Elevance Health(US:ELV)2025-10-21 15:11PART I. FINANCIAL INFORMATION This section provides comprehensive financial data for Elevance Health, Inc., including statements of financial position, income, comprehensive income, cash flows, and equity, along with detailed explanatory notes ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited consolidated financial statements of Elevance Health, Inc. for the period ended September 30, 2025, including balance sheets, statements of income, comprehensive income, cash flows, and changes in equity, along with detailed notes to these financial statements Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity as of September 30, 2025, and December 31, 2024 | Metric | Sep 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change (Millions) | % Change | | :-------------------------- | :---------------------- | :---------------------- | :---------------- | :------- | | Total Assets | $122,749 | $116,889 | $5,860 | 5.0% | | Total Liabilities | $78,667 | $75,463 | $3,204 | 4.2% | | Total Equity | $44,082 | $41,426 | $2,656 | 6.4% | | Cash & Cash Equivalents | $8,713 | $8,288 | $425 | 5.1% | | Medical Claims Payable | $17,148 | $15,746 | $1,402 | 8.9% | Consolidated Statements of Income This statement details the company's revenues, expenses, net income, and earnings per share for the three and nine months ended September 30, 2025 and 2024 | Metric | 3 Months Ended Sep 30, 2025 (Millions) | 3 Months Ended Sep 30, 2024 (Millions) | Change (Millions) | % Change | 9 Months Ended Sep 30, 2025 (Millions) | 9 Months Ended Sep 30, 2024 (Millions) | Change (Millions) | % Change | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | :------- | :------------------------------------- | :------------------------------------- | :---------------- | :------- | | Total Revenues | $50,711 | $45,106 | $5,605 | 12.4% | $149,378 | $131,569 | $17,809 | 13.5% | | Total Expenses | $49,305 | $43,733 | $5,572 | 12.7% | $142,883 | $124,271 | $18,612 | 15.0% | | Net Income | $1,187 | $1,008 | $179 | 17.8% | $5,115 | $5,558 | $(443) | (8.0)% | | Diluted EPS | $5.32 | $4.36 | $0.96 | 22.0% | $22.67 | $23.81 | $(1.14) | (4.8)% | | Dividends per share | $1.71 | $1.63 | $0.08 | 4.9% | $5.13 | $4.89 | $0.24 | 4.9% | Consolidated Statements of Comprehensive Income This statement presents net income and other comprehensive income components, reflecting total shareholders' comprehensive income for the reported periods | Metric | 3 Months Ended Sep 30, 2025 (Millions) | 3 Months Ended Sep 30, 2024 (Millions) | Change (Millions) | % Change | 9 Months Ended Sep 30, 2025 (Millions) | 9 Months Ended Sep 30, 2024 (Millions) | Change (Millions) | % Change | | :------------------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | :------- | :------------------------------------- | :------------------------------------- | :---------------- | :------- | | Net Income | $1,187 | $1,008 | $179 | 17.8% | $5,115 | $5,558 | $(443) | (8.0)% | | Other comprehensive income | $219 | $898 | $(679) | (75.6)% | $608 | $824 | $(216) | (26.2)% | | Total Shareholders' Comprehensive Income | $1,406 | $1,914 | $(508) | (26.5)% | $5,719 | $6,386 | $(667) | (10.4)% | Consolidated Statements of Cash Flows This statement outlines the cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2025 and 2024 | Metric | 9 Months Ended Sep 30, 2025 (Millions) | 9 Months Ended Sep 30, 2024 (Millions) | Change (Millions) | % Change | | :----------------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | :------- | | Net cash provided by operating activities | $4,206 | $5,102 | $(896) | (17.6)% | | Net cash used in investing activities | $(1,808) | $(3,529) | $1,721 | 48.8% | | Net cash used in financing activities | $(1,974) | $(215) | $(1,759) | 818.1% | | Change in cash and cash equivalents | $425 | $1,360 | $(935) | (68.8)% | - The decrease in net cash provided by operating activities was primarily due to the Provider Settlement Agreement payment made in September 2025 and lower net income for the nine months ended September 30, 2025189232 Consolidated Statements of Changes in Equity This statement details the changes in total shareholders' equity, retained earnings, and accumulated other comprehensive loss for the reported periods | Metric | Sep 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change (Millions) | % Change | | :-------------------------------- | :---------------------- | :---------------------- | :---------------- | :------- | | Total Shareholders' Equity | $43,953 | $41,315 | $2,638 | 6.4% | | Retained Earnings | $35,586 | $33,549 | $2,037 | 6.1% | | Accumulated Other Comprehensive Loss | $(543) | $(1,147) | $604 | (52.7)% | - Repurchase and retirement of common stock, including excise tax, amounted to $(884) million for the three months ended September 30, 2025, and $(2,134) million for the nine months ended September 30, 202518 Notes to Consolidated Financial Statements This section provides detailed disclosures and explanations supporting the consolidated financial statements, covering accounting policies, acquisitions, and other financial matters Note 1. Organization This note describes Elevance Health's business, its market position as a leading health insurer, and its reportable operating segments - Elevance Health is one of the largest health insurers in the United States, serving approximately 45.4 million medical members as of September 30, 202523157 - The company operates through four reportable segments: Health Benefits, CarelonRx, Carelon Services, and Corporate & Other24158 - Core go-to-market brands include Anthem Blue Cross/Blue Shield, Wellpoint, and Carelon26160 Note 2. Basis of Presentation and Significant Accounting Policies This note outlines the basis of financial statement preparation, key revenue recognition policies, and the adoption and impact of new accounting standards - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial reporting and should be read in conjunction with the 2024 Annual Report on Form 10-K2527 - Revenue recognition policies include premiums for risk-based contracts recognized over the coverage period, service fees for fee-based groups recognized over time, and product revenue for pharmacy services recognized using the gross method when control is transferred444648 - ASU 2023-05 (Business Combinations—Joint Venture Formations) was adopted on January 1, 2025, with no material impact on financial statements50 - Upcoming accounting guidance includes ASU 2023-09 (Income Taxes, effective after Dec 15, 2024), ASU 2025-05 (Financial Instruments—Credit Losses, effective after Dec 15, 2025), ASU 2024-03 (Expense Disaggregation, effective after Dec 15, 2026), and ASU 2025-06 (Internal-Use Software, effective after Dec 15, 2027), with impacts currently being assessed5152535455 Note 3. Business Acquisitions This note details the acquisitions of Centers Plan for Healthy Living LLC and CareBridge, including the allocation of purchase prices to assets and goodwill - On December 31, 2024, Elevance Health acquired Centers Plan for Healthy Living LLC, a managed long-term care plan, allocating $211 million to finite-lived intangible assets, $690 million to indefinite-lived intangible assets, and $246 million to goodwill57 - On December 10, 2024, the company acquired CareBridge, a value-based healthcare company, allocating $305 million to finite-lived intangible assets and $1,811 million to goodwill, including a $27 million contingent consideration58 Note 4. Business Optimization Initiative This note describes the '2023-2024 Business Efficiency Program,' its objectives, and the associated liability balances for employee termination costs - The '2023-2024 Business Efficiency Program' was finalized by December 31, 2024, focusing on operating efficiency, investment refinement, and physical footprint optimization, including IT asset write-offs, contract exit costs, and staff reductions59 - The ending liability balance for employee termination costs under the program was $109 million at September 30, 2025, down from $224 million at December 31, 202460 Note 5. Investments This note provides details on the company's fixed maturity securities, unrealized gains and losses, and equity method investments in Mosaic Health and Liberty Dental | Metric | Sep 30, 2025 (Millions) | Dec 31, 2024 (Millions) | | :----------------------------------- | :---------------------- | :---------------------- | | Total Fixed Maturity Securities (Fair Value) | $27,394 | $26,236 | | Gross Unrealized Gains | $639 | $284 | | Gross Unrealized Losses | $(542) | $(970) | | Allowance For Credit Losses | $(13) | $(6) | - Unrealized losses on fixed maturity securities are primarily due to elevated interest rates, but the company does not intend to sell these investments before anticipated recovery63 - Elevance Health holds equity method investments in Mosaic Health (approximately 40% ownership) and Liberty Dental (40% minority interest ownership)686971 | Metric | 3 Months Ended Sep 30, 2025 (Millions) | 3 Months Ended Sep 30, 2024 (Millions) | 9 