Elevance Health Reports Second Quarter 2022 Results, Raises Full Year Outlook

• Second quarter GAAP net income was $6.79 per share, including net negative adjustment items of $1.25 per share. Adjusted net income was $8.04* per share.
• Operating revenue grew 15.6% over the prior year quarter to $38.5 billion.
• Operating gain grew 13.7% over the prior year quarter to $2.4 billion.
• Medical enrollment increased 2.7 million members year-over-year and 276 thousand members during the quarter to 47.1 million members.
• Third quarter 2022 dividend of $1.28 per share declared to shareholders.

INDIANAPOLIS–(BUSINESS WIRE)–$ELV #earnings–Elevance Health, Inc. (NYSE: ELV) reported second quarter 2022 results reflecting strong financial performance, including double-digit growth in revenue, operating earnings, and adjusted earnings per share.

“The disciplined execution of our strategy, and the balance and resilience of our diversified portfolio of businesses has enabled us to deliver another quarter of strong organic growth, and we have raised our outlook for 2022 earnings per share as a result,” said Gail K. Boudreaux, President and CEO. “Our recent name change to Elevance Health and the broader rebranding strategy underscores our transformation to a lifetime, trusted health partner and our diversified set of businesses that lend resilience in any business environment. We are uniquely well-positioned for growth in the future as we remain focused on meeting the needs of our clients and customers.”

The Company now expects GAAP net income to be greater than $25.28 per share, including approximately $3.42 per share of net unfavorable items. The Company now expects full-year adjusted net income to be greater than $28.70 per share, based on stronger than expected results year-to-date.

*Refer to GAAP reconciliation tables.

CONSOLIDATED HIGHLIGHTS

Earnings Per Share: GAAP net income was $6.79 per share in the second quarter, including net negative adjustment items of $1.25 per share. Adjusted net income was $8.04* per share, up 14.4% from $7.03 in the same period a year ago.

*Please refer to the GAAP reconciliation tables.

Membership: Medical enrollment totaled approximately 47.1 million members as of June 30, 2022, an increase of 2.7 million, or 6.1 percent from the prior year quarter. Government Business enrollment increased by 1.6 million lives compared to the prior year quarter, primarily driven by organic growth in the Medicaid business, aided by the suspension of eligibility recertification efforts in our markets, the launch of Healthy Blue in North Carolina, the acquisitions of Paramount Advantage and Integra Managed Care and organic growth in Medicare Advantage. Commercial & Specialty Business enrollment increased by 1.2 million year over year primarily driven by strong sales in both fee-based and risk-based businesses.

During the second quarter of 2022, medical enrollment increased by 276 thousand lives driven by organic growth in Medicaid due to suspension of eligibility recertification, higher BlueCard activity and the acquisition of Integra Managed Care, which added 43 thousand members.

Operating Revenue: Operating revenue was $38.5 billion in the second quarter of 2022, an increase of $5.2 billion, or 15.6 percent, from the prior year quarter. The increase was driven by higher premium revenue due to membership growth in Medicaid, the acquisitions of MMM and Paramount Advantage, as well as premium rate increases to cover overall cost trends and growth in Medicare Advantage and Commercial risk-based membership. The increase in operating revenue was further attributable to the growth in pharmacy product revenue within IngenioRx, the acquisition of Integra Managed Care and the launch of Healthy Blue in North Carolina.

Benefit Expense Ratio: The benefit expense ratio was 87.0 percent in the second quarter of 2022, an increase of 20 basis points over the prior year quarter. The increase was primarily driven by a shift in mix of business driven by faster growth in Government programs, which have a higher benefit expense ratio, as compared to growth in the Commercial & Specialty risk business, which represented 27% of premium revenue in the second quarter, down from 29% in the prior year quarter.

Medical claims reserves established at December 31, 2021 developed in line with the Company’s expectations as of the second quarter of 2022.

Days in Claims Payable: Days in Claims Payable was 47.8 days as of June 30, 2022, an increase of 0.9 days from March 31, 2022 and a decrease of 0.3 days compared to June 30, 2021. The timing of certain provider pass-through payments and corresponding reserves set in the current year had the effect of increasing Days in Claims Payable by 1.8 days, which we expect will reverse in the third quarter, while the timing of the acquisitions of MMM and myNEXUS increased Days in Claims Payable by 1.6 days in the second quarter of 2021.

SG&A Expense Ratio: The SG&A expense ratio was 11.1 percent in the second quarter of 2022, a decrease of 40 basis points from 11.5 percent in the second quarter of 2021. The decrease was primarily driven by operating expense leverage associated with growth in operating revenue, partially offset by increased spend to support growth.

