Elevance Health (ELV) Q3 2026 earnings review
Elevance's claims costs fell, but one-off gains lift its outlook
Elevance Health, the Anthem insurer, paid out less in medical claims than it planned and raised its outlook again. Profit per share excluding one-offs rose 16% from a year ago to $6.99. Chief executive Gail Boudreaux's team counts about $1.85 of that as investment and other non-operating gains rather than insurance profit.
| Profit per share, excluding one-offs | $6.99 +16% from a year ago |
|---|---|
| Operating revenue | $50.4 billion +0.7% from a year ago |
| Medical claims as a share of premiums | 90.6% 91.3% a year ago |
| Full-year outlook, profit per share excluding one-offs | Raised $2.00 at least $29.00; by our math about $1.94 for Q4 |
⚖️ Verdict: 🟢 Bullish
The story got better because Elevance lifted the operating base it will grow from next year, on claims that undershot its plan in Medicaid, Medicare Advantage and exchange plans. The bad news: investment gains supply most of the higher full-year figure, and by our math the fourth quarter is now planned to earn less than it was in July, because one-time spending is rising.
The question now is whether lower claims last into 2027, when Elevance has promised at least 12% profit growth from its new base. Either government rates are catching up with medical costs, or this year's gains lean on reserve releases and investment income that will not repeat. Fourth-quarter claims and the January outlook will tell.
🐂 Bull Case
Medical Costs Came In Below Elevance's Plan
Elevance Health pays out most of each premium dollar as medical claims, and the share it pays is the benefit expense ratio. This quarter that share fell to 90.6% of premiums, 0.7 percentage points lower than a year ago, because Medicaid, Medicare Advantage and individual plans "delivered results favorable to our outlook", the insurer said.
That is the first improvement in the ratio after a year of increases, so the repricing and plan exits Elevance began last year are now showing in claims. Chief executive Gail Boudreaux credited "stronger execution across our diversified portfolio", and the lower claims produced more operating profit than the company had planned for the quarter.
This matters because Medicaid and Medicare Advantage forced two outlook cuts in the previous two years, and Boudreaux raised next year's operating base again on this quarter's claims. But one quarter of favorable claims is a reading, not a trend, so the fourth quarter has to repeat it.
What to watch: the full-year Medicaid operating margin, which Elevance states with fourth-quarter results in January. A figure better than the approximately minus 1.75% it has planned for all year would mean state rate increases have caught up with claims.
Carelon Now Earns Twice as Much as Insurance
Carelon is Elevance's health services arm: CarelonRx runs pharmacy benefits and fills prescriptions, and Carelon Services manages behavioral, home and other care for health plans. Together they earned $908 million of operating profit, up 17% from a year ago. The insurance business earned $436 million.
The company credited "strong performance of Carelon Services risk-based solutions and the improved profitability of our specialty pharmacy". But Carelon filled fewer prescriptions and served fewer consumers, so it earned more from each one, mostly from Elevance's own plans. Revenue from outside customers fell by about half last quarter, and this release gives no outside figure.
What to watch: Carelon Services' revenue from unaffiliated customers in the quarterly filing. A figure holding at the second-quarter level would mean the outside business has stabilised and the profit gain is worth more.
The Base for 2027 Growth Rose Again
Elevance promises profit per share growth of at least 12% next year from what it calls its 2026 earnings baseline, which strips out investment gains, other non-operating items and one-time spending. Boudreaux lifted that base to at least $26.75 from $26.00, citing "stronger operating performance".
The raise exceeds the quarter's operating beat of about $0.50 per share, so by our math the extra $0.25 is a better fourth-quarter outlook, which Elevance attributes to an "improved outlook for our Individual ACA business", its plans sold on the health exchanges.
Why it matters: by our math the base now points to about $29.96 for 2027, only about 3% above this year's outlook. That is because Elevance counts $2.25 of this year's profit as non-recurring, so next year must replace those gains with operating profit.
