How did Elevance's 2023 earnings compare with 2022, and what drove the difference between GAAP and adjusted results?

FY2023 GAAP diluted EPS was $25.22, up 3.9%, while adjusted diluted EPS was $33.14, up 16.2%. The gap comes from non-GAAP adjustments of $7.92 per share, mainly net losses on financial instruments ($2.92), amortization of other intangible assets ($3.73), and business optimization charges ($3.03), partly offset by a tax impact of $(2.65). Investors should weigh the GAAP figure heavily, since the adjustments recur in part every year.

What is the outlook for 2024?

Management projects GAAP diluted EPS above $34.29 and adjusted diluted EPS above $37.10. Total operating revenue is expected to be flat to low-single-digit growth, the benefit expense ratio about 87.0% (±50 bps), and the adjusted operating expense ratio about 11.1%. Adjusted operating gain is guided to more than $10.3 billion, and diluted share count to 233–234 million.

Is the company's cash flow and capital return position sustainable?

Operating cash flow was $8.1 billion in 2023, or 1.3 times GAAP net income, and 2024 guidance calls for it to exceed $8.1 billion. The company spent $2.7 billion on share repurchases and $1.4 billion on dividends in 2023, with roughly $4.2 billion of repurchase authorization left. Parent-company cash and investments were about $1.6 billion, and total debt rose to roughly $24.9 billion, so capital returns depend on continued cash generation.

Why did membership decline, and is it a concern?

Medical membership fell about 570 thousand, or 1.2%, to 47.0 million, mainly because Medicaid enrollment dropped 9.2% as eligibility redeterminations resumed in Q2 2023. Employer Group risk-based membership also declined. Growth in BlueCard, ACA plans, and Medicare Advantage partly offset these losses. 2024 year-end risk-based enrollment is guided lower (18.4–19.0 million versus 19.9 million), so membership trends remain a key watch item.

Did profitability weaken in the fourth quarter?

Operating margin fell to 3.0% from 3.2% a year earlier, and Health Benefits operating gain dropped 2% to $767 million. Management attributed this mainly to investments in long-term growth made during the quarter. Carelon segments performed better, with operating gain up 15% to $592 million, helped by Carelon Services and higher CarelonRx prescription volumes.

ELV 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed January 24, 2024. Cited figures are marked; the original filing is the authoritative source.

Elevance Health (ELV) reported fourth-quarter and full-year 2023 results that met its growth and profitability targets, and it set a 2024 outlook calling for higher earnings.

Fourth-quarter operating revenue was $42.5 billion^a, up 7.0% year over year, and full-year operating revenue was $170.2 billion, up 9.3%. Growth came mainly from higher premium revenue in Health Benefits and pharmacy product revenue at CarelonRx. Adjusted diluted EPS rose 15.2% to $5.62 in the quarter and 16.2% to $33.14 for the year.

GAAP diluted EPS was $3.63^b for the quarter (up 1.1%) and $25.22 for the year (up 3.9%). GAAP EPS was held back by $719 million of full-year business optimization charges, along with net losses on financial instruments and amortization of intangibles. Cost trends were favorable.

The full-year benefit expense ratio improved 60 basis points to 87.0%^c, reflecting premium rate increases that covered medical cost trend. The operating expense ratio rose 40 basis points to 11.8%, mainly because of the business optimization charges. Fourth-quarter operating margin slipped to 3.0% from 3.2%, as Health Benefits operating gain fell 2% on growth investments.

Medical membership ended the year at about 47.0 million, down 1.2%, driven by Medicaid attrition as eligibility redeterminations resumed. For 2024, management guided to GAAP diluted EPS above $34.29^d and adjusted diluted EPS above $37.10. It also expects total operating revenue to be flat to low-single-digit growth and adjusted operating gain above $10.3 billion, versus $9.4 billion in 2023.

Capital returns remained strong: the company raised its quarterly dividend 10.1% to $1.63 per share, bought back 5.8 million shares for $2.7 billion in 2023, and had about $4.2 billion of repurchase authorization remaining. Operating cash flow was $8.1 billion, or 1.3 times GAAP net income.

02—Key points

Key Highlights

Full-year 2023 operating revenue reached $170.2 billion, up 9.3%, and fourth-quarter operating revenue reached $42.5 billion, up 7.0%.
Adjusted diluted EPS grew 16.2% to $33.14 for FY2023 and 15.2% to $5.62 for Q4; GAAP diluted EPS was $25.22 for the year, up 3.9%.
The benefit expense ratio improved 60 bps to 87.0% for the year, driven by premium rate adjustments to cover medical cost trend.
The operating expense ratio rose 40 bps to 11.8%, largely from $719 million of business optimization charges in 2023.
2024 guidance calls for GAAP EPS above $34.29 and adjusted EPS above $37.10, with adjusted operating gain above $10.3 billion versus $9.4 billion in 2023.
Quarterly dividend increased 10.1% to $1.63 per share; 2023 share repurchases totaled $2.7 billion, with about $4.2 billion of authorization remaining.
Total medical membership fell 1.2% to about 47.0 million, mainly from Medicaid attrition (down 9.2%) tied to resumed eligibility redeterminations, partly offset by growth in BlueCard and Medicare Advantage.

03—Questions

Frequently Asked Questions

How did Elevance's 2023 earnings compare with 2022, and what drove the difference between GAAP and adjusted results?
FY2023 GAAP diluted EPS was $25.22, up 3.9%, while adjusted diluted EPS was $33.14, up 16.2%. The gap comes from non-GAAP adjustments of $7.92 per share, mainly net losses on financial instruments ($2.92), amortization of other intangible assets ($3.73), and business optimization charges ($3.03), partly offset by a tax impact of $(2.65). Investors should weigh the GAAP figure heavily, since the adjustments recur in part every year.
What is the outlook for 2024?
Management projects GAAP diluted EPS above $34.29 and adjusted diluted EPS above $37.10. Total operating revenue is expected to be flat to low-single-digit growth, the benefit expense ratio about 87.0% (±50 bps), and the adjusted operating expense ratio about 11.1%. Adjusted operating gain is guided to more than $10.3 billion, and diluted share count to 233–234 million.
Is the company's cash flow and capital return position sustainable?
Operating cash flow was $8.1 billion in 2023, or 1.3 times GAAP net income, and 2024 guidance calls for it to exceed $8.1 billion. The company spent $2.7 billion on share repurchases and $1.4 billion on dividends in 2023, with roughly $4.2 billion of repurchase authorization left. Parent-company cash and investments were about $1.6 billion, and total debt rose to roughly $24.9 billion, so capital returns depend on continued cash generation.
Why did membership decline, and is it a concern?
Medical membership fell about 570 thousand, or 1.2%, to 47.0 million, mainly because Medicaid enrollment dropped 9.2% as eligibility redeterminations resumed in Q2 2023. Employer Group risk-based membership also declined. Growth in BlueCard, ACA plans, and Medicare Advantage partly offset these losses. 2024 year-end risk-based enrollment is guided lower (18.4–19.0 million versus 19.9 million), so membership trends remain a key watch item.
Did profitability weaken in the fourth quarter?
Operating margin fell to 3.0% from 3.2% a year earlier, and Health Benefits operating gain dropped 2% to $767 million. Management attributed this mainly to investments in long-term growth made during the quarter. Carelon segments performed better, with operating gain up 15% to $592 million, helped by Carelon Services and higher CarelonRx prescription volumes.

04—Continue

← View all 8-K filings