Months Ended Sep 30, 2025 (Millions) | 9 Months Ended Sep 30, 2024 (Millions) | | :----------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Net losses on investments | $0 | $(126) | $(594) | $(379) | Note 6. Derivative Financial Instruments This note explains the company's use of derivatives to manage financial risks and details the carrying values of net put options related to equity investments - The company uses derivative financial instruments, such as interest rate swaps, futures, forward contracts, and options, to manage interest rate, foreign exchange, and credit exposure79 - The carrying value of the net put option related to the Mosaic Health equity investment was $1,330 million as of September 30, 2025, measured at fair value at the initial investment date and not subsequently marked to market83 - The carrying value of the net put option related to the Liberty Dental equity investment was $396 million as of September 30, 2025, also measured at fair value at the initial investment date and not subsequently marked to market84 Note 7. Fair Value This note presents the fair value measurements of various financial assets and liabilities, categorized by valuation input levels, and discusses nonrecurring fair value measurements | Category | Level I (Millions) | Level II (Millions) | Level III (Millions) | Total (Millions) | | :----------------------------------- | :----------------- | :------------------ | :----------------- | :--------------- | | Cash equivalents | $3,219 | $— | $— | $3,219 | | Fixed maturity securities, available-for-sale | $— | $26,012 | $1,382 | $27,394 | | Equity securities | $1,131 | $29 | $60 | $1,220 | | Other invested assets - common equity securities | $7 | $— | $— | $7 | | Securities lending collateral | $— | $2,881 | $— | $2,881 | | Derivatives - other assets | $— | $92 | $— | $92 | | Total assets | $4,357 | $29,014 | $1,442 | $34,813 | - Nonrecurring fair value measurements include assets acquired and liabilities assumed in the Centers and CareBridge acquisitions, and net put options on Mosaic Health ($1,400 million) and Liberty Dental ($444 million) as of September 30, 2025919293 Note 8. Income Taxes This note provides the company's income tax expense and effective tax rates, explaining the factors contributing to changes in the effective tax rate | Metric | 3 Months Ended Sep 30, 2025 (Millions) | 3 Months Ended Sep 30, 2024 (Millions) | 9 Months Ended Sep 30, 2025 (Millions) | 9 Months Ended Sep 30, 2024 (Millions) | | :-------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Income Tax Expense | $219 | $365 | $1,380 | $1,740 | | Effective Tax Rate | 15.6% | 26.6% | 21.2% | 23.8% | - The decrease in the effective income tax rate for both the three and nine months ended September 30, 2025, was primarily due to the impact of certain investment credits and the non-recurrence of a prior year uncertain tax position100 Note 9. Medical Claims Payable This note details the changes in medical claims payable, including incurred claims, payments, and the recognition of prior period redundancies | Metric | 2025 (Millions) | 2024 (Millions) | | :----------------------------------- | :-------------- | :-------------- | | Gross medical claims payable, beginning of period | $15,580 | $15,865 | | Net incurred medical claims | $107,157 | $91,105 | | Net payments | $106,244 | $91,787 | | Gross medical claims payable, end of period | $16,868 | $15,185 | - Prior periods redundancies of $1,266 million were recognized for the nine months ended September 30, 2025, primarily due to favorable trend factors in late 2024102103224225 - The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 86.3% for the nine months ended September 30, 2025, indicating slightly faster claims processing speed compared to 2024 (85.4%)226 Note 10. Debt This note outlines the company's outstanding senior unsecured notes, recent debt issuances, and amendments to its revolving credit facility - Total outstanding senior unsecured notes were $31,897 million at September 30, 2025108 - In September 2025, the company issued $3,000 million in new notes (2028, 2032, 2036, and 2055 Notes) to redeem $900 million of existing debt and for general corporate purposes109 - The 5-Year Facility, a senior revolving credit facility, was amended to extend its maturity to September 2030 and increase the credit available from $4,000 million to $5,000 million. The debt-to-capital ratio was 42.1% at September 30, 2025, in compliance with covenants111238 Note 11. Commitments and Contingencies