01—Abstract
Summary
Summary of the 8-K filed April 22, 2026. Cited figures are marked; the original filing is the authoritative source.
Elevance Health (ELV) reported first quarter 2026 results that beat its own expectations on an adjusted basis, while GAAP results were weaker.
Operating revenue rose 1.5% to $49.5 billiona, but GAAP diluted EPS fell 16.8% to $8.00 from $9.61. The GAAP decline is driven largely by a $935 million accrual tied to a February 27, 2026 CMS notice regarding historical Medicare Advantage risk adjustment data, plus a $129 million business optimization charge. Adjusted diluted EPS was $12.58, up 5.1%, helped by roughly $1 per share of non-recurring investment income.
The benefit expense ratio rose 40 basis points to 86.8%, mainly from elevated Medicaid medical cost trend, partly offset by Medicare improvement. Days in claims payable rose to 46.6 days, which investors should watch for signs of reserve pressure. Management raised full-year 2026 adjusted diluted EPS guidance to at least $26.75b and set GAAP diluted EPS guidance at at least $19.85, including the estimated CMS financial impact.
It reaffirmed operating cash flow of at least $5.5 billionc, which includes potential cash payments related to the CMS matter. Operating cash flow was $4.3 billion in the quarter, up $3.3 billion year over year. The company returned $1.5 billion to shareholders in the quarter through $1.1 billion of buybacks and $376 million of dividends, and it has about $5.6 billion of repurchase authorization remaining.
The quarter shows a mixed picture. Health Benefits operating margin fell to 5.1%d and Carelon margins compressed, while membership declines in Medicare Advantage and Employer Group risk business continued. Investors will need to weigh the adjusted beat and raised guidance against the CMS exposure, the cash outflow it may require, and the rising medical cost pressure in Medicaid.
02—Key points
Key Highlights
- Operating revenue of $49.5 billion, up 1.5% year over year, driven by higher Health Benefits premium yields and CarelonRx growth, partly offset by Medicare Advantage, Medicaid, and Employer Group risk membership declines.
- GAAP diluted EPS of $8.00, down 16.8% from $9.61, mainly reflecting a $935 million (about $4.24 per share) accrual for the CMS notice on historical Medicare Advantage risk adjustment data.
- Adjusted diluted EPS of $12.58, up 5.1%, supported by strong operating results and roughly $1 per share of non-recurring investment income.
- Benefit expense ratio rose 40 basis points to 86.8% on elevated Medicaid medical cost trend; Days in Claims Payable increased to 46.6 days, up 3.8 days year over year.
- Full-year 2026 adjusted EPS guidance raised to at least $26.75; GAAP EPS guidance set at at least $19.85 including the CMS estimate; operating cash flow of at least $5.5 billion reaffirmed.
- Operating cash flow of $4.3 billion in Q1, up $3.3 billion year over year; the company returned $1.5 billion to shareholders and retains about $5.6 billion of buyback authorization.
- Health Benefits operating margin fell to 5.1% from 5.4%, and Carelon operating margin declined to 5.9% from 6.6%, reflecting higher medical costs and investment in Carelon Services risk-based capabilities.
03—Questions
Frequently Asked Questions
What is the CMS matter and how large is its financial impact?
On February 27, 2026, CMS notified Elevance of potential exposure tied to certain historical Medicare Advantage risk adjustment data. The company recorded a $935 million accrual in Q1 2026 as its current best estimate, which equals about $4.24 per diluted share. The accrual is excluded from adjusted results but is included in GAAP guidance, and management notes that potential cash payments are included in the operating cash flow outlook.
Why did GAAP EPS fall while adjusted EPS rose?
GAAP EPS of $8.00 includes the $935 million CMS accrual, a $129 million business optimization charge, transaction costs, and amortization and investment-related items. Adjusted EPS of $12.58 excludes these items, and it is up 5.1% year over year, helped by about $1 per share of non-recurring investment income.
What is driving the pressure on medical costs?
The benefit expense ratio rose 40 basis points to 86.8%, mainly due to expected elevated medical cost trend in Medicaid. Medicare performance improved and partly offset the increase. Days in Claims Payable rose to 46.6 days, which investors may read as a signal to monitor reserve adequacy.
What did management change in its full-year outlook?
Management raised full-year 2026 adjusted diluted EPS guidance to at least $26.75, citing underlying business strength, actions to reduce medical costs, and improved visibility. GAAP diluted EPS guidance is at least $19.85 and reflects the CMS estimate. Operating cash flow guidance of at least $5.5 billion was reaffirmed.
How is Elevance returning capital and managing its balance sheet?
In Q1 2026, Elevance repurchased 3.7 million shares for $1.1 billion at an average price of $304.68 and paid $376 million in dividends. The Board declared a Q2 2026 dividend of $1.72 per share, payable June 25, 2026. Parent company cash and investments were about $2.2 billion, and about $5.6 billion of repurchase authorization remains. Total debt was about $31.8 billion, including short-term borrowings and current and long-term debt.
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