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Item 8. Financial Statements and Supplementary Data

2023-02-15 compared with 2022-02-16 · 503 added, 394 removed, 1843 unchanged (33% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Elevance Health, Inc.

CONSOLIDATED FINANCIAL STATEMENTS

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Public Accounting Firm

To the Shareholders and the Board of Directors of Anthem, Inc.

To the Shareholders and the Board of Directors of Elevance Health, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Anthem, Inc.

We have audited the accompanying consolidated balance sheets of Elevance Health, Inc.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(c) (collectively referred to as the “consolidated financial statements”).

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February 15, 2023

Elevance Health, Inc.

Consolidated Balance Sheets

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Total assets $ 102,772 $ 97,460

Liabilities and shareholders’ equity

Liabilities and equity

Current liabilities:

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Retained earnings 29,724 27,088

Accumulated other comprehensive (loss) income ( 178 ) 150

Accumulated other comprehensive loss ( 2,503 ) ( 178 )

Total shareholders’ equity 36,307 36,060

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See accompanying notes.

Elevance Health, Inc.

Consolidated Statements of Income

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Net investment income 1,485 1,378 877

Net gains on financial instruments 318 182 67

Net (losses) gains on financial instruments ( 550 ) 318 182

Total revenues 156,595 138,639 121,867

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See accompanying notes.

Elevance Health, Inc.

Consolidated Statements of Comprehensive Income

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See accompanying notes.

Elevance Health, Inc.

Consolidated Statements of Cash Flows

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Adjustments to reconcile net income to net cash provided by operating activities:

Net gains on financial instruments ( 318 ) ( 182 ) ( 67 )

Net losses (gains) on financial instruments 550 ( 318 ) ( 182 )

Equity in net earnings of other invested assets ( 293 ) ( 562 ) ( 51 )

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Financing activities

Net proceeds from (repayments of) commercial paper borrowings 50 ( 150 ) ( 297 )

Net (repayments of) proceeds from commercial paper borrowings ( 300 ) 50 ( 150 )

Proceeds from long-term borrowings 3,071 3,462 2,484

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Changes in securities lending payable 302 956 849

Changes in bank overdrafts 933 ( 376 ) 486

Repurchase and retirement of common stock ( 2,316 ) ( 1,900 ) ( 2,700 )

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Other, net 41 27 2

Net cash provided by (used in) financing activities 423 ( 2,567 ) ( 2,266 )

Net cash (used in) provided by financing activities ( 1,318 ) 423 ( 2,567 )

Effect of foreign exchange rates on cash and cash equivalents ( 14 ) ( 10 ) 7

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See accompanying notes.

Elevance Health, Inc.

Consolidated Statements of Shareholders’ Equity

Total Shareholders’ Equity

Common Stock Additional

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December 31, 2020 245.4 3 9,244 23,802 150 — 33,199

Adoption of Accounting Standards Update No.

2016-13 (Note 2) — — — ( 35 ) — — ( 35 )

January 1, 2020 252.9 3 9,448 22,538 ( 296 ) — 31,693

Net income — — — 6,104 — ( 9 ) 6,095

Other comprehensive income — — — — 446 — 446

Other comprehensive loss — — — — ( 328 ) ( 2 ) ( 330 )

Accumulated noncontrolling interest — — — — — 79 79

Repurchase and retirement of common stock ( 5.1 ) ( 1 ) ( 192 ) ( 1,707 ) — — ( 1,900 )

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December 31, 2021 241.8 2 9,148 27,088 ( 178 ) 68 36,128

Adoption of Accounting Standards Update 2020-06 (Note 2) — — — ( 23 ) — — ( 23 )

January 1, 2022 241.8 2 9,148 27,065 ( 178 ) 68 36,105

— — — 6,025 — ( 6 ) 6,019

Other comprehensive loss — — — — ( 2,325 ) ( 11 ) ( 2,336 )

Accumulated noncontrolling interest — — — — — 79 79

Noncontrolling interests adjustment — — — — — 36 36

Repurchase and retirement of common stock ( 4.8 ) — ( 184 ) ( 2,132 ) — — ( 2,316 )

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See accompanying notes.

Elevance Health, Inc.

Notes to Consolidated Financial Statements

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

References to the terms “we,” “our,” “us” or “Anthem” used throughout these Notes to Consolidated Financial Statements refer to Anthem, Inc., an Indiana corporation, and unless the context otherwise requires, its direct and indirect subsidiaries.

We are one of the largest health benefits companies in the United States in terms of medical membership, serving greater than 45 million medical members through our affiliated health plans as of December 31, 2021.

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.

This 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 these Notes to Consolidated Financial Statements refer to Elevance Health, Inc., an Indiana corporation, and unless the context otherwise requires, its direct and indirect subsidiaries.

References to the “states” include the District of Columbia and Puerto Rico, unless the context otherwise requires.

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

We are one of the largest health insurers in the United States in terms of medical membership, serving approximately 47.5 million medical members through our affiliated health plans as of December 31, 2022.

We offer a broad spectrum of network-based managed care risk-based plans to Individual, Group, Medicaid and Medicare markets.

In addition, we provide a broad array of managed care services to fee-based customers, including claims processing, stop loss insurance, provider network access, medical management, care management and wellness programs, actuarial services and other administrative services.

We also provide services to the federal government in connection with our Federal Health Products & Services business, which administers the Federal Employees Health Benefits (“FEHB”) Program.

We provide an array of specialty services both to our subsidiary health plans and also unaffiliated health plans, including pharmacy benefit management (“PBM”) services and dental, vision, life, disability and supplemental health insurance benefits, as well as integrated health services.

We provide services to the federal government in connection with our Federal Health Products & Services business, which administers the Federal Employees Health Benefits (“FEHB”) Program.

We provide an array of specialty services both to customers of our subsidiary health plans and also unaffiliated health plans, including pharmacy benefit management (“PBM”) services and dental, vision, life, disability and supplemental health insurance benefits, as well as integrated health services.

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

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We also conduct business through arrangements with other BCBS licensees as well as other strategic partners.

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

PBM services are offered through our IngenioRx, Inc.

(“IngenioRx”) subsidiary.

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, UniCare and/or Wellpoint.