Operating Cash Flow: Operating cash flow was approximately $2.5 billion, or 1.5 times net income in the second quarter of 2022, an increase of $769 million as compared to the prior year quarter. The year-on-year increase was driven by the impact of working capital changes, including the timing of certain provider pass-through payments.

Share Repurchase Program: During the second quarter of 2022, the Company repurchased 1.3 million shares of its common stock for $624 million, at a weighted average price of $489.07. Year-to-date, as of the end of the second quarter, the Company repurchased 2.5 million shares of its common stock for $1.2 billion, at a weighted average price of $471.72. As of June 30, 2022, the Company had approximately $3.0 billion of Board-approved share repurchase authorization remaining.

Cash Dividend: During the second quarter of 2022, the Company paid a quarterly dividend of $1.28 per share, representing a distribution of cash totaling $309 million.

On July 19, 2022, the Audit Committee of the Company’s Board of Directors declared a third quarter 2022 dividend to shareholders of $1.28 per share. The third quarter dividend is payable on September 23, 2022, to shareholders of record at the close of business on September 9, 2022.

Investment Portfolio & Capital Position: During the second quarter of 2022, the Company recorded net losses of $231 million. During the second quarter of 2021, the Company recorded net gains of $172 million. These amounts are excluded from adjusted earnings per share.

As of June 30, 2022, the Company’s net unrealized loss position in the investment portfolio was $2.0 billion, consisting primarily of fixed maturity securities. As of June 30, 2022 cash and investments at the parent company totaled approximately $948 million.

REPORTABLE SEGMENTS

Elevance Health has four reportable segments: Commercial & Specialty Business (comprised of Individual, Group risk-based, Group fee-based, and BlueCard businesses); Government Business (comprised of the Medicaid, Medicare, and Federal Health Products & Services businesses); IngenioRx; and Other (comprised of the Carelon companies, formerly known as our Diversified Business Group, and 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
			2022				2021				Change			2022				2021				Change
	Operating Revenue
	Commercial & Specialty Business		$	10,561			$	9,550			10.6	%		$	20,830			$	19,041			9.4	%
	Government Business			23,835				20,066			18.8	%			47,593				39,349			21.0	%
	IngenioRx			7,071				6,219			13.7	%			13,754				12,081			13.8	%
	Other			3,298				2,517			31.0	%			6,519				4,887			33.4	%
	Eliminations			(6,283	)			(5,073	)		23.9	%			(12,328	)			(9,981	)		23.5	%
	Total Operating Revenue1		$	38,482			$	33,279			15.6	%		$	76,368			$	65,377			16.8	%
	Operating Gain
	Commercial & Specialty Business		$	806			$	791			1.9	%		$	1,888			$	2,059			(8.3	)%
	Government Business			996				868			14.7	%			1,785				1,346			32.6	%
	IngenioRx			479				405			18.3	%			877				812			8.0	%
	Other			86				17			405.9	%			264				25			956.0	%
	Total Operating Gain1		$	2,367			$	2,081			13.7	%		$	4,814			$	4,242			13.5	%
	Operating Margin
	Commercial & Specialty Business			7.6	%			8.3	%		(70) bp				9.1	%			10.8	%		(170) bp
	Government Business			4.2	%			4.3	%		(10) bp				3.8	%			3.4	%		40 bp
	IngenioRx			6.8	%			6.5	%		30 bp				6.4	%			6.7	%		(30) bp
	Total Operating Margin1			6.2	%			6.3	%		(10) bp				6.3	%			6.5	%		(20) bp

1.	See “Basis of Presentation.”
2.	“NM” = calculation not meaningful.

Commercial & Specialty Business: Operating gain in the Commercial & Specialty Business segment totaled $806 million in the second quarter of 2022, an increase of $15 million from $791 million in the second quarter of 2021. The increase was primarily driven by the positive contribution from growth in risk- and fee-based membership, partially offset by the net unfavorable effect of COVID.

Government Business: Operating gain in the Government Business segment was $996 million in the second quarter of 2022, an increase of $128 million from $868 million in the second quarter of 2021. The increase was primarily attributable to premium rates in Medicare that better reflect the acuity of our members and membership growth in Medicaid.

IngenioRx: Operating gain was $479 million in the second quarter of 2022, an increase of $74 million from $405 million in the second quarter of 2021. The increase was driven by an in-year out of period favorable adjustment and the impact of higher prescription volume associated with growth in integrated medical and pharmacy members.

