What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-20 compared with 2022-04-20 · 205 added, 142 removed, 305 unchanged (53% of the section changed)

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the accompanying consolidated financial statements and notes, our consolidated financial statements and notes as of and for the year ended December 31, 2021 and the MD&A included in our 2021 Annual Report on Form 10-K.

References to the terms “we,” “our,” “us,” or “Anthem” used throughout this MD&A refer to Anthem, Inc., an Indiana corporation, and unless the context otherwise requires, its direct and indirect subsidiaries.

On May 18, 2022, our shareholders approved a proposal to amend our amended and restated articles of incorporation to change our name from Anthem, Inc.

to Elevance Health, Inc., which amendment and name change went into effect on June 27, 2022.

We began operating as Elevance Health, Inc.

and trading under our new ticker symbol “ELV” on June 28, 2022.

References to the terms “we,” “our,” “us,” or “Elevance Health” used throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) 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.

Results of operations, cost of care trends, investment yields and other measures for the three months ended March 31, 2022 are not necessarily indicative of the results and trends that may be expected for the full year ending December 31, 2022, or any other period.

We are one of the largest health benefits companies in the United States in terms of medical membership, serving nearly 47 million medical members through our affiliated health plans as of March 31, 2022.

This MD&A should be read in conjunction with the accompanying consolidated financial statements and notes, our consolidated financial statements and notes as of and for the year ended December 31, 2021 and the MD&A included in our 2021 Annual Report on Form 10-K.

Results of operations, cost of care trends, investment yields and other measures for the three and six months ended June 30, 2022 are not necessarily indicative of the results and trends that may be expected for the full year ending December 31, 2022, or any other period.

Elevance Health is a health company with the purpose of improving the health of humanity.

We are the largest health insurer in the United States in terms of medical membership, serving over 47 million medical members through our affiliated health plans as of June 30, 2022.

We are an independent licensee of the Blue Cross and Blue Shield Association (“BCBSA”), an association of independent health benefit plans.

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In addition, we conduct business through arrangements with other BCBS licensees as well as other strategic partners.

Through our subsidiaries, we also serve customers in numerous states as AIM Specialty Health, Amerigroup, Aspire Health, Beacon, CareMore, Freedom Health, HealthLink, HealthSun, MMM, Optimum HealthCare, Simply Healthcare, and/or UniCare.

Through our subsidiaries, we also serve customers in numerous states as AIM Specialty Health, Amerigroup, Aspire Health, Beacon, CareMore, Freedom Health, HealthLink, HealthSun, Integra Managed Care, MMM, Optimum HealthCare, Simply Healthcare, and/or UniCare.

We offer pharmacy benefits management (“PBM”) services through our IngenioRx, Inc.

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We are licensed to conduct insurance operations in all 50 states, the District of Columbia and Puerto Rico through our subsidiaries.

As part of our name change to Elevance Health, on June 15, 2022 we announced that over the next several years we will organize our brand portfolio into the following core go-to-market brands:

• Anthem Blue Cross/Anthem Blue Cross and Blue Shield — represents our existing Anthem-branded and affiliated Blue Cross and/or Blue Shield licensed plans;

• Wellpoint — we intend to unite select non-BCBSA licensed Medicare, Medicaid and Commercial plans under the Wellpoint name;

• Carelon — this brand will bring together our healthcare brands and capabilities, including our Diversified Business Group and IngenioRx business under a single brand name.

We now refer to our Diversified Business Group as Carelon.

In January 2023, IngenioRx will become CarelonRx.

There are currently no segment changes associated with this branding strategy.

For additional information about our organization, see Part I, Item 1, “Business” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2021 Annual Report on Form 10-K.

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The COVID-19 pandemic continues to impact the global economy, cause market instability and uncertainty in the labor market and put pressure on the healthcare system, and it has impacted, and will likely continue to impact, our membership, benefit expense and members behavior, including how members access healthcare services.

We continue to assist our customers, providers, members and communities in addressing the effects of the COVID-19 pandemic, including by providing expanded benefit coverage for COVID-19 diagnostic tests and vaccine administration and taking steps to increase vaccinations by enabling, educating, and encouraging vaccine acceptance among our members as well as in the communities in which we operate.

COVID-19 care, testing and vaccine administration, and the impact of new COVID-19 variants, have resulted in increased medical costs for us in the first quarter of 2022.

In the first quarter of 2022, our Medicaid membership continued to grow as a result of the temporary suspension of eligibility recertification in response to the COVID-19 pandemic, which we expect will remain suspended at least until the third quarter of 2022.

Once eligibility recertification resumes, which may not occur until 2023 in certain states, we expect a decline in our Medicaid membership.

At the same time, we expect growth in our Commercial risk-based and fee-based plans, including through Individual on-exchange products through state- or federally-facilitated marketplaces (the “Public Exchange”), as members exiting Medicaid in our fourteen Commercial states seek coverage elsewhere.

See “Business Trends - Medical Cost Trends ” below for a discussion of the impact of COVID-19 on our healthcare costs.

See “Business Trends” below for a discussion of the impact of COVID-19 on our pricing and medical costs.

The COVID-19 pandemic continues to evolve and the full extent of its impact will depend on future developments, which are highly uncertain and cannot be predicted at this time.

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Business Trends

We made the decision to modestly expand our participation in the “Public Exchange” for 2022 after also expanding in 2021.

We made the decision to modestly expand our participation in the Individual on-exchange products through state- or federally-facilitated marketplaces (the “Public Exchange”) for 2022 after also expanding in 2021.

As a result, for 2022 we are offering Public Exchange products in 122 of the 143 rating regions in which we operate, in comparison to 103 of 143 rating regions in 2021.

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We work to mitigate these trends through various medical management programs such as care and condition management, program integrity and specialty pharmacy management and utilization management, as well as benefit design changes.

There are many drivers of medical cost trends that can cause variance from our estimates, such as changes in the level and mix of services utilized, regulatory changes, aging of the population, health status and other demographic characteristics of our members, epidemics, pandemics, advances in medical technology, new high-cost prescription drugs, and healthcare provider or member fraud.

At its onset, the COVID-19 pandemic caused a decrease in utilization of non-COVID-19 health services, which decreased our claim costs in 2020.

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The Omicron surge quickly declined during the first quarter of 2022, with COVID-19 inpatient authorizations, provider-based tests, visits and vaccinations all decreasing to lower levels by the end of the first quarter of 2022;

concurrently, non-COVID-19 healthcare utilization recovered from lower levels earlier in the quarter.

In 2022, we anticipate additional claim costs for new pharmaceutical treatments for COVID-19 and compliance with governmental regulations on COVID-19 testing reimbursement.

concurrently, non-COVID-19 healthcare utilization throughout the second quarter of 2022 recovered from lower levels earlier in the year.