We offer PBM services through our CarelonRx, Inc.

(“CarelonRx”) subsidiary, which was named IngenioRx, Inc.

prior to January 1, 2023.

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, in June 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 brings together our healthcare-related services and capabilities, including our formerly named Diversified Business Group and IngenioRx businesses, under a single brand name.

There were no changes made to our segments in 2022 associated with this branding strategy.

Through December 31, 2022, we managed our operations by customer types through four reportable segments:

Commercial & Specialty Business, Government Business, CarelonRx (formerly known as IngenioRx) and Other.

Our branding strategy reflects the evolution of

our business from a traditional health insurance company into a lifetime, trusted health partner, and given this evolution we are in the process of reviewing and modifying how we will manage our business in the future.

For additional discussion, including the changes to our reportable segments for 2023, see Note 20, “Segment Information.”

Basis of Presentation and Significant Accounting Policies

Basis of Presentation:

The accompanying consolidated financial statements include the accounts of Anthem and its subsidiaries and have been prepared in conformity with U.S.

The accompanying consolidated financial statements include the accounts of Elevance Health and its subsidiaries and have been prepared in conformity with U.S.

generally accepted accounting principles (“GAAP”).

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Actual results could differ from those estimates.

Notes to Consolidated Financial Statements (continued)

Cash and Cash Equivalents:

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Investments used to satisfy contractual, regulatory or other requirements are classified as long-term, without regard to contractual maturity.

Prior to 2020, our fixed maturity securities were evaluated for other-than-temporary impairment where credit-related impairments were presented within the other-than-temporary impairment losses recognized in our consolidated statements of income with an adjustment to the security’s amortized cost basis.

Effective January 1, 2020, if a fixed maturity security is in an unrealized loss position and we have the intent to sell the fixed maturity security, or it is more likely than not that we will have to sell the fixed maturity security before recovery of its amortized cost basis, we write down the fixed maturity security’s cost basis to fair value and record an impairment loss in our consolidated statements of income.

If a fixed maturity security is in an unrealized loss position and we have the intent to sell the fixed maturity security, or it is more likely than not that we will have to sell the fixed maturity security before recovery of its amortized cost basis, we write down the fixed maturity security’s cost basis to fair value and record an impairment loss in our consolidated statements of income.

For impaired fixed maturity securities that we do not intend to sell or if it is more likely than not that we will not have to sell such securities, but we expect that we will not fully recover the amortized cost basis, we recognize the credit component of the impairment as an allowance for credit loss in our consolidated balance sheets and record an impairment loss in our consolidated statements of income.

The non-credit component of the impairment is recognized in accumulated other comprehensive (loss) income.

Furthermore, unrealized losses entirely caused by non-credit-related factors related to fixed maturity securities for which we expect to fully recover the amortized cost basis continue to be recognized in accumulated other comprehensive (loss) income.

The non-credit component of the impairment is recognized in accumulated other comprehensive loss.

The credit component of an impairment is determined primarily by comparing the net present value of projected future cash flows with the amortized cost basis of the fixed maturity security.

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For asset-backed securities included in fixed maturity securities, we recognize income using an effective yield based on anticipated prepayments and the estimated economic life of the securities.

When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments.

When estimates of prepayments change, the

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

effective yield is recalculated to reflect actual payments to date and anticipated future payments.

The net investment in the securities is adjusted to the amount that would have existed had the new effective yield been applied since the purchase date of the securities.

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Realized gains and losses are determined on the basis of the cost or amortized cost of the specific securities sold.

Notes to Consolidated Financial Statements (continued)

We participate in securities lending programs whereby marketable securities in our investment portfolio are transferred to independent brokers or dealers in exchange for cash and securities collateral.

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The deferred tax benefits of the deferred tax assets are recognized to the extent realization of such benefits is more likely than not.

Deferred income tax expense or benefit generally represents the net change in deferred income tax assets and liabilities during the year, excluding the impact from amounts initially recorded for business combinations, if any, and amounts recorded to accumulated other comprehensive income.

Deferred income tax expense or benefit generally represents the net change in deferred income tax assets and liabilities during the year, excluding the impact

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

from amounts initially recorded for business combinations, if any, and amounts recorded to accumulated other comprehensive income.

Current income tax expense represents the tax consequences of revenues and expenses currently taxable or deductible on various income tax returns for the year reported.

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We have elected to account for GILTI tax in the year the tax is incurred.

The Inflation Reduction Act of 2022 includes a provision that imposes a new corporate alternative minimum tax (the “Corporate AMT”) that became effective for us beginning January 1, 2023.

We have elected to account for the effects of the Corporate AMT on deferred tax assets and carryforwards and tax credits in the period they arise.

Additionally, the Inflation Reduction Act of 2022 imposes an excise tax on the fair market value of net stock repurchases made after December 31, 2022.

We do not believe the Corporate AMT will have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures.

We account for income tax contingencies in accordance with FASB guidance that contains a model to address uncertainty in tax positions and clarifies the accounting for income taxes by prescribing a minimum recognition threshold, which all income tax positions must achieve before being recognized in the financial statements.

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Property and equipment is recorded at cost, net of accumulated depreciation.

Depreciation is computed principally by the straight-line method over estimated useful lives ranging from fifteen to thirty-nine years for buildings and improvements, three to five years for computer equipment and software, and the lesser of the remaining life of the building lease, if any, or seven years for furniture and other equipment.

Depreciation is computed principally by the straight-line method over estimated useful lives ranging from fifteen to thirty years for buildings and improvements, three to five years for computer equipment and software, and the lesser of the remaining life of the building lease, if any, or seven years for furniture and other equipment.

Leasehold improvements are depreciated over the term of the related lease.

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FASB guidance requires business combinations to be accounted for using the acquisition method of accounting, and it also specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill.

Goodwill represents the excess of the cost of acquisition over the fair

Notes to Consolidated Financial Statements (continued)

value of net assets acquired.

Goodwill represents the excess of the cost of acquisition over the fair value of net assets acquired.

Other intangible assets represent the values assigned to customer relationships, provider and hospital networks, Blue Cross and Blue Shield and other trademarks, licenses and other agreements, such as non-compete agreements.

