Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

Elevance Health, Inc.

Consolidated Balance Sheets

March 31, 2025December 31, 2024
(Unaudited)
(In millions, except share and per share data)
Assets
Current assets:
Cash and cash equivalents$7,500$8,288
Fixed maturity securities (amortized cost of $25,813 and $25,879; allowance for credit losses of $7 and $6)25,43725,201
Equity securities7151,192
Premium receivables10,3598,011
Self-funded receivables5,2465,044
Other receivables6,5766,016
Other current assets5,2884,700
Assets held for sale—490
Total current assets61,12158,942
Long-term investments:
Fixed maturity securities (amortized cost of $1,070 and $1,049; allowance for credit losses of $0 and $0)1,0601,035
Other invested assets10,1679,749
Property and equipment, net4,6174,652
Goodwill28,42028,277
Other intangible assets11,94012,094
Other noncurrent assets2,3922,140
Total assets$119,717$116,889
Liabilities and equity
Liabilities
Current liabilities:
Medical claims payable$16,812$15,746
Other policyholder liabilities3,7964,204
Unearned income1,6401,508
Accounts payable and accrued expenses7,1316,927
Short-term borrowings250365
Current portion of long-term debt1,6431,649
Other current liabilities11,42610,029
Liabilities held for sale—153
Total current liabilities42,69840,581
Long-term debt, less current portion28,11029,218
Reserves for future policy benefits174190
Deferred tax liabilities, net2,1212,148
Other noncurrent liabilities3,9943,326
Total liabilities77,09775,463
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 – 225,641,361 and 227,479,69522
Additional paid-in capital8,8668,911
Retained earnings34,54633,549
Accumulated other comprehensive loss(911)(1,147)
Total shareholders’ equity42,50341,315
Noncontrolling interests117111
Total equity42,62041,426
Total liabilities and equity$119,717$116,889

See accompanying notes.

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Elevance Health, Inc.

Consolidated Statements of Income

(Unaudited)

Three Months Ended March 31
20252024
(In millions, except per share data)
Revenues
Premiums$40,887$35,696
Product revenue5,8094,499
Service fees2,0692,078
Total operating revenue48,76542,273
Net investment income590465
Net losses on financial instruments(464)(161)
Total revenues48,89142,577
Expenses
Benefit expense35,31230,546
Cost of products sold4,9833,825
Operating expense5,3004,886
Interest expense344265
Amortization of other intangible assets155116
Total expenses46,09439,638
Income before income tax expense2,7972,939
Income tax expense613690
Net income2,1842,249
Net income attributable to noncontrolling interests(1)(3)
Shareholders’ net income$2,183$2,246
Shareholders’ net income per share
Basic$9.64$9.65
Diluted$9.61$9.59
Dividends per share$1.71$1.63

See accompanying notes.

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Elevance Health, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended March 31
20252024
(In millions)
Net income$2,184$2,249
Other comprehensive income (loss), net of tax:
Change in net unrealized losses/gains on investments235(56)
Change in non-credit component of impairment losses on investments1—
Change in net unrealized gains/losses on cash flow hedges52
Change in net periodic pension and postretirement costs(5)4
Change in future policy benefits—(2)
Foreign currency translation adjustments1—
Other comprehensive income (loss)237(52)
Net loss attributable to noncontrolling interests(1)(3)
Other comprehensive income attributable to noncontrolling interests(1)—
Total shareholders’ comprehensive income$2,419$2,194

See accompanying notes.

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Elevance Health, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

Three Months Ended March 31
20252024
(In millions)
Operating activities
Net income$2,184$2,249
Adjustments to reconcile net income to net cash provided by operating activities:
Net losses on financial instruments464161
Equity in net (earnings) losses of other invested assets(126)27
Depreciation and amortization373331
Deferred income taxes(174)136
Share-based compensation8162
Changes in operating assets and liabilities:
Receivables, net(3,174)(282)
Other invested assets(5)(29)
Other assets(647)(1,104)
Policy liabilities60031
Unearned income13272
Accounts payable and other liabilities952(257)
Income taxes357581
Net cash provided by operating activities1,0171,978
Investing activities
Purchases of investments(3,964)(6,103)
Proceeds from sale of investments4,1504,898
Maturities, calls and redemptions from investments424535
Changes in securities lending collateral(290)(212)
Purchases of subsidiaries, net of cash acquired4(1,120)
Purchases of property and equipment(196)(279)
Other, net(25)(29)
Net cash provided by (used in) investing activities103(2,310)
Financing activities
Repayments of long-term borrowings(1,250)—
Proceeds from short-term borrowings—1,350
Repayments of short-term borrowings(115)—
Changes in securities lending payable290212
Changes in bank overdrafts546(586)
Repurchase and retirement of common stock(880)(566)
Cash dividends(386)(379)
Proceeds from issuance of common stock under employee stock plans2397
Taxes paid through withholding of common stock under employee stock plans(123)(100)
Other, net(14)4
Net cash provided by (used in) financing activities(1,909)32
Effect of foreign exchange rates on cash and cash equivalents1—
Change in cash and cash equivalents(788)(300)
Cash and cash equivalents at beginning of period8,2886,526
Cash and cash equivalents at end of period$7,500$6,226

See accompanying notes.

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Elevance Health, Inc.

Consolidated Statements of Changes in Equity

(Unaudited)

Total Shareholders’ Equity
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossNoncontrolling InterestsTotal Equity
(In millions)Number of SharesPar Value
December 31, 2024227.5$2$8,911$33,549$(1,147)$111$41,426
Net income———2,183—12,184
Other comprehensive loss————2361237
Noncontrolling interests adjustment—————44
Repurchase and retirement of common stock, including excise tax(2.2)—(97)(799)——(896)
Dividends and dividend equivalents———(387)——(387)
Issuance of common stock under employee stock plans, net of related tax benefits0.4—52———52
March 31, 2025225.7$2$8,866$34,546$(911)$117$42,620
December 31, 2023233.1$2$8,868$31,749$(1,313)$99$39,405
Net income———2,246—32,249
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 benefits0.5—59———59
March 31, 2024232.5$2$8,883$33,088$(1,365)$102$40,710

See accompanying notes.