For the remainder of 2022, we anticipate additional claim costs for new pharmaceutical treatments for COVID-19 and compliance with governmental regulations on COVID-19 testing reimbursement.

We expect claims costs related to COVID-19 testing, treatment and hospitalizations will continue throughout 2022 even during periods with lower COVID-19 infection and confirmed case activity.

The ongoing cost and volume of

covered services related to the COVID-19 pandemic may have a material adverse effect on our future claim costs.

The ongoing cost and volume of covered services related to the COVID-19 pandemic may have a material adverse effect on our future claim costs.

We continue to closely monitor the COVID-19 pandemic and its impacts on our business, financial condition, results of operations and medical cost trends.

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• mandates related to prior authorizations and payment levels to providers, additional consumer enrollment windows and an increased ability to provide telehealth services.

At the end of the currently enacted public health emergency, which has been extended until October 2022, Medicaid eligibility recertification will resume.

Recertifications could begin as early as November 2022, but may not occur until 2023 in certain states, and we expect a decline in our Medicaid membership once recertification resumes.

At the same time, we expect growth in our Commercial risk-based and fee-based plans, including through the Public Exchange, as members exiting Medicaid in our fourteen Commercial states seek coverage elsewhere.

Beginning in July 2022, the health plan price transparency regulations issued in October 2020 by the U.S.

Departments of Health and Human Services, Labor and Treasury (the “Health Plan Transparency Rule”) will require us to disclose, on a monthly basis, detailed pricing information regarding negotiated rates for all covered items and services between the plan or issuer and in-network providers and historical payments to, and billed charges from, out-of-network providers.

Departments of Health and Human Services, Labor and Treasury (the “Health Plan Transparency Rule”) require us to disclose, on a monthly basis, detailed pricing information regarding negotiated rates for all covered items and services between the plan or issuer and in-network providers and historical payments to, and billed charges from, out-of-network providers.

Additionally, beginning in 2023, we will be required to make available to members personalized out-of-pocket cost information and the underlying negotiated rates for 500 covered healthcare items and services, including prescription drugs.

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The American Rescue Plan Act of 2021, (the “Rescue Plan”), which was enacted in March 2021, contains several health-related provisions that have impacted our business, including expansion of premium tax credits for our Public Exchange business and full subsidization of the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) continuation coverage for those who were involuntarily terminated or had their work hours reduced.

The Rescue Plan’s premium tax credit provisions became effective in January 2021, while the COBRA premium subsidization was effective from April 2021 through September 2021.

The Rescue Plan’s premium tax credit

provisions became effective in January 2021, while the COBRA premium subsidization was effective from April 2021 through September 2021.

Expiration of the premium tax credit provisions on December 31, 2022, unless extended by Congress, may have an adverse effect upon our business.

Since its enactment in 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended (collectively, the “ACA”), has introduced new risks, regulatory challenges and uncertainties, has impacted our business model and strategy and has required changes in the way our products are designed, underwritten, priced, distributed and administered.

The ACA has evolved and various challenges since its enactment have introduced increased uncertainty to our business.

In June 2021, the U.S.

Supreme Court issued its opinion and dismissed the last legal challenge to the constitutionality of the ACA, leaving the law intact.

We expect the ACA will continue to significantly impact our business and results of operations, including pricing, minimum medical loss ratios and the geographies in which our products are available, and as a result of future modifications of, and guidance by federal regulatory

agencies related to, the ACA and our businesses more broadly.

We will continue to evaluate the impact of the ACA as any further developments occur.

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Business and Operational Matters

On March 10, 2022, we announced our intent to change our name to better reflect our business and our journey from a traditional health benefits organization to a lifetime, trusted health partner.

At our annual meeting of shareholders on May 18, 2022, our shareholders will vote on a proposed amendment to our amended and restated articles of incorporation to change our name to Elevance Health, Inc.

Shareholders of record on March 17, 2022 are entitled to vote.

If approved by our shareholders, we expect the name change to occur in the second quarter of 2022.

On November 10, 2021, we announced our entrance into an agreement with Personal Touch Holding Corporation to acquire Integra Managed Care (“Integra”).

As mentioned above, we began operating as Elevance Health on June 28, 2022.

This change is intended to better reflect our business and our journey from a traditional health benefits organization to a lifetime, trusted health partner.

Elevance Health supports health at every stage, offering health plans and clinical, behavioral, pharmacy and complex-care solutions that promote whole health.

On May 5, 2022, we completed our acquisition of Integra Managed Care (“Integra”).

Integra is a managed long-term care plan that serves New York state Medicaid members, enabling adults with long-term care needs and disabilities to live safely and independently in their own homes.

The acquisition is expected to close by the end of the second quarter of 2022 and is subject to standard closing conditions and customary approvals.

On June 29, 2021, we completed our acquisition of MMM Holdings, LLC (“MMM”) and its Medicare Advantage plan, Medicaid plan and other affiliated companies from InnovaCare Health, L.P.

On June 29, 2021, we completed our acquisition of MMM Holdings, LLC (“MMM”) and its Medicare Advantage plan, Medicaid plan and other affiliated companies.

MMM is a Puerto Rico-based integrated healthcare organization and seeks to provide its Medicare Advantage and Medicaid members with a whole health experience through its network of specialized clinics and wholly owned independent physician associations.

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On April 28, 2021, we completed our acquisition of myNEXUS, Inc.

(“myNEXUS”) from WindRose Health Investors.

myNEXUS is a comprehensive home-based nursing management company for payors and, at the time of acquisition, delivered integrated clinical support services for Medicare Advantage members across twenty states.

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In the fourth quarter of 2021, we identified additional office space reductions and related fixed asset impairments due to the continuing COVID-19 pandemic and recorded a charge of $202 in selling general and administrative expenses.

For additional information, see Note 4, “Business Optimization Initiatives” and Note 16, “Leases,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

For additional information, see Note 4, “Business Optimization Initiatives,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Litigation Matters

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Generally, the lawsuits in the BCBSA Litigation challenge elements of the licensing agreements between the BCBSA and the independently owned and operated Blue plans.

The cases were brought by two putative nationwide classes of plaintiffs, health plan

subscribers and providers, and the Subscriber Settlement Agreement applies only to the putative subscriber class.

The cases were brought by two putative nationwide classes of plaintiffs, health plan subscribers and providers, and the Subscriber Settlement Agreement applies only to the putative subscriber class.

No settlement agreement has been reached with the provider plaintiffs at this time, and the defendants continue to contest the consolidated cases brought by the provider plaintiffs.

