Financial Data and Key Metrics Changes - Elevance Health reported second quarter GAAP diluted earnings per share of $7.72 and adjusted diluted earnings per share of $8.84, with a revised full year 2025 adjusted EPS guidance of approximately $30 [16][9] - Operating revenue was $49.4 billion, an increase of 14% year over year, driven by higher premium yields and recent acquisitions [16][17] - The consolidated benefit expense ratio increased to 88.9%, up 260 basis points year over year, primarily due to pressures in the ACA and Medicaid businesses [17][20] Business Line Data and Key Metrics Changes - The Medicare Advantage portfolio showed continued strength, with cost trends remaining in line with expectations [18][46] - CarillonRx experienced over 20% growth in operating revenue, while Carillon services delivered more than 50% growth in revenue [19][20] - The company ended the quarter with 45.6 million medical members, a decrease of approximately 200,000 sequentially, attributed to reduced Medicaid membership and lower effectuation rates in the ACA business [16][17] Market Data and Key Metrics Changes - The ACA market is experiencing increased morbidity due to a higher proportion of higher acuity members transitioning from Medicaid, resulting in elevated medical cost trends [25][54] - Medicaid cost trends decelerated in the second quarter but at a slower pace than expected, with higher acuity and increased member utilization impacting margins [18][20] - The company anticipates a broader market reset in 2026 due to the expiration of enhanced subsidies, which could further affect risk pool changes [13][21] Company Strategy and Development Direction - The company is focused on delivering whole health solutions that are simple, affordable, and personalized, while managing costs and reinforcing operational foundations for long-term value creation [7][10] - Strategic investments are being prioritized in innovative care models, artificial intelligence, and pharmacy services to support long-term success [19][20] - The company aims to stabilize trends in high-cost areas and improve care delivery through streamlined processes and advanced analytics [10][11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the disappointment of revising guidance for the second consecutive year but emphasized the importance of transparency and strong execution in navigating unprecedented cost trends [15][21] - The company is taking proactive steps to stabilize trends, particularly in high-cost areas, and is focused on disciplined pricing and margin recovery [13][21] - Management remains confident in the strength of the enterprise and the impact of investments on long-term value creation [15][21] Other Important Information - The company is actively engaged with state partners to ensure upcoming Medicaid rate cycles reflect the developing acuity environment [13][21] - The debt to capital ratio was reported at 40.8%, preserving flexibility for strategic investments [20] - The company returned approximately $2 billion to investors year to date, with operating cash flow totaling $2.1 billion in the quarter [20] Q&A Session Summary Question: Can you help delineate the pressure you're seeing in the ACA business? - Management identified three principal factors: increased risk pool acuity, higher utilization in several cost categories, and inappropriate coding tactics contributing to inflated costs [24][25] Question: Can you size the relative impact of ACA and Medicaid in the guidance revision? - The reduction in full year guidance is slightly more weighted towards ACA, with ongoing enrollment losses in Medicaid contributing to elevated morbidity [29][35] Question: How do you think about the dynamic of Medicaid margins and rate setting? - Management expects Medicaid margins to show year-over-year improvement in the back half of the year, despite ongoing challenges with rate alignment [43][44] Question: What are you seeing on Medicare Advantage trends? - Medicare Advantage trends remain elevated and consistent with expectations, with a disciplined approach to bids for 2026 focused on margin recovery [46][48] Question: Can you comment on the utilization you're seeing? - Elevated utilization is noted in emergency room visits and behavioral health services, with a significant increase in acuity due to disenrollment of lower acuity members [54][108] Question: How is the current environment affecting capital allocation strategy? - The company plans to maintain a 50-50 split between investment and returning capital, with a focus on opportunistic share repurchases and integration of past acquisitions [74][75] Question: How do you change the pricing process for the ACA? - Management believes that ongoing discussions with CMS and state partners will help stabilize the ACA market, with upcoming rate filings capturing current acuity and expected risk pool deterioration [80][81]

Financial Performance - Elevance Health's operating revenue for 2Q 2025 grew by 143% to $494 billion [7, 9] - The medical loss ratio was 889% [9] - Adjusted operating expense ratio improved by 140 bps to 100% [9] - Operating cash flow was $21 billion [9] - Adjusted diluted earnings per share (EPS) decreased by 142% to $884 [7] Segment Results - Health Benefits operating revenue increased by 119% to $416 billion [11] - Health Benefits adjusted operating margin decreased by 200 bps to 38% [12] - Carelon revenue increased by 358% to $181 billion [14] - CarelonRx revenue increased by 213% to $1064 billion [33] - Carelon Services revenue increased by 637% to $7441 billion [33] Strategic Focus - Elevance Health is focused on simplifying healthcare, affordability, and accessibility for consumers [3, 5] - The company aims to deepen clinical and business partnerships with care providers [4, 5] - Elevance Health is targeting at least 12% average annual growth in Adjusted Diluted Earnings Per Share [19, 20]