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Elevance Health, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

March 31, 2025

(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 approximately 45.8 million medical members through our affiliated health plans as of March 31, 2025. 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 Program®. (“FEP®”). We provide an array of specialty services both to customers of our subsidiary health plans and to unaffiliated health plans, including pharmacy services, stop loss insurance, 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 Wellpoint, Carelon, MMM and/or Simply Healthcare. We are licensed to conduct insurance operations in all 50 states, the District of Columbia and Puerto Rico through our subsidiaries.

Our portfolio consists of the following core go-to-market brands:

  • Anthem Blue Cross/Anthem Blue Cross and Blue Shield — represents our Anthem-branded and affiliated Blue Cross and/or Blue Shield licensed Medicare, Medicaid, and commercial Health Benefit plans;

  • Wellpoint — represents our Wellpoint branded Medicare, Medicaid and commercial Health Benefit plans and other non-BCBSA brands; and

  • Carelon — represents our healthcare related services and capabilities, including our CarelonRx and Carelon Services businesses.

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). For additional information on reportable segments see Note 15, “Segment Information.”

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 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

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December 31, 2024 (the “2024 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 months ended March 31, 2025 and 2024 have been recorded. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2025, or any other period. The seasonal nature of portions of our healthcare 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, 2024 included in our 2024 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.

Reclassifications: Certain prior year amounts have been reclassified to conform to the current year presentation.

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 $695 and $409 at March 31, 2025 and December 31, 2024, 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.

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.

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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 have investments in limited partnerships (“LPs”) and companies in which our ownership interest may enable us to influence the operating or financial decisions of the investee company, including unconsolidated variable interest entities. These investments are accounted for using the equity method of accounting and are reported within “Other invested assets” in our consolidated balance sheets. Our proportionate share of equity in net income (loss) for these LPs and unconsolidated investee companies is reported within “Net investment income” in our consolidated statements of income. The carrying value of these investments are written down, or impaired, to fair value when a decline in value is considered to be other-than temporary. In applying the equity method (including assessment for other-than temporary impairment), we use financial information provided by the LPs and investee companies, generally on a one-to three-month lag. We consolidate investee companies in certain other instances where we are deemed to exercise control, or we are considered the primary beneficiary of a variable interest entity.

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” in 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 in 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.

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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 insured groups, individuals and government programs. Premium receivables are reported net of an allowance for doubtful accounts of $178 and $183 at March 31, 2025 and December 31, 2024, 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 $128 and $115 at March 31, 2025 and December 31, 2024, respectively.

Other receivables include pharmacy rebates, provider advances, claims recoveries, reinsurance receivables, proceeds due from brokers on investment trades that have not yet settled, accrued investment income and other miscellaneous amounts due to us. These receivables are reported net of an allowance for doubtful accounts of $1,458 and $1,385 at March 31, 2025 and December 31, 2024, respectively.

Revenue Recognition: Premiums for risk-based contracts are recognized as revenue over the period insurance coverage is provided, and, if applicable, net of amounts recognized for rebates based on medical loss ratio, or regulatory requirements. Premiums may also include performance incentives and penalties, which are recognized based on contractual terms. We estimate amounts receivable and payable under these contractual terms, and to the extent that such estimated amounts vary from the final amounts paid, the adjustments are included in earnings in the period of final settlement. Premium payments from contracted government agencies are based on eligibility lists produced by the government agencies. Premium payments related to the unexpired contractual coverage periods are reflected in the accompanying consolidated balance sheets as Unearned income. Premiums include revenue adjustments for retrospectively rated contracts where revenue is based on the estimated loss experience of the contract. Premium rates for certain lines of business are subject to approval by the Department of Insurance of each respective state. Additionally, delays in annual premium rate changes from contracted government agencies require that we defer the recognition of any increases to the period in which the premium rates become final. The value of the impact can be significant in the period in which it is recognized depending on the magnitude of the premium rate increase, the membership to which it applies and the length of the delay between the effective date of the rate increase and the final contract date. Premium rate decreases are recognized in the period the change in premium rate becomes effective and the change in the rate is known, which may be prior to the period when the contract amendment affecting the rate is finalized.

We also record premiums for certain value-based arrangements of our Carelon Services care delivery businesses. Under these value-based arrangements, we carry financial responsibility across medical claims costs through risk contracts with health plans in which we deliver, integrate, direct and control certain health care services for patients. In exchange, we receive a premium that is typically paid on a per-patient per-month basis and performance-based payments that are recognized when performance metrics are achieved. We consider these value-based arrangements to represent a single performance obligation where revenues are recognized in the period in which health care services are made available.

Service fees include revenue from certain group contracts that provide for the group to be at risk for all, or with supplemental insurance arrangements, a portion, of their claims experience. We charge these fee-based groups an administrative fee, which is based on the number of members in a group and the group’s claim experience. In addition, service fees include amounts received for the administration of Medicare, certain other government programs, and administrative services arrangements of our Carelon subsidiaries. Generally, each fee-based arrangement includes services which constitute a single suite of services provided and for which consideration is based upon an agreed-upon rate, regardless of the amount of services provided in a given period. As with premiums, each fee-based arrangement may include terms with retroactive rate or membership adjustments, performance incentives and penalties, each of which is a form of variable consideration within the transaction price. As such, each fee-based arrangement contains a single performance obligation that constitutes a series, and revenue is recognized over time as the services are performed. All benefit payments under these programs are excluded from benefit expense.

The determination of whether services are distinct performance obligations that should be accounted for separately or combined as one unit of accounting may require significant judgment. The estimation of variable consideration to be recognized requires significant judgment in the determination of the level of achievement of performance incentives, service level achievements subject to performance penalties, and the completion level of tasks subject to implementation fees.

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Product revenue represents services performed by CarelonRx for unaffiliated pharmacy customers and includes ingredient costs (net of any rebates or discounts), including co-payments made by or on behalf of the customer, and service fees. Unaffiliated pharmacy customers include our fee-based groups that have contracted with CarelonRx for pharmacy services and third-party health plans. Product revenues and costs of goods sold for our affiliated health plans are eliminated in consolidation, excluding co-payments and subsidies made by or on behalf of affiliated customers. Product revenue for pharmacy services is recognized using the gross method at the negotiated contract price when CarelonRx has concluded that it is the principal, and it controls the services before prescription drugs are transferred to the customer. CarelonRx determined it is the principal due to its contractual rights to design and develop a listing of prescription drugs offered to the customer (formulary management); its control over establishing the pharmacy network available to the customer to have its prescription fulfilled (network management); and its discretion over establishing the pricing for prescription drugs. Overall, control over these activities indicate CarelonRx is primarily responsible for fulfilling the promise to provide pharmacy services. CarelonRx recognizes revenue when control of the prescription drugs is transferred to customers, in an amount it expects to be entitled to in exchange for the products or services provided.

