Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

Elevance Health, Inc.

Consolidated Balance Sheets


	June 30, 2024		December 31, 2023
	(Unaudited)
(In millions, except share and per share data)
Assets
Current assets:
Cash and cash equivalents	$	6,497	$	6,526
Fixed maturity securities (amortized cost of $29,834 and $30,446; allowance for credit losses of $4 and $4)	28,900		29,614
Equity securities	594		229


Premium receivables	8,040		7,902
Self-funded receivables	5,297		4,558
Other receivables	5,881		5,405


Other current assets	6,464		5,795
Assets held for sale	601		—
Total current assets	62,274		60,029
Long-term investments:
Fixed maturity securities (amortized cost of $867 and $890; allowance for credit losses of $0 and $0)	849		876

Other invested assets	6,810		6,107
Property and equipment, net	4,450		4,359
Goodwill	25,962		25,317
Other intangible assets	10,447		10,273
Other noncurrent assets	2,196		1,967
Total assets	$	112,988	$	108,928

Liabilities and equity
Liabilities
Current liabilities:

Medical claims payable	$	15,204	$	16,111

Other policyholder liabilities	4,939		5,600

Unearned income	1,481		1,402
Accounts payable and accrued expenses	5,760		6,910



Short-term borrowings	225		225
Current portion of long-term debt	2,900		1,649
Other current liabilities	11,139		9,894
Liabilities held for sale	165		—
Total current liabilities	41,813		41,791
Long-term debt, less current portion	24,561		23,246
Reserves for future policy benefits	295		778
Deferred tax liabilities, net	2,037		1,970
Other noncurrent liabilities	1,985		1,738
Total liabilities	70,691		69,523

Commitments and contingencies – Note 11

Shareholders’ equity
Preferred stock, without par value, shares authorized – 100,000,000; shares issued and outstanding – none	—		—
Common stock, par value $0.01, shares authorized – 900,000,000; shares issued and outstanding – 231,902,075 and 233,071,088	2		2
Additional paid-in capital	9,001		8,868
Retained earnings	34,575		31,749
Accumulated other comprehensive loss	(1,387)		(1,313)
Total shareholders’ equity	42,191		39,306
Noncontrolling interests	106		99
Total equity	42,297		39,405
Total liabilities and equity	$	112,988	$	108,928

See accompanying notes.

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Elevance Health, Inc.

Consolidated Statements of Income

(Unaudited)


	Three Months Ended June 30				Six Months Ended June 30
	2024		2023		2024		2023
(In millions, except per share data)
Revenues
Premiums	$	35,416	$	36,589	$	71,112	$	72,457
Product revenue	5,530		4,859		10,029		8,881
Service fees	2,277		1,929		4,355		3,937
Total operating revenue	43,223		43,377		85,496		85,275
Net investment income	508		416		973		803
Net losses on financial instruments	(85)		(121)		(246)		(234)
Gain on sale of business	240		—		240		—
Total revenues	43,886		43,672		86,463		85,844
Expenses
Benefit expense	30,572		31,604		61,118		62,390
Cost of products sold	4,820		4,327		8,645		7,808
Operating expense	5,066		4,818		9,952		9,618
Interest expense	280		261		545		512
Amortization of other intangible assets	162		221		278		456


Total expenses	40,900		41,231		80,538		80,784
Income before income tax expense	2,986		2,441		5,925		5,060
Income tax expense	685		585		1,375		1,200


Net income	2,301		1,856		4,550		3,860
Net income attributable to noncontrolling interests	(1)		(3)		(4)		(18)
Shareholders’ net income	$	2,300	$	1,853	$	4,546	$	3,842
Shareholders’ net income per share


Basic	$	9.91	$	7.83	$	19.56	$	16.21



Diluted	$	9.85	$	7.79	$	19.44	$	16.10
Dividends per share	$	1.63	$	1.48	$	3.26	$	2.96

See accompanying notes.

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Elevance Health, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended June 30				Six Months Ended June 30
	2024		2023		2024		2023
(In millions)
Net income	$	2,301	$	1,856	$	4,550	$	3,860
Other comprehensive (loss) income, net of tax:
Change in net unrealized losses/gains on investments	(26)		(119)		(82)		308
Change in non-credit component of impairment losses on investments	—		(1)		—		(3)
Change in net unrealized gains/losses on cash flow hedges	4		4		6		15
Change in net periodic pension and postretirement costs	4		3		8		5
Change in future policy benefits	1		(3)		(1)		(1)
Foreign currency translation adjustments	(5)		—		(5)		2
Other comprehensive (loss) income	(22)		(116)		(74)		326
Net income attributable to noncontrolling interests	(1)		(3)		(4)		(18)
Other comprehensive income attributable to noncontrolling interests	—		—		—		(2)
Total shareholders’ comprehensive income	$	2,278	$	1,737	$	4,472	$	4,166

See accompanying notes.

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Elevance Health, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended June 30
	2024		2023
(In millions)
Operating activities
Net income	$	4,550	$	3,860
Adjustments to reconcile net income to net cash provided by operating activities:
Net losses on financial instruments	246		234
Gain on sale of business	(240)		—
Equity in net losses of other invested assets	26		73
Depreciation and amortization	666		895




Deferred income taxes	(34)		(393)



Share-based compensation	154		139

Changes in operating assets and liabilities:
Receivables, net	(1,341)		(299)
Other invested assets	(47)		(42)
Other assets	(789)		(529)
Policy liabilities	(1,366)		583
Unearned income	80		3,346
Accounts payable and other liabilities	300		160


Income taxes	174		391
Other, net	46		1
Net cash provided by operating activities	2,425		8,419
Investing activities
Purchases of investments	(10,035)		(17,648)
Proceeds from sale of investments	7,584		5,339
Maturities, calls and redemptions from investments	1,036		10,656





Changes in securities lending collateral	(321)		145
Proceeds from sale of subsidiaries, net of cash sold	399		—
Purchases of subsidiaries, net of cash acquired	(1,124)		(1,651)

Purchases of property and equipment	(602)		(651)

Other, net	(65)		(46)
Net cash used in investing activities	(3,128)		(3,856)
Financing activities

Proceeds from long-term borrowings	2,580		2,574
Repayments of long-term borrowings	—		(1,908)


Changes in securities lending payable	320		(145)
Changes in bank overdrafts	(479)		(500)



Repurchase and retirement of common stock	(1,029)		(1,268)

Cash dividends	(757)		(701)
Proceeds from issuance of common stock under employee stock plans	157		81
Taxes paid through withholding of common stock under employee stock plans	(100)		(99)

Other, net	8		5
Net cash provided by (used in) financing activities	700		(1,961)
Effect of foreign exchange rates on cash and cash equivalents	(5)		2
Change in cash and cash equivalents	(8)		2,604
Cash and cash equivalents at beginning of period	6,526		7,387
Less cash and equivalents included in assets held for sale at end of period	(21)		—
Cash and cash equivalents at end of period	$	6,497	$	9,991

See accompanying notes.

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Elevance Health, Inc.

Consolidated Statements of Changes in Equity

(Unaudited)


	Total Shareholders’ Equity
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity
(In millions)	Number of Shares	Par Value
December 31, 2023	233.1	$	2	$	8,868	$	31,749	$	(1,313)	$	99	$	39,405
Net income	—	—		—		2,246		—		3		2,249
Other comprehensive loss	—	—		—		—		(52)		—		(52)



Repurchase and retirement of common stock, including excise tax	(1.1)	—		(44)		(525)		—		—		(569)
Dividends and dividend equivalents	—	—		—		(382)		—		—		(382)
Issuance of common stock under employee stock plans, net of related tax benefits	0.5	—		59		—		—		—		59

March 31, 2024	232.5	2		8,883		33,088		(1,365)		102		40,710


Net income	—	—		—		2,300		—		1		2,301
Other comprehensive loss	—	—		—		—		(22)		—		(22)
Noncontrolling interests adjustment	—	—		—		—		—		3		3


Repurchase and retirement of common stock, including excise tax	(0.9)	—		(34)		(432)		—		—		(466)
Dividends and dividend equivalents	—	—		—		(381)		—		—		(381)
Issuance of common stock under employee stock plans, net of related tax benefits	0.3	—		152		—		—		—		152


June 30, 2024	231.9	$	2	$	9,001	$	34,575	$	(1,387)	$	106	$	42,297

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Elevance Health, Inc. Consolidated Statements of Changes in Equity (continued) (Unaudited)

	Total Shareholders’ Equity
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity
(In millions)	Number of Shares	Par Value
December 31, 2022	238.0	$	2	$	9,084	$	29,647	$	(2,490)	$	87	$	36,330
Net income	—	—		—		1,989		—		15		2,004
Other comprehensive income	—	—		—		—		440		2		442

Repurchase and retirement of common stock, including excise tax	(1.3)	—		(51)		(575)		—		—		(626)
Dividends and dividend equivalents	—	—		—		(354)		—		—		(354)
Issuance of common stock under employee stock plans, net of related tax benefits	0.4	—		6		—		—		—		6
Convertible debenture repurchases, conversions and tax adjustments	—	—		(342)		—		—		—		(342)
March 31, 2023	237.1	2		8,697		30,707		(2,050)		104		37,460
Net income	—	—		—		1,853		—		3		1,856
Other comprehensive loss	—	—		—		—		(116)		—		(116)



Repurchase and retirement of common stock, including excise tax	(1.4)	—		(52)		(600)		—		—		(652)
Dividends and dividend equivalents	—	—		—		(352)		—		—		(352)
Issuance of common stock under employee stock plans, net of related tax benefits	0.2	—		116		—		—		—		116


June 30, 2023	235.9	$	2	$	8,761	$	31,608	$	(2,166)	$	107	$	38,312

See accompanying notes.

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Elevance Health, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

June 30, 2024

(In Millions, Except Per Share Data or As Otherwise Stated Herein)

1. Organization

References to the terms “we,” “our,” “us” or “Elevance Health” used throughout these Notes to Consolidated Financial Statements refer to Elevance Health, Inc., an Indiana corporation, and unless the context otherwise requires, its direct and indirect subsidiaries. References to the “states” include the District of Columbia and Puerto Rico unless the context otherwise requires.