If approved by the Court, the Subscriber Settlement Agreement will require the defendants to make a monetary settlement payment, our portion of which is estimated to be $594, and will include certain terms imposing non-monetary obligations on the defendants.

As of March 31, 2022, the liability balance accrued for our estimated remaining payment obligation was $507, net of payments made.

As of June 30, 2022, the liability balance accrued for our estimated remaining payment obligation was $507, net of payments made.

All terms of the Subscriber Settlement Agreement are subject to approval by the Court before they become effective.

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Selected Operating Performance

For the twelve months ended March 31, 2022, total medical membership increased by 3.3 million, or 7.5%.

The increase was driven primarily by organic growth in our Medicaid business due to the continued temporary suspension of eligibility recertification during the COVID-19 pandemic, the acquisitions of MMM in the second quarter of 2021 and Ohio Medicaid members in the first quarter of 2022 through the purchase of a Medicaid contract and the launch of our HealthyBlue managed care alliance in North Carolina in the third quarter of 2021.

Our Medicare Advantage membership also increased due to organic growth.

Increases in our Commercial & Specialty Business segment were driven primarily by new sales exceeding lapses in both our Group fee-based and our Group risk-based membership.

Operating revenue for the three months ended March 31, 2022 was $37,886, an increase of $5,788, or 18.0%, from the three months ended March 31, 2021.

This increase in operating revenue was primarily driven by higher premium revenue due mainly to organic membership growth in our Medicaid business resulting primarily from the continued temporary suspension of eligibility recertification during the COVID-19 pandemic.

Other contributors to the operating revenue increase were the acquisition of MMM in the second quarter of 2021, the acquisition of Ohio Medicaid members in the first quarter of 2022 through the purchase of a Medicaid contract and the retroactive reinstatement of a Medicaid directed payment program.

Membership increases and rate increases designed to cover medical cost trends in our Medicare Advantage and Commercial risk-based businesses also provided additional premium revenue.

Product revenue increased due to growth in integrated pharmacy members in our IngenioRx segment which also contributed to the overall operating revenue increase.

Net income for the three months ended March 31, 2022 was $1,795, an increase of $128, or 7.7%, from the three months ended March 31, 2021.

This increase in net income was primarily due to a net operating gain increase from our business units and increased net investment income, partially offset by increased losses on financial instruments, increased interest expense, increased amortization of intangibles and increased income tax expense due to higher income before income tax expense.

Our fully-diluted shareholders’ earnings per share (“EPS”) was $7.39 for the three months ended March 31, 2022, which represented a 10.1% increase from EPS of $6.71 for the three months ended March 31, 2021.

Our diluted shares for the three months ended March 31, 2022 were 244.4, a decrease of 3.8, or 1.5%, compared to the three months ended March 31, 2021.

The increase in EPS resulted primarily from the increase in net income, as well as from the lower shares outstanding during the three months ended March 31, 2022.

Operating cash flow for the three months ended March 31, 2022 and 2021 was $2,541 and $2,505, respectively.

The minor increase in operating cash flow was due to higher net income in 2022, partially offset by the impact of working capital changes year over year.

The following table presents our medical membership by reportable segment and customer type as of March 31, 2022 and 2021.

For the twelve months ended June 30, 2022, total medical membership increased by 2.7 million, or 6.1%.

The Government Business segment increase was driven primarily by the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic.

In addition, Medicaid membership growth was impacted by the launch of our Healthy Blue managed care alliance in North Carolina in the third quarter of 2021, the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022 and the acquisition of Integra in the second quarter of 2022, as well as organic growth in our Medicare Advantage business.

Our Commercial & Specialty Business segment experienced organic growth in both our Group fee-based and Group risk-based membership as sales exceeded lapses.

BlueCard membership increased due to favorable membership activity at other BCBSA plans whose members reside in or travel to our licensed areas.

Individual membership increased due to our Public Exchange expansion in 2022.

Operating revenue for the three months ended June 30, 2022 was $38,482, an increase of $5,203, or 15.6%, from the three months ended June 30, 2021.

Operating revenue increased primarily as a result of higher premium revenue in our Medicaid business, including due to membership growth from the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic, the acquisition of MMM in the second quarter of 2021, the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022, as well as from premium rate increases to cover medical cost trends and membership growth in our Medicare Advantage and Commercial & Specialty Business risk-based businesses.

The increase in operating revenue was further attributable to increased pharmacy product revenue in our IngenioRx segment, the acquisition of Integra in the second quarter of 2022 and the launch of our Healthy Blue managed care alliance in North Carolina in the third quarter of 2021.

Operating revenue for the six months ended June 30, 2022 was $76,368, an increase of $10,991, or 16.8%, from the six months ended June 30, 2021.

This increase in operating revenue was primarily driven by higher premium revenue in our Medicaid business, including due to membership growth from the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic, the acquisition of MMM in the second quarter of 2021 and the retroactive reinstatement of a Medicare directed payment program.

Membership growth and premium rate increases to cover medical cost trends in our Medicare Advantage and Commercial & Specialty Business risk-based businesses also contributed to higher premium revenue.

The increase in operating revenue was further attributable to increased pharmacy product revenue in our IngenioRx segment, the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022, the launch of our Healthy Blue managed care alliance in North Carolina in the third quarter of 2021 and the acquisition of Integra in the second quarter of 2022.

Net income for the three months ended June 30, 2022 was $1,650, a decrease of $151, or 8.4%, from the three months ended June 30, 2021.

The decrease in net income was primarily due to losses on financial instruments in 2022, as compared

to gains on financial instruments in 2021, as well as increased intangible amortization in 2022 related to recent acquisitions and the rebranding of our products, as we expect to retire certain trade names in the future.

These decreases were partially offset by operating gain increases in each of our business units.

Net income for the six months ended June 30, 2022 was $3,445, a decrease of $23, or 0.7%, from the six months ended June 30, 2021.

The decrease in net income was primarily due to losses on financial instruments in 2022, as compared to gains on financial instruments in 2021, as well as increased intangible amortization in 2022 related to recent acquisitions and the rebranding of our products, as we expect to retire certain trade names in the future.

These decreases were partially offset by a net operating gain increase from our business units.

Our fully-diluted shareholders’ earnings per share (“EPS”) was $6.79 for the three months ended June 30, 2022, which represented a 6.3% decrease from EPS of $7.25 for the three months ended June 30, 2021.

Our diluted shares for the three months ended June 30, 2022 were 243.4, a decrease of 4.0, or 1.6%, compared to the three months ended June 30, 2021.

The decrease in EPS for the three months ended June 30, 2022 resulted primarily from reduced shareholders' net income, partially offset by the impact of fewer diluted shares outstanding.