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Our assumed discount rate is based on our industry’s weighted-average cost of capital and reflects volatility associated with the cost of equity capital.

Market valuations include market comparisons to publicly traded companies in our industry and are based on observed multiples of certain measures including revenue;

Market valuations include market comparisons to publicly traded

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

companies in our industry and are based on observed multiples of certain measures including revenue;

earnings before interest, taxes, depreciation and amortization (“EBITDA”);

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In addition, derivative financial instruments are used to modify the interest rate exposure of certain liabilities or forecasted transactions.

These strategies include the use of interest rate swaps and forward contracts, which are used to lock-

Notes to Consolidated Financial Statements (continued)

in interest rates or to hedge, on an economic basis, interest rate risks associated with variable rate debt.

These strategies include the use of interest rate swaps and forward contracts, which are used to lock-in interest rates or to hedge, on an economic basis, interest rate risks associated with variable rate debt.

We have used these types of instruments as designated hedges against specific liabilities.

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We recognize the funded status of pension and other postretirement benefit plans on the consolidated balance sheets based on fiscal-year-end measurements of plan assets and benefit obligations.

Prepaid pension benefits represent prepaid costs related to defined benefit pension plans and are reported with other noncurrent assets.

Prepaid pension

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

benefits represent prepaid costs related to defined benefit pension plans and are reported with other noncurrent assets.

Postretirement benefits represent outstanding obligations for retiree medical, life, vision and dental benefits.

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and (2) claims reported to us and processed through our systems but not yet paid.

Notes to Consolidated Financial Statements (continued)

Liabilities for both claims incurred but not reported and reported but not yet processed through our systems are determined in the aggregate, employing actuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice.

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No premium deficiencies were established at December 31, 2022 or 2021.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

Benefit expense includes incurred medical claims as well as quality improvement expenses for our risk-based members.

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Certain amounts reported as expense in our consolidated GAAP financial statements may be reported as a reduction of premiums in accordance with HHS regulations.

In addition, profit amounts included in our payments to third-party administrative service providers are recorded as benefit expense in our consolidated GAAP financial

Notes to Consolidated Financial Statements (continued)

statements, while HHS does not allow for the inclusion of these expenses within the medical loss expense for purposes of calculating minimum MLR.

In addition, profit amounts included in our payments to third-party administrative service providers are recorded as benefit expense in our consolidated GAAP financial statements, while HHS does not allow for the inclusion of these expenses within the medical loss expense for purposes of calculating minimum MLR.

Reserves for Future Policy Benefits:

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Premiums for risk-based contracts are recognized as revenue over the period insurance coverage is provided, and, if applicable, net of amounts recognized for MLR rebates, risk adjustment, reinsurance and risk corridor under contractual premium stabilization arrangements, the ACA or other regulatory requirements.

Premiums may also include performance incentives and penalties, which are recognized based on contractual terms.

We estimate amounts receivable and payable under these contractual terms, and to the extent that such estimated amounts vary from the final amounts paid, the adjustments are included in earnings in the period of final settlement.

Premium payments from contracted government agencies are based on eligibility lists produced by the government agencies.

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Administrative fees and other revenue include revenue from certain group contracts that provide for the group to be at risk for all, or with supplemental insurance arrangements, a portion, of their claims experience.

We charge these fee-based groups an administrative fee, which is based on the number of members in a group or the group’s claim experience.

In addition, administrative fees and other revenue include amounts received for the administration of Medicare or certain other government programs.

Under our fee-based arrangements, revenue is recognized as administrative services are performed.

We charge these fee-based

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

groups an administrative fee, which is based on the number of members in a group and the group’s claim experience.

In addition, administrative fees and other revenue include amounts received for the administration of Medicare, certain other government programs, and administrative services arrangements of our Carelon (Diversified Business Group) subsidiaries, now known as Carelon.

Generally, these fee-based arrangements include services which constitute a single suite of services provided and for which consideration is based upon an agreed-upon rate, regardless of the amount of services provided in a given period.

As with premiums, these fee-based arrangements may include terms with retroactive rate or membership adjustments, performance incentives and penalties, each of which is a form of variable consideration within the transaction price.

As such, these fee-based arrangements contain a single performance obligation that constitutes a series, and revenue is recognized over time as the services are performed.

All benefit payments under these programs are excluded from benefit expense.

Product revenue includes revenue for services performed by our IngenioRx PBM for unaffiliated PBM customers.

Unaffiliated PBM customers include our fee-based groups that have contracted with IngenioRx for PBM services and, beginning on January 1, 2020, third-party health plans.

The determination of whether services are distinct performance obligations that should be accounted for separately or combined as one unit of accounting may require significant judgment.

The estimation of variable consideration to be recognized requires significant judgment in the determination of the level of achievement of performance incentives, service level achievements subject to performance penalties, and the completion level of tasks subject to implementation fees.

Product revenue includes revenue for services performed by our CarelonRx PBM for unaffiliated PBM customers.

Unaffiliated PBM customers include our fee-based groups that have contracted with CarelonRx for PBM services and third-party health plans.

Product revenues and costs of goods sold for our affiliated health plans are eliminated in consolidation.

Product revenue for PBM services is recognized using the gross method at the negotiated contract price when IngenioRx has concluded that it is the principal and it controls the services before prescription drugs are transferred to the customer.

IngenioRx determined it is the principal due to its contractual rights to design and develop a listing of prescription drugs offered to the customer (formulary management);

Product revenue for PBM services is recognized using the gross method at the negotiated contract price when CarelonRx has concluded that it is the principal and it controls the services before prescription drugs are transferred to the customer.

CarelonRx determined it is the principal due to its contractual rights to design and develop a listing of prescription drugs offered to the customer (formulary management);

its control over establishing the pharmacy network available to the customer to have its prescription fulfilled (network management);

and its discretion over establishing the pricing for prescription drugs.

Overall, control over these activities indicate IngenioRx is primarily responsible for fulfilling the promise to provide PBM services.

Overall, control over these activities indicate CarelonRx is primarily responsible for fulfilling the promise to provide PBM services.

Product revenue includes ingredient costs (net of any rebates or discounts), including any co-payments made by or on behalf of the customer, and administrative fees.