Elevance Health is a health company with the purpose of improving the health of humanity. We are one of the largest health insurers in the United States in terms of medical membership, serving nearly 46 million medical members through our affiliated health plans as of June 30, 2024. As a lifetime, trusted health partner, we offer a broad spectrum of network-based managed care risk-based plans to Individual, Employer Group, Medicaid and Medicare markets. In addition, we provide a broad array of managed care services to fee-based customers, including claims processing, stop loss insurance, provider network access, medical management, care management, wellness programs, actuarial services and other administrative services. We provide services to the federal government in connection with our Federal Health Products & Services business, which administers the Federal Employees Health Benefits (“FEHB”) Program. We provide an array of specialty services both to customers of our subsidiary health plans and also to unaffiliated health plans, including pharmacy services, dental, vision and supplemental health insurance benefits, as well as integrated health services.

We are an independent licensee of the Blue Cross and Blue Shield Association (“BCBSA”), an association of independent health benefit plans. We serve our members as the Blue Cross licensee for California and as the Blue Cross and Blue Shield (“BCBS”) licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (in the New York City metropolitan area and upstate New York), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.) and Wisconsin. In a majority of these service areas, we do business as Anthem Blue Cross and Anthem Blue Cross and Blue Shield. We also conduct business through arrangements with other BCBS licensees as well as other strategic partners. In addition, we serve members in numerous states as Amerigroup, Freedom Health, HealthSun, MMM, Optimum HealthCare, Simply Healthcare and/or Wellpoint. We are licensed to conduct insurance operations in all 50 states, the District of Columbia and Puerto Rico through our subsidiaries. Through various subsidiaries, we also offer pharmacy services through our CarelonRx business, and other healthcare related services as Carelon Insights, Carelon Health and Carelon Behavioral Health.

We have organized our brand portfolio into the following core go-to-market brands:

Anthem Blue Cross/Anthem Blue Cross and Blue Shield — represents our existing Anthem-branded and affiliated Blue Cross and/or Blue Shield licensed plans;
Wellpoint — we are uniting select non-BCBSA licensed Medicare, Medicaid and commercial plans under the Wellpoint name; and
Carelon — this brand brings together our healthcare-related brands and capabilities, including our CarelonRx and Carelon Services businesses, under a single brand name.

We report our results of operations in the following four reportable segments: Health Benefits, CarelonRx, Carelon Services and Corporate & Other (our businesses that do not individually meet the quantitative thresholds for an operating segment, as well as corporate expenses not allocated to our other reportable segments). During the fourth quarter of 2023, we moved our Carelon Global Solutions international business from the Corporate & Other reportable segment to the Carelon Services reportable segment. All prior period reportable segment information has been reclassified for comparability to conform to the current presentation. For additional discussion regarding our segments, including the changes made, see Note 15, “Segment Information” included in this Quarterly Report on Form 10-Q.

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2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation: The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. We have omitted certain footnote disclosures that would substantially duplicate the disclosures in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report on Form 10-K”), unless the information contained in those disclosures materially changed or is required by GAAP. In the opinion of management, all adjustments, including normal recurring adjustments, necessary for a fair statement of the consolidated financial statements as of and for the three and six months ended June 30, 2024 and 2023 have been recorded. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024, or any other period. The seasonal nature of portions of our health care and related benefits business, as well as competitive and other market conditions, may cause full-year results to differ from estimates based upon our interim results of operations. These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2023 included in our 2023 Annual Report on Form 10-K.

Certain of our subsidiaries operate outside of the United States and have functional currencies other than the U.S. dollar (“USD”). We translate the assets and liabilities of those subsidiaries to USD using the exchange rate in effect at the end of the period. We translate the revenues and expenses of those subsidiaries to USD using the average exchange rates in effect during the period. The net effect of these translation adjustments is included in “Foreign currency translation adjustments” in our consolidated statements of comprehensive income.

Cash and Cash Equivalents: We control a number of bank accounts that are used exclusively to hold customer funds for the administration of customer benefits, and we have cash and cash equivalents on deposit to meet certain regulatory requirements. These amounts totaled $400 and $294 at June 30, 2024 and December 31, 2023, respectively, and are included in the cash and cash equivalents line on our consolidated balance sheets.

Investments: We classify fixed maturity securities in our investment portfolio as “available-for-sale” and report those securities at fair value. Certain fixed maturity securities are available to support current operations and, accordingly, we classify such investments as current assets without regard to their contractual maturity. Investments used to satisfy contractual, regulatory or other requirements are classified as long-term, without regard to contractual maturity.

If a fixed maturity security is in an unrealized loss position and we have the intent to sell the fixed maturity security, or it is more likely than not that we will have to sell the fixed maturity security before recovery of its amortized cost basis, we write down the fixed maturity security’s cost basis to fair value and record an impairment loss in our consolidated statements of income. For impaired fixed maturity securities that we do not intend to sell or if it is more likely than not that we will not have to sell such securities, but we expect that we will not fully recover the amortized cost basis, we recognize the credit component of the impairment as an allowance for credit loss in our consolidated balance sheets and record an impairment loss in our consolidated statements of income. The non-credit component of the impairment is recognized in accumulated other comprehensive loss. Furthermore, unrealized losses entirely caused by non-credit-related factors related to fixed maturity securities for which we expect to fully recover the amortized cost basis continue to be recognized in accumulated other comprehensive loss.

The credit component of an impairment is determined primarily by comparing the net present value of projected future cash flows with the amortized cost basis of the fixed maturity security. The net present value is calculated by discounting our best estimate of projected future cash flows at the effective interest rate implicit in the fixed maturity security at the date of purchase. For mortgage-backed and asset-backed securities, cash flow estimates are based on assumptions regarding the underlying collateral, including prepayment speeds, vintage, type of underlying asset, geographic concentrations, default rates, recoveries and changes in value. For all other securities, cash flow estimates are driven by assumptions regarding probability of default, including changes in credit ratings and estimates regarding timing and amount of recoveries associated with a default.

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For asset-backed securities included in fixed maturity securities, we recognize income using an effective yield based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. The net investment in the securities is adjusted to the amount that would have existed had the new effective yield been applied since the purchase date of the securities. Such adjustments are reported within net investment income.

The changes in fair value of our marketable equity securities are recognized in our results of operations within net losses on financial instruments. Certain marketable equity securities are held to satisfy contractual obligations or for other business purposes and are reported under the caption “Other invested assets” in our consolidated balance sheets.

Mortgage loans on real estate are classified as held for investment and are reported at their amortized cost basis net of allowance under the caption “Other invested assets” in our consolidated balance sheets. Amortized cost is the amount at which the loan is originated, adjusted for accrued interest, amortization of premium, discount and net deferred fees or costs, collection of cash and write-offs.

We have corporate-owned life insurance policies on certain participants in our deferred compensation plans and other members of management. The cash surrender value of the corporate-owned life insurance policies is reported under the caption “Other invested assets” in our consolidated balance sheets.

We use the equity method of accounting for investments in companies in which our ownership interest may enable us to influence the operating or financial decisions of the investee company. Our proportionate share of equity in net income of these unconsolidated affiliates is reported within net investment income. The equity method investments are reported under the caption “Other invested assets” in our consolidated balance sheets.

Investment income is recorded when earned. All securities sold resulting in investment gains and losses are recorded on the trade date. Realized gains and losses are determined on the basis of the cost or amortized cost of the specific securities sold.

We participate in securities lending programs whereby marketable securities in our investment portfolio are transferred to independent brokers or dealers in exchange for cash and securities collateral. We recognize the collateral as an asset, which is reported under the caption “Other current assets” on our consolidated balance sheets, and we record a corresponding liability for the obligation to return the collateral to the borrower, which is reported under the caption “Other current liabilities.” The securities on loan are reported in the applicable investment category on our consolidated balance sheets. Unrealized gains or losses on securities lending collateral are included in accumulated other comprehensive loss as a separate component of shareholders’ equity. The market value of loaned securities and that of the collateral pledged can fluctuate in non-synchronized fashions. To the extent the loaned securities’ value appreciates faster or depreciates slower than the value of the collateral pledged, we are exposed to the risk of the shortfall. As a primary mitigating mechanism, the loaned securities and collateral pledged are marked to market on a daily basis and the shortfall, if any, is collected accordingly. Secondarily, the collateral level is set at 102% of the value of the loaned securities, which provides a cushion before any shortfall arises. The investment of the cash collateral is subject to market risk, which is managed by limiting the investments to higher quality and shorter duration instruments.

Receivables: Receivables are reported net of amounts for expected credit losses. The allowance for doubtful accounts is based on historical collection trends, future forecasts and our judgment regarding the ability to collect specific accounts.

Premium receivables include the uncollected amounts from employer risk-based groups, individuals and government programs for insurance services. Premium receivables are reported net of an allowance for doubtful accounts of $177 and $212 at June 30, 2024 and December 31, 2023, respectively.

Self-funded receivables include administrative fees, claims and other amounts due from fee-based customers for administrative services. Self-funded receivables are reported net of an allowance for doubtful accounts of $87 at both June 30, 2024 and December 31, 2023, respectively.

Other receivables include pharmacy rebates, provider advances, claims recoveries, reinsurance receivables, proceeds due from brokers on investment trades, accrued investment income and other miscellaneous amounts due to us. These receivables

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are reported net of an allowance for doubtful accounts of $1,046 and $941 at June 30, 2024 and December 31, 2023, respectively.

Revenue Recognition: For our non-risk-based contracts, we had no material contract assets, contract liabilities or deferred contract costs recorded on our consolidated balance sheet at June 30, 2024 or December 31, 2023. For the three and six months ended June 30, 2024 and 2023, revenue recognized from performance obligations related to prior periods, such as changes in transaction price, were not material. For contracts that have an original, expected duration of greater than one year, revenue expected to be recognized in future periods related to unfulfilled contractual performance obligations and contracts with variable consideration related to undelivered performance obligations is not material.

