Elevance Health Reports Fourth Quarter and Full Year 2022 Results

• Fourth quarter and full year GAAP net income was $3.93 and $24.81 per share
• Fourth quarter and full year adjusted net income was $5.23* and $29.07* per share
• Full year operating revenue grew 13.7% year-over-year to $156 billion
• Full year operating gain grew 12.9% year-over-year to $8.5 billion
• Medical enrollment increased 2.2 million members year-over-year to 47.5 million members
• Quarterly dividend increased by 16% to $1.48 per share

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

“We made considerable progress in our transformation to become a lifetime, trusted health partner in 2022,” said Gail K. Boudreaux, President and CEO. “Through strategic advancements we are making to optimize our health benefits businesses, invest in high growth opportunities, and accelerate capabilities and services, we are delivering on our commitments to our communities and all of our stakeholders. Additionally, we look forward to welcoming Blue Cross and Blue Shield of Louisiana to Elevance Health to further this commitment within a 15th Blue state. Last year marked the fifth consecutive year in which we met or exceeded our long-term adjusted earnings per share growth target, and we are well-positioned to do it again in 2023.”

The Company expects GAAP net income to be greater than $29.80 per share in 2023, and adjusted net income to be greater than $32.60 per share.

*Refer to GAAP reconciliation tables.

CONSOLIDATED HIGHLIGHTS

Earnings Per Share: GAAP net income was $3.93 per share in the fourth quarter, including net negative adjustment items of $1.30 per share. Adjusted net income was $5.23* per share. Full year GAAP net income was $24.81 per share, including net negative adjustment items of $4.26 per share. Adjusted net income was $29.07* per share.

*Please refer to the GAAP reconciliation tables.

Membership: Medical membership totaled approximately 47.5 million as of December 31, 2022, an increase of 2.2 million, or 4.8 percent year-over-year. Government Business membership increased by 1.1 million year-over-year driven primarily by growth in the Medicaid business and organic growth in Medicare Advantage. Commercial & Specialty Business membership increased by 1.1 million year-over-year, driven primarily by strong sales to fee-based employers.

During the fourth quarter of 2022, medical membership increased by 248 thousand driven by organic growth in Medicaid, which we attribute primarily to the suspension of eligibility recertification, as well as the acquisition of Vivida Health, which added 29 thousand Medicaid members.

Operating Revenue: Operating revenue was $39.7 billion in the fourth quarter of 2022, an increase of $3.6 billion, or 10.1 percent year-over-year. Operating revenue was $155.7 billion for the full year, representing 13.7 percent growth over 2021. The increase in both the quarter and the full year was driven by higher premium revenue due to membership growth in Medicaid, growth in Medicare Advantage, as well as premium rate increases to cover overall cost trends. The increase in operating revenue was further attributable to growth in pharmacy product revenue within CarelonRx driven by growth in consumers served and higher utilization of prescription drugs.

Benefit Expense Ratio: The benefit expense ratio was 89.4 percent in the fourth quarter of 2022, a decrease of 10 basis points year-over-year. The decrease was driven by the realignment of certain quality improvement costs to match recent regulatory clarifications. Excluding the realignment, our benefit expense ratio would have increased, driven by the non-recurrence of favorable out of period adjustment items in Medicaid in the prior year quarter, partially offset by improved medical underwriting performance in our Commercial & Specialty business. The benefit expense ratio was 87.4 percent for the full year of 2022, a decrease of 10 basis points year-over-year. The decrease was primarily driven by the realignment of certain quality improvement costs. Excluding the realignment, the full year benefit expense ratio would have increased, driven by a shift in business mix toward Medicaid, which carries a higher benefit expense ratio than our commercial and Medicare health plans.

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

Days in Claims Payable: Days in Claims Payable was 47.7 days as of December 31, 2022, unchanged from September 30, 2022 and an increase of 2.5 days compared to December 31, 2021.

SG&A Expense Ratio: The SG&A expense ratio was 11.5 percent in the fourth quarter of 2022, a decrease of 20 basis points from 11.7 percent in the fourth quarter of 2021. For the full year of 2022, the SG&A expense ratio was 11.4 percent, a decrease of 20 basis points from 11.6 percent in 2021. The decrease for both the quarter and the full year was primarily driven by operating expense leverage associated with growth in operating revenue and lower business optimization charges taken in 2022 as compared to 2021, partially offset by increased spend to support growth in operations and the realignment of certain quality improvement expenses previously reported in benefit expense in the prior year periods.

