Elevance Health : Q2 2023 Earnings Release

P R E S S R E L E A S E

ELEVANCE HEALTH REPORTS SECOND QUARTER 2023 RESULTS

• Second quarter GAAP net income was $7.79 per share, including net negative adjustment items of $1.25 per share. Adjusted net income was $9.04* per share.
• Operating revenue grew 12.7% year-over-year to $43.4 billion
• Operating gain grew 12.0% year-over-year to $2.6 billion
• Medical enrollment increased 938 thousand members year-over-year to 48.0 million members
• Third quarter 2023 dividend of $1.48 per share declared to shareholders

Indianapolis, Ind. - July 19, 2023 - Elevance Health, Inc. (NYSE: ELV) reported second quarter 2023 results reflecting strong financial performance, including double-digit growth in revenue, operating earnings, and adjusted earnings per share.

"Our solid execution and continued progress of our strategy to become a lifetime trusted health partner resulted in strong second quarter and first half results," said Gail K. Boudreaux, President and CEO. "Our focused efforts to optimize our mature businesses, invest in high-growth opportunities, and accelerate our growth through Carelon to meet the whole health needs of consumers positions us well for the rest of 2023 and beyond."

Given the strong performance in the first half of the year and momentum across Elevance Health, we now expect GAAP net income to be greater than $29.09 per share in 2023, and adjusted net income to be greater than $32.85 per share.

*Refer to GAAP reconciliation tables on page 14.

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CONSOLIDATED HIGHLIGHTS

Earnings Per Share: GAAP net income was $7.79 per share in the second quarter, including net negative adjustment items of $1.25 per share. Adjusted net income was $9.04* per share.

*Please refer to the GAAP reconciliation tables on page 14.

Membership: Medical membership totaled approximately 48.0 million as of June 30, 2023, an increase of 938 thousand, or 2.0 percent year-over-year, driven primarily by growth in Medicaid, BlueCard, ACA health plan, and Medicare Advantage members, partially offset by attrition in our Employer Group risk- based business.

During the second quarter of 2023, medical membership decreased by 135 thousand driven by attrition in Medicaid due to the resumption of eligibility redeterminations.

Operating Revenue: Operating revenue was $43.4 billion in the second quarter of 2023, an increase of $4.9 billion, or 12.7 percent year-over-year. The increase was primarily driven by premium rate increases in our Health Benefits business and higher premium revenue due to membership growth in Medicaid and Medicare. The increase in operating revenue was further attributable to growth in pharmacy product revenue within CarelonRx driven by growth in external pharmacy members served and the acquisition of BioPlus in the first quarter of 2023.

Benefit Expense Ratio: The benefit expense ratio was 86.4 percent in the second quarter of 2023, a decrease of 70 basis points year-over-year. The decrease was driven by premium rate adjustments to more accurately reflect cost of care.

Medical claims reserves established at December 31, 2022 developed in line with the Company's expectations as of the second quarter of 2023.

Days in Claims Payable: Days in Claims Payable was 46.5 days as of June 30, 2023, an increase of 0.5 days from March 31, 2023 and a decrease of 1.3 days compared to June 30, 2022. The timing of certain provider pass-through payments and corresponding reserves set in the prior year had the effect of increasing Days in Claims Payable by 1.8 days in the second quarter of 2022. Adjusting for these impacts, Days in Claims Payable would have increased 0.5 days year-over-year.

Operating Expense Ratio: The operating expense ratio was 11.1 percent in the second quarter of 2023, unchanged from 11.1 percent in the second quarter of 2022.

Operating Cash Flow: Operating cash flow was approximately $2.0 billion, or 1.1 times net income in the second quarter of 2023.

Share Repurchase Program: During the second quarter of 2023, the Company repurchased 1.4 million shares of its common stock for $646 million, at a weighted average price of $457.34. Year-to-date, as of the end of the second quarter, the Company repurchased 2.7 million shares of its common stock for $1.3 billion, at a weighted average price of $466.62. As of June 30, 2023, the Company had approximately $5.6 billion of Board-approved share repurchase authorization remaining.

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Cash Dividend: During the second quarter of 2023, the Company paid a quarterly dividend of $1.48 per share, representing a distribution of cash totaling $350 million.

On July 18, 2023, the Audit Committee of the Company's Board of Directors declared a third quarter 2023 dividend to shareholders of $1.48 per share. The third quarter dividend is payable on September 22, 2023, to shareholders of record at the close of business on September 8, 2023.

