Q1 2025 Earnings Summary
- Disciplined cost management and stable margin outlook: Management highlighted that Medicare Advantage trends remain consistent with expectations and that group MA utilization is stable—supporting strong member retention and earnings sustainability ( ).
- Robust Carelon Services growth: Executives noted over 60% quarterly growth in Carelon Services—with expectations to track at or above 50% growth for the year—which diversifies revenue and enhances long‐term profitability ( ).
- Proactive member engagement strategy: The company emphasized early engagement with new members through accelerated wellness visits and improved risk adjustment, which supports long-term retention and helps stabilize future cost trends ( ).
- Membership Effectuation Concerns: The call noted lower-than-expected premium payment effectuation rates, with expected mid-single-digit membership attrition in early Q2, suggesting potential weakness in ACA membership retention that could pressure future earnings .
- Elevated Utilization Pressures: Higher-than-anticipated flu and respiratory-related costs increased benefit expense ratios by 15–20 basis points in Q1, indicating that sustained cost pressures could negatively affect margins if seasonal trends persist .
- Uncertainty in Medicaid Rate Renewals: Discussions on upcoming Medicaid rate updates remain in early stages, with only about one-third of the membership under review for July renewals, leaving potential margin improvements uncertain and possibly delaying stabilization in Medicaid profitability .
| Metric | YoY Change | Reason |
|---|---|---|
Total Operating Revenue | +15% (from $42,273M to $48,765M) | Increases in premium rate adjustments, membership growth (particularly Medicare Advantage and Individual ACA), and strong performance in key segments like CarelonRx and Carelon Services drove the 15% rise, building on trends seen in Q1 2024 vs.. |
Total Revenue | +15% (from $42,577M to $48,891M) | The similar 15% YoY uplift reflects the combined impact of premium increases, acquisition-driven product revenue boosts, and operational expansion across segments, continuing the positive growth observed in the preceding period vs.. |
Health Benefits | +11% (from $37,258M to $41,431M) | The 11% increase is attributed to improved premium yields and targeted membership mix shifts, contrasting with previous period pressures, with growth driven largely by strong performance in enrolled segments despite previously lower premiums in Q1 2024 vs.. |
CarelonRx | +25% (from $8,067M to $10,116M) | A robust 25% growth resulted from higher prescription volumes, the beneficial impact of recent and ongoing pharmacy acquisitions, and an enhanced product revenue mix, building on momentum from Q1 2024 vs.. |
Carelon Services | +63% (from $4,009M to $6,536M) | The dramatic 63% jump is driven by the expansion of risk-based products, accelerated growth from strategic acquisitions (e.g., CareBridge), and broader service expansion initiatives, marking a significant step up from Q1 2024 levels vs.. |
Operating Cash Flow | -49% (from $1,978M to $1,017M) | A nearly 50% decline reflects timing-related working capital changes and adjustments in cash collections compared to Q1 2024, highlighting the sensitivity of operating cash flow to short-term balance sheet shifts vs.. |
Balance Sheet – Total Assets | +7% (from $111,894M to $119,717M) | The 7% increase in total assets is primarily driven by a significant rise in premium and other receivables, along with continued growth in long-term investments, reflecting ongoing acquisition activity and improved receivables management since Q1 2024 vs.. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted Diluted EPS | FY 2025 | $34.15 to $34.85 | $34.15 to $34.85 | no change |
Operating Cash Flow | FY 2025 | $1 billion or 1x GAAP net income | approximately $8 billion | raised |
Earnings Seasonality | FY 2025 | Just over 60% of adjusted EPS expected in the first half with slightly more than half in Q1 | More than 60% of adjusted EPS expected in the first half | no change |
Commercial Risk-Based Membership | FY 2025 | no prior guidance | 4.9 million to 5 million members | no prior guidance |
Medicaid Margins | FY 2025 | no prior guidance | Expected to remain flat year-over-year before improving in FY 2026 | no prior guidance |
Days in Claims Payable (DCP) | FY 2025 | no prior guidance | Trend towards the low 40s | no prior guidance |
Medicare Margins | FY 2025 | no prior guidance | Expected to remain stable in FY 2025 | no prior guidance |
Operating Revenue Growth | FY 2025 | Expected to grow in the high single to low double-digit percent range | no current guidance | no current guidance |
Consolidated MLR | FY 2025 | Expected to be around 89.1%, plus or minus 50 basis points | no current guidance | no current guidance |