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 March 31, 2025 or December 31, 2024. For the three months ended March 31, 2025 and 2024, 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 2023, the Financial Accounting Standards Board (“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. 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 adopted ASU 2023-07 as of January 1, 2024. The adoption of ASU 2023-07 did not have an impact on our results of operations or our consolidated cash flows.

Recent Accounting Guidance Not Yet Adopted: In November 2024, the FASB issued Accounting Standards Update No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). This standard requires additional expense breakdowns in the footnotes for items such as inventory purchases, employee compensation, depreciation, and intangible asset amortization. Public companies must also provide a qualitative description of remaining expense amounts not separately disclosed, as well as the definition and total amount of selling expenses. ASU 2024-03 is effective for our fiscal year beginning after December 15, 2026, and interim periods within our fiscal year beginning after December 15, 2027. The amendments are to be applied either prospectively to financial statements issued for reporting periods after the effective date of the update, or retrospectively to all prior periods presented in the financial statements. We are currently evaluating the effects the adoption of ASU 2024-03 will have on our consolidated financial statements and related disclosures.

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, however, these disclosures are not required for interim periods. 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 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.

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There were no other new accounting pronouncements that were issued or became effective since the issuance of our 2024 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.

3. Business Acquisitions and Divestitures

Completed Acquisitions

On December 31, 2024, we completed our acquisition of 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. As of March 31, 2025, 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 $152 has been allocated to finite-lived intangible assets, $426 to indefinite-lived intangible assets and $451 to goodwill. The majority of the goodwill is not deductible for income tax purposes. As of March 31, 2025, 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 December 10, 2024, we completed our acquisition of RSV QOZB LTSS, Inc. and certain affiliated entities (“CareBridge”), a value-based healthcare company that manages home and community-based services for Medicaid and dual-eligible members receiving long-term services and support. This acquisition aligns with Carelon Services’ care at home strategy, and 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 March 31, 2025, 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 $995 has been allocated to finite-lived intangible assets and $1,756 to goodwill. The majority of the goodwill is not deductible for income tax purposes. As of March 31, 2025, 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 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 March 31, 2025, the purchase price was allocated to the tangible and intangible net assets acquired based on their fair values, of which $411 has been allocated to finite-lived intangible assets and $747 to goodwill. The majority of the goodwill is not deductible for income tax purposes. Since closing and during the measurement period we have adjusted goodwill by $(30). As of March 31, 2025, the accounting for the acquisition is finalized. 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 $201. 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 divested and results of operations as of and for the three months ended March 31, 2024 were not material.

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4. Business Optimization Initiative

In 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 included 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 was finalized as of December 31, 2024, except as to cash outlays related to personnel-related costs associated with this program, which are expected to be paid through 2025.

The ending liability balances related to the employee termination costs under the 2023-2024 Business Efficiency Program at March 31, 2025 and December 31, 2024 were $190 and $224, respectively. During the three months ended March 31, 2025, there were no charges recorded related to employee termination costs under the 2023-2024 Business Efficiency Program, and payments were $34.

5. Investments

Fixed Maturity Securities

A summary of current and long-term fixed maturity securities, available-for-sale, at March 31, 2025 and December 31, 2024 is as follows:

Cost or Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance For Credit LossesEstimated Fair Value
March 31, 2025
Fixed maturity securities:
United States Government securities$1,782$15$(38)$—$1,759
Government sponsored securities1112(3)—110
Foreign government securities10———10
States, municipalities and political subdivisions, tax-exempt3,03828(115)—2,951
Corporate securities14,007243(275)(4)13,971
Residential mortgage-backed securities3,50225(179)—3,348
Commercial mortgage-backed securities1,96218(37)—1,943
Other asset-backed securities2,47136(99)(3)2,405
Total fixed maturity securities$26,883$367$(746)$(7)$26,497
December 31, 2024
Fixed maturity securities:
United States Government securities$1,907$2$(85)$—$1,824
Government sponsored securities156—(5)—151
Foreign government securities19—(2)—17
States, municipalities and political subdivisions, tax-exempt3,14233(123)—3,052
Corporate securities14,095192(367)(4)13,916
Residential mortgage-backed securities3,27413(236)—3,051
Commercial mortgage-backed securities1,8018(60)(1)1,748
Other asset-backed securities2,53436(92)(1)2,477
Total fixed maturity securities$26,928$284$(970)$(6)$26,236

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

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For fixed maturity securities in an unrealized loss position at March 31, 2025 and December 31, 2024, 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 Months12 Months or Greater
(Securities are whole amounts)Number of SecuritiesEstimated Fair ValueGross Unrealized LossNumber of SecuritiesEstimated Fair ValueGross Unrealized Loss
March 31, 2025
Fixed maturity securities:
United States Government securities31$614$(18)18$282$(20)
Government sponsored securities321(1)3437(2)
Foreign government securities16—21—
States, municipalities and political subdivisions, tax-exempt4711,026(25)618864(90)
Corporate securities1,1683,231(64)1,2182,290(211)
Residential mortgage-backed securities186622(6)1,2721,223(173)
Commercial mortgage-backed securities108457(5)255618(32)
Other asset-backed securities110265(7)212656(92)
Total fixed maturity securities2,078$6,242$(126)3,629$5,971$(620)
December 31, 2024
Fixed maturity securities:
United States Government securities40$1,240$(52)25$330$(33)
Government sponsored securities1089(2)3642(3)
Foreign government securities215(1)22(1)
States, municipalities and political subdivisions, tax-exempt5271,092(22)661943(101)
Corporate securities1,4154,717(92)1,3172,645(275)
Residential mortgage-backed securities3061,097(25)1,3121,291(211)
Commercial mortgage-backed securities136670(15)297661(45)
Other asset-backed securities123293(9)236735(83)
Total fixed maturity securities2,559$9,213$(218)3,886$6,649$(752)

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Unrealized losses on our securities shown in the table above have not been recognized into income because, as of March 31, 2025, 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 anticipated recovery. The declines in fair values are largely due to elevated interest rates driven by the higher rate of inflation and other market conditions.