Investment Portfolio & Capital Position: During the second quarter of 2023, the Company recorded net losses of $121 million. During the second quarter of 2022, the Company recorded net losses of $231 million. These amounts are excluded from adjusted earnings per share.

As of June 30, 2023, the Company's net unrealized loss position in the investment portfolio was $1.9 billion, consisting primarily of fixed maturity securities. As of June 30, 2023, cash and investments at the parent company totaled approximately $1.0 billion.

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REPORTABLE SEGMENTS

Elevance Health has four reportable segments: Health Benefits, the aggregation of our Commercial & Specialty Business and Government Business (comprised of Individual, Employer Group risk-based, Employer Group fee-based, BlueCard businesses, Medicaid, Medicare, and Federal Health Products & Services businesses); CarelonRx (formerly IngenioRx); Carelon Services (formerly known as Diversified Business Group); and Corporate & Other (comprised of businesses that do not individually meet the quantitative thresholds for an operating division as well as corporate expenses not allocated to our other reportable segments).

Elevance Health, Inc.

Reportable Segment Highlights

(Unaudited)

(In millions)	Three Months Ended June 30		Six Months Ended June 30
	2023	2022		Change	2023	2022		Change
			(Restated)						(Restated)
Operating Revenue
Health Benefits	$38,000	$34,396	10.5 %	$75,280	$68,423	10.0 %
Carelon1	11,907	10,054	18.4 %	23,243	19,685	18.1 %
Corporate & Other	287	315	(8.9)%	538	588	(8.5)%
Eliminations	(6,817)		(6,283)		8.5 %		(13,786)		(12,328)		11.8 %
Total Operating Revenue2	$43,377	$38,482	12.7 %	$85,275	$76,368	11.7 %
Operating Gain (Loss)
Health Benefits	$2,148	$1,781	20.6 %	$4,307	$3,632	18.6 %
Carelon1	632	592	6.8 %	1,353	1,190	13.7 %
Corporate & Other	(152)		(27)		NM3		(201)		(49)		NM3
Total Operating Gain2	$2,628	$2,346	12.0 %	$5,459	$4,773	14.4 %
Operating Margin
Health Benefits	5.7 %	5.2 %		50 bp	5.7 %	5.3 %		40 bp
Carelon1	5.3 %	5.9 %		(60) bp	5.8 %	6.0 %		(20) bp
Total Operating Margin2	6.1 %	6.1 %		- bp	6.4 %	6.3 %		10 bp

1. Operating Revenue and Operating Gain for Carelon for the three months ended June 30, 2023 included $8,466 and $496 for CarelonRx; $3,441 and $136 for Carelon Services, respectively. Operating Revenue and Operating Gain for Carelon for the three months ended June 30, 2022 included $7,071 and $479 for CarelonRx; $2,983 and $113 for Carelon Services, respectively. Operating Revenue and Operating Gain for Carelon for the six months ended June 30, 2023 included $16,490 and $1,008 for CarelonRx; $6,753 and $345 for Carelon Services, respectively. Operating Revenue and Operating Gain for Carelon for the six months ended June 30, 2022 included $13,754 and $877 for CarelonRx; $5,931 and $313 for Carelon Services, respectively.
2. See "Basis of Presentation" on page 6 herein.
3. "NM" = calculation not meaningful.

Health Benefits: Operating gain in the Health Benefits segment totaled $2.1 billion in the second quarter of 2023, an increase of $367 million from $1.8 billion in the second quarter of 2022, representing growth of approximately 21%. The increase was primarily driven by premium rate adjustments to more accurately reflect cost of care and membership growth in Medicaid, partially offset by a charge associated with a court ruling impacting health plans in a certain state related to prior years' COVID-19 costs.

Carelon: Operating gain in the Carelon segment was $632 million in the second quarter of 2023, an increase of $40 million from $592 million in the second quarter of 2022. The increase was primarily driven by improved performance in our medical management business and the expansion of our post- acute care services, partially offset by higher medical cost trends and the non-recurrence of an out of period favorable adjustment in the second quarter of 2022 in CarelonRx.

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Corporate & Other: The Company reported an operating loss of $152 million in the Corporate & Other segment for the second quarter of 2023, a decrease of $125 million from an operating loss of $27 million in the second quarter of 2022, driven by an increase in unallocated corporate expenses.

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