Our fully-diluted shareholders’ EPS was $14.18 for the six months ended June 30, 2022, which represented a 1.6% increase from fully-diluted EPS of $13.95 for the six months ended June 30, 2021.

Our diluted shares for the six months ended June 30, 2022 were 243.9, a decrease of 3.9, or 1.6%, compared to the six months ended June 30, 2021.

The increase in EPS for the six months ended June 30, 2022 resulted primarily from the impact of fewer diluted shares outstanding.

Operating cash flow for the six months ended June 30, 2022 and 2021 was $4,993 and $4,188, respectively.

The increase was primarily due to higher net income in 2022, excluding the non-cash impact of losses/gains on investments, as we recognized realized losses during the first six months of 2022 compared to realized gains in the first six months of 2021.

The increase was further attributable to the timing of working capital changes.

The following table presents our medical membership by reportable segment and customer type as of June 30, 2022 and 2021.

Also included below is other membership by product.

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Medical Membership

Total medical membership increased in both our Commercial & Specialty Business and Government Business segments.

The largest increase was in our Government Business segment, primarily due to organic Medicaid membership growth resulting from the continued temporary suspension of eligibility recertification during the COVID-19 pandemic, the acquisitions of MMM in the second quarter of 2021 and Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022, as well as the launch of our HealthyBlue managed care alliance in North Carolina in the third quarter of 2021.

Our Medicare Advantage membership also increased due to organic growth.

Increases in our Commercial & Specialty Business segment were driven primarily by new sales exceeding lapses in both our Group fee-based and Group risk-based membership.

BlueCard membership increases and Individual membership increases due to our Public Exchange expansion in 2022 also contributed to our overall membership increases.

Medical membership increased in both our Government Business and Commercial & Specialty Business segments primarily due to organic growth.

The Government Business segment organic growth was primarily driven by the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic.

Our Commercial & Specialty Business segment experienced organic growth in both our Group fee-based and Group risk-based membership as sales exceeded lapses.

BlueCard membership increased due to favorable membership activity at other BCBSA plans whose members reside in or travel to our licensed areas.

Individual membership increased due to our Public Exchange expansion in 2022.

Other Membership

Our other membership can be impacted by changes in our medical membership, as our medical members often purchase our other products that are ancillary to our health business.

Life and disability membership decreased primarily due to lapses and negative in-group change exceeding membership increases in our Group fee-based business.

Dental membership

increased primarily due to sales exceeding lapses in our Group risk-based accounts and penetration increases in our Federal Employees Health Benefits (“FEHB”) program, partially offset by the loss of a significant Group fee-based account.

Life and disability membership increased primarily due to new

sales of disability products, partially offset by lapses and negative in-group change of life membership.

Dental membership increased primarily due to sales exceeding lapses in our Group risk-based accounts and penetration increases in our Federal Employees Health Benefits (“FEHB”) program, partially offset by the loss of a significant Group fee-based account.

Dental administration membership increased primarily due to increased sales to other BCBS plans associated with the FEHB program.

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Consolidated Results of Operations

Our consolidated summarized results of operations and other financial information for the three months ended March 31, 2022 and 2021 are as follows:

Our consolidated summarized results of operations and other financial information for the three and six months ended June 30, 2022 and 2021 are as follows:

Three Months Ended

2022 2021 Change % Change

June 30 Six Months Ended

June 30 Change

Three Months Ended

June 30 Six Months Ended

2021 2022 vs.

2022 2021 2022 2021 $ % $ %

Total operating revenue $ 38,482 $ 33,279 $ 76,368 $ 65,377 $ 5,203 15.6 % $ 10,991 16.8 %

Net investment income 381 400 741 691 (19) (4.8) % 50 7.2 %

Net losses on financial instruments (151) (4) (147) NM

Net (losses) gains on financial instruments (231) 172 (382) 168 (403) NM (550) NM

Total revenues 38,632 33,851 76,727 66,236 4,781 14.1 % 10,491 15.8 %

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Net income $ 1,650 $ 1,801 $ 3,445 $ 3,468 $ (151) (8.4) % $ (23) (0.7) %

Net loss (income) attributable to noncontrolling interests 10 (2) 12 NM

Net loss (income) attributable to noncontrolling interests 3 (8) 13 (10) 11 NM 23 NM

Shareholders’ net income $ 1,653 $ 1,793 $ 3,458 $ 3,458 $ (140) (7.8) % $ — — %

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NM Not meaningful.

1 Includes interest expense and amortization of other intangible assets.

1 Includes interest expense, amortization of other intangible assets and loss on extinguishment of debt..

2 Benefit expense ratio represents benefit expense as a percentage of premium revenue.

Premiums for the three months ended March 31, 2022 and 2021 were $32,785 and $27,676, respectively.

Premiums for the three months ended June 30, 2022 and 2021 were $33,076 and $28,533, respectively.

Premiums for the six months ended June 30, 2022 and 2021 were $65,861 and $56,209, respectively.

3 bp = basis point;

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4 Selling, general and administrative expense ratio represents selling, general and administrative expense as a percentage of total operating revenue.

Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021

Total operating revenue increased primarily as a result of higher premium revenue due mainly to organic membership growth in our Medicaid business resulting primarily from the continued temporary suspension of eligibility recertification during the COVID-19 pandemic.

Membership increases and rate increases designed to cover medical cost trends in our Medicare Advantage and Commercial risk-based businesses also

provided additional premium revenue.

Product revenue increased due to growth in integrated pharmacy members in our IngenioRx segment which also contributed to the overall operating revenue increase.

Net investment income increased primarily due to increases in net income from our alternative investments and higher income from fixed maturity securities.

Net losses on financial instruments increased primarily as a result of increased losses on fixed maturity securities and fewer gains on equity securities.

Losses related to our Russia and Ukraine fixed maturity securities were not material.

At March 31, 2022, our remaining holdings of Russia and Ukraine fixed maturity securities were not material.

Benefit expense increased primarily due to healthcare costs associated with organic membership growth in our Medicaid and Medicare businesses, the acquisition of MMM in the second quarter of 2021, the acquisition of Ohio Medicaid members in the first quarter of 2022 through the purchase of a Medicaid contract and the retroactive reinstatement of a Medicaid directed payment program.

Higher healthcare costs in our Commercial risk-based business also contributed to the increased benefit expense.

Our benefit expense ratio increased primarily due to the impact of continued increases in our Government Business segment membership, which has a higher benefit expense ratio than our Commercial & Specialty Business segment membership.

Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021

Total operating revenue increased primarily as a result of higher premium revenue in our Medicaid business, including due to membership growth from the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic, the acquisition of MMM in the second quarter of 2021, the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022, as well as from premium rate increases to cover medical cost trends and membership growth in our Medicare Advantage and Commercial & Specialty Business risk-based businesses.