IngenioRx recognizes revenue when control of the prescription drugs is transferred to customers, in an amount it expects to be entitled to in exchange for the products or services provided.

CarelonRx recognizes revenue when control of the prescription drugs is transferred to customers, in an amount it expects to be entitled to in exchange for the products or services provided.

For our non-risk-based contracts, we had no material contract assets, contract liabilities or deferred contract costs recorded on our consolidated balance sheet at December 31, 2022.

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For contracts that have an original expected duration of greater than one year, revenue expected to be recognized in future periods related to unfulfilled contractual performance obligations and contracts with variable consideration related to undelivered performance obligations is not material.

Notes to Consolidated Financial Statements (continued)

Cost of Products Sold:

IngenioRx’s cost of products sold includes the cost of prescription drugs dispensed to unaffiliated PBM customers (net of rebates or discounts).

This cost includes any co-payments made by or on behalf of the customer.

Cost of products sold also includes per-claim administrative fees for prescription fulfillment by its vendor and certain IngenioRx direct costs related to sales and administration of customer contracts.

CarelonRx’s cost of products sold includes the cost of prescription drugs dispensed to unaffiliated PBM customers (net of rebates or discounts).

Cost of products sold includes per-claim administrative fees for prescription fulfillment by its vendor and certain CarelonRx direct costs related to sales and administration of customer contracts.

Share-Based Compensation:

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We use print, broadcast and other advertising to promote our products and to develop our corporate image.

We market our products through direct marketing activities and an extensive network of independent agents, brokers and retail partnerships for Individual and Medicare customers, and for certain Group risk-based customers with a smaller employee base.

We market our products through direct marketing activities and an extensive network of independent

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

agents, brokers and retail partnerships for Individual and Medicare customers, and for certain Group risk-based customers with a smaller employee base.

Products for Group risk-based customers with a larger employee base are generally sold through independent brokers or consultants retained by the customer who work with industry specialists from our in-house sales force.

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The ACA imposed an annual Health Insurance Provider Fee (“HIP Fee”) on health insurers that wrote certain types of health insurance on U.S.

risks, which has been permanently repealed effective January 1, 2021.

risks, which was permanently repealed effective January 1, 2021.

The HIP Fee was non-deductible for federal income tax purposes.

Our affected products were priced to cover the increased selling, general and administrative and income tax expenses associated with the HIP Fee when it was in effect.

The HIP Fee was suspended for 2019, resumed and increased to $ 15,523 for 2020 and was permanently eliminated beginning in 2021.

The HIP Fee was $ 15,523 for 2020 and was permanently eliminated beginning in 2021.

For the year ended December 31, 2020, we recognized $ 1,570 as selling, general and administrative expense related to the HIP Fee.

There was no corresponding HIP Fee expense for 2019 or 2021.

We lease office space and certain computer and related equipment under noncancelable operating leases.

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We also do not recognize a lease liability or ROU asset for our office space leases whose lease terms, at commencement, are twelve months or less and that do not include a purchase option or option to extend that we are reasonably certain to exercise.

We assess our ROU assets for impairment when there are indicators and compare the carrying amount of the ROU asset to its estimated undiscounted future cash flows.

If the estimated undiscounted future cash flows are less than the carrying

Notes to Consolidated Financial Statements (continued)

amount of the ROU asset, an impairment calculation is performed.

We assess our ROU assets for impairment when there are indicators of impairment and compare the carrying amount of the ROU asset to its estimated undiscounted future cash flows.

If the estimated undiscounted future cash flows are less than the carrying amount of the ROU asset, an impairment calculation is performed.

An impairment loss is recorded for the difference of the ROU asset’s carrying value that exceeds its estimated discounted cash flows.

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2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”).

The amendments in ASU 2021-01 provide optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of the reference rate reform.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

reference rate reform.

The provisions must be applied at a Topic, Subtopic, or Industry Subtopic level for all transactions other than derivatives, which may be applied at a hedging relationship level.

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ASU 2020-08 became effective for interim and annual reporting periods beginning after December 15, 2020.

The amendments are to be applied on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities.

The amendments were applied on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities.

We adopted ASU 2020-08 on January 1, 2021, and the adoption did not have an impact on our consolidated financial position, results of operations or cash flows.

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The amendments eliminate two of the three accounting models that require separate accounting for convertible features of debt securities, simplify the contract settlement assessment for equity classification, require the use of the if-converted method for all convertible instruments in the diluted earnings per share calculation and expand disclosure requirements.

The amendments are effective for our annual and interim reporting periods beginning after December 15, 2021.

We adopted ASU 2020-06 on January 1, 2022 and are using the modified retrospective transition method which resulted in an increase to our reported debt outstanding and a corresponding cumulative-effect reduction to opening retained earnings;

the amounts are not material to our overall consolidated financial position.

The amendments became effective for our annual and interim reporting periods beginning after December 15, 2021.

We adopted ASU 2020-06 on January 1, 2022 using the modified retrospective transition method, which resulted in an increase to our reported debt outstanding of $ 31 , a decrease to our deferred tax liabilities of $ 8 , and a corresponding cumulative-effect reduction to our opening retained earnings of $ 23 , eliminating the bifurcation of the embedded conversion option;

these amounts were not material to our overall consolidated financial position.

The adoption of ASU 2020-06 did not have an impact on our results of operations or our consolidated cash flows.

Use of the if-converted method is not expected to have a material impact on our overall earnings per share calculation.

Use of the if-converted method did not have an impact on our overall earnings per share calculation.

In December 2019, the FASB issued Accounting Standards Update No.

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We adopted ASU 2019-12 on January 1, 2021, and the adoption did not have an impact on our consolidated financial position, results of operations or cash flows.

In June 2016, the FASB issued Accounting Standards Update No.

2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

ASU 2016-13 introduces a current

Notes to Consolidated Financial Statements (continued)

expected credit loss model for measuring expected credit losses for certain types of financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts.

ASU 2016-13 replaces the incurred loss model for measuring expected credit losses, requires expected losses on available-for-sale debt securities to be recognized through an allowance for credit losses rather than as reductions in the amortized cost of the securities and provides for additional disclosure requirements.

