Elevance Health (NYSE:ELV) Q4 2025 Earnings call January 28, 2026 08:30 AM ET Company ParticipantsA.J. Rice - Managing Director and Equity ResearchAndrew Mok - Director, Equity ResearchBen Hendrix - VP and Assistant VPDave Windley - Managing DirectorFelicia Norwood - President, Government Health BenefitsGail Boudreaux - President and CEOLisa Gill - Managing DirectorMark Kaye - CFOMorgan Kendrick - President, Commercial Health BenefitsNathan Rich - VP of Investor RelationsPete Haytaian - President of Carelon ...

Financial Data and Key Metrics Changes - Elevance Health reported adjusted diluted earnings per share of $3.33 for Q4 2025 and $30.29 for the full year, with fourth quarter results benefiting from greater tax favorability than anticipated [15] - Operating revenue for Q4 totaled $49.3 billion, an increase of 10% from the prior year, driven by premium rate adjustments and acquisitions [16] - The consolidated benefit expense ratio was 93.5% for Q4 and 90% for the full year, in line with guidance [16] Business Line Data and Key Metrics Changes - Medicaid operating margin is expected to be approximately -1.75% for 2026, with improvement anticipated over time as rates incorporate more current experience [6] - Medicare Advantage membership is expected to decline in the high teens percentage range in 2026, reflecting deliberate portfolio actions [7] - The commercial business showed healthy momentum, particularly in national accounts, supported by a productive selling season and favorable client retention [8] Market Data and Key Metrics Changes - The company ended the year with 45.2 million members, a decrease of approximately 500,000 year-over-year, primarily due to a decline in Medicaid membership [16] - The individual ACA market is expected to see membership at least 900,000 by year-end 2026, reflecting the expiration of enhanced premium tax credits [70] Company Strategy and Development Direction - The company views 2026 as a year of execution and repositioning, with a focus on improving margins and reducing volatility [4] - The long-term earnings growth algorithm is reaffirmed at least 12% adjusted EPS growth annually on average over time, with expectations to return to this level in 2027 [22] - The company is recalibrating long-term margin targets to reflect the current portfolio and expected future evolution [23] Management's Comments on Operating Environment and Future Outlook - Management emphasized the importance of affordability in healthcare and the need for prudent planning assumptions in a dynamic environment [4] - The company is confident in its long-term algorithm and expects to return to at least 12% adjusted EPS growth in 2027, supported by diversified earnings power [13] - Management acknowledged the challenges posed by the current operating environment but remains focused on disciplined execution and targeted investments [10] Other Important Information - The company plans to allocate approximately $2.3 billion towards share repurchases in 2026, reflecting a balanced approach to capital allocation [22] - Operating cash flow was $4.3 billion for the year, with expectations for at least $5.5 billion in 2026 [19] Q&A Session Summary Question: Cost trend across major lines of business - Management indicated that cost trends in commercial, Medicaid, and Medicare are expected to remain elevated but stable, with some variations by line of business [25][27] Question: Membership declines during AEP - Management explained that membership declines were larger than expected, particularly in Medicare, due to deliberate repositioning towards margin stability [31][34] Question: Medicaid margin drivers - Management noted that Medicaid margins were slightly better than expected in Q4 due to favorable prior period development and modest retroactive rates [40] Question: Rate outlook for Medicaid - Management anticipates a composite rate increase in the mid-single-digit percentage range for 2026, but rates will still lag trend due to ongoing membership attrition [46] Question: Long-term EPS growth confidence - Management expressed confidence in achieving at least 12% adjusted EPS growth starting in 2027, driven by disciplined execution and multiple independent levers [52][55] Question: Capital deployment priorities - Management stated that near-term capital allocation will reflect a conservative posture, focusing on integration and execution rather than new M&A activity [75]