We had net losses on financial instruments in the second quarter of 2022 as compared to net gains in the second quarter of 2021, as a result of increased losses on fixed maturity securities, mark-to-market losses on equity securities still held and reduced gains on sales of equity securities.

Benefit expense increased primarily due to healthcare costs associated with organic membership growth in our Medicaid and Medicare businesses, the acquisition of MMM in the second quarter of 2021 and the acquisition of Ohio Medicaid members in the first quarter of 2022 through the purchase of a Medicaid contract.

Membership growth in our Commercial risk-based business also contributed to the increased benefit expense.

The increase in benefit expense was also attributable to the acquisition of Integra in the second quarter of 2022 and the launch of our Healthy Blue managed care alliance in North Carolina in the third quarter of 2021.

Our benefit expense ratio increased primarily due to the impact of continued membership increases in our Government Business segment, which has a higher benefit expense ratio than our Commercial & Specialty Business segment.

Cost of products sold reflects the cost of pharmaceuticals dispensed by IngenioRx for our unaffiliated PBM customers.

Cost of products sold increased as the corresponding pharmacy product revenues increased.

Selling, general and administrative expense increased primarily due to increased costs to support membership growth and related to our acquisitions.

Our selling, general and administrative expense ratio decreased primarily due to the operating revenue growth in 2022, partially offset by increased costs to support membership growth.

Other expense increased primarily due to additional amortization of intangible assets related to recent acquisitions and the rebranding of our products.

The amortization period of certain intangible assets is being shortened to align with anticipated dates the new branding will take place.

In addition, certain indefinite-lived intangible assets have been reclassified as definite-lived, and therefore, are now being amortized.

For additional information regarding intangible asset amortization, see Note 17, “Goodwill and Other Intangible Assets,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Our shareholders’ net income as a percentage of total revenues decreased in 2022 as compared to 2021 as a result of all factors discussed above.

Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

Net investment income increased primarily due to higher income from fixed maturity securities, partially offset by reduced investment income from alternative investments.

We had net losses on financial instruments in the first six months of 2022 as compared to net gains in the first six months of 2021, as a result of increased losses on fixed maturity securities, mark-to-market losses on equity securities still held and reduced gains on sales of equity securities.

Benefit expense increased primarily due to healthcare costs associated with organic membership growth in our Medicaid and Medicare businesses, the acquisition of MMM in the second quarter of 2021 and the retroactive reinstatement of a Medicaid directed payment program.

Membership growth and higher healthcare costs in our Commercial risk-based business also contributed to the higher benefit expense.

The increase in benefit expense was also attributable to the acquisition of Ohio Medicaid members in the first quarter of 2022 through the purchase of a Medicaid contract, the launch of our Healthy Blue managed care alliance in North Carolina in the first quarter of 2021 and the acquisition of Integra in the second quarter of 2022.

Higher healthcare costs in our Commercial risk-based businesses also contributed to the benefit expense ratio increase.

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Cost of products sold increased as the corresponding pharmacy product revenues increased.

Selling, general and administrative expense increased primarily due to the increased costs to support growth.

Our selling, general and administrative expense ratio decreased primarily due to the operating revenue growth in 2022, partially offset by increased costs to support growth.

Selling, general and administrative expense increased primarily due to increased costs to support membership growth and related to our acquisitions.

Our selling, general and administrative expense ratio decreased primarily due to operating revenue growth in 2022, partially offset by increased costs to support membership growth.

Other expense increased primarily due to additional amortization of intangible assets related to recent acquisitions and the rebranding of our products.

The amortization period of certain intangible assets is being shortened to align with anticipated dates the new branding will take place.

In addition, certain indefinite-lived intangible assets have been reclassified as definite-lived, and therefore, are now being amortized.

Our shareholders’ net income as a percentage of total revenues decreased in 2022 as compared to 2021 as a result of all factors discussed above.

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Operating gain is calculated as total operating revenue less benefit expense, cost of products sold and selling, general and administrative expense.

It does not include net investment income, net gains (losses) on financial instruments, interest expense, amortization of other intangible assets or income taxes, as these items are managed in our corporate shared service environment and are not the responsibility of operating segment management.

It does not include net investment income, net (losses) gains on financial instruments, interest expense, amortization of other intangible assets, loss on extinguishment of debt or income taxes, as these items are managed in our corporate shared service environment and are not the responsibility of operating segment management.

Operating margin is calculated as operating gain divided by operating revenue.

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For a reconciliation of reportable segments’ operating revenue to the amounts of total revenue included in the consolidated statements of income and a reconciliation of income before income tax expense to reportable segments’ operating gain, see Note 15, “Segment Information,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Results of our operations are described through four reportable segments:

As previously discussed, we will be organizing our brand portfolio into three core go-to-market brands over the next several years.

There are currently no changes to our segments associated with this branding strategy.

The results of our operations continue to be described through four reportable segments:

Commercial & Specialty Business, Government Business, IngenioRx and Other.

For additional information, see Note 15, “Segment Information,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

The following table presents a summary of the reportable segment financial information for the three months ended March 31, 2022 and 2021:

The following table presents a summary of the reportable segment financial information for the three and six months ended June 30, 2022 and 2021:

Three Months Ended

2022 2021 Change % Change

June 30 Six Months Ended

June 30 Change

Three Months Ended

June 30 Six Months Ended

2021 2022 vs.

2022 2021 2022 2021 $ % $ %

Operating Revenue

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Other 3,298 2,517 6,519 4,887 781 31.0 % 1,632 33.4 %

Eliminations (6,045) (4,908) (1,137) NM

Eliminations (6,283) (5,073) (12,328) (9,981) (1,210) NM (2,347) NM

Total operating revenue $ 38,482 $ 33,279 $ 76,368 $ 65,377 $ 5,203 15.6 % $ 10,991 16.8 %

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IngenioRx 479 405 877 812 74 18.3 % 65 8.0 %

Other 178 8 170 NM

Other 86 17 264 25 69 NM 239 NM

Operating Margin

Commercial & Specialty Business 10.5 % 13.4 % (290) bp

Government Business 3.3 % 2.5 % 80 bp

IngenioRx 6.0 % 6.9 % (90) bp

Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021

Commercial & Specialty Business 7.6 % 8.3 % 9.1 % 10.8 % (70) bp (170) bp

Government Business 4.2 % 4.3 % 3.8 % 3.4 % (10) bp 40 bp

IngenioRx 6.8 % 6.5 % 6.4 % 6.7 % 30 bp (30) bp

Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021

Commercial & Specialty Business

Operating revenue increased primarily due to higher premiums in our Commercial risk-based businesses due to increased membership, premium rate increases in our Commercial risk-based businesses designed to cover medical cost trends and increased administrative fees in our Commercial fee-based businesses.

