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]

3 Strategic Focus Areas Elevance Health 4Q 2025 Earnings Presentation January 28, 2026 Key Highlights 1 2025 Results Elevance Health fourth quarter operational results consistent with expectations 2 2026 Guidance & 2027 Outlook 2026 adjusted diluted EPS1 guidance of at least $25.50 2027 adjusted diluted EPS1 to grow at least 12%, off our ending 2026 earnings baseline Fourth Quarter & Full Year 2025 Results | Elevance Health | 4Q 2025 | 4Q 2024 | Change | 2025 | 2024 | Change | | --- | --- | --- | --- | --- ...

Core Insights - Elevance Health reported fourth quarter and full year 2025 results, showing disciplined execution in a dynamic environment and a focus on advancing affordability and healthcare accessibility for members [2][4]. Financial Performance - Operating revenue for Q4 2025 was $49.3 billion, a 10% increase from Q4 2024, while total operating revenue for 2025 reached $197.6 billion, up 13% year-over-year [4][11]. - The operating gain for Q4 2025 was $0.3 billion, with an adjusted operating gain of $0.4 billion, reflecting a decrease compared to the previous year [4][12]. - The benefit expense ratio increased to 93.5% in Q4 2025, up 110 basis points from the prior year, driven by higher medical costs [5][25]. Segment Performance - The Health Benefits segment generated $41.8 billion in operating revenue for Q4 2025, an 11% increase compared to Q4 2024, with a full year revenue of $167.1 billion, also up 11% [10][11]. - Carelon segment reported operating revenue of $18.7 billion in Q4 2025, a significant increase of 27% year-over-year, driven by growth in CarelonRx and Carelon Services [15][29]. Membership Metrics - Medical membership totaled approximately 45.2 million as of December 31, 2025, a decrease of 0.5 million or 1% year-over-year, primarily due to attrition in the Medicaid business [13][22]. Cash Flow and Shareholder Returns - Operating cash flow for 2025 was $4.3 billion, approximately 0.8 times GAAP net income, with cash and investments at the parent company totaling $2.6 billion as of December 31, 2025 [8][26]. - The company repurchased 1.4 million shares for $471 million in Q4 2025 and declared a quarterly dividend of $1.71 per share, totaling $377 million in cash distribution [9][17].

Group 1 - Elevance Health, Inc. (NYSE:ELV) is considered a cheap healthcare stock with a median price target of $394, indicating an upside potential of 19.12% [1] - TD Cowen raised the price target for Elevance Health to $400 from $380, maintaining a 'Buy' rating and highlighting it as their "Best Idea for 2026" [2] - Mizuho reduced its price target for Elevance Health to $400 from $420 while keeping an 'Outperform' rating, also lowering earnings guidance for 2026 and 2027 due to challenges in Carelon [3] Group 2 - Elevance Health operates through four segments: Health Benefits, CarelonRx, Carelon Services, and Corporate & Other, and aims to simplify the healthcare system [4]