ASU 2016-13 requires a cumulative-effect adjustment to the opening balance of retained earnings on the balance sheet at the date of adoption and a prospective transition approach for debt securities for which an other-than-temporary impairment had been recognized before the adoption date.

The effect of a prospective transition approach is to maintain the same amortized cost basis before and after the date of adoption.

We adopted ASU 2016-13 on January 1, 2020, and recognized a cumulative-effect adjustment of $ 35 to our opening retained earnings for credit related allowances on receivables.

The adoption did not have an impact on our consolidated statements of income or cash flows.

Recent Accounting Guidance Not Yet Adopted:

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Targeted Improvements to the Accounting for Long-Duration Contracts (“ASU 2018-12”), which was issued in November 2018.

The amendments in ASU 2020-11 have extended the original effective date by one year and now the amendments are required for our interim and annual reporting periods beginning after December 15, 2022.

The amendments in ASU 2018-12 make changes to a variety of areas to simplify or improve the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity.

The amendments require insurers to annually review the assumptions they make about their policyholders and update the liabilities for future policy benefits if the assumptions change.

The amendments also simplify the amortization of deferred contract acquisition costs and add new disclosure requirements about the assumptions insurers use to measure their liabilities and how they may affect future cash flows.

The amendments related to the liability for future policy benefits for traditional and limited-payment contracts and deferred acquisition costs are to be applied to contracts in force as of the beginning of the earliest period presented, with an option to apply such amendments retrospectively with a cumulative-effect adjustment to the opening balance of retained earnings as of the earliest period presented.

The amendments for market risk benefits are to be applied retrospectively.

We are currently evaluating the effects the adoption of ASU 2020-11 and ASU 2018-12 will have on our consolidated financial position, results of operations, cash flows, and related disclosures.

The amendments in ASU 2020-11 extended the original effective date by one year, with the amendments required for our interim and annual reporting periods beginning after December 15, 2022.

This standard requires the Company to review cash flow assumptions for its long-duration insurance contracts at least annually and recognize the effect of changes in future cash flow assumptions in net income.

This standard also requires the Company to update discount rate assumptions quarterly and recognize the effect of changes in these assumptions in other comprehensive income.

The rate used to discount the Company’s reserves for future policy benefits will be based on an estimate of the yield for an upper-medium grade fixed-income instrument with a duration profile matching that of the Company’s liabilities.

In addition, this standard changes the amortization method for deferred acquisition costs.

The Company adopted the new standard on January 1, 2023, using the modified retrospective transition method for changes to the liability for future policy benefits and deferred acquisition costs as of the earliest period presented, January 1, 2021.

The adoption did not have a material impact on our consolidated financial position, results of operations, cash flows, or related disclosures.

There were no other new accounting pronouncements that were issued or became effective during the year ended December 31, 2022 that had, or are expected to have, a material impact on our financial position, results of operations, cash flows or financial statement disclosures.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

Business Acquisitions

Completed Acquisitions

During the year ended December 31, 2021, the Company completed business combinations for total cash consideration of approximately $ 4,021 .

During the year ended December 31, 2022, we completed business combinations for total cash consideration of approximately $ 752 .

These acquisitions included Integra MLTC, Inc.

(“Integra”), acquired May 2022, which 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 purchase prices for all business combinations were allocated to the tangible and intangible net assets acquired based on management’s initial estimates of their fair values, of which $ 89 was allocated to finite-lived intangible assets, $ 250 to indefinite-lived intangible assets, and $ 145 to goodwill.

The intangible assets and goodwill acquired were assigned to our Government Business reportable segment.

The majority of goodwill is deductible for income tax purposes.

As of December 31, 2022, the initial accounting for the acquisitions completed in 2022 had not been finalized.

Any subsequent adjustments made to the assets acquired or liabilities assumed during the measurement period will be recorded as an adjustment to goodwill.

The proforma effects of these acquisitions for prior periods were not material to our consolidated results of operations.

During the year ended December 31, 2021, we completed business combinations for total cash consideration of approximately $ 4,021 .

These acquisitions included myNEXUS, Inc.

(“myNEXUS”), a comprehensive home-based nursing management company for payors, and MMM Holdings, LLC (“MMM”), including its Medicare Advantage plan, Medicaid plan, and other affiliated companies.

The purchase price was allocated to the tangible and intangible net assets acquired based on management's final estimates of their fair values, of which $ 1,577 has been allocated to finite-lived intangible assets, $ 20 to indefinite-lived intangible assets, and $ 2,521 to goodwill.

The majority of goodwill is not deductible for income tax purposes.

During the year ended December 31, 2020, the Company completed business combinations for total cash consideration of approximately $ 2,488 .

These acquisitions included Beacon Health Options, Inc.

(“Beacon”) a behavioral health managed care organization.

The purchase price was allocated to the tangible and intangible net assets acquired based on management's final estimates of their fair values, of which $ 868 was allocated to finite-lived intangible assets, $ 225 to indefinite-lived intangible assets, and $ 1,231 to goodwill.

The majority of goodwill is not deductible for income tax purposes.

Notes to Consolidated Financial Statements (continued)

(“myNEXUS”), acquired April 2021, a comprehensive home-based nursing management company for payors, and MMM Holdings, LLC (“MMM”), acquired June 2021, including its Medicare Advantage plan, Medicaid plan, and other affiliated companies.

The purchase prices for all business combinations were allocated to the tangible and intangible net assets acquired based on management’s final estimates of their fair values, of which $ 1,577 was allocated to finite-lived intangible assets, $ 20 to indefinite-lived intangible assets, and $ 2,531 to goodwill, including measurement period adjustments of $ 10 during the year ended December 31, 2022.

Of these amounts, $ 795 was allocated to our Other reportable segment and $ 3,333 to our Government Business reportable segment.The majority of goodwill is not deductible for income tax purposes.

Acquired tangible assets (liabilities) at the acquisition date were:

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Other long-term liabilities ( 15 ) ( 6 )

Deferred tax liabilities ( 32 ) ( 556 )

Total net tangible assets $ 267 $ ( 107 )

The preliminary purchase price allocations for the various business combinations are subject to adjustment as valuation analyses, primarily related to intangible assets and contingent and tax liabilities, are finalized.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

Acquisition date fair values and weighted-average useful lives assigned to intangible assets include:

Fair Value Weighted Average Useful Life Fair Value Weighted Average Useful Life

Customer relationships $ 1,313 13 years $ 680 19 years

Customer-related $ 85 10 years $ 1,313 13 years

Provider and hospital relationships 2 15 years 240 14 years

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The pro forma effects of the acquisitions on net earnings were immaterial for both years.