Allowances for credit losses have been recorded in the amount of $7 and $6 at March 31, 2025 and December 31, 2024, respectively, for declines in fair value due to unfavorable changes in the credit quality characteristics that impact our assessment of collectability of principal and interest.

The amortized cost and fair value of fixed maturity securities at March 31, 2025, 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 CostEstimated Fair Value
Due in one year or less$196$196
Due after one year through five years4,6854,647
Due after five years through ten years10,62010,578
Due after ten years5,9185,785
Mortgage-backed securities5,4645,291
Total fixed maturity securities$26,883$26,497

Equity Securities

A summary of current equity securities at March 31, 2025 and December 31, 2024 is as follows:

March 31, 2025December 31, 2024
Equity securities:
Exchange traded funds$621$1,002
Common equity securities32118
Private equity securities6272
Total$715$1,192

Other Invested Assets

At March 31, 2025, “Other invested assets” include non-controlled joint ventures, including our minority interest ownership of approximately 40% of Augusta Topco Holdings, L.P. (“Mosaic Health”) and our 40% minority interest ownership of Project Freedom Holdings, LLC, which is the ultimate parent of LIBERTY Dental Plan Corporation (“Liberty Dental”).

On August 6, 2024, we made an investment of $2,580, consisting of cash and the net put option discussed in Note 6, “Derivative Financial Instruments”. Mosaic Health is a joint venture with Clayton, Dubilier & Rice (“CD&R”) that is designed to accelerate innovation in care delivery across multiple regions in the United States by bringing together certain care delivery and enablement assets of Carelon Management Services Inc. (“CMSI Assets”), a Carelon Health business, and two CD&R portfolio businesses, apree health and Millennium Physician Group. The investment is accounted for as an equity method investment. Our additional contribution of the CMSI Assets to Mosaic Health was completed on January 1, 2025, for which we received an additional $300 of equity (approximately 5% ownership) in Mosaic Health.

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In connection with our equity method investment in Mosaic Health, we entered into a financing agreement to provide a term loan of $200 and a revolving credit facility of up to $500 to Mosaic Health. Net amounts receivable under these arrangements were $188 at both March 31, 2025 and December 31, 2024, which are included under the caption “Other noncurrent assets” in our consolidated balance sheets as of March 31, 2025 and December 31, 2024. During the three months ended March 31, 2025, we recognized $4 in interest income from the financing arrangement with Mosaic Health. In addition to the term loan and line of credit, we committed to providing $70 of funding with no additional equity interest in Mosaic Health to meet any shortfall in operating cash flow and regulatory capital requirements of the CMSI Assets through December 31, 2026, and to fund any remaining shortfalls as necessary for which we would receive additional equity interests in Mosaic Health. In addition, during the quarter ended March 31, 2025, in the normal course of business, Mosaic provided care delivery and enablement services to Elevance Health subsidiaries amounting to $175, reported in benefit expense.

In January 2023, we made an equity investment consisting of cash and a net put option in Liberty Dental, a joint venture with Welsh, Carson, Anderson & Stowe which engages in dental insurance and dental health care administration. The investment is accounted for as an equity method investment. In connection with our equity method investment in Liberty Dental, in December 2024 we entered into a commitment to provide funding in the form of mandatorily redeemable preferred equity shares in Liberty Dental of up to $250, of which $93 and $87 was disbursed as of March 31, 2025 and December 31, 2024, respectively. The mandatorily redeemable preferred equity in Liberty Dental is included in the caption “Other invested assets” in our consolidated balance sheets at March 31, 2025 and December 31, 2024. Dividend income recognized from the financing arrangement during the three months ended March 31, 2025 and the year ended December 31, 2024 was not material.During the quarter ended March 31, 2025, in the normal course of business, Liberty Dental provided administrative services to our Medicare Advantage members under a capitated arrangement amounting to $146, reported in benefit expense.

Investment Gains (Losses)

Net investment gains (losses) for the three months ended March 31, 2025 and 2024 are as follows:

Three Months Ended March 31
20252024
Net gains (losses):
Fixed maturity securities:
Gross realized gains from sales$28$22
Gross realized losses from sales(82)(159)
Impairment losses recognized in income(1)(2)
Net realized losses from sales of fixed maturity securities(55)(139)
Equity securities:
Unrealized gains (losses) recognized on equity securities still held at the end of the period(6)2
Net realized (losses) gains recognized on equity securities sold during the period(1)—
Net gains (losses) on equity securities(7)2
Other investments:
Gross gains516
Gross losses(94)(20)
Other realized losses recognized in income(311)(25)
Net losses on other investments(400)(29)
Net losses on investments$(462)$(166)

A primary objective in the management of our fixed maturity and equity portfolios is to maximize total return relative to underlying liabilities and respective liquidity needs. In achieving this goal, assets may be sold to take advantage of market conditions or other investment opportunities as well as tax considerations. Sales will generally produce realized gains and losses. In the ordinary course of business, we may sell securities at a loss for a number of reasons, including, but not limited

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to: (i) changes in the investment environment; (ii) expectations 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.

Total proceeds from sales, maturities, calls or redemptions of fixed maturity securities were $3,338 and $5,401 during the three months ended March 31, 2025 and 2024, respectively.

Accrued Investment Income

At March 31, 2025 and December 31, 2024, accrued investment income totaled $268 and $287, respectively. We recognize accrued investment income under the caption “Other receivables” on our consolidated balance sheets.

Securities Lending Programs

The fair value of the cash and securities received as collateral for securities loaned at March 31, 2025 and December 31, 2024 was $2,596 and $2,305, respectively. The collateral received was 102% of the market value of the loaned securities at each of March 31, 2025 and December 31, 2024.

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 March 31, 2025 and December 31, 2024, the remaining contractual maturities of our securities lending transactions included overnight and continuous transactions of cash for $2,402 and $2,115, respectively, United States Government securities for $194 and $176, respectively, and residential mortgage-backed securities for $0 and $14, respectively.