Recently Adopted Accounting Guidance: In November 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2020-11, Financial Services—Insurance (Topic 944): Effective Date and Early Application (“ASU 2020-11”). The amendments in ASU 2020-11 changed the effective date and early application of Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, which was issued in November 2018. The amendments in ASU 2020-11 extended the original effective date by one year to our interim and annual reporting periods beginning after December 15, 2022. This standard requires us to review cash flow assumptions for our long-duration insurance contracts at least annually and recognize the effect of changes in future cash flow assumptions in net income. This standard also requires us to update discount rate assumptions quarterly and recognize the effect of changes in these assumptions in other comprehensive income. The rate used to discount our reserves for future policy benefits is based on an estimate of the yield for an upper-medium grade fixed-income instrument with a duration profile matching that of our liabilities. In addition, this standard changes the amortization method for deferred acquisition costs. We adopted these amendments on January 1, 2023, using the modified retrospective transition method for changes to the liability for future policy benefits and deferred acquisition costs as of the transition date, January 1, 2021. The adoption did not have an overall material impact on our financial statements.

Recent Accounting Guidance Not Yet Adopted: In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740) (“ASU 2023-09”). The amendments in ASU 2023-09 are intended to improve income tax disclosures, primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for our fiscal year beginning after December 15, 2024. The amendments are to be applied on a prospective basis, although retrospective adoption is permitted. We do not believe the adoption of ASU 2023-09 will have a material impact on our consolidated financial statements or disclosures.

In November 2023, the FASB issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments in ASU 2023-07 are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for our fiscal year beginning after December 15, 2023, and interim periods within our fiscal year beginning after December 15, 2024. The amendments are to be applied retrospectively to all prior periods presented in the financial statements, and upon transition, the significant segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. We do not believe the adoption of ASU 2023-07 will have a material impact on our consolidated financial statements or disclosures.

In August 2023, the FASB issued Accounting Standards Update No. 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement (“ASU 2023-05”). ASU 2023-05 clarifies existing guidance to reduce diversity in practice and requires a joint venture to recognize and initially measure its assets and liabilities using a new basis of accounting, at fair value, upon formation. These amendments are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. We do not believe the adoption of ASU 2023-05 will have a material impact on our consolidated financial statements and disclosures.

There were no other new accounting pronouncements that were issued or became effective since the issuance of our 2023 Annual Report on Form 10-K that had, or are expected to have, a material impact on our consolidated financial position, results of operations, cash flows or disclosures.

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3. Business Acquisitions and Divestitures

Completed Acquisitions

On March 11, 2024, we completed our acquisition of Paragon Healthcare, Inc. (“Paragon”). Paragon, which operates as part of CarelonRx, provides infusion services and injectable therapies through its omnichannel model of ambulatory infusion centers, home infusion pharmacies, and other specialty pharmacy services. This acquisition aligns with our vision to be an innovative, valuable and inclusive healthcare partner by providing care management programs that improve the lives of the people we serve. As of June 30, 2024, the purchase price was allocated to the tangible and intangible net assets acquired based on management's initial estimates of their fair values, of which $411 has been allocated to finite-lived intangible assets and $753 to goodwill. The majority of the goodwill is not deductible for income tax purposes. During the three months ended June 30, 2024, measurement period adjustments were $(25). As of June 30, 2024, the initial accounting for the acquisition has not been finalized. The proforma effects of this acquisition for prior periods were not material to our consolidated results of operations.

On February 15, 2023, we completed our acquisition of BioPlus Parent, LLC and subsidiaries (“BioPlus”) from CarepathRx Aggregator, LLC. Prior to the acquisition, BioPlus was one of the largest independent specialty pharmacy organizations in the United States. BioPlus, which operates as part of CarelonRx, seeks to connect payors and providers of specialty pharmaceuticals to meet the medication therapy needs of patients with complex medical conditions. This acquisition aligns with our vision to be an innovative, valuable and inclusive healthcare partner by providing care management programs that improve the lives of the people we serve. As of June 30, 2024, the purchase price was allocated to the tangible and intangible net assets acquired based on management’s estimates of their fair values, of which $820 has been allocated to finite-lived intangible assets and $893 to goodwill. The majority of goodwill is not deductible for income tax purposes. The accounting for the acquisition was finalized as of March 31, 2024. The proforma effects of this acquisition for prior periods were not material to our consolidated results of operations.

Divestiture

On April 1, 2024, we completed the sale of our life and disability businesses to StanCorp Financial Group, Inc. (“The Standard”), a provider of financial protection products and services for employers and individuals, which resulted in a gain on sale of business of $240. Upon closing, we and The Standard entered into a product distribution partnership. The related net assets held for sale for the life and disability businesses to be divested as of December 31, 2023 and results of operations for the three and six months ending June 30, 2024 were not material.

Pending Acquisitions and Divestitures

On December 31, 2023, we entered into an agreement to acquire Centers Plan for Healthy Living LLC and Centers for Specialty Care Group IPA, LLC (“Centers”). Centers is a managed long-term care plan that serves New York state Medicaid and dual-eligible Medicaid/Medicare members, enabling adults with long-term care needs and disabilities to live safely and independently in their own home. This acquisition aligns with our strategic plan to grow the Health Benefits segment and leverage industry-leading expertise while serving Medicaid and dual-eligible populations. The acquisition is expected to close in the third quarter of 2024 and is subject to standard closing conditions and customary approvals.

On April 12, 2024, we entered into an agreement to partner with Clayton, Dubilier & Rice (“CD&R”) to accelerate innovation in care delivery across multiple regions in the United States by bringing together through a new company, Augusta Topco Holdings, L.P. (“Augusta”), certain care delivery and enablement assets of Carelon Management Services Inc., a Carelon Health business (“CMSI Assets”), and two CD&R portfolio businesses, apree health and Millennium Physician Group. Our investment in Augusta will be through a combination of cash, an existing equity investment in apree health, and the contribution of CMSI Assets. We will account for our initial minority ownership interest in Augusta as an equity method investment. Further, in connection with our equity investment, each party will have certain rights and obligations, including certain put, call, and purchase price true-up options, for which the estimated value will be determinable at the time of the incremental investments. Our and CD&R's investments and contributions to Augusta are subject to standard closing conditions and customary approvals.

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The CMSI Assets, along with certain other assets planned to be divested, are included in assets held for sale and liabilities held for sale as of June 30, 2024. In conjunction with the classification as assets held for sale, a $44 impairment of goodwill was recorded during the quarter ended June 30, 2024.

4. Business Optimization Initiatives

During the third quarter of 2023, based on a strategic review of our operations, assets and investments, management implemented the “2023-2024 Business Efficiency Program” to enhance operating efficiency, refine the focus of our investments and optimize our physical footprint. The 2023-2024 Business Efficiency Program includes the write-off of certain information technology assets and contract exit costs, a reduction in staff including the relocation of certain job functions, and the impairment of assets associated with the closure or partial closure of data centers and offices. The 2023-2024 Business Efficiency Program is expected to be substantially complete by the end of the third quarter of 2024. Cash outlays associated with this program, which primarily relate to the personnel-related costs, are expected to be paid through 2024.

The ending balances related to the total liabilities for employee termination costs under the 2023-2024 Business Efficiency Program at June 30, 2024 and December 31, 2023 were $125 and $191, respectively, and were recorded in the Corporate & Other reportable segment. During the quarter ended June 30, 2024, there were no charges or releases related to employee termination costs under the 2023-2024 Business Efficiency Program, and payments were $25.

5. Investments

Fixed Maturity Securities

We evaluate our available-for-sale fixed maturity securities for declines based on qualitative and quantitative factors. We have established an allowance for credit loss and recorded credit loss expense as a reflection of our expected impairment losses. We continue to review our investment portfolios under our impairment review policy. Given the inherent uncertainty of changes in market conditions and the significant judgments involved, there is a continuing risk that declines in fair value may occur and additional material impairment losses for credit losses on investments may be recorded in future periods.

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A summary of current and long-term fixed maturity securities, available-for-sale, at June 30, 2024 and December 31, 2023 is as follows:


	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance For Credit Losses		Estimated Fair Value

June 30, 2024
Fixed maturity securities:
United States Government securities	$	1,794	$	4	$	(85)	$	—	$	1,713
Government sponsored securities	129		1		(5)		—		125
Foreign government securities	71		—		(2)		—		69
States, municipalities and political subdivisions, tax-exempt	3,626		45		(152)		—		3,519
Corporate securities	15,953		203		(526)		(2)		15,628
Residential mortgage-backed securities	4,140		24		(304)		—		3,860
Commercial mortgage-backed securities	1,976		9		(91)		(2)		1,892
Other asset-backed securities	3,012		27		(96)		—		2,943
Total fixed maturity securities	$	30,701	$	313	$	(1,261)	$	(4)	$	29,749
December 31, 2023
Fixed maturity securities:
United States Government securities	$	1,873	$	25	$	(54)	$	—	$	1,844
Government sponsored securities	112		1		(3)		—		110
Foreign government securities	5		1		(2)		—		4
States, municipalities and political subdivisions, tax-exempt	3,985		69		(152)		—		3,902
Corporate securities	14,838		322		(580)		(2)		14,578
Residential mortgage-backed securities	4,071		40		(279)		—		3,832
Commercial mortgage-backed securities	2,174		13		(138)		(2)		2,047
Other asset-backed securities	4,278		25		(130)		—		4,173
Total fixed maturity securities	$	31,336	$	496	$	(1,338)	$	(4)	$	30,490

Other asset-backed securities primarily consists of collateralized loan obligations and other debt securities.