Pending Acquisition

On November 10, 2021, we announced our entrance into an agreement with Personal Touch Holding Corporation to acquire 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 home.

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.

Pending Acquisitions

Louisiana Health Service & Indemnity Company (d/b/a Blue Cross and Blue Shield of Louisiana)

On January 23, 2023, we announced our entrance into an agreement to acquire Louisiana Health Service & Indemnity Company, d/b/a Blue Cross and Blue Shield of Louisiana, an independent licensee of the BCBSA that provides healthcare plans to the Individual, Group, Medicaid and Medicare markets, primarily in the State of Louisiana.

This acquisition aligns with our vision to be an innovative, valuable and inclusive healthcare partner by providing care management programs that improve the lives of the people we serve.

The acquisition is expected to close by the end of the fourth quarter of 2023 and is subject to standard closing conditions and customary approvals.

BioPlus Parent, LLC

On November 9, 2022, we announced our entrance into an agreement with CarepathRx Aggregator, LLC to acquire its specialty pharmacy division, which includes BioPlus Parent, LLC (“BioPlus”) and subsidiaries.

BioPlus is one of the largest independent specialty pharmacy organizations in the United States and seeks to connect payors and providers of specialty pharmaceuticals to meet the medication therapy needs of patients with complex medical conditions.

This acquisition aligns with our vision to be an innovative, valuable and inclusive healthcare partner by providing care management programs that improve the lives of the people we serve.

The acquisition was completed on February 15, 2023, and initial purchase accounting for the acquisition has not been finalized.

Business Optimization Initiatives

We believe that our properties are adequate and suitable for our business as presently conducted;

however, we are continuing to evaluate our real estate strategy as it relates to the impact of the COVID-19 pandemic and the changing needs of a more hybrid remote and in-office workforce.

As a result, during 2021, we identified additional reductions of office space and recorded a charge of $ 202 in selling, general and administrative expenses.

however, we are continuing to evaluate our real estate strategy as it relates to the changing needs of a more hybrid remote workforce.

As a result, during 2022, we identified additional reductions of office space and recorded a net charge of $ 39 in selling, general and administrative expenses.

This charge includes $ 34 for impairment and abandonment of operating-lease related ROU assets and $ 7 for impairment and abandonment of property and equipment.

The charges recognized in the Commercial & Specialty Business, Government Business, IngenioRx and Other segments in 2021, were $ 108 , $ 60 , $ 1 and $ 33 , respectively.

See also Note 20, “Segment Information.”

In addition, we released $ 2 of employee termination costs, as reflected in the table below.

The net charges recognized in the Commercial & Specialty Business, Government Business, CarelonRx and Other segments in 2022, were $ 20 , $ 16 , $ 0 and $ 3 , respectively.

See Note 20, “Segment Information” for a discussion of our segments.

During 2021, we identified reductions of office space and recorded a charge of $ 202 in selling, general and administrative expenses.

This charge included $ 136 for impairment and abandonment of operating-lease related ROU assets and $ 66 for impairment and abandonment of property and equipment.

The charges recognized in the Commercial & Specialty Business, Government Business, CarelonRx and Other segments in 2021, were $ 108 , $ 60 , $ 1 and $ 33 , respectively.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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This charge included $ 258 for impairment and abandonment of operating-lease related ROU assets, $ 198 for impairment and abandonment of property and equipment and $ 197 for future payments for employee termination costs in connection with the repositioning and reskilling of our workforce.

The charges recognized in the Commercial & Specialty Business, Government Business, IngenioRx and Other segments in 2020, were $ 311 , $ 205 , $ 4 and $ 133 , respectively.

See also Note 20, “Segment Information.” We believe these initiatives largely represent our progression towards becoming a more agile organization, including process automation and a reduction in our office space footprint.

A summary of the activity of the 2020 employee termination costs for the year ended December 31, 2021 and ending balance at December 31, 2021 is as follows:

Commercial & Specialty Business Government Business IngenioRx Other Total

The charges recognized in the Commercial & Specialty Business, Government Business, CarelonRx and Other segments in 2020, were $ 311 , $ 205 , $ 4 and $ 133 , respectively.

A summary of the activity for the year ended December 31, 2022 and ending balance at December 31, 2022, related to the liability for employee termination costs previously incurred in 2020, is as follows:

Commercial & Specialty Business Government Business CarelonRx Other Total

2020 Business Optimization Initiatives

Employee termination costs:

Liabilities for employee termination costs at January 1, 2022

$ 61 $ 57 $ 1 $ 3 $ 122

Payments ( 20 ) ( 18 ) — ( 1 ) ( 39 )

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Total liabilities for employee termination costs ending balance at December 31, 2022

We expect the employee termination costs to be paid by the end of 2022.

$ 41 $ 39 $ 1 $ — $ 81

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

Certain prior year residential and commercial mortgage-backed securities have been reclassified throughout this Note 5 and Note 7, “Fair Value” to conform to the current year presentation.

A summary of current and long-term fixed maturity securities, available-for-sale, at December 31, 2022 and 2021 is as follows:

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2,055 1 ( 176 ) ( 2 ) 1,878

Other securities 2,907 24 ( 24 ) — 2,907

Other asset-backed securities 3,967 12 ( 241 ) — 3,738

Total fixed maturity securities $ 29,015 $ 76 $ ( 2,378 ) $ ( 9 ) $ 26,704

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1,632 29 ( 16 ) ( 2 ) 1,643

Other securities 1,937 33 ( 11 ) — 1,959

Other asset-backed securities 2,907 24 ( 24 ) — 2,907

Total fixed maturity securities $ 26,257 $ 830 $ ( 182 ) $ ( 6 ) $ 26,899

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

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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Commercial mortgage-backed securities 457 1,082 ( 76 ) 324 719 ( 100 )

Other securities 511 1,707 ( 19 ) 50 85 ( 5 )