Operating Cash Flow: Operating cash flow was a use of $1.5 billion, or (1.6) times net income in the fourth quarter of 2022, a decrease of $3.2 billion as compared to the prior year quarter. The year-on-year decrease was driven by the early receipt of premium payments from the Centers for Medicare and Medicaid in third quarter of 2022, which were received during the fourth quarter in 2021. For the full year 2022, operating cash flow was $8.4 billion, or 1.4 times net income.

Share Repurchase Program: During the fourth quarter of 2022, the Company repurchased 1.1 million shares of its common stock for $567 million, at a weighted average price of $497.24. For the full year of 2022, the Company repurchased 4.8 million shares of its common stock for $2.3 billion, at a weighted average price of $478.99. As of December 31, 2022, the Company had approximately $1.9 billion of Board-approved share repurchase authorization remaining.

On January 24, 2023, our Audit Committee, pursuant to authorization granted by the Board of Directors, authorized a $5.0 billion increase to the common stock repurchase program. The Company intends to utilize this authorization over a multi-year period, subject to market and industry conditions.

Cash Dividend: During the fourth quarter of 2022, the Company paid a quarterly dividend of $1.28 per share, representing a distribution of cash totaling $305 million.

On January 24, 2023, the Audit Committee of the Company’s Board of Directors declared a first quarter 2023 dividend to shareholders of $1.48 per share, an increase of 16 percent from the quarterly dividend payment in the fourth quarter. On an annualized basis, the new quarterly dividend equates to $5.92 per share. The first quarter dividend is payable on March 24, 2023, to shareholders of record at the close of business on March 10, 2023.

Investment Portfolio & Capital Position: During the fourth quarter of 2022, the Company recorded net losses of $111 million. During the fourth quarter of 2021, the Company recorded net gains of $211 million. These amounts are excluded from adjusted earnings per share.

As of December 31, 2022, the Company’s net unrealized loss position in the investment portfolio was $2.3 billion, consisting primarily of fixed maturity securities. As of December 31, 2022, cash and investments at the parent company totaled approximately $1.2 billion.

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); CarelonRx (formerly 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 December 31											Twelve Months Ended December 31
			2022				2021				Change			2022				2021				Change
	Operating Revenue
	Commercial & Specialty Business		$	10,350			$	9,905			4.5	%		$	41,674			$	38,809			7.4	%
	Government Business			24,646				21,912			12.5	%			96,810				82,919			16.8	%
	CarelonRx			7,523				6,801			10.6	%			28,526				25,431			12.2	%
	Other			3,410				2,693			26.6	%			13,294				10,250			29.7	%
	Eliminations			(6,262	)			(5,293	)		18.3	%			(24,644	)			(20,466	)		20.4	%
	Total Operating Revenue1		$	39,667			$	36,018			10.1	%		$	155,660			$	136,943			13.7	%
	Operating Gain (Loss)2
	Commercial & Specialty Business		$	260			$	74			251.4	%		$	2,933			$	2,753			6.5	%
	Government Business			644				748			(13.9	)%			3,297				3,061			7.7	%
	CarelonRx			475				427			11.2	%			1,868				1,684			10.9	%
	Other			(11	)			(61	)		NM				354				(9	)		NM
	Total Operating Gain1		$	1,368			$	1,188			15.2	%		$	8,452			$	7,489			12.9	%
	Operating Margin
	Commercial & Specialty Business			2.5	%			0.7	%		180 bp				7.0	%			7.1	%		(10) bp
	Government Business			2.6	%			3.4	%		(80) bp				3.4	%			3.7	%		(30) bp
	CarelonRx			6.3	%			6.3	%		— bp				6.5	%			6.6	%		(10) bp
	Total Operating Margin1			3.4	%			3.3	%		10 bp				5.4	%			5.5	%		(10) bp

1.

See “Basis of Presentation.”

2.