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For fixed maturity securities in an unrealized loss position at June 30, 2024 and December 31, 2023, the following table summarizes the aggregate fair values and gross unrealized losses by length of time those securities have continuously been in an unrealized loss position:


	Less than 12 Months					12 Months or Greater
(Securities are whole amounts)	Number of Securities	Estimated Fair Value		Gross Unrealized Loss		Number of Securities	Estimated Fair Value		Gross Unrealized Loss
June 30, 2024
Fixed maturity securities:
United States Government securities	27	$	914	$	(28)	38	$	503	$	(57)
Government sponsored securities	5	48		(1)		37	46		(4)
Foreign government securities	7	61		(1)		2	4		(1)
States, municipalities and political subdivisions, tax-exempt	342	742		(11)		869	1,469		(141)
Corporate securities	1,184	4,445		(65)		1,810	4,654		(461)
Residential mortgage-backed securities	256	1,002		(17)		1,561	1,998		(287)
Commercial mortgage-backed securities	104	415		(7)		405	1,071		(84)
Other asset-backed securities	127	337		(8)		355	1,174		(88)
Total fixed maturity securities	2,052	$	7,964	$	(138)	5,077	$	10,919	$	(1,123)


December 31, 2023
Fixed maturity securities:
United States Government securities	35	$	552	$	(9)	44	$	370	$	(45)
Government sponsored securities	—	—		—		40	52		(3)
Foreign government securities	—	—		—		2	4		(2)
States, municipalities and political subdivisions, tax-exempt	203	354		(2)		1,034	1,811		(150)
Corporate securities	389	608		(15)		2,624	6,871		(565)
Residential mortgage-backed securities	183	438		(5)		1,620	2,075		(274)
Commercial mortgage-backed securities	112	353		(6)		534	1,317		(132)
Other asset-backed securities	110	394		(18)		761	2,342		(112)
Total fixed maturity securities	1,032	$	2,699	$	(55)	6,659	$	14,842	$	(1,283)

Unrealized losses on our securities shown in the table above have not been recognized into income because, as of June 30, 2024, we do not intend to sell these investments and it is likely that we will not be required to sell these investments prior to their maturity or anticipated recovery. The declines in fair values are largely due to increasing interest rates driven by the higher rate of inflation and other market conditions.

Allowances for credit losses have been recorded in the amount of $4 at both June 30, 2024 and December 31, 2023, for declines in fair value due to unfavorable changes in the credit quality characteristics that impact our assessment of collectability of principal and interest.

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The amortized cost and fair value of fixed maturity securities at June 30, 2024, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations.


	Amortized Cost		Estimated Fair Value
Due in one year or less	$	197	$	197
Due after one year through five years	5,510		5,376
Due after five years through ten years	11,319		11,055
Due after ten years	7,559		7,369
Mortgage-backed securities	6,116		5,752
Total fixed maturity securities	$	30,701	$	29,749

During the three and six months ended June 30, 2024, we received total proceeds from sales, maturities, calls or redemptions of fixed maturity securities of $3,014 and $8,414, respectively. During the three and six months ended June 30, 2023, we received total proceeds from sales, maturities, calls or redemptions of fixed maturity securities of $9,675 and $15,085, respectively.

In the ordinary course of business, we may sell securities at a loss for a number of reasons, including, but not limited to: (i) changes in the investment environment; (ii) expectation that the fair value could deteriorate further; (iii) desire to reduce exposure to an issuer or an industry; (iv) changes in credit quality; or (v) changes in expected cash flow.

All securities sold resulting in investment gains and losses are recorded on the trade date. Realized gains and losses are determined on the basis of the cost or amortized cost of the specific securities sold.

Equity Securities

A summary of marketable equity securities at June 30, 2024 and December 31, 2023 is as follows:


	June 30, 2024		December 31, 2023
Equity securities:
Exchange traded funds	$	481	$	106

Common equity securities	35		45
Private equity securities	78		78
Total	$	594	$	229

Other Invested Assets

Other invested assets include primarily our investments in limited partnerships, joint ventures and other non-controlled corporations, mortgage loans and the cash surrender value of corporate-owned life insurance policies. Investments in limited partnerships, joint ventures and other non-controlled corporations are carried at our share in the entities’ undistributed earnings, which approximates fair value. Financial information for certain of these investments is reported on a one or three month lag due to the timing of when we receive financial information from the companies.

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Investment (Losses) and Gains

Net investment gains and (losses) for the three and six months ended June 30, 2024 and 2023 are as follows:


	Three Months Ended June 30				Six Months Ended June 30
	2024		2023		2024		2023
Net (losses) gains:
Fixed maturity securities:
Gross realized gains from sales	$	17	$	11	$	39	$	21
Gross realized losses from sales	(88)		(99)		(247)		(214)
Impairment losses recognized in income	(3)		(3)		(4)		(10)
Net realized losses from sales of fixed maturity securities	(74)		(91)		(212)		(203)
Equity securities:
Unrealized (losses) gains recognized on equity securities still held at the end of the period	(2)		2		1		(2)
Net realized gains (losses) recognized on equity securities sold during the period	—		1		(1)		4
Net (losses) gains on equity securities	(2)		3		—		2
Other investments:
Gross gains	3		2		10		20
Gross losses	(13)		(16)		(25)		(9)
Impairment losses recognized in income	(1)		(26)		(26)		(29)
Net losses on other investments	(11)		(40)		(41)		(18)
Net losses on investments	$	(87)	$	(128)	$	(253)	$	(219)

Accrued Investment Income

At June 30, 2024 and December 31, 2023, accrued investment income totaled $316 and $301, respectively. We recognize accrued investment income under the caption “Other receivables” on our consolidated balance sheets.

Securities Lending Programs

We participate in securities lending programs whereby marketable securities in our investment portfolio are transferred to independent brokers or dealers in exchange for cash and securities collateral. The fair value of the collateral received at the time of the transactions amounted to $2,700 and $2,380 at June 30, 2024 and December 31, 2023, respectively. The value of the collateral represented 102% of the market value of the securities on loan at each of June 30, 2024 and December 31, 2023. We recognize the collateral as an asset under the caption “Other current assets” in our consolidated balance sheets, and we recognize a corresponding liability for the obligation to return the collateral to the borrower under the caption “Other current liabilities.” The securities on loan are reported in the applicable investment category on our consolidated balance sheets.

At June 30, 2024 and December 31, 2023, the remaining contractual maturity of our securities lending agreements included overnight and continuous transactions of cash for $2,269 and $2,255, respectively, of United States Government securities for $261 and $99, respectively, and of residential mortgage-backed securities for $170 and $26, respectively.

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6. Derivative Financial Instruments

We primarily invest in the following types of derivative financial instruments: interest rate swaps, futures, forward contracts, put and call options, swaptions, embedded derivatives and warrants. We also enter into master netting agreements, which reduce credit risk by permitting net settlement of transactions.

We have entered into various interest rate swap contracts to convert a portion of our interest rate exposure on our long-term debt from fixed rates to floating rates. The floating rates payable on all of our fair value hedges are benchmarked to the Secured Overnight Financing Rate (“SOFR”). Any amounts recognized for changes in fair value of these derivatives are included in the captions “Other current assets,” “Other noncurrent assets,” “Other current liabilities” or “Other noncurrent liabilities” in our consolidated balance sheets.

The unrecognized loss for all expired and terminated cash flow hedges included in accumulated other comprehensive loss, net of tax, was $205 and $211 at June 30, 2024 and December 31, 2023, respectively.

During the three and six months ended months ended June 30, 2024, we recognized net gains of $2 and net gains of $7, respectively, on non-hedging derivatives. During the three and six months ended June 30, 2023, we recognized net gains of $7 and net losses of $15 on non-hedging derivatives, respectively.

For additional information relating to the fair value of our derivative assets and liabilities, see Note 7, “Fair Value,” included in this Quarterly Report on Form 10-Q.

7. Fair Value

Assets and liabilities recorded at fair value in our consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. These assets and liabilities are classified into one of three levels of hierarchy defined by GAAP.

For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see Note 7, “Fair Value,” to our audited consolidated financial statements as of and for the year ended December 31, 2023 included in Part II, Item 8 of our 2023 Annual Report on Form 10-K.

A summary of fair value measurements by level for assets and liabilities measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023 is as follows:

-18-


	Level I		Level II		Level III		Total
June 30, 2024
Assets:
Cash equivalents	$	1,508	$	—	$	—	$	1,508
Fixed maturity securities, available-for-sale:
United States Government securities	—		1,713		—		1,713
Government sponsored securities	—		125		—		125
Foreign government securities	—		69		—		69
States, municipalities and political subdivisions, tax-exempt	—		3,519		—		3,519
Corporate securities	—		15,566		62		15,628
Residential mortgage-backed securities	—		3,853		7		3,860
Commercial mortgage-backed securities	—		1,892		—		1,892
Other asset-backed securities	—		2,176		767		2,943

Total fixed maturity securities, available-for-sale	—		28,913		836		29,749
Equity securities:
Exchange traded funds	481		—		—		481
Common equity securities	13		22		—		35
Private equity securities	—		—		78		78
Total equity securities	494		22		78		594
Other invested assets - common equity securities	19		—		—		19
Securities lending collateral	—		2,701		—		2,701
Derivatives - other assets	—		6		—		6
Total assets	$	2,021	$	31,642	$	914	$	34,577
Percentage of total assets at fair value	6%		92%		2%		100%
Liabilities:
Derivatives - other liabilities	$	—	$	(55)	$	—	$	(55)
Total liabilities	$	—	$	(55)	$	—	$	(55)

December 31, 2023
Assets:
Cash equivalents	$	2,210	$	—	$	—	$	2,210
Fixed maturity securities, available-for-sale:
United States Government securities	—		1,844		—		1,844
Government sponsored securities	—		110		—		110
Foreign government securities	—		4		—		4
States, municipalities and political subdivisions, tax-exempt	—		3,902		—		3,902
Corporate securities	—		14,532		46		14,578
Residential mortgage-backed securities	—		3,830		2		3,832
Commercial mortgage-backed securities	—		2,047		—		2,047
Other asset-backed securities	—		3,634		539		4,173
Total fixed maturity securities, available-for-sale	—		29,903		587		30,490
Equity securities:
Exchange traded funds	106		—		—		106

Common equity securities	12		33		—		45
Private equity securities	—		—		78		78
Total equity securities	118		33		78		229
Other invested assets - common equity securities	111		—		—		111
Securities lending collateral	—		2,382		—		2,382
Derivatives - other assets	—		10		—		10
Total assets	$	2,439	$	32,328	$	665	$	35,432
Percentage of total assets at fair value	7%		91%		2%		100%
Liabilities:
Derivatives - other liabilities	$	—	$	(40)	$	—	$	(40)
Total liabilities	$	—	$	(40)	$	—	$	(40)

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There were no individually material transfers into or out of Level III during the three and six months ended June 30, 2024 or 2023. There were no adjustments to quoted market prices obtained from the pricing services during the three and six months ended June 30, 2024 or 2023.

