Elevance Health(ELV) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents Elevance Health's unaudited Consolidated Financial Statements for the period ended June 30, 2025, covering Balance Sheets, Income, Cash Flows, and Equity with detailed notes Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $8,560 | $8,288 | | Total current assets | $63,324 | $58,942 | | Goodwill | $28,368 | $28,277 | | Total assets | $121,938 | $116,889 | | Liabilities & Equity | | | | Medical claims payable | $17,155 | $15,746 | | Long-term debt, less current portion | $28,178 | $29,218 | | Total liabilities | $78,087 | $75,463 | | Total shareholders' equity | $43,722 | $41,315 | Consolidated Income Statement Highlights (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total operating revenue | $49,421 | $43,223 | $98,186 | $85,496 | | Benefit expense | $36,706 | $30,572 | $72,018 | $61,118 | | Net income | $1,744 | $2,301 | $3,928 | $4,550 | | Diluted EPS | $7.72 | $9.85 | $17.33 | $19.44 | Consolidated Cash Flow Highlights (in millions) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,071 | $2,425 | | Net cash used in investing activities | ($584) | ($3,128) | | Net cash provided by (used in) financing activities | ($2,217) | $700 | | Change in cash and cash equivalents | $272 | ($8) | Note 1. Organization Elevance Health, a major U.S. health insurer, serves approximately 45.6 million members across diverse markets and reports results through four distinct segments - As of June 30, 2025, the company serves approximately 45.6 million medical members through its affiliated health plans[22] - The company's results are reported in four segments: Health Benefits, CarelonRx, Carelon Services, and Corporate & Other[23] Note 3. Business Acquisitions and Divestitures The company expanded its Health Benefits and Carelon Services segments through acquisitions and divested its life and disability businesses, recognizing a significant gain - Completed the acquisition of Centers Plan for Healthy Living LLC on December 31, 2024, to grow the Health Benefits segment, adding $211 million in finite-lived intangibles and $285 million in goodwill[53] - Completed the acquisition of CareBridge on December 10, 2024, to enhance Carelon Services' at-home care strategy, adding $305 million in finite-lived intangibles and $1,814 million in goodwill[54] - On April 1, 2024, the company sold its life and disability businesses, recognizing a gain of $240 million[55] Note 9. Medical Claims Payable Medical claims payable increased to $17.2 billion by June 30, 2025, with $1.065 billion in favorable prior period development for the first six months of 2025 Medical Claims Payable Reconciliation (in millions) | Description | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net medical claims payable, beginning of period | $15,567 | $15,858 | | Total net incurred medical claims | $70,025 | $59,078 | | Prior periods redundancies | ($1,065) | ($1,473) | | Total net payments | $68,919 | $59,881 | | Gross medical claims payable, end of period | $16,871 | $15,067 | - Favorable development in the first six months of 2025 was $1.065 billion, resulting from late 2024 trend factors being more favorable than originally expected[100] Note 10. Debt Elevance Health's outstanding senior unsecured notes decreased to $29.8 billion, with a $1.25 billion repayment and a $4.0 billion undrawn revolving credit facility, maintaining a healthy debt-to-capital ratio - On January 15, 2025, the company repaid $1,250 million of its 2.375% unsecured notes at maturity[105] - The company has a $4.0 billion senior revolving credit facility maturing in April 2027, with no amounts outstanding as of June 30, 2025[106] - The debt-to-capital ratio under the 5-Year Facility was 40.8% as of June 30, 2025, well below the 60% covenant limit[106] Note 11. Commitments and Contingencies The company is involved in significant litigation, including the Blue Cross Blue Shield Antitrust Litigation, with a $666 million estimated settlement for provider plaintiffs, and a False Claims Act lawsuit - The Subscriber Settlement Agreement in the Blue Cross Blue Shield Antitrust Litigation became effective in June 2024[114] - A proposed Provider Settlement Agreement received preliminary court approval, with a final hearing set for July 29, 2025; the company's estimated payment obligation is $666 million, which was recognized in September 2024[118] - The company is defending a lawsuit from the U.S. Department of Justice alleging violations of the False Claims Act related to Medicare Part C risk-adjustment data[120] Note 12. Capital Stock During the first half of 2025, Elevance Health repurchased 3.2 million shares for $1.26 billion and paid $3.42 per share in cash dividends, with $8.04 billion remaining for future repurchases Share Repurchase Summary | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Shares repurchased (millions) | 3.2 | 2.0 | | Average price per share | $399.97 | $506.55 | | Aggregate cost (millions) | $1,259 | $1,029 | | Authorization remaining (millions) | $8,041 | $3,171 | Dividend Summary | Period | Cash Dividend per Share | Total Paid (millions) | | :--- | :--- | :--- | | Q1 2025 | $1.71 | $386 | | Q2 2025 | $1.71 | $385 | | YTD 2025 Total | $3.42 | $771 | Note 15. Segment Information In Q2 2025, Health Benefits operating gain decreased, while CarelonRx and Carelon Services saw increased operating gains, contributing to a total operating gain of $2.425 billion Segment Operating Gain (Loss) (in millions) | Segment | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Health Benefits | $1,560 | $2,145 | $3,777 | $4,432 | | CarelonRx | $536 | $497 | $1,138 | $1,020 | | Carelon Services | $400 | $208 | $891 | $498 | | Corporate & Other | ($71) | ($85) | ($211) | ($169) | | Total Operating Gain | $2,425 | $2,765 | $5,595 | $5,781 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's Q2 and H1 2025 financial performance, covering business trends, acquisitions, consolidated and segment results, liquidity, and critical accounting policies Business and Regulatory Trends Elevated medical cost trends in Individual ACA and Medicaid, coupled with regulatory changes like the OBBBA of 2025 and ongoing Medicaid redeterminations, are impacting the business - Medical cost trends are elevated due to increased morbidity in the Individual ACA business and higher member acuity and utilization in Medicaid[158] - The budget reconciliation legislation of 2025, the One Big Beautiful Bill Act (OBBBA), is expected to impact Medicaid renewal/eligibility rules and other areas, with most provisions effective in 2027 and 2028[165] - Medicaid eligibility redeterminations, which began in April 2023, are ongoing, with states having until December 31, 2025 to complete the process[167] Other Significant Items The company's 2025 Medicare Advantage Star Ratings show a decline, expected to reduce 2026 operating revenue by $183 million, alongside recent acquisitions and joint venture investments - The 2025 Medicare Advantage Star Ratings show 38% of members in plans rated 4.0 Stars or higher, down from 53% in the 2024 ratings[174][175] - The lower Star Ratings are expected to cause a reduction in 2026 operating revenue of approximately $183 million, which the company plans to mitigate through various strategies[175] Membership and Other Metrics Total medical membership slightly decreased by 0.3% year-over-year to 45.6 million, driven by a decline in Medicaid membership largely offset by an increase in Medicare Advantage Medical Membership by Category (in thousands) | Category | June 30, 2025 | June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Commercial Fee-Based | 27,154 | 27,234 | (0.3)% | | Medicare Advantage | 2,255 | 2,031 | 11.0% | | Medicaid | 8,733 | 9,028 | (3.3)% | | Total Medical Membership | 45,621 | 45,776 | (0.3)% | Consolidated Results of Operations Q2 2025 operating revenue grew 14.3% to $49.4 billion, but net income fell 24.2% due to a higher benefit expense ratio driven by increased medical cost trends - Q2 2025 operating revenue increased 14.3% YoY, while net income decreased 24.2% YoY[196][198] - The benefit expense ratio for Q2 2025 increased to 88.9% from 86.3% in Q2 2024, driven by higher medical cost trends in Medicaid and ACA plans[197][200] - The operating expense ratio improved by 160 basis points to 10.1% in Q2 2025, reflecting operating leverage from revenue growth[197][202] Reportable Segments Results of Operations In Q2 2025, Health Benefits operating gain declined significantly, while CarelonRx and Carelon Services experienced substantial growth in operating gain due to acquisitions and improved performance - Health Benefits operating gain decreased 27.3% in Q2 2025, as Medicaid and ACA plan rates were inadequate to cover medical cost trends[214][216] - CarelonRx operating gain increased 7.8% in Q2 2025, driven by higher prescription volume and revenue from recent acquisitions[214][217] - Carelon Services operating gain grew 92.3% in Q2 2025, primarily due to the acquisition of CareBridge and improved performance in specialty and behavioral health services[214][218] Liquidity and Capital Resources Net cash from operating activities increased to $3.1 billion for the first half of 2025, with the parent company holding $2.2 billion in cash and investments, and the debt-to-capital ratio improving to 40.8% - Net cash provided by operating activities for the first six months of 2025 was $3,071 million, an increase from $2,425 million in the same period of 2024[237] - As of June 30, 2025, the parent company held $2,224 million of cash, cash equivalents, and investments available for general corporate use[241] - The consolidated debt-to-capital ratio was 40.8% as of June 30, 2025, compared to 43.0% as of December 31, 2024[243] Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to the company's market risks since the disclosures in its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes to the company's market risks since December 31, 2024[257] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[258] - No material changes to internal control over financial reporting were identified during the second quarter of 2025[259] PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 11 of the Consolidated Financial Statements for detailed information regarding the company's legal proceedings as of June 30, 2025 - Information regarding legal proceedings is incorporated by reference from Note 11, "Commitments and Contingencies," in Part I, Item 1 of this report[260] Risk Factors The company reports that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes to the risk factors disclosed in the 2024 Annual Report on Form 10-K[261] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 928,007 shares of common stock, with approximately $8.04 billion remaining available under the repurchase authorization Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 567,084 | $427.05 | | May 2025 | 112,510 | $390.43 | | June 2025 | 248,413 | $380.11 | | Total | 928,007 | N/A | - As of the end of June 2025, the remaining authorization under the share repurchase program was approximately $8.04 billion[262] Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None[263] Mine Safety Disclosures This section is not applicable to the company - None[264] Other Information The company disclosed that no directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the second quarter of 2025 - During the three months ended June 30, 2025, no directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement[265] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, CEO/CFO certifications, and XBRL data files - Exhibits filed include the Amended and Restated Articles of Incorporation, Bylaws, CEO/CFO certifications (Sections 302 and 906), and XBRL interactive data files[267]