Other: The Company reported an operating gain of $86 million in the Other segment for the second quarter of 2022, an increase of $69 million from $17 million in the prior year quarter. The increase was driven by improved performance in Carelon’s affiliated and unaffiliated earnings.

Basis of Presentation

1. Operating revenue and operating gain/loss are the key measures used by management to evaluate performance in each of its reporting segments, allocate resources, set incentive compensation targets and to forecast future operating performance. Operating gain/loss is calculated as total operating revenue less benefit expense, cost of products sold and selling, general and administrative expense. It does not include net investment income, net gains/losses on financial instruments, interest expense, amortization of other intangible assets, gains/losses on extinguishment of debt or income taxes, as these items are managed in a corporate shared service environment and are not the responsibility of operating segment management. Refer to the GAAP reconciliation tables.
2. Operating margin is defined as operating gain divided by operating revenue.

Conference Call and Webcast

Management will host a conference call and webcast today at 8:30 a.m. Eastern Daylight Time (“EDT”) to discuss the company’s second quarter results and outlook. The conference call should be accessed at least 15 minutes prior to the start of the call with the following numbers:

888-947-9963 (Domestic)		866-430-8797 (Domestic Replay)
312-470-0178 (International)		203-369-0943 (International Replay)

The access code for today’s conference call is 3972058. The replay will be available from 11:30 a.m. EDT today, until the end of the day on August 20, 2022. The call will also be available through a live webcast at www.elevancehealth.com under the “Investors” link. A webcast replay will be available following the call.

About Elevance Health, Inc.

Elevance Health is a lifetime, trusted health partner fueled by its purpose to improve the health of humanity. The company supports consumers, families, and communities across the entire care journey – connecting them to the care, support, and resources they need to lead healthier lives. Elevance Health’s companies serve more than 118 million people through a diverse portfolio of industry-leading medical, digital, pharmacy, behavioral, clinical, and complex care solutions. For more information, please visit www.elevancehealth.com or follow us @ElevanceHealth on Twitter and Elevance Health on LinkedIn.

Elevance Health, Inc.
Membership Summary
(Unaudited and in Thousands)
								Change from
Medical Membership		June 30, 2022		June 30, 2021		March 31, 2022		June 30, 2021			March 31, 2022
Commercial & Specialty Business
Individual		803		738		818		8.8	%		(1.8	)%
Group Risk-Based		4,020		3,851		4,028		4.4	%		(0.2	)%
Commercial Risk-Based		4,823		4,589		4,846		5.1	%		(0.5	)%
BlueCard®		6,445		6,235		6,370		3.4	%		1.2	%
Group Fee-Based		20,086		19,372		20,148		3.7	%		(0.3	)%
Commercial Fee-Based		26,531		25,607		26,518		3.6	%		—	%
Total Commercial & Specialty Business		31,354		30,196		31,364		3.8	%		—	%
Government Business
Medicare Advantage		1,946		1,824		1,921		6.7	%		1.3	%
Medicare Supplement		942		936		939		0.6	%		0.3	%
Total Medicare		2,888		2,760		2,860		4.6	%		1.0	%
Medicaid		11,181		9,754		10,919		14.6	%		2.4	%
Federal Employees Health Benefits		1,628		1,631		1,632		(0.2	)%		(0.2	)%
Total Government Business		15,697		14,145		15,411		11.0	%		1.9	%
Total Medical Membership		47,051		44,341		46,775		6.1	%		0.6	%
Other Membership
Life and Disability Members		4,779		4,732		4,679		1.0	%		2.1	%
Dental Members		6,620		6,606		6,649		0.2	%		(0.4	)%
Dental Administration Members		1,589		1,497		1,588		6.1	%		0.1	%
Vision Members		9,385		7,819		9,211		20.0	%		1.9	%
Medicare Part D Standalone Members		276		433		279		(36.3	)%		(1.1	)%