Operating gain decreased primarily due to the net unfavorable effect of COVID-19 and increased selling, general and administrative costs to support growth and innovation.

Operating revenue increased primarily due to higher premiums in our Commercial risk-based business due to membership growth, premium rate increases in our Commercial risk-based business designed to cover medical cost trends and increased administrative fees in our Commercial fee-based businesses.

Operating gain increased primarily due to the positive contribution from increased risk-based and fee-based membership, partially offset by the net unfavorable effect of COVID-19.

Government Business

Operating revenue increased primarily as a result of higher premium revenue associated with organic Medicaid membership growth resulting from the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic, the acquisition of MMM at the end of the second quarter of 2021 and the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022.

Membership growth and premium rate increases to cover medical cost trends in our Medicare Advantage business also increased premium revenue, as did the acquisition of Integra during the second quarter of 2022 and the launch of our Healthy Blue managed care alliance in North Carolina in the third quarter of 2021.

The increase in operating gain was primarily driven by premium rates in Medicare that better reflect the acuity of our members and organic membership growth in our Medicaid membership resulting from the continued temporary suspension of eligibility recertification during the COVID-19 pandemic.

Operating revenue increased primarily due to higher prescription volume driven by growth in integrated medical and pharmacy members in 2022 and to a lesser extent, a favorable out of period adjustment related to the first quarter of 2022.

The increase in operating gain was primarily driven by a favorable out of period adjustment related to the first quarter of 2022, as well as the impact of higher prescription volume associated with growth in integrated medical and pharmacy members in 2022.

Operating revenue increased primarily due to higher revenue for expanded services performed by Carelon, formerly known as our Diversified Business Group, for our Commercial & Specialty Business segment in 2022.

In addition, results in 2022 include revenue from myNEXUS, which was acquired in the second quarter of 2021.

These increases were partially offset by the reduction of external revenue due to the loss of a behavioral health contract.

Operating gain increased primarily due to improved performance in Carelon.

Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

Commercial & Specialty Business

Operating revenue increased primarily due to higher premiums in our Commercial risk-based business due to membership growth, premium rate increases in our Commercial risk-based business to cover medical cost trends and increased administrative fees in our Commercial fee-based businesses.

Operating gain decreased primarily due to the net unfavorable effect of COVID-19 and increased spend to support growth.

These impacts were partially offset by positive contribution from the growth in our risk-based and fee-based membership.

Government Business

Operating revenue increased primarily as a result of higher premium revenue due mainly to organic membership growth in our Medicaid business primarily resulting from the continued temporary suspension of eligibility recertification during the COVID-19 pandemic.

Membership increases and rate increases designed to cover medical cost trends in our Medicare Advantage business also increased premium revenue.

The increase in operating gain was primarily driven by the acquisition of MMM in the second quarter of 2021, organic membership growth in our Medicaid business resulting from the continued temporary suspension of eligibility recertification during the COVID-19 pandemic, improved risk revenue in Medicare and favorable out of period adjustments in our Medicaid businesses.

These increases were partially offset by increased selling, general and administrative costs to support growth.

Operating revenue increased primarily as a result of higher premium revenue associated with organic Medicaid membership growth resulting from the continued temporary suspension of Medicaid eligibility recertification during the COVID-19 pandemic, the acquisition of MMM at the end of the second quarter of 2021 and the retroactive reinstatement of a Medicaid directed payment program.

Membership growth and premium rate increases to cover medical cost trends in our Medicare Advantage business also increased premium revenue, as did the acquisition of Ohio Medicaid members through the purchase of a Medicaid contract in the first quarter of 2022, the launch of our Healthy Blue managed care alliance in North Carolina in the third quarter of 2021 and the acquisition of Integra during the second quarter of 2022.

The increase in operating gain was primarily driven by premium rates in Medicare that better reflect the acuity of our members, organic membership growth in our Medicaid membership resulting from the continued temporary suspension of eligibility recertification during the COVID-19 pandemic and the acquisition of MMM in the second quarter of 2022.

These increases were partially offset by additional spend to support growth.

Operating revenue increased as a result of higher prescription volume, driven by growth in integrated medical and pharmacy members in 2022.

The decrease in operating gain was primarily driven by the non-recurrence of a favorable out of period adjustment recorded in the first quarter of 2021, partially offset by the impact of higher prescription volume resulting from growth in integrated medical and pharmacy members.

Operating revenue increased primarily due to higher revenue for expanded services performed by our Diversified Business Group for our Commercial & Specialty Business segment in 2022.

In addition, results in 2022 include revenue from myNEXUS, which was acquired in the second quarter of 2021.

Operating gain increased primarily due to improved performance in our Diversified Business Group’s affiliated and unaffiliated earnings and the acquisition of myNEXUS.

The increase in operating gain was further driven by lower unallocated corporate expenses in 2022.

The increase in operating gain was primarily a result of higher prescription volume, driven by growth in integrated medical and pharmacy members in 2022, partially offset by the non-recurrence of a favorable out of period adjustment recorded in the first quarter of 2021 related to 2020.

Operating revenue increased primarily due to higher revenue for expanded services performed by Carelon for our Commercial & Specialty Business segment in 2022.

In addition, results in 2022 included revenue from myNEXUS, which was acquired in the second quarter of 2021.

These increases were partially offset by the reduction of external revenue due to the loss of a behavioral health contract.

Operating gain increased primarily due to improved performance in Carelon and the acquisition of myNEXUS in 2021.

Critical Accounting Policies and Estimates

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We consider our most important accounting policies that require significant estimates and management judgment to be those policies with respect to liabilities for medical claims payable, income taxes, goodwill and other intangible assets, investments and retirement benefits.

Our accounting policies related to these items are discussed in our 2021 Annual Report on Form 10-K in Note 2, “Basis of Presentation and Significant Accounting Policies,” to our audited consolidated financial statements as of and for the year ended December 31, 2021, as well as in the “Critical Accounting Policies and Estimates” section of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of March 31, 2022, our critical accounting policies and estimates have not changed from those described in our 2021 Annual Report on Form 10-K.

Our accounting policies related to these items are discussed in our 2021 Annual Report on Form 10-K in Note 2, “Basis of Presentation and Significant Accounting Policies,” to our audited consolidated financial statements as of and for the year ended December 31, 2021, as well as in the “Critical Accounting Policies and Estimates” section of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of June 30, 2022, our critical accounting policies and estimates have not changed from those described in our 2021 Annual Report on Form 10-K.