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6. Derivative Financial Instruments

We use derivative financial instruments to manage interest rate and foreign exchange risk and credit exposure. We primarily invest in the following types of derivative financial instruments: interest rate swaps, futures, forward contracts, put and call options, collars, swaptions, embedded derivatives and warrants. We also enter into master netting agreements, which reduce credit risk by permitting net settlement of transactions. At March 31, 2025 and December 31, 2024, we had posted collateral of $14 and $142, respectively, related to our derivative financial instruments.

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, as applicable.

The unrecognized loss for all expired and terminated cash flow hedges included in accumulated other comprehensive loss, net of tax, was $199 and $201 at March 31, 2025 and December 31, 2024, respectively.

During the three months ended March 31, 2025, we recognized net gains of $1 and net losses of $(3), respectively, on non-hedging derivatives. During the three months ended March 31, 2024, we recognized net gains of $11 and net losses of $(6) on non-hedging derivatives, respectively.

In connection with our equity investment in Mosaic Health (see Note 5, “Investments”), we entered into a limited partnership and related agreements with the majority owners that provides for certain rights and obligations of each party, including certain put, call, and purchase price true-up options. These options, if exercised, will result in our purchase of the units held by the majority owners as early as 2028 but no later than 2030 at a price based on certain multiples of revenue and earnings of Mosaic Health businesses, subject to various adjustments and qualifications. We have calculated the fair value of the net put option, which is a Level III measurement (see Note 7, “Fair Value”), using a Monte Carlo simulation, which relies on assumptions including cash flow projections, risk-free rates, volatility and details specific to the options. Significant changes in assumptions could result in significantly lower or higher fair value measurements. The net put option’s estimated fair value liability of $1,330, which is a non-cash item measured at the date of our initial investment, is included under the caption “Other noncurrent liabilities” in our consolidated balance sheets as of March 31, 2025 and December 31, 2024. We have elected to not mark the net put option to market, as it is an option on large blocks of equity securities, and the carrying value of the net put option will remain on the consolidated balance sheets until it is exercised or expires.

In connection with our equity investment in Liberty Dental (see Note 5, “Investments”), we entered into an agreement with the majority owners that provides for certain rights and obligations of each party, including certain put and call options. These options, if exercised, will result in our purchase of the units held by the majority owners as early as 2026 but no later than 2027 at a price based on certain multiples of earnings of Liberty Dental, subject to various adjustments and qualifications. We have calculated the fair value of the net put option, which is a Level III measurement (see Note 7, “Fair Value”), using a Monte Carlo simulation, which relies on assumptions including cash flow projections, risk-free rates, volatility and details specific to the options. Significant changes in assumptions could result in significantly lower or higher fair value measurements. On March 28, 2025, the terms of the put and call options were substantially amended. The previous net put option liability of $85 at December 31, 2024 was extinguished and we recognized a new net put option liability at its estimated fair value of $396 which is included under the caption “Other noncurrent liabilities” in our consolidated balance sheets as of March 31, 2025. The change in value was recognized through net losses on financial instruments in our consolidated statement of income.

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.

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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 and determine the fair value hierarchy classification for each class of financial instruments, see Note 7, “Fair Value,” to our audited consolidated financial statements as of and for the year ended December 31, 2024 included in Part II, Item 8 of our 2024 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 March 31, 2025 and December 31, 2024 is as follows:

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Level ILevel IILevel IIITotal
March 31, 2025
Assets:
Cash equivalents$3,489$—$—$3,489
Fixed maturity securities, available-for-sale:
United States Government securities—1,759—1,759
Government sponsored securities—110—110
Foreign government securities—10—10
States, municipalities and political subdivisions, tax-exempt—2,951—2,951
Corporate securities—13,85611513,971
Residential mortgage-backed securities—3,348—3,348
Commercial mortgage-backed securities—1,943—1,943
Other asset-backed securities—1,6028032,405
Total fixed maturity securities, available-for-sale—25,57991826,497
Equity securities:
Exchange traded funds621——621
Common equity securities230—32
Private equity securities——6262
Total equity securities6233062715
Other invested assets - common equity securities8——8
Securities lending collateral—2,597—2,597
Derivatives - other assets—32—32
Total assets$4,120$28,238$980$33,338
Percentage of total assets at fair value12%85%3%100%
Liabilities:
Derivatives - other liabilities$—$(47)$—$(47)
Total liabilities$—$(47)$—$(47)
December 31, 2024
Assets:
Cash equivalents$3,199$—$—$3,199
Fixed maturity securities, available-for-sale:
United States Government securities—1,824—1,824
Government sponsored securities—151—151
Foreign government securities—17—17
States, municipalities and political subdivisions, tax-exempt—3,052—3,052
Corporate securities—13,8734313,916
Residential mortgage-backed securities—3,041103,051
Commercial mortgage-backed securities—1,748—1,748
Other asset-backed securities—1,7307472,477
Total fixed maturity securities, available-for-sale—25,43680026,236
Equity securities:
Exchange traded funds1,002——1,002
Common equity securities8731—118
Private equity securities——7272
Total equity securities1,08931721,192
Other invested assets - common equity securities18——18
Securities lending collateral—2,306—2,306
Derivatives - other assets—5—5
Total assets$4,306$27,778$872$32,956
Percentage of total assets at fair value13%84%3%100%
Liabilities:
Derivatives - other liabilities$—$(150)$—$(150)
Total liabilities$—$(150)$—$(150)

There were no individually material transfers into or out of Level III during the three months ended March 31, 2025 or 2024. There were no adjustments to quoted market prices obtained from the pricing services during the three months ended March 31, 2025 or 2024.

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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 Centers and CareBridge in December 2024 and Paragon in March 2024. The net assets acquired in our acquisitions of Centers, CareBridge and Paragon, 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 initial fair values of goodwill and other intangible assets acquired in our acquisitions of Centers and CareBridge 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. The fair values of goodwill and other intangible assets acquired in our acquisition of Paragon were finalized as of March 31, 2025 and were calculated based on the income approach.

In 2024, we entered into a limited partnership and related agreements which included certain put and call options on our minority interest ownership of Mosaic Health. Also, in 2023, we entered into a limited liability company agreement which included certain put and call options on our minority interest ownership of Liberty Dental.The net put option liabilities were recorded at their fair value measured at the date of acquisition using Level III inputs based on a Monte Carlo simulation, which relies on assumptions including cash flow projections, risk-free rates, volatility and details specific to the options. We have elected to not mark the net put options to market.