What to watch: the 2027 outlook in January and how much of it rests on Individual ACA plans. A figure at or above $29.96 would mean the operating base is holding.
🐻 Bear Case
Fourth-Quarter Profit Is Planned to Fall 42%
The release speaks of "continued operating momentum", and the full-year outlook for profit per share excluding one-offs rose by $2.00 to at least $29.00. But Elevance earned $6.99 against the roughly $4.59 its July plan pointed to. By our math the raise therefore kept back $0.40 of the beat.
Subtract the nine-month total from the floor and the fourth quarter is left with about $1.94 per share, by our math. Three months ago the same calculation gave $2.38. A year ago the fourth quarter produced $3.33, so the plan has profit falling by more than two-fifths in the final quarter.
Spending is part of the reason. The gap between the outlook and the earnings baseline widened to $2.25 from $1.00. The quarter added about $1.85 of investment and other non-operating gains. By our math that leaves roughly $0.60 per share of extra one-time investment in the fourth quarter, unless Boudreaux's team now assumes smaller non-operating items.
What to watch: fourth-quarter profit per share excluding one-offs against the $1.94 the outlook implies, and the one-time charges reported with it. A result well above that with ordinary spending would mean Elevance set the floor cautiously again.
The Cash Floor Implies a Negative Fourth Quarter
Elevance raised its full-year operating cash flow floor to at least $6.5 billion, but it had already collected $7.5 billion in the first nine months. By our math the outlook therefore allows the fourth quarter to consume about $1.0 billion of cash, against a small inflow in the same quarter last year.
The release credits this quarter's $1.27 billion of operating cash to "favorable working capital dynamics". Behind it, premium and other receivables have grown 14% since December, far faster than revenue. Days in claims payable, how long the insurer takes to pay a bill, rose 3.5 days to 44.9. Both lift cash now and lower it later.
What to watch: fourth-quarter operating cash flow and year-end days in claims payable in January. An outflow near $1 billion with payable days still rising would mean the strong first-half cash was timing, not earnings.
Spending Grew Faster Than Revenue
Lower claims did not reach the bottom line of the insurance business. Adjusted operating expense, the cost of running the company excluding one-off charges, rose to 11.3% of revenue from 10.4% a year ago, an extra $461 million that Elevance attributed to "targeted, one-time investments in capabilities that support our long-term performance".
Health Benefits, the insurance segment, carried most of it: operating profit fell 27% to $436 million even though claims fell. Its margin is now 1.0% of revenue, while Carelon's gain kept the group margin excluding one-offs at 2.7%. In July management placed the full-year expense ratio in the upper half of its 10.6% plus or minus 0.5 point range.
What to watch: the fourth-quarter adjusted operating expense ratio against the 11.1% top of that range. A quarter inside the range would mean the extra spending is winding down as the insurer says.
Risks This Quarter Didn't Answer
Several standing concerns got no new numbers in the release or the presentation, so their readings wait for the quarterly filing or the January outlook.
- Carelon Services outside customers: revenue from unaffiliated clients is not in the release; the filing's segment note will show whether it held after falling by about half last quarter.
- Medicaid market exits: management said in July it would leave more states within 12 to 18 months; no state beyond the District of Columbia is named.
- Medicare Advantage funding and audits: enrollment fell 15.5% from a year ago, but the release says nothing on 2027 rates or the expanded federal audit program.
- Individual ACA plans in 2027: the 2026 outlook improved, but Elevance gave no view of enrollment or health status after enhanced subsidies expired.
- Pharmacy benefit reform, litigation and purchase obligations: no update on rebate pass-through rules, the Medicare risk-adjustment accrual, the Blue Cross antitrust follow-on cases or the Mosaic Health and Liberty Dental put options.
👓 Other Themes
Government Programs Now Cover Fewer Elevance Members
Medicare Advantage membership fell 15.5% from a year ago after Elevance left service areas and plans this year. Medicaid membership fell 4.9% as states kept re-checking eligibility. Premium revenue hardly moved because higher rates offset the lost members, and employer fee-based plans, where the insurer administers benefits without taking risk, were the only line that grew.