This note discusses significant legal proceedings, including antitrust settlements and a Department of Justice lawsuit, along with major contractual obligations - In the Blue Cross Blue Shield Antitrust Litigation, the Subscriber Settlement Agreement became effective in June 2024, and the Provider Settlement Agreement received final approval in August 2025, leading to a $666 million monetary settlement payment by the company on September 19, 2025120122183184 - The company is a defendant in a civil lawsuit by the U.S. Department of Justice regarding alleged false certification of diagnosis data for Medicare Part C risk adjustment, with fact discovery ongoing until December 9, 2025124 - Contractual obligations include a remaining commitment of approximately $1,746 million under an IT infrastructure agreement through June 2029 and a pharmacy services agreement with CVS through December 31, 2027126127 Note 12. Capital Stock This note provides information on stock option and restricted stock unit grants, cash dividends paid, and common stock repurchase activities - For the nine months ended September 30, 2025, 0.6 million stock options were granted at a weighted-average option price of $394.27 per share, and 0.6 million restricted stock units were granted at a weighted-average grant date fair value of $393.39 per share130133 - Cash dividends of $1.71 per share were paid for each of the first three quarters of 2025135 - The company repurchased 6.1 million shares of common stock at an aggregate cost of $2,134 million for the nine months ended September 30, 2025, with $7,166 million remaining under the common stock repurchase program authorization137 Note 13. Accumulated Other Comprehensive (Loss) Income This note details the components and changes in accumulated other comprehensive loss, primarily driven by net unrealized investment gains | Metric | Sep 30, 2025 (Millions) | Sep 30, 2024 (Millions) | | :----------------------------------- | :---------------------- | :---------------------- | | Total end of period accumulated other comprehensive loss | $(543) | $(489) | - The accumulated other comprehensive loss improved from $(1,147) million at December 31, 2024, to $(543) million at September 30, 2025, primarily driven by net unrealized investment gains8139 Note 14. Shareholders' Earnings per Share This note presents the denominators used for basic and diluted earnings per share calculations, including the impact of anti-dilutive stock options | Metric | 3 Months Ended Sep 30, 2025 (Millions) | 3 Months Ended Sep 30, 2024 (Millions) | 9 Months Ended Sep 30, 2025 (Millions) | 9 Months Ended Sep 30, 2024 (Millions) | | :----------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Denominator for basic shareholders' earnings per share | 223.3 | 231.9 | 225.0 | 232.3 | | Denominator for diluted shareholders' earnings per share | 223.7 | 233.1 | 225.6 | 233.6 | - Weighted-average shares related to certain stock options (2.2 million for Q3 2025 and 1.9 million for 9 months 2025) were excluded from diluted EPS calculations as they were anti-dilutive140 Note 15. Segment Information This note provides detailed operating revenue and gain information for the Health Benefits, CarelonRx, Carelon Services, and Corporate & Other segments | Segment | 3 Months Ended Sep 30, 2025 (Millions) | 3 Months Ended Sep 30, 2024 (Millions) | % Change (YoY) | 9 Months Ended Sep 30, 2025 (Millions) | 9 Months Ended Sep 30, 2024 (Millions) | % Change (YoY) | | :---------------- | :------------------------------------- | :------------------------------------- | :------------- | :------------------------------------- | :------------------------------------- | :------------- | | Health Benefits | $42,246 | $38,278 | 10.4% | $125,259 | $112,695 | 11.1% | | CarelonRx | $10,997 | $9,143 | 20.3% | $31,756 | $25,984 | 22.2% | | Carelon Services | $7,324 | $4,638 | 57.9% | $21,301 | $13,192 | 61.5% | | Corporate & Other | $149 | $74 | 101.4% | $546 | $323 | 69.0% | | Total Operating Revenue | $50,087 | $44,719 | 12.0% | $148,273 | $130,215 | 13.9% | | Segment | 3 Months Ended Sep 30, 2025 (Millions) | 3 Months Ended Sep 30, 2024 (Millions) | % Change (YoY) | 9 Months Ended Sep 30, 2025 (Millions) | 9 Months Ended Sep 30, 2024 (Millions) | % Change (YoY) | | :---------------- | :------------------------------------- | :------------------------------------- | :------------- | :------------------------------------- | :------------------------------------- | :------------- | | Health Benefits | $601 | $1,604 | (62.5)% | $4,378 | $6,036 | (27.5)% | | CarelonRx | $556 | $619 | (10.2)% | $1,694 | $1,639 | 3.4% | | Carelon Services | $219 | $184 | 19.0% | $1,110 | $682 | 62.8% | | Corporate & Other | $(81) | $(999) | (91.9)% | $(292) | $(1,168) | (75.0)% | | Total Operating Gain | $1,295 | $1,408 | (8.0)% | $6,890 | $7,189 | (4.2)% | - Health Benefits operating gain decreased due to higher medical cost trends and increased investments, with rates for Affordable Care Act health plans and Medicaid being inadequate to cover medical cost trends for the nine-month period211215 - Carelon Services operating gain increased significantly due to the CareBridge acquisition and improved performance in post-acute care, specialty care solutions, and behavioral health services213218 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on Elevance Health's financial condition and results of operations, highlighting business trends, regulatory changes, significant operational items, and detailed financial performance across segments, liquidity, and capital resources Overview This overview introduces Elevance Health as a leading US health company and outlines its four reportable operating segments - Elevance Health is a leading US health company serving approximately 45.4 million medical members as of September 30, 2025157 - The company reports results in four segments: Health Benefits, CarelonRx, Carelon Services, and Corporate & Other158 Business Trends This section discusses elevated medical cost trends, membership shifts, pricing challenges in government programs, and the company's pharmacy services delegation - Medical cost trends are elevated due to membership shifts from Medicaid to Individual ACA, lower effectuation rates, higher population acuity, and increased utilization of services161162 - Pricing of Medicare and Medicaid programs may not adequately reflect current underlying healthcare cost trends due to timing lags in rate establishment163164 - CarelonRx offers comprehensive pharmacy services, with certain core services delegated to CVS Health Corporation through December 31, 2027166167 Regulatory Trends and Uncertainties This section addresses the impact of new legislation like the OBBBA and IRA, and potential adverse effects from increased Medicare Advantage RADV audits - The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, includes provisions impacting Medicaid eligibility, state directed payments, provider taxes, and ACA cost sharing, with most effective dates in 2027-2028169 - The Inflation Reduction Act of 2022 (IRA) extends enhanced Premium Tax Credits through 2025; their expiration could have a material adverse effect on the business173 - CMS plans to substantially increase the scale and pace of Risk Adjustment Data Validation (RADV) audits of Medicare Advantage plans, which could adversely affect financial condition and results of operations175 Other Significant Items This section covers key operational matters, recent business acquisitions, and significant litigation developments impacting the company Business and Operational Matters This subsection highlights the improvement in the company's 2026 Medicare Advantage Star Ratings, with a higher percentage of members in 4.0+ Star plans - The company's 2026 Medicare Advantage Star Ratings reflect approximately 55% of members enrolled in plans rated at least 4.0 Stars or higher, an increase from 40% for 2025 Star Ratings177 Business Acquisitions This subsection details the strategic acquisitions of Centers Plan and CareBridge, along with significant equity investments in Mosaic Health - Acquisitions of Centers Plan for Healthy Living LLC and CareBridge were completed in December 2024, aligning with strategic growth in Health Benefits and Carelon Services segments178 - An equity investment of $2,580 million was made in Mosaic Health in August 2024, resulting in approximately 35% minority interest ownership, with an additional $300 million equity contribution in January 2025 for an additional 5% ownership179 Litigation Matters This subsection provides updates on the Blue Cross Blue Shield Antitrust Litigation, including the final approval and payment of the Provider Settlement Agreement - In the Blue Cross Blue Shield Antitrust Litigation, the Subscriber Settlement Agreement became effective in June 2024, and the Provider Settlement Agreement received final approval in August 2025, leading to a $666 million payment by the company in September 2025183184 Selected Operating Performance This section presents key financial