Financial Data and Key Metrics Changes - Elevance Health reported third quarter GAAP diluted earnings per share of $5.32 and adjusted diluted earnings per share of $6.03, reflecting enhanced medical cost management and expense discipline [14][15] - Total operating revenue for the quarter was $50.1 billion, up 12% year over year, driven by higher premium yields and growth in Medicare Advantage membership [15] - The consolidated benefit-expense ratio was 91.3%, aligned with expectations, while Medicaid performance faced pressure from elevated acuity and utilization [15][16] Business Line Data and Key Metrics Changes - In Medicare Advantage, approximately 55% of members will be in four-star or higher contracts for the 2027 payment year, up from about 40% for 2026, indicating improvement in STAR ratings [8] - CarelonRx revenue grew 20% year over year, driven by strong momentum with large clients, while Carelon Services grew by more than 50% [17] - The ACA market is experiencing higher acuity, and the anticipated expiration of enhanced subsidies could significantly impact membership in 2026 [9][10] Market Data and Key Metrics Changes - Medicaid operating margin is expected to be modestly negative for 2025, with a decline of at least 125 basis points anticipated for 2026 due to elevated acuity and utilization trends [16][20] - The company expects a high single-digit decline in full-year operating margin for the ACA market, while commercial group business margins remain consistent with prior expectations [16][50] Company Strategy and Development Direction - The company is focused on lowering the total cost of care and improving member experience through an integrated clinical and benefits approach, leveraging value-based care [6][10] - Elevance Health is committed to disciplined capital allocation, balancing investment and growth with consistent shareholder returns, including share repurchases [12][13] - The company is investing in technology, particularly AI, to enhance member and provider experiences, aiming for long-term growth [34][38] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by rising medical and pharmacy costs and regulatory changes impacting coverage for millions of Americans [6] - The company is approaching 2026 with a prudent and practical posture, setting expectations that reflect current realities and uncertainties [7][22] - Management is confident in the strategy and execution, aiming for sustainable value for stakeholders despite a dynamic external environment [13][22] Other Important Information - The company is expanding external relationships and scaling pharmacy, behavioral health, and specialty care management, embedding value-based care principles throughout [9][10] - By year-end, over 10 million members will have access to the AI-enabled virtual assistant, enhancing access and engagement [11] Q&A Session Summary Question: Medicaid margin outlook and state discussions - Management discussed the expectation of a 125 basis point decline in Medicaid margins for 2026, driven by elevated acuity and utilization trends, and noted constructive conversations with states regarding rate adequacy [24][28][27] Question: Investment spending impact on 2026 - Management clarified that several hundred million dollars of investment is planned for technology adoption, Carelon expansion, and operational initiatives, which are expected to enhance long-term growth [32][34] Question: ACA membership impact from subsidy expiration - Management indicated that if enhanced subsidies expire, a material contraction in the ACA marketplace is expected, leading to lower enrollment and higher premium increases [41][45] Question: Medicaid membership outlook - Management anticipates a modest decline in Medicaid membership for 2026 due to ongoing re-verification processes and state program changes [75][76] Question: Medicaid coding trends and provider engagement - Management is actively working with providers to ensure accurate clinical documentation and is taking steps to improve oversight and compliance [81][84]

Financial Data and Key Metrics Changes - Elevance Health reported third quarter GAAP diluted earnings per share of $5.32 and adjusted diluted earnings per share of $6.03, reflecting enhanced medical cost management and expense discipline [14] - Total operating revenue for the quarter was $50.1 billion, up 12% year-over-year, driven by higher premium yields and growth in Medicare Advantage membership [15] - The consolidated benefit-expense ratio was 91.3%, aligned with expectations, while the Medicaid operating margin is expected to be modestly negative for the full year 2025 [15][16] Business Line Data and Key Metrics Changes - In Medicare Advantage, approximately 55% of members will be in four-star or higher contracts for the 2027 payment year, up from about 40% for 2026, indicating improved STAR performance [8] - CarelonRx revenue grew 20% year-over-year, driven by strong momentum with large clients, while Carelon Services grew by more than 50% [17] - The integrated medical pharmacy model and advocacy solutions are driving higher retention and expanded fee-based relationships in the commercial segment [17] Market Data and Key Metrics Changes - The ACA market is experiencing higher acuity, and the anticipated expiration of enhanced subsidies could significantly impact membership in 2026 [9] - Medicaid performance is under pressure from elevated acuity and utilization, with disenrollment concentrated among lower acuity members due to stricter eligibility reviews [15][16] - The company expects a high single-digit decline in full-year operating margin for the ACA business, while commercial group margins are expected to remain consistent with prior expectations [16] Company Strategy and Development Direction - The company is focused on lowering the total cost of care and improving member experience through an integrated clinical and benefits approach [6] - Elevance Health is committed to disciplined capital allocation, balancing investment and growth with consistent shareholder returns, prioritizing share repurchases [13] - The company is investing in technology, particularly AI, to enhance member and provider experiences, aiming for long-term growth [34][36] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by rising medical and pharmacy costs and regulatory changes impacting coverage [6] - The company is approaching 2026 with a prudent and practical posture, planning for at least a 125 basis point decline in Medicaid margins due to elevated acuity and utilization trends [7][20] - Management remains confident in the long-term growth algorithm, expecting 2027 to mark a return to a more balanced earnings growth profile [22][72] Other Important Information - The company is integrating recent acquisitions to expand Carelon's capabilities while maintaining a strong balance sheet to support growth objectives [20][13] - The company is proactively working with state partners on rate alignment and operational enhancements to ensure the sustainability of Medicaid programs [10][20] Q&A Session Summary Question: Medicaid margin outlook and state discussions - Management discussed the expectation of a 125 basis point margin decline next year, with ongoing discussions with states about affordability and program changes [24][28] Question: Investment spending impact on 2026 - Management clarified that several hundred million dollars of investment is aimed at technology adoption, Carelon scaling, and operational improvements, which are expected to enhance long-term growth [32][34] Question: ACA membership impact from subsidy expiration - Management indicated that if enhanced subsidies expire, a material contraction in the ACA marketplace is expected, leading to lower enrollment and higher premium increases [41][45] Question: Medicaid membership and revenue outlook - Management anticipates a modest decline in Medicaid membership in 2026 due to ongoing normalization following the redetermination process [75] Question: Medicaid risk pool shifts and coding trends - Management noted that elevated acuity and utilization pressures are impacting Medicaid margins, with ongoing efforts to improve coding accuracy and compliance [82][84]

