September 30, 2024 decreased by 22.5% to $1,008 million, primarily due to a net decrease in operating gain and lower gain on sale of life and disability businesses[159] - Fully-diluted EPS for the three months ended September 30, 2024 decreased by 20.0% to $4.36, primarily due to decreased net income[161] - Operating cash flow for the nine months ended September 30, 2024 decreased to $5,102 million, primarily due to timing of CMS payments and Medicaid membership decline[162] - Total operating revenue increased by $2.239 billion (5.3%) for the three months ended September 30, 2024, compared to the same period in 2023, driven by premium rate increases and higher product revenue from CarelonRx[169][170] - Net investment income rose by $58 million (11.8%) for the three months ended September 30, 2024, primarily due to higher income from fixed maturity securities[169][171] - Benefit expense increased by $2.343 billion (7.7%) for the three months ended September 30, 2024, driven by higher medical cost trends in the Health Business segment, partially offset by Medicaid membership attrition[169][171] - Cost of products sold increased by $445 million (9.6%) for the three months ended September 30, 2024, reflecting higher pharmacy revenues from CarelonRx[169][172] - Operating expense decreased by $201 million (3.7%) for the three months ended September 30, 2024, due to disciplined cost management and lower business optimization charges[169][172] - Shareholders' net income decreased by $273 million (21.2%) for the three months ended September 30, 2024, primarily due to higher benefit expenses and increased tax reserves[169][173] - Total operating revenue increased by $2.460 billion (1.9%) for the nine months ended September 30, 2024, driven by premium rate increases and higher product revenue from CarelonRx[169][173] - Net investment income increased by $228 million (17.6%) for the nine months ended September 30, 2024, due to higher income from fixed maturity securities and alternative investments[169][174] - Benefit expense increased by $1.071 billion (1.2%) for the nine months ended September 30, 2024, driven by higher medical cost trends in the Health Business segment, partially offset by Medicaid membership attrition[169][174] - Shareholders' net income increased by $431 million (8.4%) for the nine months ended September 30, 2024, despite higher benefit expenses and increased tax reserves[169][177] - Health Benefits operating revenue increased by $1.534 billion (4.2%) for the three months ended September 30, 2024, compared to the same period in 2023, driven by higher premium revenues[181][182] - CarelonRx operating revenue increased by $625 million (7.3%) for the three months ended September 30, 2024, primarily due to the acquisition of Paragon and higher prescription volume[181][183] - Carelon Services operating revenue increased by $1.129 billion (32.2%) for the three months ended September 30, 2024, driven by the expansion of medical management, behavioral health, and post-acute care services[181][184] - Total operating revenue increased by $2.239 billion (5.3%) for the three months ended September 30, 2024, compared to the same period in 2023[181] - Health Benefits operating gain decreased by $230 million (12.5%) for the three months ended September 30, 2024, due to inadequate Medicaid rates to cover medical cost trends[181][182] - CarelonRx operating gain increased by $142 million (29.8%) for the three months ended September 30, 2024, driven by growth in product revenue[181][183] - Total operating gain decreased by $348 million (19.8%) for the three months ended September 30, 2024, compared to the same period in 2023[181] - The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 85.4% for the nine months ended September 30, 2024, indicating slightly faster claims processing speed compared to 84.6% in 2023[194] - Favorable development in completion factors and trend factors contributed to a total favorable development of $1.610 billion for the nine months ended September 30, 2024[193] - The percentage of prior year redundancies in the current period was 11.3% for the nine months ended September 30, 2024, driven by favorable completion and trend factor development[195] - Net cash provided by operating activities decreased to $5,102 million for the nine months ended September 30, 2024, compared to $11,032 million in the same period in 2023, primarily due to timing of CMS payments, Medicaid membership decline, and working capital changes[201] - Total cash, cash equivalents, and investments in fixed maturity and equity securities increased by $1,581 million to $38,826 million as of September 30, 2024, driven by cash from operations, debt issuances, and proceeds from subsidiary sales[202] - The company's consolidated debt-to-capital ratio improved to 38.2% as of September 30, 2024, compared to 38.9% at December 31, 2023[205] - The company maintains a senior revolving credit facility of up to $4,000 million, with no amounts outstanding as of September 30, 2024[208] - Short-term borrowings from Federal Home Loan Banks increased to $360 million as of September 30, 2024, from $225 million at December 31, 2023[210] - The company holds $3,107 million in cash, cash equivalents, and investments at the parent company level, available for general corporate use, including acquisitions and stock repurchases[204] - The company's senior debt is rated "A" by S&P Global Ratings, "BBB+" by Fitch Ratings, "Baa2" by Moody's, and "bbb+" by AM Best, with intentions to maintain investment-grade ratings[206] - The company has a shelf registration statement to issue an unlimited amount of debt or equity securities for general corporate purposes, including acquisitions and debt repayment[207] - The company's regulated subsidiaries exceeded all applicable mandatory Risk-Based Capital (RBC) requirements as of December 31, 2023[212] - The company expects future liquidity needs to be met through cash on hand, operating cash flows, and available credit facilities, including the $4,000 million 5-Year Facility[213] Acquisitions and Investments - CarelonRx began assuming responsibility for pharmacy mail order front-end intake from CVS in Q1 2024, with the CVS agreement set to terminate on December 31, 2025[136] - Elevance Health made a $2,580 million equity investment in Mosaic Health, a joint venture with CD&R, in August 2024[147] - The company completed the acquisition of Paragon Healthcare, Inc. on March 11, 2024, enhancing its infusion services and injectable therapies offerings[148] - On April 1, 2024, Elevance Health sold its life and disability businesses to StanCorp Financial Group, Inc., resulting in a $201 million gain[150] - The company entered into an agreement to acquire Centers Plan for Healthy Living LLC on December 31, 2023, expected to close in Q4 2024[151] - Elevance Health agreed to acquire CareBridge on October 15, 2024, aligning with its care-at-home strategy, with closing expected in late 2024 or early 2025[152] Medicare Advantage and Star Ratings - 53% of Medicare Advantage members are enrolled in plans rated at least 4.0 Stars or higher for 2024, up from 34% in October 2023[145] - The company expects a $183 million reduction in 2026 operating revenue due to lower Medicare Advantage Star Ratings, with 38% of members in plans rated 4.0 Stars or higher for 2025[146] Risks and Uncertainties - Forward-looking statements reflect the company's views about future events and financial performance, not historical facts[216] - Risks and uncertainties include trends in healthcare costs, reduced enrollment, and the impact of large-scale medical emergencies[216] - The company faces risks related to cyber-attacks, data security incidents, and compliance with privacy laws[216] - Changes in economic and market conditions may negatively affect the company's liquidity and investment portfolios[216] - Competitive pressures and the ability to adapt to industry changes are significant risks[216] - Risks associated with Medicare and Medicaid programs, including non-compliance with complex regulations[216] - The company's ability to maintain and improve CMS Star Ratings and other quality scores is a key risk[216] - Risks related to mergers, acquisitions, joint ventures, and strategic alliances[216] - Possible impairment of intangible assets if future results do not support goodwill and other intangible assets[216] - No material changes to market risks since December 31, 2023[218]