metrics including total operating revenue, net income, diluted EPS, and operating cash flow, alongside medical membership trends | Metric | 3 Months Ended Sep 30, 2025 (Millions) | 3 Months Ended Sep 30, 2024 (Millions) | % Change | 9 Months Ended Sep 30, 2025 (Millions) | 9 Months Ended Sep 30, 2024 (Millions) | % Change | | :----------------------------------- | :------------------------------------- | :------------------------------------- | :------- | :------------------------------------- | :------------------------------------- | :------- | | Total Operating Revenue | $50,087 | $44,719 | 12.0% | $148,273 | $130,215 | 13.9% | | Net Income | $1,187 | $1,008 | 17.8% | $5,115 | $5,558 | (8.0)% | | Diluted EPS | $5.32 | $4.36 | 22.0% | $22.67 | $23.81 | (4.8)% | | Operating Cash Flow (9 months) | $4,206 | $5,102 | (17.6)% | | | | - Total medical membership declined by 0.9% for the twelve months ended September 30, 2025, primarily due to decreases in BlueCard business and Medicaid attrition, partially offset by increases in Medicare Advantage186 Membership and Other Metrics This section provides detailed membership data across various customer types, along with CarelonRx script volumes and Carelon Services consumers served | Customer Type | Sep 30, 2025 | Sep 30, 2024 | Change | % Change | | :---------------------- | :----------- | :----------- | :----- | :------- | | Individual | 1,354 | 1,299 | 55 | 4.2% | | Employer Group Risk-Based | 3,616 | 3,672 | (56) | (1.5)% | | BlueCard® | 6,394 | 6,677 | (283) | (4.2)% | | Employer Group Fee-Based | 20,608 | 20,589 | 19 | 0.1% | | Medicare Advantage | 2,245 | 2,047 | 198 | 9.7% | | Medicare Supplement | 877 | 894 | (17) | (1.9)% | | Medicaid | 8,645 | 8,926 | (281) | (3.1)% | | Federal Employee Program | 1,630 | 1,656 | (26) | (1.6)% | | Total Medical Membership | 45,369 | 45,760 | (391) | (0.9)% | | Metric | Sep 30, 2025 (Millions) | Sep 30, 2024 (Millions) | Change | % Change | | :---------------------------- | :---------------------- | :---------------------- | :----- | :------- | | CarelonRx Quarterly Adjusted Scripts | 85.0 | 80.2 | 4.8 | 6.0% | | Carelon Services Consumers Served | 97.6 | 101.3 | (3.7) | (3.7)% | - Dental membership increased by 4.9% and Vision membership increased by 4.4%, primarily due to favorable sales in Employer Group business and higher sales across various health plans, respectively192193 Consolidated Results of Operations This section analyzes the consolidated financial performance, including revenue, expenses, net income, and key ratios, explaining the drivers of changes | Metric | 3 Months Ended Sep 30, 2025 (Millions) | 3 Months Ended Sep 30, 2024 (Millions) | % Change | 9 Months Ended Sep 30, 2025 (Millions) | 9 Months Ended Sep 30, 2024 (Millions) | % Change | | :----------------------------------- | :------------------------------------- | :------------------------------------- | :------- | :------------------------------------- | :------------------------------------- | :------- | | Total operating revenue | $50,087 | $44,719 | 12.0% | $148,273 | $130,215 | 13.9% | | Net investment income | $625 | $551 | 13.4% | $1,701 | $1,524 | 11.6% | | Net losses on financial instruments | $(1) | $(125) | 99.2% | $(596) | $(371) | (60.6)% | | Benefit expense | $38,140 | $32,949 | 15.8% | $110,158 | $94,067 | 17.1% | | Cost of products sold | $5,380 | $5,093 | 5.6% | $15,656 | $13,738 | 14.0% | | Operating expense | $5,272 | $5,269 | 0.1% | $15,569 | $15,221 | 2.3% | | Net income | $1,187 | $1,008 | 17.8% | $5,115 | $5,558 | (8.0)% | | Diluted shareholders' earnings per share | $5.32 | $4.36 | 22.0% | $22.67 | $23.81 | (4.8)% | | Effective tax rate | 15.6% | 26.6% | (1100) bp| 21.2% | 23.8% | (260) bp | | Benefit expense ratio | 91.3% | 89.5% | 180 bp | 88.9% | 87.2% | 170 bp | | Operating expense ratio | 10.5% | 11.8% | (130) bp | 10.5% | 11.7% | (120) bp | - The increase in net income for the three months ended September 30, 2025, was primarily due to decreased losses on financial instruments and decreased income tax expense187 - The decrease in net income for the nine months ended September 30, 2025, was primarily due to decreased operating gain within the Health Benefits segment and increased net losses on financial instruments187 Reportable Segments Results of Operations This section provides a detailed breakdown of operating revenue and gain for each reportable segment, highlighting performance drivers and trends | Segment | 3 Months Ended Sep 30, 2025 (Millions) | 3 Months Ended Sep 30, 