As discussed in Note 6, “Derivatives”, on March 28, 2025, the terms of the Liberty Dental put and call options were substantially amended. The previous net put option liability was extinguished and we recognized a new net put option liability at its estimated fair value of $396. The extinguished net put option estimated fair value was $543 at December 31, 2024.

Other than the assets acquired and liabilities assumed in our acquisitions of Centers, CareBridge and Paragon and the net put options on Mosaic Health and Liberty Dental, there were no material assets or liabilities measured at fair value on a nonrecurring basis during the three months ended March 31, 2025 or 2024.

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 limited partnerships, joint ventures, other non-controlled corporations, corporate-owned life insurance policies, and 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, 2024 included in Part II, Item 8 of our 2024 Annual Report on Form 10-K for details on the methods and assumptions used to estimate the fair value for each class of financial instruments that are recorded at their carrying value in our consolidated balance sheets.

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A summary of the estimated fair values by level for each class of financial instruments that is recorded at its carrying value on our consolidated balance sheets at March 31, 2025 and December 31, 2024 is as follows:

Carrying ValueEstimated Fair Value
Level ILevel IILevel IIITotal
March 31, 2025
Assets:
Other invested assets$657$—$—$634$634
Liabilities:
Debt:
Short-term borrowings250—250—250
Notes29,753—27,586—27,586
Options1,726——1,7261,726
December 31, 2024
Assets:
Other invested assets$642$—$—$610$610
Liabilities:
Debt:
Short-term borrowings365—365—365
Notes30,867—28,460—28,460
Options1,415——1,8731,873

8. Income Taxes

During the three months ended March 31, 2025 and 2024, we recognized income tax expense of $613 and $690, respectively, which represent effective income tax rates of 21.9% and 23.5%, respectively. The decrease in our effective income tax rate from the three months ended March 31, 2024 was primarily due to favorable resolutions of uncertain tax positions and certain investment credits.

We recognized income taxes receivable of $63 and $213 as an asset under the caption “Other current assets” and income taxes payable of $267 and $75 as a liability under the caption “Other current liabilities” in our consolidated balance sheets as of March 31, 2025 and December 31, 2024, respectively.

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9. Medical Claims Payable

A reconciliation of the beginning and ending balances for medical claims payable for the three months ended March 31, 2025 and 2024 is as follows:

20252024
Gross medical claims payable, beginning of period$15,580$15,865
Ceded medical claims payable, beginning of period(13)(7)
Net medical claims payable, beginning of period15,56715,858
Business combinations and purchase adjustments(85)—
Net incurred medical claims:
Current period35,31330,708
Prior periods redundancies(1,025)(1,205)
Total net incurred medical claims34,28829,503
Net payments attributable to:
Current period medical claims23,39219,580
Prior periods medical claims9,8639,606
Total net payments33,25529,186
Net medical claims payable, end of period16,51516,175
Ceded medical claims payable, end of period148
Gross medical claims payable, end of period$16,529$16,183

At March 31, 2025, the total of net incurred but not reported liabilities plus expected development on reported claims was $11,835, $3,979 and $701 for the claim years 2025, 2024, and 2023 and prior, respectively.

The favorable development recognized in the three months ended March 31, 2025 resulted from faster than expected development of completion factors from the latter part of 2024 as well as smaller but significant contribution from trend factors in late 2024 developing more favorably than originally expected.

The favorable development recognized in the three months ended March 31, 2024 resulted from faster than expected development of completion factors during the latter part of 2023, as well as trend factors in late 2023 developing more favorably than originally expected.

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The reconciliation of net incurred medical claims to benefit expense included in our consolidated statements of income for the three months ended March 31, 2025 and 2024 is as follows:

20252024
Net incurred medical claims with medical claims payable$33,349$29,503
Performance-based arrangements without medical claims payable939—
Total net incurred medical claims34,28829,503
Quality improvement and other claims expense1,0241,043
Benefit expense$35,312$30,546

Net incurred medical claims under certain performance-based risk arrangements that include gain or loss sharing components do not require a medical claim payable liability.

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 sheets, as of March 31, 2025 is as follows:

Total
Net medical claims payable, end of period$16,515
Ceded medical claims payable, end of period14
Insurance lines other than short duration283
Gross medical claims payable, end of period$16,812

10. Debt

We generally issue senior unsecured notes for long-term borrowing purposes. At March 31, 2025 and December 31, 2024, we had $29,728 and $30,842, respectively, outstanding under these notes.

We have an unsecured surplus note with an outstanding principal balance of $25 at both March 31, 2025 and December 31, 2024.

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 March 31, 2025, our debt-to-capital ratio, as defined and calculated under the 5-Year Facility, was 41.3%. We do not believe the restrictions contained in our 5-Year Facility covenants materially affect our financial or operating flexibility. As of March 31, 2025, 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 three months ended March 31, 2025 or during the year ended December 31, 2024.

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 no amounts outstanding under this program at both March 31, 2025 and December 31, 2024.

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 $250 and $365 of outstanding short-term borrowings from the FHLBs at March 31, 2025 and December 31, 2024, respectively.

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

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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) 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 individually, 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 and related state laws. The cases were brought by two putative nationwide classes of plaintiffs, health plan subscribers and providers.

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.

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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. The ultimate amount paid by us under the Subscriber Settlement Agreement was $604.

The Subscriber Settlement Agreement and the defendants' payment and non-monetary obligations under the Subscriber Settlement Agreement became effective in June 2024, with the request for second Blue plan bid provisions effective in September 2024. The funds held in escrow will be distributed in accordance with the Subscriber Settlement Agreement.

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 1:21-cv-23448 (S.D. Fla.).; 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. On February 14, 2025, the VHS plaintiffs amended their complaint to add an additional plaintiff, Children’s Hospital of Los Angeles. 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.

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, and 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.