Medical Claims Payable

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Our accounting policies related to medical claims payable are discussed in the references cited above.

As of March 31, 2022, our critical accounting policies and estimates related to medical claims payable have not changed from those described in our 2021 Annual Report on Form 10-K.

For a reconciliation of the beginning and ending balance for medical claims payable for the three months ended March 31, 2022 and 2021, see Note 9, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

The following table provides a summary of the two key assumptions having the most significant impact on our incurred but not paid liability estimates for the three months ended March 31, 2022 and 2021, which are the trend and completion factors.

As of June 30, 2022, our critical accounting policies and estimates related to medical claims payable have not changed from those described in our 2021 Annual Report on Form 10-K.

For a reconciliation of the beginning and ending balance for medical claims payable for the six months ended June 30, 2022 and 2021, see Note 9, “Medical Claims Payable,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

The following table provides a summary of the two key assumptions having the most significant impact on our incurred but not paid liability estimates for the six months ended June 30, 2022 and 2021, which are the trend and completion factors.

These two key assumptions can be influenced by utilization levels, unit costs, mix of business, benefit plan designs, provider reimbursement levels, processing system conversions and changes, claim inventory levels, claim processing patterns, claim submission patterns and operational changes resulting from business combinations.

The impact from COVID-19 on healthcare utilization and medical claims submission patterns continues to provide increased estimation uncertainty on our incurred but not reported liability at March 31, 2022.

Favorable Developments by

Changes in Key Assumptions

Three Months Ended

Six Months Ended

Assumed trend factors $ 967 $ 1,402

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Total $ 972 $ 1,772

The favorable development recognized in the three months ended March 31, 2022 and 2021 resulted primarily from trend factors in late 2021 and late 2020, respectively, developing more favorably than originally expected.

Favorable development in the completion factors resulting from the latter part of 2020 developing faster than expected also contributed to the favorable development for the three months ended March 31, 2021.

The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 61.0% and 62.1% for the three months ended March 31, 2022 and 2021, respectively.

This ratio serves as an indicator of claims processing speed whereby claims payments slowed down slightly during the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.

The favorable development recognized in the six months ended June 30, 2022 and 2021 resulted primarily from trend factors in late 2021 and late 2020, respectively, developing more favorably than originally expected.

Favorable development in the completion factors resulting from the latter part of 2020 developing faster than expected also contributed to the favorable development for the six months ended June 30, 2021.

The ratio of current year medical claims paid as a percent of current year net medical claims incurred was 76.9% and 77.6% for the six months ended June 30, 2022 and 2021, respectively.

This ratio serves as an indicator of claims processing

speed whereby claims payments slowed down slightly during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

This was driven by the strengthening of incurred but not reported claims, within our medical claims payable, to account for an increase in overall payment cycle time.

We calculate the percentage of prior year redundancies in the current period as a percent of prior year net medical claims payable less prior year redundancies in the current period in order to demonstrate the development of prior year reserves.

For the three months ended March 31, 2022, this metric was 7.6%, largely driven by favorable trend factor development at the end of 2021.

For the three months ended March 31, 2021, this metric was 15.5%, largely driven by favorable trend factor development at the end of 2020 as well as favorable completion factor development from 2020.

For the six months ended June 30, 2022, this metric was 7.9%, largely driven by favorable trend factor development at the end of 2021.

For the six months ended June 30, 2021, this metric was 19.0%, largely driven by favorable trend factor development at the end of 2020 as well as favorable completion factor development from 2020.

We calculate the percentage of prior year redundancies in the current period as a percent of prior year net incurred medical claims to indicate the percentage of redundancy included in the preceding year calculation of current year net incurred medical claims.

We believe this calculation supports the reasonableness of our prior year estimate of incurred medical claims and the consistency in our methodology.

For the three months ended March 31, 2022, this metric was 0.9%, which was calculated using the redundancy of $933.

For the three months ended March 31, 2021, the comparable metric was 1.8%, which was calculated using the redundancy of $1,488.

For the six months ended June 30, 2022, this metric was 1.0%, which was calculated using the redundancy of $972.

For the six months ended June 30, 2021, the comparable metric was 2.1%, which was calculated using the redundancy of $1,772.

We believe these metrics demonstrate an appropriate level of reserve conservatism.

New Accounting Pronouncements

For information regarding new accounting pronouncements that were adopted and new accounting pronouncements that were issued during the three months ended March 31, 2022, see the “ Recently Adopted Accounting Guidance ” and “ Recent Accounting Guidance Not Yet Adopted ” sections of Note 2, “Basis of Presentation and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

For information regarding new accounting pronouncements that were adopted and new accounting pronouncements that were issued during the six months ended June 30, 2022, see the “ Recently Adopted Accounting Guidance ” and “ Recent Accounting Guidance Not Yet Adopted ” sections of Note 2, “Basis of Presentation and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Liquidity and Capital Resources

Sources and Uses of Capital

Our cash receipts result primarily from premiums, product revenue, administrative fees and other revenue, investment income, proceeds from the sale or maturity of our investment securities, proceeds from borrowings, and proceeds from the

issuance of common stock under our employee stock plans.

Cash disbursements result mainly from claims payments, administrative expenses, taxes, purchases of investment securities, interest expense, payments on borrowings, acquisitions, capital expenditures, repurchases of our debt securities and common stock and the payment of cash dividends.

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For a more detailed overview of our liquidity and capital resources management, see the “ Introduction ” section included in the “Liquidity and Capital Resources” section of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2021 Annual Report on Form 10-K.

For additional information regarding our sources and uses of capital during the three months ended March 31, 2022, see Note 6, “Derivative Financial Instruments,” Note 10, “Debt,” and Note 12, “Capital Stock – Use of Capital – Dividends and Stock Repurchase Program, ” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

A summary of our major sources and uses of cash and cash equivalents for the three months ended March 31, 2022 and 2021 is as follows:

Three Months Ended

March 31 2022 vs.

For additional information regarding our sources and uses of capital during the three and six months ended June 30, 2022, see Note 6, “Derivative Financial Instruments,” Note 10, “Debt,” and Note 12, “Capital Stock – Use of Capital – Dividends and Stock Repurchase Program, ” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

A summary of our major sources and uses of cash and cash equivalents for the six months ended June 30, 2022 and 2021 is as follows:

Six Months Ended

June 30 2022 vs.

2022 2021 Change

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Effect of foreign exchange rates on cash and cash equivalents (10) (7) (3)

Net increase in cash and cash equivalents $ 1,281 $ 3,585 $ (2,304)

The increase in cash provided by operating activities was primarily driven by higher net income in 2022, partially offset by the impact of working capital changes, year-over-year.