Operating gain for the three and twelve months ended December 31, 2022 included $39 of charges related to business optimization plans; including $20 for Commercial & Specialty Business; $16 for the Government Business; and $3 for the Other segment. Operating gain for the three and twelve months ended December 31, 2021 included $187 of charges related to business optimization plans; including $106 for Commercial & Specialty Business; $47 for the Government Business; $2 for CarelonRx; and $32 for the Other segment.

Commercial & Specialty Business: Operating gain in the Commercial & Specialty Business segment totaled $260 million in the fourth quarter of 2022, an increase of $186 million from $74 million in the fourth quarter of 2021. The increase was primarily driven by improved medical underwriting performance in our commercial risk-based business and lower business optimization expenses in the fourth quarter of 2022 as compared to the fourth quarter of 2021.

Government Business: Operating gain in the Government Business segment was $644 million in the fourth quarter of 2022, a decrease of $104 million from $748 million in the fourth quarter of 2021. The decrease was primarily driven by the non-recurrence of certain favorable out of period rate actions in Medicaid in the prior year quarter partially offset by increased gross profit in our Medicare health plans and lower business optimization expenses in the fourth quarter of 2022 as compared to the fourth quarter of 2021.

CarelonRx: Operating gain was $475 million in the fourth quarter of 2022, an increase of $48 million from $427 million in the fourth quarter of 2021. The increase was driven by higher prescription volumes associated with growth in integrated medical and standalone pharmacy customers.

Other: The Company reported an operating loss of $11 million in the Other segment for the fourth quarter of 2022, an improvement of $50 million from an operating loss of $61 million in the prior year quarter, driven by growth 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 fourth 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)		800-396-1242 (Domestic Replay)
312-470-0178 (International)		203-369-3272 (International Replay)

The access code for today’s conference call is 3972058. There is no access code for the replay. The replay will be available from 11:30 a.m. EDT today, until the end of the day on February 24, 2023. 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 approximately 119 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		December 31, 2022		December 31, 2021		September 30, 2022		December 31, 2021			September 30, 2022
Commercial & Specialty Business
Individual		789		759		800		4.0	%		(1.4	)%
Group Risk-Based		3,988		4,006		3,988		(0.4	)%		—	%
Commercial Risk-Based		4,777		4,765		4,788		0.3	%		(0.2	)%
BlueCard®		6,462		6,178		6,453		4.6	%		0.1	%
Group Fee-Based		20,174		19,395		20,184		4.0	%		—	%
Commercial Fee-Based		26,636		25,573		26,637		4.2	%		—	%
Total Commercial & Specialty Business		31,413		30,338		31,425		3.5	%		—	%
Government Business
Medicare Advantage		1,977		1,859		1,969		6.3	%		0.4	%
Medicare Supplement		947		952		945		(0.5	)%		0.2	%
Total Medicare		2,924		2,811		2,914		4.0	%		0.3	%
Medicaid		11,571		10,600		11,319		9.2	%		2.2	%
Federal Employees Health Benefits		1,623		1,625		1,625		(0.1	)%		(0.1	)%
Total Government Business		16,118		15,036		15,858		7.2	%		1.6	%
Total Medical Membership		47,531		45,374		47,283		4.8	%		0.5	%
Other Membership
Life and Disability Members		4,834		4,782		4,796		1.1	%		0.8	%
Dental Members		6,692		6,674		6,655		0.3	%		0.6	%
Dental Administration Members		1,586		1,491		1,577		6.4	%		0.6	%
Vision Members		9,813		8,031		9,628		22.2	%		1.9	%
Medicare Part D Standalone Members		271		438		274		(38.1	)%		(1.1	)%

Elevance Health, Inc.
Consolidated Statements of Income
(Unaudited)
(In millions, except per share data)		Three Months Ended December 31
		2022				2021				Change
Revenues
Premiums		$	33,646			$	30,769			9.4	%
Product revenue			4,137				3,525			17.4	%
Administrative fees and other revenue			1,884				1,724			9.3	%
Total operating revenue			39,667				36,018			10.1	%
Net investment income			373				352			6.0	%
Net (losses) gains on financial instruments			(111	)			211			(152.6	)%
Total revenues			39,929				36,581			9.2	%
Expenses
Benefit expense			30,091				27,538			9.3	%
Cost of products sold			3,646				3,070			18.8	%
Selling, general and administrative expense			4,562				4,222			8.1	%
Interest expense			229				200			14.5	%
Amortization of other intangible assets			247				135			83.0	%
Loss on extinguishment of debt			—				16			(100.0	)%
Total expenses			38,775				35,181			10.2	%
Income before income tax expense			1,154				1,400			(17.6	)%
Income tax expense			193				275			(29.8	)%
Net income			961				1,125			(14.6	)%
Net (income) loss attributable to noncontrolling interests			(12	)			12			NM
Shareholders’ net income		$	949			$	1,137			(16.5	)%
Shareholders’ net income per diluted share		$	3.93			$	4.63			(15.1	)%
Diluted shares			241.2				245.5			(1.8	)%
Benefit expense as a percentage of premiums			89.4	%			89.5	%		(10) bp
Selling, general and administrative expense as a percentage of total operating revenue			11.5	%			11.7	%		(20) bp
Income before income tax expense as a percentage of total revenue			2.9	%			3.8	%		(90) bp
«NM» = calculation not meaningful

Elevance Health, Inc.
Consolidated Statements of Income
(Unaudited)
(In millions, except per share data)		Twelve Months Ended December 31
		2022				2021				Change
Revenues
Premiums		$	133,229			$	117,373			13.5	%
Product revenue			14,978				12,657			18.3	%
Administrative fees and other revenue			7,453				6,913			7.8	%
Total operating revenue			155,660				136,943			13.7	%
Net investment income			1,485				1,378			7.8	%
Net (losses) gains on financial instruments			(550	)			318			(273.0	)%
Total revenues			156,595				138,639			13.0	%
Expenses
Benefit expense			116,487				102,645			13.5	%
Cost of products sold			13,035				10,895			19.6	%
Selling, general and administrative expense			17,686				15,914			11.1	%
Interest expense			851				798			6.6	%
Amortization of other intangible assets			767				441			73.9	%
Loss on extinguishment of debt			—				21			(100.0	)%
Total expenses			148,826				130,714			13.9	%
Income before income tax expense			7,769				7,925			(2.0	)%
Income tax expense			1,750				1,830			(4.4	)%
Net income			6,019				6,095			(1.2	)%
Net loss attributable to noncontrolling interests			6				9			NM
Shareholders’ net income		$	6,025			$	6,104			(1.3	)%
Shareholders’ net income per diluted share		$	24.81			$	24.73			0.3	%
Diluted shares			242.8				246.8			(1.6	)%
Benefit expense as a percentage of premiums			87.4	%			87.5	%		(10) bp
Selling, general and administrative expense as a percentage of total operating revenue			11.4	%			11.6	%		(20) bp
Income before income tax expense as a percentage of total revenue			5.0	%			5.7	%		(70) bp
«NM» = calculation not meaningful

Elevance Health, Inc.
Consolidated Balance Sheets
(In millions)		December 31, 2022				December 31, 2021
Assets		(Unaudited)
Current assets:
Cash and cash equivalents		$	7,387			$	4,880
Fixed maturity securities			25,952				26,267
Equity securities			953				1,881
Premium receivables			7,083				5,681
Self-funded receivables			4,663				4,010
Other receivables			4,298				3,749
Other current assets			5,281				4,654
Total current assets			55,617				51,122
Long-term investments:
Fixed maturity securities			752				632
Other invested assets			5,685				5,225
Property and equipment, net			4,316				3,919
Goodwill			24,383				24,228
Other intangible assets			10,315				10,615
Other noncurrent assets			1,704				1,719
Total assets		$	102,772			$	97,460
Liabilities and equity
Liabilities
Current liabilities:
Medical claims payable		$	15,596			$	13,518
Other policyholder liabilities			6,505				5,521
Unearned income			1,112				1,153
Accounts payable and accrued expenses			5,035				4,970
Short-term borrowings			265				275
Current portion of long-term debt			1,500				1,599
Other current liabilities			9,683				7,849
Total current liabilities			39,696				34,885
Long-term debt, less current portion			22,349				21,157
Reserves for future policy benefits			737				802
Deferred tax liabilities, net			2,034				2,805
Other noncurrent liabilities			1,562				1,683
Total liabilities			66,378				61,332
Shareholders’ equity
Common stock			2				2
Additional paid-in capital			9,084				9,148
Retained earnings			29,724				27,088
Accumulated other comprehensive loss			(2,503	)			(178	)
Total shareholders’ equity			36,307				36,060
Noncontrolling interests			87				68
Total equity			36,394				36,128
Total liabilities and equity		$	102,772			$	97,460