2024 (Millions) | % Change (YoY) | 9 Months Ended Sep 30, 2025 (Millions) | 9 Months Ended Sep 30, 2024 (Millions) | % Change (YoY) | | :---------------- | :------------------------------------- | :------------------------------------- | :------------- | :------------------------------------- | :------------------------------------- | :------------- | | Health Benefits | $42,246 | $38,278 | 10.4% | $125,259 | $112,695 | 11.1% | | CarelonRx | $6,163 | $5,889 | 4.7% | $18,021 | $15,920 | 13.2% | | Carelon Services | $1,953 | $881 | 121.7% | $5,771 | $2,476 | 133.1% | | Corporate & Other | $149 | $74 | 101.4% | $546 | $323 | 69.0% | | Total Operating Revenue | $50,087 | $44,719 | 12.0% | $148,273 | $130,215 | 13.9% | | Segment | 3 Months Ended Sep 30, 2025 (Millions) | 3 Months Ended Sep 30, 2024 (Millions) | % Change (YoY) | 9 Months Ended Sep 30, 2025 (Millions) | 9 Months Ended Sep 30, 2024 (Millions) | % Change (YoY) | | :---------------- | :------------------------------------- | :------------------------------------- | :------------- | :------------------------------------- | :------------------------------------- | :------------- | | Health Benefits | $601 | $1,604 | (62.5)% | $4,378 | $6,036 | (27.5)% | | CarelonRx | $556 | $619 | (10.2)% | $1,694 | $1,639 | 3.4% | | Carelon Services | $219 | $184 | 19.0% | $1,110 | $682 | 62.8% | | Corporate & Other | $(81) | $(999) | (91.9)% | $(292) | $(1,168) | (75.0)% | | Total Operating Gain | $1,295 | $1,408 | (8.0)% | $6,890 | $7,189 | (4.2)% | - Health Benefits operating gain decreased due to higher medical cost trends and increased investments, with rates for Affordable Care Act health plans and Medicaid being inadequate to cover medical cost trends for the nine-month period211215 - Carelon Services operating gain increased significantly due to the CareBridge acquisition and improved performance in post-acute care, specialty care solutions, and behavioral health services213218 Critical Accounting Policies and Estimates This section discusses the most subjective accounting estimates, particularly the liability for medical claims payable, and the impact of prior period redundancies - The most subjective accounting estimate is the liability for medical claims payable, which relies on significant judgment regarding trend and completion factors222223 - Favorable development of $1,266 million was recognized for the nine months ended September 30, 2025, primarily from favorable trend factors in late 2024224225 - The percentage of prior year redundancies in the current period was 8.9% for the nine months ended September 30, 2025, indicating an appropriate and consistent level of reserve conservatism227228 Liquidity and Capital Resources This section examines the company's cash flow, liquidity position, capital structure, and available financial resources to meet future obligations and strategic needs Sources and Uses of Capital This subsection identifies the primary sources of cash receipts and the main categories of cash disbursements for the company - Primary cash receipts include premiums, product revenue, service fees, investment income, and proceeds from investment sales, borrowings, and stock issuance229 - Primary cash disbursements include claims payments, operating expenses, taxes, investment purchases, interest expense, debt payments, acquisitions, capital expenditures, and stock/debt repurchases229 Liquidity This subsection analyzes changes in operating cash flow, the total cash and investment position, and the consolidated debt-to-capital ratio - Net cash provided by operating activities decreased by $896 million to $4,206 million for the nine months ended September 30, 2025, primarily due to the Provider Settlement Agreement payment and lower net income232 - Consolidated cash, cash equivalents, and investments in fixed maturity and equity securities totaled $37,327 million at September 30, 2025, an increase of $1,611 million since December 31, 2024234 - The consolidated debt-to-capital ratio improved to 42.1% at September 30, 2025, from 43.0% at December 31, 2024238 - The parent company held $2,647 million in cash, cash equivalents, and investments available for general corporate use236 Capital Resources This subsection details the company's available capital resources, including shelf registration, revolving credit facility, and commercial paper program - The company has a shelf registration statement for future debt or equity securities offerings and a $5,000 million senior revolving credit facility (5-Year