Financial Data and Key Metrics Changes - Elevance Health reported third quarter GAAP diluted earnings per share of $5.32 and adjusted diluted earnings per share of $6.03, reflecting enhanced medical cost management and expense discipline [12][14] - Total operating revenue for the quarter was $50.1 billion, up 12% year over year, driven by higher premium yields and growth in Medicare Advantage membership [14][15] - The consolidated benefit-expense ratio was 91.3%, aligned with expectations, while Medicaid performance faced pressure from elevated acuity and utilization [14][15] Business Line Data and Key Metrics Changes - In Medicare Advantage, approximately 55% of members will be in four-star or higher contracts for the 2027 payment year, up from about 40% for 2026, indicating improvement in STAR ratings performance [6][15] - CarelonRx revenue grew 20% year over year, driven by strong momentum with large clients, while Carelon Services grew by more than 50% due to robust organic growth [16][17] - The ACA market is expected to face challenges due to the anticipated expiration of enhanced subsidies, which could significantly impact membership in 2026 [8][14] Market Data and Key Metrics Changes - Medicaid operating margin is expected to be modestly negative for 2025, with a projected decline of at least 125 basis points in 2026 due to ongoing acuity and utilization trends [15][18] - The company anticipates a high single-digit decline in full-year operating margin for the ACA business, while commercial group margins are expected to remain consistent with prior expectations [15][16] - The anticipated expiration of enhanced subsidies could lead to a material contraction in the ACA marketplace, affecting overall membership [40][41] Company Strategy and Development Direction - The company is focused on lowering the total cost of care and improving member experience through an integrated clinical and benefits approach, leveraging value-based care [4][10] - Elevance Health is committed to disciplined capital allocation, balancing investment and growth with consistent shareholder returns, including share repurchases [11][18] - The company is investing in technology adoption, Carelon capabilities, and operational initiatives to enhance performance and support long-term growth [30][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the dynamic external environment but expressed confidence in the company's strategy and execution to drive sustainable value [11][20] - The company is proactively working with state partners on rate alignment and program improvements to ensure the sustainability of Medicaid programs [9][26] - Management expects 2026 to be a trough year for Medicaid margins, with a return to a more balanced earnings growth profile anticipated in 2027 [24][66] Other Important Information - The company is integrating recent acquisitions to expand Carelon's capabilities while maintaining a strong balance sheet to support growth objectives [11][18] - The company is embedding AI and digital tools across operations to enhance member and provider experiences, aiming for improved affordability and operational performance [30][35] Q&A Session Summary Question: Medicaid margin outlook and state discussions - Management indicated that Medicaid margins are expected to be slightly negative for 2025, with a projected decline of at least 125 basis points in 2026 due to elevated acuity and utilization trends [22][24] - Discussions with states are constructive, with states exploring ways to reduce overall Medicaid program costs and improve affordability [25][26] Question: Investment spending impact on 2026 - The company plans to make several hundred million dollars in discrete investments to advance strategic goals, which are expected to impact EPS positively in the long term [29][30] Question: ACA membership impact from subsidy expiration - If enhanced subsidies expire, a material contraction in the ACA marketplace is expected, leading to lower enrollment and higher premium increases [40][41] Question: Medicaid risk pool shifts and coding trends - Management noted that elevated acuity and utilization pressures have led to a below-breakeven Medicaid operating margin, with ongoing efforts to improve coding accuracy and compliance [76][78] Question: State partners considering benefit adjustments - States are looking at various levers, including potential program changes, to improve affordability in Medicaid, with adjustments typically aligning with new contract years [81][83]