Analytics Platform Identified $300 Million in Savings
Elevance highlighted three internal tools. Its Elevate insights platform, which scans claims for emerging cost drivers, has identified more than $300 million of anticipated savings this year, the company said. HealthOS, its system for exchanging records with hospitals, cut documentation requests to health systems by more than 60%. A cancer care program reduced avoidable hospital admissions by 15% among enrolled commercial members. None has a disclosed effect on this quarter's claims.
💲 Other KPIs
Fewer shares, but the buyback has slowed: 217.6 million diluted shares, down 2.7% from a year ago. The decline ran near 4% in late 2025. Elevance bought 0.8 million shares for $330 million in the quarter. About $5.0 billion of authorisation remains.
Investment income keeps climbing: $1,037 million, up 66% from a year ago. The gain was 45% last quarter and smaller before that. Elevance treats the extra as non-recurring and excludes it from its base for next year, but the line has beaten the prior year for three quarters running.
Exchange-plan membership rose to 1.35 million, up 2.4% from June. That is 0.4% below a year ago, while revenue from these plans rose 6.6%. The insurer improved its view of the business for this year, yet its year-end target of at least 1 million members sits well below the current count.
🔮 Guidance
Raised. The floor moved up $2.00 to at least $29.00. That still means profit per share about 4% below 2025. By our math the fourth quarter is left with about $1.94, down from $3.33 a year ago. Third raise this year: +$1.25, +$0.25 and now +$2.00, this one mostly from the quarter's non-operating gain.
Raised. At least $22.00, up from $20.10 in July. Nine-month earnings stand at $21.01. By our math that leaves about $0.99 for the fourth quarter. The gap of $7.00 to the figure excluding one-offs is mostly the Medicare risk-adjustment accrual booked in the first quarter, plus intangible amortisation.
Raised. At least $6.5 billion, up from $6.0 billion in July. Elevance has already collected $7.5 billion this year. By our math the floor therefore allows an outflow of about $1.0 billion in the fourth quarter, against a small inflow a year ago. The floor has risen twice, by $0.5 billion each time, and each time after cash already collected had passed it.
Raised. At least $26.75, up from $26.00 in July, as the starting point for next year's growth. The base excludes non-operating gains and one-time spending, and it has moved up in each quarter this year: +$0.25, +$0.25, +$0.75. The latest move exceeds the quarter's stated operating beat of about $0.50.
Unchanged. At least 12% growth from the new base, which by our math points to about $29.96 for 2027. Elevance has repeated the promise every quarter since October 2025; what changed is the base beneath it, which has risen in each of those quarters.
Unchanged. $1.72 per share, payable December 18, the same as each quarter this year and one cent above a year ago. With 217.6 million shares, by our math the payment costs about $374 million a quarter, close to the $373 million paid in the third quarter.
❓ Key Questions
What did Carelon Services earn from outside customers?
Carelon's profit rose 17%, but the release gives no revenue from unaffiliated clients, which fell by about half last quarter. Without it, readers cannot tell whether the growth comes from outside the group or from Elevance's own plans.
Why does the cash outlook allow a negative fourth quarter?
The $6.5 billion floor sits $1.0 billion below cash already collected. The release cites working capital timing; it does not say how much reverses, or whether the state pass-through payment mentioned in July has been repaid.
Which Medicaid markets will Elevance leave, and how large are they?
In July management said it would exit more states within 12 to 18 months. No state beyond the District of Columbia is named, so the membership and revenue at stake remain unknown.
Is 2026 revenue still planned to decline?
In January Elevance planned a low-single-digit fall in operating revenue for 2026. Nine-month revenue is up 1.0% and the release does not update the figure, so the fourth-quarter revenue the plan assumes is unclear.
How much one-time spending lands in the fourth quarter?
By our math the gap between the outlook and the earnings baseline implies about $0.60 per share of extra one-time investment in the fourth quarter. The release does not size that spending or say when it stops.