In the third quarter of 2024, the BCBSA, along with the individually named Blue plans approved a settlement agreement and release (the “Provider Settlement Agreement”) with the provider plaintiffs, and in October 2024 the provider plaintiffs filed a motion for preliminary approval with the Court. The Court granted preliminary approval of the provider settlement on December 4, 2024. A Final Fairness hearing is scheduled for July 29, 2025. If finally approved by the Court, the Provider Settlement Agreement will require the defendants to make a monetary settlement payment, our portion of which is estimated to be $666, and will contain certain non-monetary terms including (i) expansion of certain opportunities to contract with providers in contiguous service areas, (ii) certain prompt pay commitments, and (iii) various technological enhancements to the BlueCard program. We recognized our estimated payment obligation under the Provider Settlement Agreement of $666 in September 2024. We recognized this estimated payment obligation as operating expense in the Corporate & Other segment (see Note 15, “Segment Information”).

A number of follow-on cases involving entities that opted out of the putative Provider Settlement Agreement have been filed. We intend to continue to vigorously defend these provider follow-on cases, which we believe are without merit; however, their ultimate outcome cannot be presently determined.

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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 “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 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. In December 2024, the District Court issued a scheduling order setting the deadlines for the completion of fact discovery in August 2025 and April 2026 for the completion of expert discovery. 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.

Contractual Obligations and Commitments

In September 2024, we extended our agreement with a vendor for information technology infrastructure and related management and support services through June 2029. Our remaining commitment under this agreement is approximately $1,961. We 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. 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 (the “CVS Agreement”), with the current contractual term extending through December 31, 2027. We can elect to have CVS continue to provide services to us for a three-year extension period on the same terms and conditions as in the current CVS Agreement in the event of a termination or non-renewal by either party.

We have financial guarantees related to standby letters of credit and surety bonds related to certain contractual commitments, which totaled $894 as of March 31, 2025. We do not believe such obligations will materially affect our financial position, results of operations, or cash flows.

We have unfunded loan commitments to certain equity investees of $501 at March 31, 2025. We do not believe such obligations will materially affect our financial position, results of operations, or cash flows.

Vulnerability Concentrations

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, investment securities, premium receivables and instruments held through hedging activities. All investment securities are managed by professional investment managers within policies authorized by our Board of Directors. Such policies limit the

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amounts that may be invested in any one issuer and prescribe certain investee company criteria. Concentrations of credit risk with respect to premium receivables are limited due to the large number of employer groups that constitute our customer base in the states in which we conduct business. As of March 31, 2025, there were no significant concentrations of financial instruments in a single investee, industry or geographic location.

`12. Capital Stock

Stock Incentive Plan****s

A summary of stock option activity for the three months ended March 31, 2025 is as follows:

Number of SharesWeighted- Average Option Price per ShareWeighted- Average Remaining Contractual Life (Years)Aggregate Intrinsic Value
Outstanding at January 1, 20252.9$361.36
Granted0.6395.49
Exercised(0.1)209.75
Outstanding at March 31, 20253.4371.806.28$264
Exercisable at March 31, 20252.2339.924.92$239

A summary of the status of nonvested restricted stock activity, including restricted stock units and performance units, for the three months ended March 31, 2025 is as follows:

Restricted Stock Shares and UnitsWeighted- Average Grant Date Fair Value per Share
Nonvested at January 1, 20251.0$478.70
Granted0.6395.49
Vested(0.4)465.96
Nonvested at March 31, 20251.2442.07

During the three months ended March 31, 2025, we granted approximately 0.2 restricted stock units that are contingent upon us achieving earnings targets over the three-year period from 2025 to 2027. These grants have been included in the activity shown above but will be subject to adjustment at the end of 2027 based on results during 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, 2024 included in Part II, Item 8 of our 2024 Annual Report on Form 10-K.

The following weighted-average assumptions were used to estimate the fair values of options granted during the three months ended March 31, 2025 and 2024:

Three Months Ended March 31
20252024
Risk-free interest rate4.29%4.28%
Volatility factor30.00%28.00%
Quarterly dividend yield0.432%0.327%
Weighted-average expected life (years)4.454.40

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The following weighted-average fair values per option or share were determined for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31
20252024
Options granted during the period$107.31$134.53
Restricted stock awards granted during the period395.49499.00

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 three months ended March 31, 2025 and 2024 is as follows:

Declaration DateRecord DatePayment DateCash Dividend per ShareTotal
Three Months Ended March 31, 2025
January 22, 2025March 10, 2025March 25, 2025$1.71$386
Three Months Ended March 31, 2024
January 23, 2024March 8, 2024March 22, 2024$1.63$379

On April 16, 2025, our Audit Committee declared a second quarter 2025 dividend to shareholders of $1.71 per share, payable on June 25, 2025 to shareholders of record at the close of business on June 10, 2025.

Under our Board of Directors’ authorization, we maintain a common stock repurchase program. On October 15, 2024, our Audit Committee, pursuant to authorization granted by the Board of Directors, authorized an $8,000 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. 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.

A summary of common stock repurchases for the three months ended March 31, 2025 and 2024 is as follows:

Three Months Ended March 31
20252024
Shares repurchased2.21.1
Average price per share$395.78$492.76
Aggregate cost$880$566
Authorization remaining at the end of the period$8,420$3,633

We expect to utilize the remaining authorized amount over a multi-year period, subject to market and industry conditions. 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, 2024 included in Part II, Item 8 of our 2024 Annual Report on Form 10-K.

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13. Accumulated Other Comprehensive (Loss) Income

A reconciliation of the components of accumulated other comprehensive (loss) income at March 31, 2025 and 2024 is as follows:

20252024
Net unrealized investment (losses) gains:
Beginning of period balance$(523)$(632)
Other comprehensive income (loss) before reclassifications, net of tax (expense) benefit of ($60) and $50 respectively193(162)
Amounts reclassified from accumulated other comprehensive income, net of tax expense of ($13) and ($33) respectively42106
Other comprehensive income (loss)235(56)
Other comprehensive loss attributable to noncontrolling interests, net of tax benefit of $0 and $0 respectively(1)—
End of period balance(289)(688)
Non-credit components of impairments on investments:
Beginning of period balance(2)(3)
Other comprehensive income, net of tax expense of $0 and $0 respectively1—
End of period balance(1)(3)
Net cash flow hedges:
Beginning of period balance(207)(211)
Other comprehensive income, net of tax expense of ($3) and ($1) respectively52
End of period balance(202)(209)
Pension and other postretirement benefits:
Beginning of period balance(399)(459)
Other comprehensive (loss) income, net of tax expense of ($8) and ($1) respectively(5)4
End of period balance(404)(455)
Future policy benefits:
Beginning of period balance810
Other comprehensive loss, net of tax benefit of $0 and $0 respectively—(2)
End of period balance88
Foreign currency translation adjustments:
Beginning of period balance(24)(18)
Other comprehensive income, net of tax expense of $0 and $0 respectively1—
End of period balance(23)(18)
Total:
Total beginning of period accumulated other comprehensive loss(1,147)(1,313)
Total other comprehensive income (loss), net of tax (expense) benefit of ($84) and $15 respectively237(52)
Total other comprehensive loss attributable to noncontrolling interests, net of tax benefit of $0 and $0 respectively(1)—
Total end of period accumulated other comprehensive loss$(911)$(1,365)