Q3 2025 Financial Performance - Elevance Health's Q3 2025 operating revenue reached $50.1 billion, a 12.0% increase year-over-year, driven by higher premium yields, acquisitions, and Medicare Advantage growth, offset by Medicaid reverifications[4, 7] - The benefit expense ratio was 91.3%, aligning with expectations but reflecting elevated costs across business lines[3, 7] - Adjusted diluted EPS was $6.03, including approximately $1 of higher net investment income and tax benefit timing[3] - Operating cash flow was $1.1 billion, impacted by the BCBSA Provider Settlement Agreement payment[7] Health Benefits Segment - Health Benefits operating revenue increased by 10.4% to $42.2 billion, driven by higher premium yields, acquisitions, and Medicare Advantage growth, partially offset by Medicaid reverifications[4, 9, 10] - Adjusted operating margin for Health Benefits declined by 280 bps to 1.4%, due to higher medical costs and strategic investments[9, 10] - Health Benefits membership stood at 45.4 million, reflecting lower BlueCard membership and Medicaid reverifications, offset by Medicare Advantage growth[9, 10] Carelon Segment - Carelon's operating revenue grew by 32.9% to $18.3 billion, driven by its integrated platform and performance in Pharmacy and Services[4, 12] - Adjusted operating gain for Carelon was $0.8 billion, a decrease of 9.5%[12] - Carelon Services revenue increased by approximately 60%, supported by the CareBridge integration and expansion of risk-based and home-health capabilities[13] Strategic Outlook - Elevance Health reaffirmed its full-year adjusted diluted EPS guidance of approximately $30, including a benefit expense ratio of approximately 90.0% and approximately $3 of discrete, non-core items[3] - The company anticipates Medicaid operating margin to decline by at least 125 basis points year-over-year due to rate increases lagging acuity and utilization trends[3] - Approximately 55% of Medicare Advantage members are in 4-Star or higher contracts for payment year 2027, up from approximately 40%[3]

Core Insights - Elevance Health, Inc. (NYSE:ELV) is highlighted as one of the stocks with the lowest P/E ratios on the NYSE [1] - Cantor Fitzgerald has reaffirmed its Overweight rating and set a price target of $400 for Elevance Health, indicating confidence in the company's future performance [2] - The company’s weighted-average estimate for 2026 Marketplace rates is only about 40 basis points away from proposed rates, with most initial state authorizations aligning closely with payor plans [2] - Less than 25% of members currently have final rates, and political factors may still influence outcomes related to the CMS Marketplace Integrity & Affordability Final Rule [3] - Elevance Health has reiterated its 2025 earnings outlook, projecting a benefit expense ratio near 90% and earnings of $24.10 per diluted share, with an adjusted basis projection of approximately $30.00 [4] Business Segments - Elevance Health operates through four main business segments: Health Benefits, CarelonRx, Carelon Services, and Corporate & Other [4]

Core Insights - Elevance Health, Inc. is facing challenges from rising medical costs, slower Medicaid recovery, and increased utilization, leading to a reduced outlook for 2025 [1][5] - The company reported a significant increase in benefits expenses and cost of products sold in the first half of the year [1] Financial Performance - Benefits expense surged nearly 18% to over $72 billion, while cost of products sold increased almost 19% to $10.3 billion [1] - The second-quarter benefit expense ratio reached 88.9%, up 260 basis points year over year, with a projected full-year ratio of about 90% compared to 88.5% in 2024 [2][9] Membership and Growth - Commercial individual memberships rose 9.7% in the first half of 2025, following a 25.6% increase in 2024, indicating strong growth in the commercial segment [3][9] - Carelon's revenue is expected to grow nearly 30% in 2025, driven by a 60% surge in Carelon Services [4][9] Competitive Landscape - Other companies in the health benefits space, such as UnitedHealth Group and Centene Corporation, are also experiencing pressure from rising medical costs [6] - UnitedHealth's medical care ratio deteriorated to 89.4%, while Centene's health benefits ratio reached 93%, indicating industry-wide challenges [7] Valuation and Estimates - Elevance's shares have declined 20.7% year-to-date, compared to a 3.9% decline in the industry [8] - The forward price-to-earnings ratio for Elevance is 9.19, significantly lower than the industry average of 14.57, with a Zacks Consensus Estimate for 2025 earnings at $30.59 per share, reflecting a 7.4% decline from the previous year [10][11]