Elevance Profit Slides as Medical Costs Climb
The health insurer reported second-quarter adjusted earnings of $7.45 a share, down 15.7% from a year earlier.
Elevance Health (ELV) posted a sharper decline in profit during the second quarter as medical costs rose and operating margins compressed across its core insurance and care-delivery businesses.
The results marked a continuation of the trend that emerged in the first quarter, when adjusted earnings fell 15% year-over-year. In the latest period, the company’s benefit expense ratio climbed 80 basis points to 89.7%, driven by elevated medical cost trends in its government programs, even as performance in the Individual ACA segment improved.
Revenue inched up 0.8% to $49.8 billion, decelerating from 1.5% growth in the prior quarter. Diluted earnings fell 13.1% to $6.71 a share, while adjusted earnings declined 15.7% to $7.45 a share. The adjusted figure excluded roughly $1 a share of non-recurring investment income that had lifted first-quarter results.
The Health Benefits segment, which accounts for the bulk of revenue, saw operating income drop 42.6% to $900 million as margins narrowed to 2.1% from 3.8% a year earlier. Membership in the unit fell by 469,000 sequentially to 44.9 million, reflecting attrition in Medicaid and Individual ACA plans. Medicare Advantage enrollment declined 4.2% year-over-year, accelerating from a 3.6% drop in the first quarter.
Carelon, the company’s care-delivery arm, fared better. Revenue grew 6% to $19.2 billion, though growth slowed from 7.9% in the prior quarter. Operating margins in the segment slipped 30 basis points to 4.9%, with CarelonRx product revenue contributing to the top line. CarelonRx’s operating gain rose 8.6% to $582 million, while Carelon Services saw its gain decline 8.5% to $366 million.
Elevance raised its full-year guidance, now expecting adjusted earnings of at least $27.00 a share, up from at least $26.75 previously. Operating cash flow guidance was also lifted to at least $6.0 billion from $5.5 billion. The company repurchased $234 million of its shares during the quarter, down from $1.1 billion in the first quarter.
The outlook reflects strong second-quarter operating results, though the company continues to navigate higher medical costs and targeted investments in its care-delivery platform.