Adjusted Operating Expense Ratio | FY 2025 | Expected to be 10.4%, plus or minus 50 basis points | no current guidance | no current guidance |
Share Repurchases | FY 2025 | Planned allocation of approximately $2.3 billion | no current guidance | no current guidance |
Medicare Membership | FY 2025 | Total Medicare membership expected to be 45.8M to 46.6M; Medicare Advantage membership expected to grow to 2.2M to 2.25M | no current guidance | no current guidance |
Dividend | FY 2025 | A 5% increase in the quarterly dividend to $1.71 per share | no current guidance | no current guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Operating Revenue Growth | Q1 2025 | Expected to grow in the high single to low double-digit percent range | 15.3% YoY growth (from $42,273 millionIn Q1 2024 to $48,765 millionIn Q1 2025) | Surpassed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Medicaid margins | Consistently discussed as challenged by timing mismatches and elevated cost trends – Q4 2024 noted back‐end loading with rate updates , Q3 2024 highlighted significant compression and timing disconnects , and Q2 2024 stressed active engagement with states on rate timing | Q1 2025 reported margins remain elevated but are decelerating with expectations of stabilization later in the year and ongoing efforts to align reimbursement rates | Recurring emphasis on Medicaid challenges continues; sentiment remains cautious with proactive state collaboration suggesting eventual stabilization. |
Medicare Advantage membership growth and retention strategies | Q4 2024 emphasized 7–9% growth targets and strong retention driven by local strategies and low-premium designs ; Q3 2024 discussed market exits and focus on high-priority products, including D-SNP ; Q2 2024 underlined disciplined, profitable growth and strategic alignment between Medicare and Medicaid | Q1 2025 highlighted a targeted membership increase of 99,000 with a focus on early engagement (annual wellness visits and risk assessments) and sustainable retention | Consistent focus on MA growth and retention with Q1 2025 reinforcing early engagement; overall sentiment remains positive with additional emphasis on precise targeting and engagement practices. |
Carelon Services and CarelonRx growth impact and business mix shifts | Q4 2024 underscored robust Carelon Services growth (30%+ CAGR, shift from fee-based to risk-based models) and mid-teens growth for CarelonRx bolstered by strategic acquisitions (e.g., CareBridge, Kroger Specialty Pharmacy) ; Q3 2024 provided evidence of 4x external growth and highlighted key acquisitions ; Q2 2024 focused on strong revenue and margin growth with strategic integration of acquisitions | Q1 2025 reported over 60% growth in Carelon Services (with at least 50% sustained growth for the year) and strong performance in CarelonRx driven by recent acquisitions and a noted shift in business mix (lower Medicaid, higher ACA) | Acceleration in growth metrics and integration efforts continue; the business mix adjustment aligns with strategic initiatives, indicating robust momentum and positive impact on future value. |
Cost management and utilization pressures (including seasonal effects) | Q4 2024 described elevated but priced-in cost trends across Medicaid, Medicare, and Commercial segments with clear seasonal drivers ; Q3 2024 noted increased Medicaid expense ratios (up 270 bps) and recognized seasonal Q4 effects ; Q2 2024 emphasized disciplined expense management, seasonal impacts (leap year effects) and working capital adjustments | Q1 2025 reiterated a commitment to disciplined cost management; utilization pressures remain elevated but align with guidance, with seasonal flu effects causing higher early-quarter utilization that moderated later – benefit expense ratio impact estimated at 15–20 bps | Consistent cost management strategies continue; Q1 2025 shows expected seasonal impacts being managed effectively, maintaining stability in projected financial metrics. |
Member engagement and ACA membership retention concerns | Q4 2024 highlighted digital enhancements (e.g., Sydney app) improving engagement and expressed optimism over ACA retention despite subsidy risks ; Q2 2024 focused on robust engagement during coverage transitions and improved persistency in the ACA segment ; Q3 2024 offered limited specific commentary but noted ACA as a growth pillar | Q1 2025 emphasized proactive early engagement through wellness visits and risk assessments; however, it also flagged potential moderation with ACA renewals (11% sequential growth with projected mid-single-digit attrition in early Q2) | While member engagement remains a priority, Q1 2025 shows a nuanced shift with proactive initiatives but emerging caution on ACA retention, indicating heightened attention to evolving member behaviors. |