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14. Shareholders' Earnings per Share

The denominator for basic and diluted shareholders' earnings per share for the three months ended March 31, 2025 and 2024 is as follows:

20252024
Denominator for basic shareholders' earnings per share – weighted-average shares226.4232.7
Effect of dilutive securities – employee stock options, non-vested restricted stock awards and convertible debentures0.81.5
Denominator for diluted shareholders' earnings per share227.2234.2

During the three months ended March 31, 2025 and 2024, weighted-average shares related to certain stock options of 1.5 and 0.6, respectively, were excluded from the denominator for diluted shareholders' earnings per share because the stock options were anti-dilutive.

We have issued approximately 0.6 cumulative restricted stock units under our stock incentive plans, of which vesting is contingent upon us meeting specified annual earnings targets. Contingent restricted stock units are excluded from the denominator for diluted shareholders’ earnings per share and are included only if and when the contingency is met. These contingent restricted stock units are being measured over a three-year period and generally vest in March of the year following each measurement period.

15. Segment Information

We report our results of operations in the following four reportable segments: Health Benefits, CarelonRx, Carelon Services and Corporate & Other. An immaterial amount of our total consolidated revenues is derived from activities outside of the U.S. and Puerto Rico.

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 FEP® members. 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 integrates physical, behavioral, pharmacy, and social services with the aim of delivering whole health affordably by offering a broad array of healthcare related services and capabilities to internal and external customers through our Carelon Health and Carelon Insights businesses. Carelon promotes affordability by managing complex areas of the healthcare system, leveraging data and insights to ensure members receive safe, appropriate, high-quality care and providers are reimbursed accurately and timely. Our approach to cost management relies on capabilities including provider enablement, value-based networks, member engagement, and utilization management. Our care delivery services primarily target serving chronic and complex populations by providing personalized care in the home and virtually. As a part of Carelon Health, we completed our acquisition of CareBridge at the end of 2024, which provides virtual care to complex Medicaid and Medicare patients and supports plans in managing home and community-based services.

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 premiums, 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

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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. Certain administrative costs related to affiliate services are charged to the operating segment receiving the benefits and the amounts may change over time. These affiliated revenues are eliminated in our consolidated financial statements. For segment reporting, we present all capitation risk arrangements on a gross basis; therefore, eliminations also include adjustments for capitated risk arrangements that are recognized on a net basis under GAAP.

The accounting policies of the segments are consistent with those described in the summary of significant accounting policies in Note 2, “Basis of Presentation and Significant Accounting Policies,” except that all capitation risk arrangements are reported on a gross basis with an adjustment included in eliminations for capitated risk arrangements that are presented on a net basis under GAAP.

Our chief operating decision maker (the “CODM”) is our Chief Executive Officer. The CODM assesses the performance of our reportable segments based on operating gain or loss as defined above. The CODM evaluates net investment income, net gains (losses) on financial instruments, interest expense, depreciation and amortization expense, income taxes and assets, liabilities and equity on a consolidated basis, as these items are managed in a corporate shared service environment and are not the responsibility of segment operating management.

The CODM uses operating gain or loss, developed during the annual budget process, and updated during the periodic forecasting process, as a basis to assess performance and allocate operating and capital resources to each segment.

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Financial data by reportable segment for the three months ended March 31, 2025 and 2024 is as follows:

Carelon
Health BenefitsCarelonRxCarelon ServicesTotalCorporate & OtherEliminationsTotal
Three Months Ended March 31, 2025
Premiums$39,588$—$1,500$1,500$—$(201)$40,887
Product revenue—5,809—5,809——$5,809
Service fees1,8433223226——2,069
Operating revenue - unaffiliated41,4315,8121,7237,535—(201)48,765
Operating revenue - affiliated—4,3044,8139,117165(9,282)—
Operating revenue - total$41,431$10,116$6,536$16,652$165$(9,483)$48,765
Benefit expense$34,393$—$5,319$5,319$10$(4,410)$35,312
Cost of products sold—9,284—9,284—(4,301)$4,983
Operating expense4,821230726956295(772)5,300
Operating gain (loss)$2,217$602$491$1,093$(140)$—$3,170
Three Months Ended March 31, 2024
Premiums$35,382$—$408$408$—$(94)$35,696
Product revenue—4,499—4,499——$4,499
Service fees1,87611971984—2,078
Operating revenue - unaffiliated37,2584,5006055,1054(94)42,273
Operating revenue - affiliated—3,5673,4046,971123(7,094)—
Operating revenue - total$37,258$8,067$4,009$12,076$127$(7,188)$42,273
Benefit expense$30,500$—$3,010$3,010$10$(2,974)$30,546
Cost of products sold—7,373—7,373—(3,548)$3,825
Operating expense4,471171709880201(666)4,886
Operating gain (loss)$2,287$523$290$813$(84)$—$3,016

A reconciliation of reportable segments’ operating revenue to the amounts of total revenues included in our consolidated statements of income for the three months ended March 31, 2025 and 2024 is as follows:

Three Months Ended March 31
20252024
Reportable segments’ operating revenue48,76542,273
Net investment income590465
Net losses on financial instruments(464)(161)
Total revenues$48,891$42,577

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A reconciliation of reportable segments' operating gain to income before income tax expense included in our consolidated statements of income for the three months ended March 31, 2025 and 2024 is as follows:

Three Months Ended March 31
20252024
Income before income tax expense2,7972,939
Net investment income(590)(465)
Net losses on financial instruments464161
Interest expense344265
Amortization of other intangible assets155116
Reportable segments’ operating gain3,1703,016

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