Other significant changes in sources or uses of cash year-over-year included reduced proceeds from commercial paper and short- and long-term debt, net of repayments, partially offset by reduced purchases of investments, net of proceeds from sales, maturities, calls and redemptions and other sources of cash, net.

Net increase (decrease) in cash and cash equivalents $ 1,576 $ (483) $ 2,059

The increase in net cash provided by operating activities was primarily due to higher net income in 2022, excluding the non-cash impact of losses/gains on investments, as we recognized realized losses during the first six months of 2022 compared to realized gains in the first six months of 2021.

The increase was further attributable to the timing of working capital changes.

Other significant changes in sources or uses of cash year-over-year included lower amounts for purchases of subsidiaries, net of cash acquired and reduced purchases of investments, net of proceeds from sales, maturities, calls and redemptions and increased other sources of cash, net, partially offset by reduced proceeds from commercial paper and short- and long-term debt, net of repayments.

Financial Condition

We maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equity securities of $34,638 at March 31, 2022.

Since December 31, 2021, total cash, cash equivalents and investments in fixed maturity and equity securities increased by $978, primarily due to cash generated from operations and net proceeds from the issuance of commercial paper.

The increase was partially offset by cash used for common stock repurchases, dividends paid to shareholders, purchases of property and equipment and cash used for acquisitions.

We maintained a strong financial condition and liquidity position, with consolidated cash, cash equivalents and investments in fixed maturity and equity securities of $34,396 at June 30, 2022.

Since December 31, 2021, total cash, cash equivalents and investments in fixed maturity and equity securities increased by $736, primarily due to cash generated from operations.

This increase was partially offset by cash used for common stock repurchases, dividends paid to shareholders, acquisitions and purchases of property and equipment.

Many of our subsidiaries are subject to various government regulations that restrict the timing and amount of dividends and other distributions that may be paid to their respective parent companies.

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In addition, we have agreed to certain undertakings to regulatory authorities, including the requirement to maintain certain capital levels in certain of our subsidiaries.

At March 31, 2022, we held $1,424 of cash, cash equivalents and investments at the parent company, which are available for general corporate use, including investment in our businesses, acquisitions, potential future common stock repurchases and dividends to shareholders, repurchases of debt securities and debt and interest payments.

At June 30, 2022, we held $948 of cash, cash equivalents and investments at the parent company, which are available for general corporate use, including investment in our businesses, acquisitions, potential future common stock repurchases and dividends to shareholders, repurchases of debt securities and debt and interest payments.

Periodically, we access capital markets and issue debt (“Notes”) for long-term borrowing purposes, for example, to refinance debt, to finance acquisitions or for share repurchases.

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Our debt-to-capital ratio may not be comparable to similarly titled measures reported by other companies.

Our consolidated debt-to-capital ratio was 39.2% and 38.9% as of March 31, 2022 and December 31, 2021, respectively.

Our consolidated debt-to-capital ratio was 39.7% and 38.9% as of June 30, 2022 and December 31, 2021, respectively.

Our senior debt is rated “A” by S&P Global Ratings, “BBB” by Fitch Ratings, Inc., “Baa2” by Moody’s Investor Service, Inc.

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Also in April 2022, concurrently with the amendment and restatement of the 5-Year Facility, we terminated our 364-day senior revolving credit facility that provided for credit in the amount of $1,000, which was scheduled to mature in June 2022 (the “2021 364-Day Facility” and together with the 5-Year Facility, the “Credit Facilities”).

In June 2021, we terminated our 364-day senior revolving credit facility (the “prior 364-Day Facility”), which was scheduled to mature in June 2021, and entered into the 2021 364-Day Facility with a group of lenders for general corporate purposes.

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.

We do not believe the restrictions contained in our 5-Year Credit Facility covenants materially affect our financial or operating flexibility.

As of March 31, 2022, we were in compliance with all of the debt covenants under the Credit Facilities.

As of June 30, 2022, we were in compliance with all of the debt covenants under the Credit Facilities.

Through certain subsidiaries, we have entered into multiple 364-day lines of credit (the “Subsidiary Credit Facilities”) with separate lenders for general corporate purposes.

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Our ability to borrow under the Subsidiary Credit Facilities is subject to compliance with certain covenants.

At March 31, 2022 and December 31, 2021, we had no outstanding borrowings under the Subsidiary Credit Facilities.

We have a $3,500 commercial paper program, the proceeds of which may be used for general corporate purposes.

At June 30, 2022 and December 31, 2021, we had no outstanding borrowings under the Subsidiary Credit Facilities.

We have an authorized commercial paper program of up to $4,000, the proceeds of which may be used for general corporate purposes.

In July 2022, we increased the amount available under the commercial paper program from $3,500 to $4,000.

Should commercial paper issuance become unavailable, we have the ability to use a combination of cash on hand and/or our 5-Year Facility, which provides for credit in the amount of $4,000, to redeem any outstanding commercial paper upon maturity.

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 $275 of outstanding short-term borrowings from the FHLBs at March 31, 2022 and December 31, 2021.

As a member, we have the ability to obtain short-term cash advances, subject to certain minimum collateral

requirements.

We had $175 and $275 of outstanding short-term borrowings from the FHLBs at June 30, 2022 and December 31, 2021, respectively.

While there is no assurance in the current economic environment, we believe the lenders participating in our credit facilities, if market conditions allow, would be willing to provide financing in accordance with their legal obligations.

At March 31, 2022, we had $525 outstanding under our commercial paper program.

At June 30, 2022, we had $550 outstanding under our commercial paper 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.

For additional information regarding our sources and uses of capital at March 31, 2022, see Note 5, “Investments,” Note 6, “Derivative Financial Instruments,” Note 10, “Debt,” and Note 12, “Capital Stock – Use of Capital – Dividends and Stock Repurchase Program, ” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

For additional information regarding our sources and uses of capital at June 30, 2022, see Note 5, “Investments,” Note 6, “Derivative Financial Instruments,” Note 10, “Debt,” and Note 12, “Capital Stock – Use of Capital – Dividends and Stock Repurchase Program, ” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

In addition to regulations regarding the timing and amount of dividends, our regulated subsidiaries’ states of domicile have statutory risk-based capital (“RBC”) requirements for health and other insurance companies and health maintenance organizations largely based on the National Association of Insurance Commissioners (“NAIC”) Risk-Based Capital (RBC) for Health Organizations Model Act (the “RBC Model Act”).

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our ability to secure sufficient premium rates, including regulatory approval for and implementation of such rates;

the impact of federal, state and international law and regulation, including ongoing changes in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended;

the impact of federal, state and international law and regulation, including changes in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended;

changes in economic and market conditions, as well as regulations that may negatively affect our liquidity and investment portfolios;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis