Elevance Health (ELV) reported sequential and annual declines in its second-quarter memberships, although the health insurer lifted its full-year earnings outlook and recorded an unexpected year-over-year revenue increase in the previous three-month period.
Total medical membership came in at 44.9 million for the June quarter, down 1% and 1.5% on sequential and annual bases, driven by a known commercial fee-based customer transition and attrition in the firm's individual Affordable Care Act and Medicaid membership.
Elevance's shares dropped 8.8% in Wednesday trade, reducing its year-to-date gain to 10.9%.
"Rate updates received during the quarter were higher than anticipated, and membership and acuity remained broadly aligned with our expectations," Chief Financial Officer Mark Kaye said during an earnings call, according to a FactSet transcript.
Within the commercial risk-based business, individual membership decreased 2.3% from the prior-year quarter, while employer group fell 5.5%.
"The Medicaid environment continues to be dynamic, and we're managing it with discipline," Chief Executive Gail Boudreaux said on the call. "We're improving our ability to detect cost pressures earlier and respond quickly with targeted action plans across our clinical network, payment integrity and operating teams."
The company now expects adjusted earnings of at least $27 a share for 2026, up from its prior guidance of $26.75. The improved guidance is "prudent" and "supported by current operating trends," according to Kaye. The current consensus on FactSet is for non-GAAP EPS of $26.87.
"We remain confident in our ability to return to at least 12% adjusted EPS growth in 2027," Boudreaux told analysts on the call.
The insurer's adjusted EPS slipped about 16% year over year to $7.45 in the second quarter, but topped the Street's view of $6.21. Operating revenue edged up to $49.83 billion from $49.42 billion, defying the average analyst estimate for a decrease to $48.88 billion. Higher premium yields and product revenue drove the top line increase, partially offset by a lower health plan membership in Medicaid, Kaye said on the call.
Overall premiums were nearly flat at $41.28 billion. Product revenue advanced by 3.7%, while service fees rose 8.3%. By segment, health benefits revenue increased 2.7% to $42.72 billion while its Carelon division, composed of CarelonRx and Carelon Services, inclined 6% to $192 billion.
The benefit-expense ratio rose by 80 basis points year over year to 89.7% for the second quarter. The increase was driven by higher medical cost trends in the company's government business, it said.
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