Elevance Health beats estimates with $1.45B profit, raises outlook

Elevance Health beat quarterly profit estimates as medical costs eased, lifting its full-year earnings forecast.

Elevance Health reported $1.45 billion in second-quarter net income, beating analyst estimates, as easing medical costs in some health plans drove an improved full-year outlook. The Indianapolis-based insurer earned $6.71 per share, topping the $6.18 consensus estimate compiled by Wall Street analysts, though net income fell 16.6% from $1.74 billion, or $7.72 per share, a year earlier.

"Second quarter results exceeded our expectations, supported by disciplined execution and improved operating performance across our diversified portfolio," Chief Executive Officer Gail K. Boudreaux said. The company attributed the results partly to "favorable benefit expense performance and an approximately $0.80 per share net below-the-line benefit."

Revenue rose 1.4% to $50.47 billion, above the $48.45 billion forecast. Operating revenue reached $49.8 billion, up $400 million from the prior year, driven by higher premium yields in the health benefits segment and growth in CarelonRx product revenue. The benefit expense ratio — the share of premium revenue spent on medical claims — widened to 89.7% from 88.9% a year earlier, driven by elevated costs in government-backed plans including Medicare Advantage and Medicaid, partially offset by improved performance in individual ACA plans.

Elevance raised its full-year adjusted earnings forecast to at least $27 per share for 2026, up from a prior outlook of at least $19.85, and said it expects to return to at least 12% adjusted EPS growth in 2027. The company also lifted its 2026 guidance to at least $20.10 per share from at least $19.85, reflecting confidence in the second-half outlook.

Membership fell to 44.9 million from 45.6 million a year earlier, a decline of 1.5%, driven by losses in Medicare Advantage, Medicaid, and employer-group risk plans. Premium revenue dropped 3.3% to $39.9 billion, partially offset by a 4.7% increase in product revenue to $6.32 billion and a 6% gain in service fees to $2.24 billion. Net investment income fell 8.1% to $446.9 million. Analysts had modeled total medical membership of 44.82 million, Medicare Advantage enrollment of 1.87 million, and Medicaid membership of 8.23 million.

The results come as the health insurance sector navigates elevated medical costs that have persisted since the pandemic. Rivals including UnitedHealth Group and Humana have reported similar pressure from Medicare Advantage members catching up on deferred care. Health insurers historically target benefit expense ratios in the mid-to-low 80s, a level that has remained largely out of reach for most plans over the past year. The last time the industry saw sustained ratios below 85% was before the pandemic, when utilization patterns were more predictable.

Elevance, the nation's second-largest health insurer behind UnitedHealth Group's UnitedHealthcare unit, operates Anthem-branded Blue Cross and Blue Shield plans across 14 states. It also manages Medicaid contracts in multiple states and sells individual coverage through the Affordable Care Act marketplaces. Its Carelon healthcare services business contributed to revenue growth, with the company planning accelerated investments in medical cost management, member experience, and provider connectivity.

Boudreaux said the company is "raising our 2026 adjusted guidance to at least $27.00 and accelerating targeted investments in the capabilities that matter most: medical cost management, member experience, provider connectivity, operating efficiency, and Carelon's value-based solutions." The moves are designed to "strengthen how we operate, improve consistency over time, and reinforce our confidence in returning to at least 12% adjusted EPS growth in 2027 off our 2026 earnings baseline."

The forward guidance implies that management sees the current cost cycle peaking, with the benefit expense ratio expected to improve as investments in cost management take effect. If Elevance achieves its 2027 target, it would mark a return to the growth trajectory the company delivered before the post-pandemic utilization surge disrupted margins across the managed-care sector.

This article is for informational purposes only and does not constitute investment advice.