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. As disclosed in Note 3, “Business Acquisitions and Divestitures,” we completed our acquisition of Paragon in the first quarter of 2024 and the acquisition of BioPlus in the first quarter of 2023. The net assets acquired in our acquisitions of Paragon and BioPlus and resulting goodwill and other intangible assets were recorded at fair value primarily using Level III inputs. The majority of tangible assets acquired and liabilities assumed were recorded at their carrying values as of the acquisition date, as their carrying values approximated their fair values due to their short-term nature. The fair values of goodwill and other intangible assets acquired in our acquisitions of Paragon and BioPlus were internally estimated based on the income approach. The income approach estimates fair value based on the present value of the cash flows that the assets could be expected to generate in the future. We developed internal estimates for the expected cash flows and discount rate in the present value calculation. Also in 2023, we entered into a shareholder’s agreement which included certain put and call options on our minority interest ownership of Liberty Dental. The resulting net put option liability was recorded at its fair value measured at the date of acquisition using Level III inputs with an election not to mark the derivative to market. Other than the assets acquired and liabilities assumed in our acquisitions of Paragon and BioPlus and the net put option on Liberty Dental, there were no material assets or liabilities measured at fair value on a nonrecurring basis during the three and six months ended June 30, 2024 or 2023.

In addition to the preceding disclosures on assets recorded at fair value in the consolidated balance sheets, FASB guidance also requires the disclosure of fair values for certain other financial instruments for which it is practicable to estimate fair value, whether or not such values are recognized in our consolidated balance sheets.

Non-financial instruments such as property and equipment, other current assets, deferred income taxes, intangible assets and certain financial instruments, such as policy liabilities, are excluded from the fair value disclosures. Therefore, the fair value amounts cannot be aggregated to determine our underlying economic value.

The carrying amounts reported in the consolidated balance sheets for cash, premium receivables, self-funded receivables, other receivables, unearned income, accounts payable and accrued expenses, and certain other current liabilities approximate fair value because of the short-term nature of these items. These assets and liabilities are not listed in the table below.

See Note 7, “Fair Value,” to our audited consolidated financial statements as of and for the year ended December 31, 2023 included in Part II, Item 8 of our 2023 Annual Report on Form 10-K for details on the methods and assumptions used to estimate the fair value of each class of financial instrument that is recorded at its carrying value in our consolidated balance sheets.

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A summary of the estimated fair values by level of each class of financial instrument that is recorded at its carrying value on our consolidated balance sheets at June 30, 2024 and December 31, 2023 is as follows:


	Carrying Value			Estimated Fair Value
			Level I			Level II			Level III			Total
June 30, 2024
Assets:
Other invested assets	$	6,791		$	—		$	—		$	6,760		$	6,760
Liabilities:
Debt:
Short-term borrowings	225			—			225			—			225

Notes	27,461			—			25,326			—			25,326

December 31, 2023
Assets:
Other invested assets	$	5,996		$	—		$	—		$	5,972		$	5,972
Liabilities:
Debt:
Short-term borrowings	225			—			225			—			225

Notes	24,895			—			23,569			—			23,569

8. Income Taxes

During the three months ended June 30, 2024 and 2023, we recognized income tax expense of $685 and $585, respectively, which represent effective income tax rates of 22.9% and 24.0%, respectively. During the six months ended June 30, 2024 and 2023, we recognized income tax expense of $1,375 and $1,200, respectively, which represent effective income tax rates of 23.2% and 23.7%, respectively. The decrease in our effective income tax rate from the three and six months ended June 30, 2023 is primarily due to the favorable resolution of an uncertain tax benefit and the impact of certain investment credits.

Income taxes receivable totaled $369 and $543 at June 30, 2024 and December 31, 2023, respectively. We recognize income taxes receivable as an asset under the caption “Other current assets” in our consolidated balance sheets.

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9. Medical Claims Payable

A reconciliation of the beginning and ending balances for medical claims payable for the six months ended June 30, 2024 and 2023 is as follows:


	2024		2023
Gross medical claims payable, beginning of period	$	15,865	$	15,348
Ceded medical claims payable, beginning of period	(7)		(6)
Net medical claims payable, beginning of period	15,858		15,342

Net incurred medical claims:
Current period	60,551		61,290
Prior periods redundancies	(1,473)		(1,112)
Total net incurred medical claims	59,078		60,178
Net payments attributable to:
Current period medical claims	48,297		48,217
Prior periods medical claims	11,584		11,409
Total net payments	59,881		59,626
Net medical claims payable, end of period	15,055		15,894
Ceded medical claims payable, end of period	12		8
Gross medical claims payable, end of period	$	15,067	$	15,902

At June 30, 2024, the total of net incurred but not reported liabilities plus expected development on reported claims was $452, $2,349 and $12,254 for the claim years 2022 and prior, 2023 and 2024, respectively.

The favorable development recognized in the six months ended June 30, 2024 resulted from faster than expected development of completion factors from the latter part of 2023 as well as trend factors in late 2023 developing more favorably than originally expected. The favorable development recognized in the six months ended June 30, 2023 resulted primarily from trend factors in late 2022 developing more favorably than expected. Favorable development in the completion factors resulting from the latter part of 2022 developing faster than expected also contributed.

The reconciliation of net incurred medical claims to benefit expense included in our consolidated statements of income for the six months ended June 30, 2024 and 2023 is as follows:



	2024		2023
Total net incurred medical claims	$	59,078	$	60,178
Quality improvement and other claims expense	2,040		2,212
Benefit expense	$	61,118	$	62,390

The reconciliation of the medical claims payable reflected in the tables above to the consolidated ending balance for medical claims payable included in the consolidated balance sheet, as of June 30, 2024 is as follows:



	Total

Net medical claims payable, end of period	$	15,055
Ceded medical claims payable, end of period	12
Insurance lines other than short duration	248
Liabilities held for sale	(111)
Gross medical claims payable, end of period	$	15,204

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10. Debt

We generally issue senior unsecured notes for long-term borrowing purposes. At June 30, 2024 and December 31, 2023, we had $27,436 and $24,870, respectively, outstanding under these notes.

On May 30, 2024, we issued $600 aggregate principal amount of 5.150% Notes due 2029 (the “2029 Notes”), $1,000 aggregate principal amount of 5.375% Notes due 2034 (the “2034 Notes”) and $1,000 aggregate principal amount of 5.650% Notes due 2054 (the “2054 Notes”, and, together with the 2029 Notes and the 2034 Notes, the “Notes”) under our shelf registration statement. Interest on the Notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing December 15, 2024. We intend to use the net proceeds for working capital and general corporate purposes, including, but not limited to, the funding of acquisitions, repayment of short-term and long-term debt and the repurchase of our common stock pursuant to our share repurchase program.

We have an unsecured surplus note with an outstanding principal balance of $25 at both June 30, 2024 and December 31, 2023.

We have a senior revolving credit facility (the “5-Year Facility”) with a group of lenders for general corporate purposes. The 5-Year Facility provides credit of up to $4,000 and matures in April 2027. Our ability to borrow under the 5-Year Facility is subject to compliance with certain covenants, including covenants requiring us to maintain a defined debt-to-capital ratio of not more than 60%, subject to increase in certain circumstances set forth in the credit agreement for the 5-Year Facility. As of June 30, 2024, our debt-to-capital ratio, as defined and calculated under the 5-Year Facility, was 39.6%. We do not believe the restrictions contained in our 5-Year Facility covenants materially affect our financial or operating flexibility. As of June 30, 2024, we were in compliance with all of our debt covenants under the 5-Year Facility. There were no amounts outstanding under the 5-Year Facility at any time during the six months ended June 30, 2024 or the year ended December 31, 2023.

We have an authorized commercial paper program of up to $4,000, the proceeds of which may be used for general corporate purposes. We had $0 outstanding under this program at both June 30, 2024 and December 31, 2023. We have classified our commercial paper balances from long-term debt to short-term debt as our intent is to not replace short-term commercial paper outstanding at expiration with additional short-term commercial paper for an uninterrupted period extending for more than one year.

We are a member, through certain subsidiaries, of the Federal Home Loan Bank of Indianapolis, the Federal Home Loan Bank of Cincinnati, the Federal Home Loan Bank of Atlanta and the Federal Home Loan Bank of New York (collectively, the “FHLBs”). As a member, we have the ability to obtain short-term cash advances, subject to certain minimum collateral requirements. We had $225 of outstanding short-term borrowings from the FHLBs at each of June 30, 2024 and December 31, 2023.

All debt is a direct obligation of Elevance Health, Inc., except for the surplus note and the FHLBs borrowings.

11. Commitments and Contingencies

Litigation and Regulatory Proceedings

We are defendants in, or parties to, a number of pending or threatened legal actions or proceedings. To the extent a plaintiff or plaintiffs in the following cases have specified in their complaint or in other court filings the amount of damages being sought, we have noted those alleged damages in the descriptions below.

Where available information indicates that it is probable that a loss has been incurred as of the date of the consolidated financial statements and we can reasonably estimate the amount of that loss, we accrue the estimated loss by a charge to income. In many proceedings, however, it is difficult to determine whether any loss is probable or reasonably possible. In addition, even where loss is possible or probable or an exposure to loss exists in excess of the liability already accrued with respect to a previously identified loss contingency, it is not always possible to reasonably estimate the amount of the possible or probable loss or range of losses in excess of the amount, if any, accrued, for various reasons, including but not limited to some or all of the following: (i) there are novel or unsettled legal issues presented, (ii) the proceedings are in early stages, (iii) there is uncertainty as to the likelihood of a class being certified or decertified or the ultimate size and scope of the class, (iv)

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there is uncertainty as to the outcome of pending appeals or motions, (v) there are significant factual issues to be resolved, and/or (vi) in many cases, the plaintiffs have not specified damages in their complaint or in court filings.