Other asset-backed securities 784 2,203 ( 124 ) 398 1,074 ( 117 )

Total fixed maturity securities 7,781 $ 16,035 $ ( 1,071 ) 4,060 $ 7,537 $ ( 1,307 )

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Government sponsored securities

— — — 1 1 ( 1 )

Foreign government securities 188 143 ( 8 ) 68 41 ( 5 )

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272 676 ( 8 ) 66 137 ( 8 )

Other securities

207 509 ( 5 ) 79 179 ( 6 )

Other asset-backed securities 511 1,707 ( 19 ) 50 85 ( 5 )

Total fixed maturity securities 3,571 $ 8,755 $ ( 131 ) 686 $ 985 $ ( 51 )

Below are discussions by security type for unrealized losses and credit losses as of December 31, 2021:

Corporate securities:

An allowance for credit losses on certain retail, travel and entertainment, energy, and basic materials sector fixed maturity corporate securities has been determined based on qualitative and quantitative factors including credit rating, decline in fair value and industry condition along with other available market data.

With multiple risk factors present, these securities were reviewed for expected future cash flow to determine the portion of unrealized losses that were credit related and to record an allowance for credit losses.

Unrealized losses on our other corporate securities were largely due to market conditions relating to the COVID-19 pandemic;

however, qualitative factors did not indicate a credit loss as of December 31, 2021.

We do not intend to sell these investments and it is likely we will not have to sell these investments prior to maturity or recovery of amortized cost.

Residential mortgage-backed securities:

An allowance for credit loss was established on certain residential mortgage-backed securities.

Notification of maturity and coupon default, as well as a significant and sustained decline in fair value, were factors to indicate a credit loss.

No other mortgage securities had material unrealized losses or qualitative factors to indicate a credit loss.

We do not intend to sell these investments and it is likely we will not be required to sell these investments prior to maturity or recovery of amortized cost.

Unrealized losses on our securities shown in the table above have not been recognized into income because, as of December 31, 2022, we do not intend to sell these investments and it is likely that we will not be required to sell these investments prior to their anticipated recovery.

The declines in fair values are largely due to increasing interest rates driven by the higher rate of inflation and other market conditions.

Allowances for credit losses have been recorded in the amounts of $ 9 and $ 6 at December 31, 2022 and 2021, respectively, for declines in fair value due to unfavorable changes in the credit quality characteristics that impact our assessment of collectability of principal and interest.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

As for the remaining securities shown in the table above, unrealized losses on these securities have not been recognized into income because we do not intend to sell these investments and it is likely that we will not be required to sell these investments prior to their anticipated recovery.

The decline in fair value is largely due to changes in interest rates and other market conditions.

We have evaluated these securities for any change in credit rating and have determined that no allowance is necessary.

The fair value is expected to recover as the securities approach maturity.

The tables below present a roll-forward by major security type of the allowance for credit losses on fixed maturity securities available-for-sale held at period end for the years ended December 31, 2021, and 2020:

Year Ended December 31, 2021 Corporate Securities Residential Mortgage-backed Securities Total

Allowance for credit losses:

Beginning balance $ 7 $ — $ 7

Additions for securities for which no previous expected credit losses were recognized 1 — 1

Securities sold during the period ( 2 ) — ( 2 )

(Decreases) increases to the allowance for credit losses on securities ( 2 ) 2 —

Total allowance for credit losses $ 4 $ 2 $ 6

Year Ended December 31, 2020 Corporate Securities Foreign Government Securities Total

Allowance for credit losses:

Beginning balance $ — $ — $ —

Additions for securities for which no previous expected credit losses were recognized 64 1 65

Securities sold during the period ( 17 ) ( 1 ) ( 18 )

Decreases to the allowance for credit losses on securities ( 40 ) — ( 40 )

Total allowance for credit losses $ 7 $ — $ 7

The amortized cost and fair value of fixed maturity securities at December 31, 2022, by contractual maturity, are shown below.

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Total fixed maturity securities $ 29,015 $ 26,704

Notes to Consolidated Financial Statements (continued)

Equity Securities

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Exchange traded funds $ 822 $ 1,750

Fixed maturity mutual funds — 144

Common equity securities 43 42

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Net investment income $ 1,485 $ 1,378 $ 877

Investment Gains

Net investment gains (losses) for the years ended December 31, 2021, 2020 and 2019 are as follows:

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

Investment (Losses) Gains

Net investment (losses) gains for the years ended December 31, 2022, 2021 and 2020 are as follows:

2022 2021 2020

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Gross realized losses from sales ( 469 ) ( 44 ) ( 105 )

Impairment recoveries (losses) recognized in income 1 ( 7 ) ( 13 )

Net gains on fixed maturity securities 127 63 53

Impairment (losses) recoveries recognized in income ( 31 ) 1 ( 7 )

Net realized gains on fixed maturity securities ( 448 ) 127 63

Equity securities:

Gross gains 37 269 147

Gross losses ( 108 ) ( 75 ) ( 84 )

Unrealized (losses) gains recognized on equity securities still held ( 78 ) 2 133

Net realized (losses) gains recognized on equity securities sold ( 102 ) ( 73 ) 61

Net (losses) gains on equity securities ( 180 ) ( 71 ) 194

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Impairment losses recognized in income ( 34 ) ( 16 ) ( 91 )

Net gains (losses) on other investments 255 ( 73 ) ( 32 )

Net gains on investments $ 311 $ 184 $ 84

Notes to Consolidated Financial Statements (continued)

The gains and losses related to equity securities for the years ended December 31, 2021, 2020, and 2019 are as follows:

2021 2020 2019

Net (losses) gains recognized on equity securities $ ( 71 ) $ 194 $ 63

Net realized (losses) gains recognized on equity securities sold during the period ( 73 ) 61 39

Unrealized gains recognized in income on equity securities still held at December 31 $ 2 $ 133 $ 24

Net (losses) gains on other investments ( 2 ) 255 ( 73 )

Net (losses) gains on investments $ ( 630 ) $ 311 $ 184

A primary objective in the management of our fixed maturity and equity portfolios is to maximize total return relative to underlying liabilities and respective liquidity needs.