Commercial business performance and pricing strategy | Q4 2024 reported stable performance with disciplined pricing adjustments and strong retention; Q3 2024 noted robust growth, expanding ACA footprints, and confidence in pricing discipline ; Q2 2024 demonstrated solid membership additions and emphasized ongoing pricing repricing initiatives yielding margin recovery | Q1 2025 maintained confidence in integrated Commercial offerings with expansion into new states and a continued focus on operational excellence, though detailed pricing specifics were less pronounced | The narrative is consistent across periods with steady growth and disciplined pricing; Q1 2025 reinforces strong performance without significant strategic shifts, maintaining positive outlook. |
Operating cash flow and working capital adjustments | Q2 2024 provided detailed commentary on cash flow declines (year-to-date $2.4B, impacted by timing items and Medicaid attrition) with expectations of a full-year flow slightly north of $7B ; Q3 2024 mentioned an expected full-year operating cash flow of $4.5B, with no elaboration on working capital; Q4 2024 noted annual operating cash flow of $5.8B with stable days in claims payable | Q1 2025 reported quarterly operating cash flow of $1B affected by timing items, with an outlook for a full-year operating cash flow of approximately $8B once these items reverse | Discussion on operating cash flow and working capital has become less prominent; Q1 2025 downplays the operational minutiae while reaffirming a strong full-year cash flow outlook, suggesting refinement in messaging over time. |
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Membership Attrition
Q: Q2 membership attrition expectations?
A: Management expects mid-single-digit attrition early in Q2 with stabilization for the rest of 2025, which supports our reaffirmed EPS guidance. -
Medicaid Costs
Q: How did Medicaid MLR change?
A: Medicaid MLR decelerated in Q1 due to stable membership and workday dynamics, with improvements anticipated later in the year. -
Part D Utilization
Q: What’s the Part D utilization trend?
A: Part D now follows a seasonality pattern similar to our broader medical benefits, showing strong early performance and expected shifts as members reach catastrophic phases later. -
Flu Impact
Q: How much did flu affect MLR?
A: Flu-related costs added roughly 15-20 basis points to the benefit expense ratios in Q1, with impacts expected to normalize in Q2. -
Carelon Growth
Q: How is Carelon Services performing?
A: Carelon Services grew over 60% in Q1, with balanced internal and external growth promising robust continuation throughout the year. -
Risk Model Effect
Q: What’s the V28 risk model effect?
A: The V28 changes were fully anticipated and factored into planning, showing no unexpected stacking effects as the focus remains on strong member engagement. -
New Member Engagement
Q: How’s new member engagement impacting care?
A: Early, proactive outreach—especially via annual wellness visits—is enhancing primary care activity and ensuring accurate health assessments. -
RAF Scores
Q: How do new member RAF scores compare?
A: New member RAF score onboarding is tracking at historical levels, assuring consistent and sound risk adjustment practices. -
Medicaid Rates
Q: Any update on July Medicaid rates?
A: While January and April renewals met expectations, discussions for July rates have just begun, and further details will be shared as they evolve. -
MA Bid Strategy
Q: Is lifetime value key for MA bids?
A: Absolutely—our strategy leverages lifetime member value by targeting complex, high-cost segments and aligning them with enhanced Carelon services. -
Medicare Trends
Q: What underpins Medicare guidance?
A: Stable Medicare margins are expected, driven by high retention, disciplined cost management, and a favorable mix of membership. -
Group MA Utilization
Q: Any changes in group MA utilization?
A: Utilization in group MA has remained consistent with expectations, reflecting stable and sustainable performance across our portfolio. -
New Member Risk Coding
Q: How is new risk coding managed?
A: We are actively managing new Medicare member risk coding in line with revised Part D seasonality, ensuring accurate documentation and forecast alignment. -
MLR Seasonality Q2
Q: What factors affect Q2 MLR outlook?
A: Seasonality influenced by a favorable workday calendar and Part D design changes should align Q2 MLR more closely with our standard medical benefits model. -
Better MLR Performance
Q: What drove improved MLR?
A: Factors such as premium tax adjustments and consistent Part D performance led to the better-than-expected MLR in Q1, without impacting overall earnings. -
Overall Medicare Costs
Q: Are Medicare costs unusual this year?
A: Medicare costs remain elevated but manageable and are consistent with previous guidance, reflecting steady operational execution.
Research analysts covering Elevance Health.