With respect to the cases described below, we contest liability and/or the amount of damages in each matter, and we believe we have meritorious defenses. We do not believe the outcome of any known pending or threatened legal actions or proceedings will, in the aggregate, have a material impact on our financial position. However, unanticipated outcomes do sometimes occur, which could result in liabilities in excess of our accruals and could have a material adverse effect on our consolidated financial position or results of operations.

In addition to the lawsuits described below, we are also involved in other pending and threatened litigation of the character incidental to our business and are from time to time involved as a party in various governmental investigations, audits, reviews and administrative proceedings (“government actions”). These government actions include routine and special inquiries by and disclosures to state insurance departments, state attorneys general, U.S. Regulatory Agencies, the U.S. Attorney General and subcommittees of the U.S. Congress. Such government actions could result in the imposition of civil or criminal fines, penalties, other sanctions and additional rules, regulations or other restrictions on our business operations. Any liability that may result from any one of these government actions, or in the aggregate, could have a material adverse effect on our consolidated financial position or results of operations.

Blue Cross Blue Shield Antitrust Litigation

We are a defendant in multiple lawsuits that were initially filed in 2012 against the BCBSA and Blue Cross and/or Blue Shield licensees (the “Blue plans”) across the country. Cases filed in twenty-eight states were consolidated into a single, multi-district proceeding captioned In re Blue Cross Blue Shield Antitrust Litigation that is pending in the U.S. District Court for the Northern District of Alabama (the “Court”). Generally, the suits allege that the BCBSA and the Blue plans have conspired to horizontally allocate geographic markets through license agreements, best efforts rules that limit the percentage of non-Blue revenue of each plan, restrictions on acquisitions, rules governing the BlueCard® and National Accounts programs and other arrangements in violation of the Sherman Antitrust Act (“Sherman Act”) and related state laws. The cases were brought by two putative nationwide classes of plaintiffs, health plan subscribers and providers.

In April 2018, the Court issued an order on the parties’ cross motions for partial summary judgment, determining that the defendants’ aggregation of geographic market allocations and output restrictions are to be analyzed under a per se standard of review, and the BlueCard® program and other alleged Section 1 Sherman Act violations are to be analyzed under the rule of reason standard of review. With respect to whether the defendants operate as a single entity with regard to the enforcement of the Blue Cross Blue Shield trademarks, the Court found that summary judgment was not appropriate due to the existence of genuine issues of material fact. In April 2019, the plaintiffs filed motions for class certification, which defendants opposed.

The BCBSA and Blue plans approved a settlement agreement and release with the subscriber plaintiffs (the “Subscriber Settlement Agreement”), which agreement required the Court’s approval to become effective. The Subscriber Settlement Agreement requires the defendants to make a monetary settlement payment and contains certain terms imposing non-monetary obligations including (i) eliminating the “national best efforts” rule in the BCBSA license agreements (which rule limits the percentage of non-Blue revenue permitted for each Blue plan) and (ii) allowing for some large national employers with self-funded benefit plans to request a bid for insurance coverage from a second Blue plan in addition to the local Blue plan.

In November 2020, the Court issued an order preliminarily approving the Subscriber Settlement Agreement, following which members of the subscriber class were provided notice of the Subscriber Settlement Agreement and an opportunity to opt out of the class. A small number of subscribers submitted valid opt-outs by the opt-out deadline.

In August 2022, the Court issued a final order approving the Subscriber Settlement Agreement (the “Final Approval Order”). The Court amended its Final Approval Order in September 2022, further clarifying the injunctive relief that may be available to subscribers who submitted valid opt-outs. In compliance with the Subscriber Settlement Agreement, we paid $506 into an escrow account in September 2022, for an aggregate and full settlement payment by us of $596, which was accrued in 2020.

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Four notices of appeal of the Final Approval Order were heard by a panel of the United States Court of Appeals for the Eleventh Circuit in September 2023 (the “Eleventh Circuit”), and the Eleventh Circuit affirmed the Court’s Final Approval Order approving the Subscriber Settlement Agreement in October 2023. Petitions for rehearing were filed by certain appellants in November 2023 and December 2023 and were denied in January 2024. As a result, the Eleventh Circuit issued a mandate terminating the jurisdiction of the Eleventh Circuit in February 2024. In March 2024, Home Depot, one of the appellants, filed a petition for certiorari to the United States Supreme Court (the “Supreme Court”). On the respondents' request, the Supreme Court granted an extension to respond until May 2024. In April 2024, David Behenna, another appellant, filed a petition for certiorari to the Supreme Court, and the defendants and the subscriber plaintiffs filed briefs in opposition in May 2024. In June 2024, the Supreme Court declined to grant certiorari, exhausting all appellate rights. The Subscriber Settlement Agreement became effective on June 24, 2024, and the defendants’ payment and non-monetary obligations under the Subscriber Settlement Agreement and the funds held in escrow will be distributed in accordance with the Subscriber Settlement Agreement.

In October 2020, after the Court lifted the stay as to the provider litigation, provider plaintiffs filed a renewed motion for class certification, which defendants opposed. In March 2021, the Court issued an order terminating the pending motion for class certification until the Court determined the standard of review applicable to the providers’ claims. In response to that order, the parties filed renewed standard of review motions in May 2021. In June 2021, the parties filed summary judgment motions not critically dependent on class certification. In February 2022, the Court issued orders (i) granting certain defendants’ motion for partial summary judgment against the provider plaintiffs who had previously released claims against such defendants, and (ii) granting the provider plaintiffs’ motion for partial summary judgment, determining that Ohio v. American Express Co. does not affect the standard of review in this case. In August 2022, the Court issued orders (i) granting in part the defendants’ motion regarding the antitrust standard of review, holding that for the period of time after the elimination of the “national best efforts” rule, the rule of reason applies to the provider plaintiffs’ market allocation conspiracy claims, and (ii) denying the provider plaintiffs’ motion for partial summary judgment on the standard of review, reaffirming its prior holding that the provider groups’ boycott claims are subject to the rule of reason. In December 2023, the Court denied defendants’ motion for summary judgment on providers’ damage claims as time-barred and speculative and provider plaintiffs’ motion for partial summary judgment on the defendants’ single entity defense due to the existence of genuine issues of material fact. In January 2024, the Court issued orders (i) denying defendants’ motion for summary judgment on (a) all claims by certain hospital providers and (b) any claims based on the Blue system's rules other than exclusive serviced areas or BlueCard and (ii) denying provider plaintiffs’ motion for partial summary judgment on defendants’ common law trademark claims. Provider plaintiffs’ motion for class certification, filed in October 2020, remains pending. We intend to continue to vigorously defend the provider litigation, which we believe is without merit; however, its ultimate outcome cannot be presently determined.

A number of follow-on cases involving entities that opted out of the Subscriber Settlement Agreement have been filed. Those actions are: Alaska Air Group, Inc., et al. v. Anthem, Inc., et al., No. 2:21-cv-01209-AMM (N.D. Ala.) (“Alaska Air”); JetBlue Airways Corp., et al. v. Anthem, Inc., et al., No. 2:22-cv-00558-GMB (N.D. Ala.) (“Jet Blue”); Metropolitan Transportation Authority v. Blue Cross and Blue Shield of Alabama et al., No. 2:22-cv-00265-RDP (N.D. Ala.) (dismissed without prejudice in June 2023); Bed Bath & Beyond Inc. v. Anthem, Inc., No. 2:22-cv-01256-SGC (N.D. Ala.); Hoover, et al. v. Blue Cross Blue Shield Association, et al., No. 2:22-cv-00261-RDP (N.D. Ala.); and VHS Liquidating Trust v. Blue Cross of California, et al., No. RG21106600 (Cal. Super.) (“VHS”). In February 2023, the Court denied the defendants’ motion to dismiss based on a statute of limitations defense in Alaska Air and Jet Blue. In September 2023, the California court presiding over the VHS case upheld its prior order granting in part defendants’ motion to strike based on the statute of limitations. We intend to continue to vigorously defend these follow-on cases, which we believe are without merit; however, their ultimate outcome cannot be presently determined.

Express Scripts, Inc. PBM Litigation

In March 2016, we filed a lawsuit against Express Scripts, Inc. (“Express Scripts”), our vendor at the time for pharmacy benefit management services, captioned Anthem, Inc. v. Express Scripts, Inc., in the U.S. District Court for the Southern District of New York (the “District Court”). The lawsuit sought to recover over $14,800 in damages for pharmacy pricing that is higher than competitive benchmark pricing under the agreement between the parties (the “ESI Agreement”), over $158 in damages related to operational breaches, as well as various declarations under the ESI Agreement, including that Express Scripts: (i) breached its obligation to negotiate in good faith and to agree in writing to new pricing terms (the “Pricing Claim”); (ii) was required to provide competitive benchmark pricing to us through the term of the ESI Agreement; (iii) has

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breached the ESI Agreement; and (iv) is required under the ESI Agreement to provide post-termination services, at competitive benchmark pricing, for one year following any termination.

Express Scripts disputed our contractual claims and it sought declaratory judgments: (i) regarding the timing of the periodic pricing review under the ESI Agreement, and (ii) that it has no obligation to ensure that we receive any specific level of pricing, that we have no contractual right to any change in pricing under the ESI Agreement and that its sole obligation is to negotiate proposed pricing terms in good faith. In the alternative, Express Scripts claimed that we have been unjustly enriched by its payment of $4,675 at the time we entered into the ESI Agreement. In March 2017, the District Court granted our motion to dismiss Express Scripts’ counterclaims for (i) breach of the implied covenant of good faith and fair dealing, and (ii) unjust enrichment with prejudice. After such ruling, Express Scripts’ only remaining claims were for breach of contract and declaratory relief. In August 2021, Express Scripts filed a motion for summary judgment, which we opposed. In March 2022, the District Court granted in part and denied in part Express Scripts’ motion for summary judgment. The District Court dismissed our declaratory judgment claim, our breach of contract claim for failure to prove damages and most of our operational breach claims. As a result of the summary judgment decision, the only remaining claims as of the filing of this Quarterly Report on Form 10-Q were (i) our operational breach claim based on Express Scripts’ prior authorization processes and (ii) Express Scripts’ counterclaim for breach of the market check provision of the ESI Agreement. Express Scripts filed a second motion for summary judgment in June 2022, challenging our remaining operational breach claims, which the District Court denied in March 2023. In November 2023, the District Court issued a final judgment ending the lawsuit in the District Court after the parties settled and stipulated to dismiss the only remaining claim that had not been disposed of by the court order or stipulation. In December 2023, we filed a notice of appeal with the United States Court of Appeal for the Second Circuit (the “Second Circuit”), regarding the Pricing Claim. Mediation ordered by the Second Circuit occurred in March 2024 and was unsuccessful. We submitted our appellant brief in April 2024. Briefing must be complete by August 2024. The ultimate outcome of this appeal cannot be presently determined.