Elevance Health, Inc.
Consolidated Statements of Income
(Unaudited)
(In millions, except per share data)		Three Months Ended June 30
		2022				2021				Change
Revenues
Premiums		$	33,076			$	28,533			15.9	%
Product revenue			3,568				3,042			17.3	%
Administrative fees and other revenue			1,838				1,704			7.9	%
Total operating revenue			38,482				33,279			15.6	%
Net investment income			381				400			(4.8	)%
Net (losses) gains on financial instruments			(231	)			172			(234.3	)%
Total revenues			38,632				33,851			14.1	%
Expenses
Benefit expense			28,777				24,763			16.2	%
Cost of products sold			3,069				2,614			17.4	%
Selling, general and administrative expense			4,269				3,821			11.7	%
Interest expense			208				205			1.5	%
Amortization of other intangible assets			166				90			84.4	%
Loss on extinguishment of debt			—				5			(100.0	)%
Total expenses			36,489				31,498			15.8	%
Income before income tax expense			2,143				2,353			(8.9	)%
Income tax expense			493				552			(10.7	)%
Net income			1,650				1,801			(8.4	)%
Net loss/(income) attributable to noncontrolling interests			3				(8	)		NM
Shareholders’ net income		$	1,653			$	1,793			(7.8	)%
Shareholders’ net income per diluted share		$	6.79			$	7.25			(6.3	)%
Diluted shares			243.4				247.4			(1.6	)%
Benefit expense as a percentage of premiums			87.0	%			86.8	%		20 bp
Selling, general and administrative expense as a percentage of total operating revenue			11.1	%			11.5	%		(40) bp
Income before income tax expense as a percentage of total revenue			5.5	%			7.0	%		(150) bp
“NM” = calculation not meaningful

Elevance Health, Inc.
Consolidated Statements of Income
(Unaudited)
(In millions, except per share data)		Six Months Ended June 30
		2022				2021				Change
Revenues
Premiums		$	65,861			$	56,209			17.2	%
Product revenue			6,869				5,779			18.9	%
Administrative fees and other revenue			3,638				3,389			7.3	%
Total operating revenue			76,368				65,377			16.8	%
Net investment income			741				691			7.2	%
Net (losses) gains on financial instruments			(382	)			168			(327.4	)%
Total revenues			76,727				66,236			15.8	%
Expenses
Benefit expense			56,992				48,462			17.6	%
Cost of products sold			5,952				4,927			20.8	%
Selling, general and administrative expense			8,610				7,746			11.2	%
Interest expense			409				397			3.0	%
Amortization of other intangible assets			295				170			73.5	%
Loss on extinguishment of debt			—				5			(100.0	)%
Total expenses			72,258				61,707			17.1	%
Income before income tax expense			4,469				4,529			(1.3	)%
Income tax expense			1,024				1,061			(3.5	)%
Net income			3,445				3,468			(0.7	)%
Net loss/(income) attributable to noncontrolling interests			13				(10	)		NM
Shareholders’ net income		$	3,458			$	3,458			—	%
Shareholders’ net income per diluted share		$	14.18			$	13.95			1.6	%
Diluted shares			243.9				247.8			(1.6	)%
Benefit expense as a percentage of premiums			86.5	%			86.2	%		30 bp
Selling, general and administrative expense as a percentage of total operating revenue			11.3	%			11.8	%		(50) bp
Income before income tax expense as a percentage of total revenue			5.8	%			6.8	%		(100) bp
“NM” = calculation not meaningful

Elevance Health, Inc.
Consolidated Balance Sheets
(In millions)		June 30, 2022				December 31, 2021
Assets		(Unaudited)
Current assets:
Cash and cash equivalents		$	6,456			$	4,880
Fixed maturity securities			25,765				26,267
Equity securities, current			1,572				1,881
Premium receivables			6,757				5,681
Self-funded receivables			3,844				4,010
Other receivables			3,600				3,749
Other current assets			5,661				4,654
Total current assets			53,655				51,122
Long-term investments:
Fixed maturity securities			603				632
Other invested assets			5,398				5,225
Property and equipment, net			4,090				3,919
Goodwill			24,367				24,228
Other intangible assets			10,762				10,615
Other noncurrent assets			2,002				1,719
Total assets		$	100,877			$	97,460
Liabilities and equity
Liabilities
Current liabilities:
Medical claims payable		$	15,127			$	13,518
Other policyholder liabilities			5,577				5,521
Unearned income			971				1,153
Accounts payable and accrued expenses			5,850				4,970
Short-term borrowings			175				275
Current portion of long-term debt			2,248				1,599
Other current liabilities			9,360				7,849
Total current liabilities			39,308				34,885
Long-term debt, less current portion			21,165				21,157
Reserves for future policy benefits			822				802
Deferred tax liabilities, net			2,021				2,805
Other noncurrent liabilities			1,694				1,683
Total liabilities			65,010				61,332
Shareholders’ equity
Common stock			2				2
Additional paid-in capital			9,134				9,148
Retained earnings			28,825				27,088
Accumulated other comprehensive loss			(2,149	)			(178	)
Total shareholders’ equity			35,812				36,060
Noncontrolling interests			55				68
Total equity			35,867				36,128
Total liabilities and equity		$	100,877			$	97,460