Facility) extended to September 2030240241 - An authorized commercial paper program of up to $4,000 million had no outstanding amounts at September 30, 2025242 - Regulated subsidiaries' risk-based capital (RBC) levels exceeded all mandatory requirements as of December 31, 2024246 Future Sources and Uses of Liquidity This subsection outlines the company's expectations regarding the adequacy of its current and future liquidity sources to cover anticipated disbursements - The company expects current cash, future operating cash receipts, investments, and available credit facilities to be adequate for expected cash disbursements over the next twelve months and for future operations and strategic transactions247248 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section refers to the company's 2024 Annual Report on Form 10-K for a discussion of market risks, stating that there have been no material changes to these risks since December 31, 2024 - No material changes to market risks have occurred since December 31, 2024251 ITEM 4. CONTROLS AND PROCEDURES Management, including the Chief Executive Officer and Chief Financial Officer, concluded that the company's disclosure controls and procedures were effective as of September 30, 2025, and reported no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were deemed effective as of September 30, 2025252 - No material changes in internal control over financial reporting occurred during the three months ended September 30, 2025253 PART II. OTHER INFORMATION This section presents additional disclosures on legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and exhibits ITEM 1. LEGAL PROCEEDINGS This section incorporates by reference the information regarding legal proceedings from Note 11, 'Commitments and Contingencies,' in Part I, Item 1 of this Quarterly Report on Form 10-Q - Information regarding legal proceedings is incorporated by reference from Note 11, 'Commitments and Contingencies'254 ITEM 1A. RISK FACTORS This section refers to the risk factors discussed in Part I, Item 1A of the company's 2024 Annual Report on Form 10-K, stating that there have been no material changes to these risk factors - No material changes to the risk factors as disclosed in Part I, Item 1A of the 2024 Annual Report on Form 10-K256 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section details the company's common stock repurchase activities for the three months ended September 30, 2025, including the number of shares purchased and the remaining authorization under the program | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs (Millions) | | :------------------------------ | :------------------------------- | :--------------------------- | :--------------------------------------------------------------------------------------- | | July 1, 2025 to July 31, 2025 | 944,457 | $306.12 | $7,753 | | August 1, 2025 to August 31, 2025 | 1,289,067 | $295.88 | $7,372 | | September 1, 2025 to September 30, 2025 | 652,318 | $314.80 | $7,166 | | Total (3 months) | 2,885,842 | | | - The common stock repurchase program is discretionary, has no set duration, and the company reserves the right to discontinue it at any time258 ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section states that there were no defaults upon senior securities during the reported period - No defaults upon senior securities occurred259 ITEM 4. MINE SAFETY DISCLOSURES This section indicates that there were no mine safety disclosures required for the reported period - No mine safety disclosures were reported260 ITEM 5. OTHER INFORMATION This section reports that no directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended September 30, 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers in Q3 2025261 ITEM 6. EXHIBITS This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, debt instrument forms, employment agreements, certifications, and XBRL financial data - Exhibits include amended and restated articles of incorporation, bylaws, forms of notes, employment agreements, CEO/CFO certifications, and XBRL instance documents262 SIGNATURES This section contains the signatures of the authorized officers, Mark B. Kaye (Executive Vice President and Chief Financial Officer) and Ronald W. Penczek (Chief Accounting Officer and Controller), certifying the report on October 21, 2025 - The report was signed by Mark B. Kaye, Executive Vice President and Chief Financial Officer, and Ronald W. Penczek, Chief Accounting Officer and Controller, on October 21, 2025266