Medicare Risk Adjustment Litigation

In March 2020, the U.S. Department of Justice (“DOJ”) filed a civil lawsuit against Elevance Health, Inc. in the U.S. District Court for the Southern District of New York (the “New York District Court”) in a case captioned United States v. Anthem, Inc. The DOJ’s suit alleges, among other things, that we falsely certified the accuracy of the diagnosis data we submitted to the Centers for Medicare and Medicaid Services (“CMS”) for risk-adjustment purposes under Medicare Part C and knowingly failed to delete inaccurate diagnosis codes. The DOJ further alleges that, as a result of these purported acts, we caused CMS to calculate the risk-adjustment payments based on inaccurate diagnosis information, which enabled us to obtain unspecified amounts of payments in Medicare funds in violation of the False Claims Act. The DOJ filed an amended complaint in July 2020, alleging the same causes of action but revising some of its factual allegations. In September 2020, we filed a motion to transfer the lawsuit to the Southern District of Ohio, a motion to dismiss part of the lawsuit, and a motion to strike certain allegations in the amended complaint, all of which the New York District Court denied in October 2022. In November 2022, we filed an answer. In March 2023, discovery commenced, and an initial case management conference was held in April 2023. Fact discovery is ongoing, and the New York District Court will address deadlines to complete discovery at the next case management conference in July 2024. We intend to continue to vigorously defend this suit, which we believe is without merit; however, the ultimate outcome cannot be presently determined.

Other Contingencies

From time to time, we and certain of our subsidiaries are parties to various legal proceedings, many of which involve claims for coverage encountered in the ordinary course of business. We, like Health Maintenance Organizations (“HMOs”) and health insurers generally, exclude certain healthcare and other services from coverage under our HMO, Preferred Provider Organizations and other plans. We are, in the ordinary course of business, subject to the claims of our enrollees arising out of decisions to restrict or deny reimbursement for uncovered services. The loss of even one such claim, if it results in a significant punitive damage award, could have a material adverse effect on us. In addition, the risk of potential liability under punitive damage theories may increase significantly the difficulty of obtaining reasonable reimbursement of coverage claims.

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Contractual Obligations and Commitments

In March 2020, we entered into an agreement with a vendor for information technology infrastructure and related management and support services through June 2025. Our remaining commitment under this agreement at June 30, 2024 is approximately $356. We will have the ability to terminate the agreement upon the occurrence of certain events, subject to early termination fees.

CarelonRx markets and offers pharmacy services to our affiliated health plan customers throughout the country, as well as to customers outside of the health plans we own. The comprehensive pharmacy services portfolio includes all core pharmacy services, such as home delivery and specialty pharmacies, claims adjudication, formulary management, pharmacy networks, rebate administration, a prescription drug database and member services, as well as infusion services and injectable therapies. CarelonRx delegates certain core pharmacy services to CaremarkPCS Health, L.L.C. (“CVS”), which is a subsidiary of CVS Health Corporation, pursuant to an agreement that is set to terminate on December 31, 2025. In the first quarter of 2024, CarelonRx began assuming responsibility from CVS for pharmacy mail order front-end intake.

12. Capital Stock

Use of Capital – Dividends and Stock Repurchase Program

We regularly review the appropriate use of capital, including acquisitions, common stock and debt security repurchases and dividends to shareholders. The declaration and payment of any dividends or repurchases of our common stock or debt is at the discretion of our Board of Directors and depends upon our financial condition, results of operations, future liquidity needs, regulatory and capital requirements and other factors deemed relevant by our Board of Directors.

A summary of our cash dividend activity for the six months ended June 30, 2024 and 2023 is as follows:


Declaration Date	Record Date	Payment Date	Cash Dividend per Share	Total
Six Months Ended June 30, 2024
January 23, 2024	March 8, 2024	March 22, 2024	$1.63	$	379
April 16, 2024	June 10, 2024	June 25, 2024	$1.63	$	378




Six Months Ended June 30, 2023
January 24, 2023	March 10, 2023	March 24, 2023	$1.48	$	351
April 18, 2023	June 9, 2023	June 23, 2023	$1.48	$	350

On July 16, 2024, our Audit Committee declared a third quarter 2024 dividend to shareholders of $1.63 per share, payable on September 25, 2024 to shareholders of record at the close of business on September 10, 2024.

Under our Board of Directors’ authorization, we maintain a common stock repurchase program. On January 24, 2023, our Audit Committee, pursuant to authorization granted by the Board of Directors, authorized a $5,000 increase to the common stock repurchase program. No duration has been placed on the common stock repurchase program, and we reserve the right to discontinue the program at any time. Repurchases may be made from time to time at prevailing market prices, subject to certain restrictions on volume, pricing and timing. The repurchases are effected from time to time in the open market, through negotiated transactions, including accelerated share repurchase agreements, and through plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our stock repurchase program is discretionary, as we are under no obligation to repurchase shares. We repurchase shares under the program when we believe it is a prudent use of capital. The excess cost of the repurchased shares over par value is charged on a pro rata basis to additional paid-in capital and retained earnings.

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A summary of common stock repurchases for the six months ended June 30, 2024 and 2023 is as follows:


	Six Months Ended June 30
	2024		2023
Shares repurchased	2.0		2.7
Average price per share	$	506.55	$	466.62
Aggregate cost	$	1,029	$	1,268
Authorization remaining at the end of the period	$	3,171	$	5,608

For additional information regarding the use of capital for debt security repurchases, see Note 10, “Debt,” included in this Quarterly Report on Form 10-Q and Note 13, “Debt,” to our audited consolidated financial statements as of and for the year ended December 31, 2023 included in Part II, Item 8 of our 2023 Annual Report on Form 10-K.

Stock Incentive Plan****s

A summary of stock option activity for the six months ended June 30, 2024 is as follows:


	Number of Shares	Weighted- Average Option Price per Share		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2024	3.0	$	327.14
Granted	0.5	499.31
Exercised	(0.4)	287.38
Forfeited or expired	(0.1)	453.92
Outstanding at June 30, 2024	3.0	359.56		6.18	$	554
Exercisable at June 30, 2024	2.0	298.49		4.95	$	492

A summary of the status of nonvested restricted stock activity, including restricted stock units and performance units, for the six months ended June 30, 2024 is as follows:


	Restricted Stock Shares and Units	Weighted- Average Grant Date Fair Value per Share
Nonvested at January 1, 2024	1.1	$	423.94
Granted	0.6	500.66
Vested	(0.6)	354.27
Forfeited	—	469.96
Nonvested at June 30, 2024	1.1	476.95

During the six months ended June 30, 2024, we granted approximately 0.3 restricted stock units that are contingent upon us achieving earnings targets over the three-year period from 2024 to 2026. These grants have been included in the activity shown above but will be subject to adjustment at the end of 2026 based on results in the three-year period.

Fair Value

We use a binomial lattice valuation model to estimate the fair value of all stock options granted. For a more detailed discussion of our stock incentive plan fair value methodology, see Note 15, “Capital Stock,” to our audited consolidated financial statements as of and for the year ended December 31, 2023 included in Part II, Item 8 of our 2023 Annual Report on Form 10-K.

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The following weighted-average assumptions were used to estimate the fair values of options granted during the six months ended June 30, 2024 and 2023:


	Six Months Ended June 30
	2024		2023
Risk-free interest rate	4.28	%	3.95	%
Volatility factor	28.00	%	29.00	%
Quarterly dividend yield	0.327	%	0.316	%
Weighted-average expected life (years)	4.40		4.40

The following weighted-average fair values per option or share were determined for the six months ended June 30, 2024 and 2023:


	Six Months Ended June 30
	2024		2023
Options granted during the period	$	134.57	$	127.13
Restricted stock awards granted during the period	500.66		469.60

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13. Accumulated Other Comprehensive (Loss) Income

A reconciliation of the components of accumulated other comprehensive (loss) income at June 30, 2024 and 2023 is as follows:


	Three Months Ended June 30				Six Months Ended June 30
	2024		2023		2024		2023

Net unrealized investment (losses) gains:
Beginning of period balance	$	(688)	$	(1,330)	$	(632)	$	(1,755)
Other comprehensive income (loss) before reclassifications, net of tax benefit (expense) of $26, $61, $75 and $(25), respectively	(82)		(191)		(245)		146
Amounts reclassified from accumulated other comprehensive income, net of tax benefit of $(17), $(23), $(49) and $(51), respectively	56		72		163		162
Other comprehensive income (loss)	(26)		(119)		(82)		308
Other comprehensive income attributable to noncontrolling interests, net of tax benefit (expense) of $0, $0, $0 and $0, respectively	—		—		—		(2)
End of period balance	(714)		(1,449)		(714)		(1,449)

Non-credit components of impairments on investments:
Beginning of period balance	(3)		(5)		(3)		(3)
Other comprehensive loss, net of tax benefit of $0, $0, $0 and $1, respectively	—		(1)		—		(3)
End of period balance	(3)		(6)		(3)		(6)

Net cash flow hedges:
Beginning of period balance	(209)		(218)		(211)		(229)
Other comprehensive income, net of tax benefit (expense) of $(1), $(1), $(2) and $7, respectively	4		4		6		15
End of period balance	(205)		(214)		(205)		(214)