Elevance Health, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In millions)		Twelve Months Ended December 31
		2022				2021
Operating activities
Net income		$	6,019			$	6,095
Adjustments to reconcile net income to net cash provided by operating activities:
Net losses (gains) on financial instruments			550				(318	)
Equity in net earnings of other invested assets			(293	)			(562	)
Depreciation and amortization			1,675				1,302
Deferred income taxes			(76	)			326
Impairment of property and equipment			7				73
Share-based compensation			264				255
Changes in operating assets and liabilities:
Receivables, net			(2,510	)			(2,138	)
Other invested assets			11				(70	)
Other assets			120				37
Policy liabilities			2,826				2,597
Unearned income			(42	)			(113	)
Accounts payable and other liabilities			252				719
Income taxes			(338	)			140
Other, net			(66	)			21
Net cash provided by operating activities			8,399				8,364
Investing activities
Purchases of investments			(24,946	)			(18,669	)
Proceeds from sale of investments			11,988				10,269
Maturities, calls and redemptions from investments			10,620				4,344
Changes in securities lending collateral			(301	)			(956	)
Purchases of subsidiaries, net of cash acquired			(649	)			(3,476	)
Purchases of property and equipment			(1,152	)			(1,087	)
Other, net			(120	)			(63	)
Net cash used in investing activities			(4,560	)			(9,638	)
Financing activities
Net (repayments of) proceeds from commercial paper borrowings			(300	)			50
Net proceeds from (repayments of) short-term borrowings			(10	)			275
Net proceeds from long-term borrowings			1,172				2,394
Changes in securities lending payable			302				956
Changes in bank overdrafts			933				(376	)
Repurchase and retirement of common stock			(2,316	)			(1,900	)
Cash dividends			(1,229	)			(1,104	)
Proceeds from issuance of common stock under employee stock plans			182				203
Taxes paid through withholding of common stock under employee stock plans			(93	)			(102	)
Other, net			41				27
Net cash (used in) provided by financing activities			(1,318	)			423
Effect of foreign exchange rates on cash and cash equivalents			(14	)			(10	)
Change in cash and cash equivalents			2,507				(861	)
Cash and cash equivalents at beginning of period			4,880				5,741
Cash and cash equivalents at end of period		$	7,387			$	4,880

Elevance Health, Inc.
Reconciliation of Medical Claims Payable
		Years Ended December 31
		2022				2021				2020
(In millions)		(Unaudited)
Gross medical claims payable, beginning of year		$	13,282			$	11,135			$	8,647
Ceded medical claims payable, beginning of year			(21	)			(46	)			(33	)
Net medical claims payable, beginning of year			13,261				11,089				8,614
Business combinations and purchase adjustments			133				420				339
Net incurred medical claims:
Current year			113,414				100,440				85,094
Prior years redundancies(1)			(869	)			(1,703	)			(637	)
Total net incurred medical claims			112,545				98,737				84,457
Net payments attributable to:
Current year medical claims			98,997				88,156				74,629
Prior years medical claims			11,600				8,829				7,692
Total net payments			110,597				96,985				82,321
Net medical claims payable, end of year			15,342				13,261				11,089
Ceded medical claims payable, end of year			6				21				46
Gross medical claims payable, end of year*		$	15,348			$	13,282			$	11,135
Current year medical claims paid as a percentage of current year net incurred medical claims			87.3	%			87.8	%			87.7	%
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			7.0	%			18.1	%			8.0	%
Prior year redundancies in the current year as a percentage of prior year net incurred medical claims			0.9	%			2.0	%			0.8	%

Contacts

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

Media
Leslie Porras
Leslie.Porras@elevancehealth.com

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