Elevance Health, Inc. (NYSE:ELV), a health insurer, reported its third-quarter 2023 results, leading to a 0.8% increase in its shares on October 18. This positive response can be attributed to an earnings beat and an increased profit guidance for 2023. Management believed that the strength of the Health Benefits and Carelon businesses contributed to the quarterly results, although escalating benefit expenses may have partially offset the gains.
Overview of Q3 Earnings
ELV reported adjusted net income of $8.99 per share, surpassing the Zacks Consensus Estimate by 6.4%. The bottom line showed a year-over-year improvement of 20.5%.
Operating revenues amounted to $42.5 billion, representing a 7.2% year-over-year increase in the third quarter. However, the top line narrowly missed the consensus estimate.
Growing Premiums: A Significant Top-Line Contributor
Premiums, a crucial contributor to a health insurer’s top line, reached $35.3 billion for Elevance Health in the third quarter. This figure marked a 4.6% year-over-year increase and exceeded the estimate of $34.3 billion. Premiums saw an uptick thanks to increased membership growth in ELV’s BlueCard, Affordable Care Act health plan, and Medicare Advantage divisions.
The medical membership inched up 0.1% year over year to approximately 47.3 million as of September 30, 2023, falling slightly short of the estimate of 47.4 million.
Segmental Contribution
The Health Benefits and Carelon businesses displayed impressive performance in the third quarter of 2023, thanks to higher premium revenues and strong pharmacy product revenues. The Health Benefits unit’s operating revenues grew 4.8% year over year to $36.7 billion, surpassing the estimate of $35.6 billion. Operating revenues of the Carelon segment amounted to $11.9 billion, marking a 14.3% year-over-year increase and outpacing the estimate of $10.8 billion. The unit’s operating profit of $650 million crept up by 1.4% compared to the previous year.
Solid Growth in Cash Reserves
Elevance Health demonstrated a solid financial standing, supported by expanding cash reserves. As of September 30, 2023, its cash and cash equivalents of $10.9 billion surged by 47.8% compared to the figure at the end of 2022. This financial strength positions the health insurer to pursue uninterrupted business investments and engage in returning capital to shareholders.
A Promising Forward Outlook
Exceptional performance in the initial nine months of 2023 led the management to revise its upward adjusted profit guidance for the current year. Adjusted net income is now expected to be more than $33.00 per share, up from the previous guidance of adjusted net income of more than $32.85 per share and the 2022 reported figure of $29.07 per share.
Management anticipates that the adjusted earnings per share (EPS) for 2024 will be approximately $37. Furthermore, the segmental strength makes management optimistic about achieving its long-term compound annual growth rate target of adjusted EPS growth between 12% and 15%.
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