Pension and other postretirement benefits:
Beginning of period balance	(455)		(497)		(459)		(499)
Other comprehensive income, net of tax expense of $(1), $(1), $(2) and $(2), respectively	4		3		8		5
End of period balance	(451)		(494)		(451)		(494)

Future policy benefits:
Beginning of period balance	8		15		10		13
Other comprehensive income (loss), net of tax benefit of $0, $1, $0 and $1, respectively	1		(3)		(1)		(1)
End of period balance	9		12		9		12

Foreign currency translation adjustments:
Beginning of period balance	(18)		(15)		(18)		(17)
Other comprehensive income (loss), net of tax expense of $0, $(5), $0 and $(3), respectively	(5)		—		(5)		2
End of period balance	(23)		(15)		(23)		(15)

Total:
Total beginning of period accumulated other comprehensive loss	(1,365)		(2,050)		(1,313)		(2,490)
Total other comprehensive (loss) income, net of tax benefit (expense) of $7, $32, $22, and $(72), respectively	(22)		(116)		(74)		326
Total other comprehensive loss attributable to noncontrolling interests, net of tax benefit (expense) of $0, $0, $0 and $0 respectively	—		—		—		(2)
Total end of period accumulated other comprehensive loss	$	(1,387)	$	(2,166)	$	(1,387)	$	(2,166)

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14. Shareholders' Earnings per Share

The denominator for basic and diluted shareholders' earnings per share for the three and six months ended June 30, 2024 and 2023 is as follows:


	Three Months Ended June 30		Six Months Ended June 30
	2024	2023	2024	2023
Denominator for basic shareholders' earnings per share – weighted-average shares	232.2	236.6	232.4	237.0
Effect of dilutive securities – employee stock options, nonvested restricted stock awards and convertible debentures	1.2	1.2	1.4	1.7
Denominator for diluted shareholders' earnings per share	233.4	237.8	233.8	238.7

During the three months ended June 30, 2024 and 2023, weighted-average shares related to certain stock options of 0.5 and 1.0 respectively, were excluded from the denominator for diluted shareholders' earnings per share because the stock options were anti-dilutive. During the six months ended June 30, 2024 and 2023, weighted-average shares related to certain stock options of 0.6 and 0.7, respectively, were excluded from each of the denominators for diluted earnings per share because the stock options were anti-dilutive.

During the three and six months ended June 30, 2024, we issued approximately 0.0 and 0.6 restricted stock units under our stock incentive plans, 0.0 and 0.3 of which vesting is contingent upon us meeting specified annual earnings targets for the three-year period of 2024 through 2026. During the three and six months ended months ended June 30, 2023, we issued approximately 0.0 and 0.6 restricted stock units under our stock incentive plans, 0.0 and 0.2 of which vesting is contingent upon us meeting specified annual earnings targets for the three-year period of 2023 through 2025. The contingent restricted stock units have been excluded from the denominators for diluted shareholders' earnings per share and will be included only if and when the contingency is met.

15. Segment Information

We report our results of operations in the following four reportable segments: Health Benefits, CarelonRx, Carelon Services and Corporate & Other. During the fourth quarter of 2023, we moved our Carelon Global Solutions international businesses from the Corporate & Other reportable segment to the Carelon Services reportable segment. All prior period reportable segment information has been reclassified for comparability to conform to the current presentation.

Our Health Benefits segment offers a comprehensive suite of health plans and services to our Individual, Employer Group risk-based, Employer Group fee-based, BlueCard®, Medicare, Medicaid and FEHB program members. Our Health Benefits segment also includes our National Government Services business. The Health Benefits segment offers health products on a full-risk basis; provides a broad array of administrative managed care services to our fee-based customers; and provides a variety of specialty and other insurance products and services such as stop loss, dental, vision and supplemental health insurance benefits.

Our CarelonRx segment includes our pharmacy services business. CarelonRx markets and offers pharmacy services to our affiliated health plan customers, as well as to external customers outside of the health plans we own. CarelonRx offers a comprehensive pharmacy services portfolio, which includes all core pharmacy services, such as home delivery and specialty pharmacies, claims adjudication, formulary management, pharmacy networks, rebate administration, a prescription drug database and member services, as well as infusion services and injectable therapies.

Our Carelon Services segment offers a broad array of healthcare related services and capabilities to internal and external customers including utilization management, behavioral health, integrated care delivery, palliative care, payment integrity services and subrogation services, as well as health and wellness programs. At the end of 2023, Carelon Services integrated Carelon Global Solutions into the Carelon family of offerings. The companies under Carelon Global Solutions have been providing services related to data management, information technology and business operations since 2019 and were previously included within our Corporate & Other segment.

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Our Corporate & Other segment includes our businesses that do not individually meet the quantitative threshold for an operating segment, as well as corporate expenses not allocated to our other reportable segments.

We define operating revenues to include premium income, product revenue and service fees. Operating revenues are derived from premiums and fees received, primarily from the sale and administration of health benefits and pharmacy products and services. Operating gain is calculated as total operating revenue less benefit expense, cost of products sold and operating expense.

Affiliated revenues represent revenues or costs for services provided to our subsidiaries by CarelonRx and Carelon Services, in addition to certain administrative and other services provided by our international businesses, which are recorded at cost or management’s estimate of fair market value. These affiliated revenues are eliminated in consolidation.

Financial data by reportable segment for the three and six months ended June 30, 2024 and 2023 is as follows:


			Carelon
	Health Benefits		CarelonRx		Carelon Services		Total		Corporate & Other		Eliminations		Total
Three Months Ended June 30, 2024
Premiums	$	35,096	$	—	$	794	$	794	$	—	$	(474)	$	35,416
Product revenue	—		5,530		—		5,530		—		—		5,530
Service fees	2,063		1		196		197		17		—		2,277
Operating revenue - unaffiliated	37,159		5,531		990		6,521		17		(474)		43,223
Operating revenue - affiliated	—		3,243		3,555		6,798		105		(6,903)		—
Operating revenue - total	$	37,159	$	8,774	$	4,545	$	13,319	$	122	$	(7,377)	$	43,223

Operating gain (loss)	$	2,145	$	497	$	208	$	705	$	(85)	$	—	$	2,765
Depreciation and amortization of property and equipment	—		—		—		—		234		—		—

Three Months Ended June 30, 2023
Premiums	$	36,233	$	—	$	429	$	429	$	—	$	(73)	$	36,589
Product revenue	—		4,859		—		4,859		—				4,859
Service fees	1,767		—		201		201		(39)				1,929
Operating revenue - unaffiliated	38,000		4,859		630		5,489		(39)		(73)		43,377
Operating revenue - affiliated	—		3,607		2,974		6,581		151		(6,732)		—
Operating revenue - total	$	38,000	$	8,466	$	3,604	$	12,070	$	112	$	(6,805)	$	43,377

Operating gain (loss)	$	2,138	$	496	$	157	$	653	$	(163)	$	—	$	2,628
Depreciation and amortization of property and equipment	—		—		—		—		221		—		—

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			Carelon
	Health Benefits		CarelonRx		Carelon Services		Total		Corporate & Other		Eliminations		Total
Six Months Ended June 30, 2024
Premiums	$	70,478	$	—	$	1,202	$	1,202	$	—	$	(568)	$	71,112
Product revenue	—		10,029		—		10,029		—				10,029
Service fees	3,939		2		393		395		21				4,355
Operating revenue - unaffiliated	74,417		10,031		1,595		11,626		21		(568)		85,496
Operating revenue - affiliated	—		6,810		6,959		13,769		228		(13,997)		—
Operating revenue - total	$	74,417	$	16,841	$	8,554	$	25,395	$	249	$	(14,565)	$	85,496

Operating gain (loss)	$	4,432	$	1,020	$	498	$	1,518	(169)		—		5,781
Depreciation and amortization of property and equipment	—		—		—		—		456				—

Six Months Ended June 30, 2023
Premiums	$	71,767	$	—	$	839	$	839	$	—	$	(149)	$	72,457
Product revenue	—		8,881		—		8,881		—				8,881
Service fees	3,513		—		409		409		15				3,937
Operating revenue - unaffiliated	75,280		8,881		1,248		10,129		15		(149)		85,275
Operating revenue - affiliated	—		7,609		5,816		13,425		188		(13,613)		—
Operating revenue - total	$	75,280	$	16,490	$	7,064	$	23,554	$	203	$	(13,762)	$	85,275

Operating gain (loss)	$	4,287	$	1,008	$	386	$	1,394	$	(222)	$	—	$	5,459
Depreciation and amortization of property and equipment	—		—		—		—		439		—		—

For segment reporting, we present all capitated risk arrangements on a gross basis; therefore, eliminations also include adjustments for unaffiliated capitated risk arrangements that are recognized on a net basis under GAAP, as well as affiliated eliminations.

A reconciliation of reportable segments’ operating revenue to the amounts of total revenues included in our consolidated statements of income for the three and six months ended June 30, 2024 and 2023 is as follows:


	Three Months Ended June 30				Six Months Ended June 30
	2024		2023		2024		2023
Reportable segments’ operating revenue	$	43,223	$	43,377	$	85,496	$	85,275
Net investment income	508		416		973		803
Net losses on financial instruments	(85)		(121)		(246)		(234)
Gain on sale of business	240		—		240		—
Total revenues	$	43,886	$	43,672	$	86,463	$	85,844

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A reconciliation of income before income tax expense to reportable segments’ operating gain included in our consolidated statements of income for the three and six months ended June 30, 2024 and 2023 is as follows:


	Three Months Ended June 30				Six Months Ended June 30
	2024		2023			2024		2023

Income before income tax expense	$	2,986	$	2,441		$	5,925	$	5,060
Net investment income	(508)		(416)			(973)		(803)
Net losses on financial instruments	85		121			246		234
Gain on sale of business	(240)		—			(240)		—
Interest expense	280		261			545		512
Amortization of other intangible assets	162		221			278		456

Reportable segments’ operating gain	$	2,765	$	2,628		$	5,781	$	5,459

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