Elevance Health, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In millions)		Six Months Ended June 30
		2022				2021
Operating activities
Net income		$	3,445			$	3,468
Adjustments to reconcile net income to net cash provided by operating activities:
Net losses (gains) on financial instruments			382				(168	)
Equity in net earnings of other invested assets			(258	)			(309	)
Depreciation and amortization			751				591
Deferred income taxes			(172	)			(8	)
Share-based compensation			122				133
Changes in operating assets and liabilities:
Receivables, net			(662	)			(1,632	)
Other invested assets			32				(44	)
Other assets			(419	)			(247	)
Policy liabilities			1,514				1,912
Unearned income			(182	)			(180	)
Accounts payable and other liabilities			632				560
Income taxes			(159	)			106
Other, net			(33	)			6
Net cash provided by operating activities			4,993				4,188
Investing activities
Purchases of investments			(13,253	)			(11,221	)
Proceeds from sale of investments			7,140				6,345
Maturities, calls and redemptions from investments			4,347				2,246
Changes in securities lending collateral			(620	)			(642	)
Purchases of subsidiaries, net of cash acquired			(609	)			(3,442	)
Purchases of property and equipment			(549	)			(489	)
Other, net			(58	)			(29	)
Net cash used in investing activities			(3,602	)			(7,232	)
Financing activities
Net proceeds from commercial paper borrowings			250				300
Net proceeds from (repayments of) short-term borrowings			(100	)			175
Net proceeds from long-term borrowings			357				2,510
Changes in securities lending payable			620				642
Changes in bank overdrafts			817				364
Repurchase and retirement of common stock			(1,169	)			(927	)
Cash dividends			(618	)			(555	)
Proceeds from issuance of common stock under employee stock plans			116				141
Taxes paid through withholding of common stock under employee stock plans			(88	)			(93	)
Other, net			10				11
Net cash provided by financing activities			195				2,568
Effect of foreign exchange rates on cash and cash equivalents			(10	)			(7	)
Change in cash and cash equivalents			1,576				(483	)
Cash and cash equivalents at beginning of period			4,880				5,741
Cash and cash equivalents at end of period		$	6,456			$	5,258

Elevance Health, Inc.
Reconciliation of Medical Claims Payable
		Six Months Ended June 30								Years Ended December 31
		2022				2021				2021				2020				2019
(In millions)		(Unaudited)				(Unaudited)
Gross medical claims payable, beginning of period		$	13,282			$	11,135			$	11,135			$	8,647			$	7,266
Ceded medical claims payable, beginning of period			(21	)			(46	)			(46	)			(33	)			(34	)
Net medical claims payable, beginning of period			13,261				11,089				11,089				8,614				7,232
Business combinations and purchase adjustments			133				420				420				339				—
Net incurred medical claims:
Current year			55,737				48,343				100,440				85,094				78,695
Prior years redundancies(1)			(972	)			(1,772	)			(1,703	)			(637	)			(500	)
Total net incurred medical claims			54,765				46,571				98,737				84,457				78,195
Net payments attributable to:
Current year medical claims			42,882				37,533				88,156				74,629				70,294
Prior years medical claims			10,401				7,767				8,829				7,692				6,519
Total net payments			53,283				45,300				96,985				82,321				76,813
Net medical claims payable, end of period			14,876				12,780				13,261				11,089				8,614
Ceded medical claims payable, end of period			13				41				21				46				33
Gross medical claims payable, end of period		$	14,889			$	12,821			$	13,282			$	11,135			$	8,647
Current year medical claims paid as a percentage of current year net incurred medical claims			76.9	%			77.6	%			87.8	%			87.7	%			89.3	%
Prior year redundancies in the current year as a percentage of prior year net medical claims payable less prior year redundancies in the current year			7.9	%			19.0	%			18.1	%			8.0	%			7.4	%
Prior year redundancies in the current year as a percentage of prior year net incurred medical claims			1.0	%			2.1	%			2.0	%			0.8	%			0.7	%
(1) Negative amounts reported for net incurred medical claims related to prior years result from claims being settled for amounts less than originally estimated.

Elevance Health, Inc.

GAAP Reconciliation

(Unaudited)

Elevance Health, Inc. has referenced “Adjusted Net Income” and “Adjusted Net Income Per Share,” which are non-GAAP measures, in this document.

Contacts

Elevance Health Contacts:
Investor Relations
Stephen Tanal
Stephen.Tanal@elevancehealth.com

Media
Leslie Porras
Leslie.Porras@elevancehealth.com

Read full story here