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(i) the extent to which the fair value is less than book value, (ii) the financial condition and near term prospects of the issuer, (iii) our intent and ability to retain impaired investments for a period of time sufficient to allow for any anticipated recovery in fair value, (iv) our intent to sell or the likelihood that we will need to sell a fixed maturity security before recovery of its amortized cost basis, (v) whether the debtor is current on interest and principal payments, (vi) the reasons for the decline in value (i.e., credit event compared to liquidity, general credit spread widening, currency exchange rate or interest rate factors) and (vii) general market conditions and industry or sector specific factors.

For securities that are deemed to be credit impaired, an allowance is created.

When a decision has been made to sell an impaired security or it is more likely than not that the impaired security will be required to be disposed of prior to recovery of its cost basis, the security is written down to fair value at the reporting date.

For all other impaired securities, if the impairment is deemed to be credit related, an allowance is created.

Investment securities are exposed to various risks, such as interest rate, market and credit.

Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is possible that changes in these risk factors in the near term could have a material adverse impact on our results of operations or shareholders’ equity.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

At December 31, 2022 and 2021, there were no individual investments that exceeded 10% of shareholders’ equity.

At December 31, 2021 and 2020, there were two and three , respectively, fixed maturity investments that did not produce income during the years then ended.

At December 31, 2022 and 2021, there were eight and two , respectively, fixed maturity investments that did not produce income during the years then ended.

As of December 31, 2022 and 2021, we had committed approximately $ 1,504 and $ 1,558 , respectively, to future capital calls from various third-party investments in exchange for an ownership interest in the related entities.

As of December 31, 2022 and 2021, we had committed approximately $ 185 and $ 329 , respectively, to future investments in rated notes.

At December 31, 2022 and 2021, securities with carrying values of approximately $ 752 and $ 632 , respectively, were deposited by our insurance subsidiaries under requirements of regulatory authorities.

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The value of the collateral represented 102 % of the market value of the securities on loan at each of December 31, 2022 and 2021.

Notes to Consolidated Financial Statements (continued)

We recognize the collateral as an asset under the caption “Other current assets” in our consolidated balance sheets, and we recognize a corresponding liability for the obligation to return the collateral to the borrower under the caption “Other current liabilities.” The securities on loan are reported in the applicable investment category on our consolidated balance sheets.

At December 31, 2021 and 2020, the remaining contractual maturities of our securities lending transactions included overnight and continuous transactions of cash for $ 1,874 and $ 1,056 , respectively, and United States Government securities for $ 281 and $ 143 , respectively.

At December 31, 2022 and 2021, the remaining contractual maturities of our securities lending transactions included overnight and continuous transactions of cash for $ 2,221 and $ 1,874 , respectively, United States Government securities for $ 224 and $ 281 , respectively, and residential mortgage-backed securities for $ 12 and $ 0 , respectively.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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Non-hedging instruments

Derivatives embedded in convertible fixed maturity securities 18 Fixed Maturity Securities 4 —

Interest rate swaps 5 Equity securities/other assets/other liabilities — —

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Non-hedging instruments

Interest rate swaps 27 Equity securities — —

Interest rate swaps 119 Equity securities/other assets/other liabilities — ( 5 )

Options 100 Other assets/other liabilities — —

Collars 19 Equity securities 21 ( 17 )

Futures 344 Equity securities 3 ( 2 )

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Net derivatives $ 26 $ ( 8 )

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

1 unchanged sentence

We have entered into various interest rate swap contracts to convert a portion of our interest rate exposure on our long-term debt from fixed rates to floating rates.

The floating rates payable on all of our fair value hedges are benchmarked to the LIBOR.

The floating rates payable on all of our fair value hedges are benchmarked to the LIBOR or the Secured Overnight Financing Rate.

A summary of our outstanding fair value hedges at December 31, 2022 and 2021 is as follows:

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Received Expiration Date

Interest rate swap

2022 $ 150 $ — 5.500 % April 15, 2032

Interest rate swap

2022 75 — 4.101 September 1, 2027

Interest rate swap

2022 75 — 2.250 November 15, 2029

Interest rate swap 2021 150 150 2.550 September 15, 2030

6 unchanged sentences

Total notional amount outstanding

$ 1,125 $ 825

The following amounts were recorded on our consolidated balance sheets related to cumulative basis adjustments for fair value hedges at December 31, 2022 and 2021:

1 unchanged sentence

2022 2021 2022 2021

Current portion of long term-debt $ 1,599 $ 700 $ 23 $ 37

Long-term debt $ 22,349 $ 21,157 $ ( 57 ) $ 18

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No amounts were excluded from effectiveness testing.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

4 unchanged sentences

Year ended December 31, 2022

Interest rate swaps Net gains on financial instruments $ ( 4 )

Collars Net gains on financial instruments 4

Futures Net gains on financial instruments 7

Derivatives embedded in convertible securities Net (losses) gains on financial instruments $ ( 3 )

Interest rate swaps Net (losses) gains on financial instruments ( 4 )

Options (including swaptions) Net (losses) gains on financial instruments 13

Collars Net (losses) gains on financial instruments 10

Futures Net (losses) gains on financial instruments 64

Year ended December 31, 2021

Interest rate swaps Net gains on financial instruments $ ( 1 )

Options Net gains on financial instruments ( 5 )

Futures Net gains on financial instruments 4

Total $ ( 2 )

Interest rate swaps Net (losses) gains on financial instruments $ ( 4 )

Collars Net (losses) gains on financial instruments 4

Futures Net (losses) gains on financial instruments 7

Year ended December 31, 2020

Interest rate swaps Net gains on financial instruments $ 1

Options Net gains on financial instruments ( 8 )

Futures Net gains on financial instruments ( 10 )

Interest rate swaps Net (losses) gains on financial instruments $ ( 1 )

Options Net (losses) gains on financial instruments ( 5 )

Futures Net (losses) gains on financial instruments 4

Total $ ( 2 )

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These fair values are obtained primarily from third-party pricing services, which generally use Level I or Level II inputs for the determination of fair value to facilitate fair value measurements and disclosures.

Level II securities primarily include corporate securities, securities from states, municipalities and political subdivisions, mortgage-backed securities, United States Government securities, foreign government securities, and certain other asset-backed securities.

For securities not actively traded, the pricing services may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets

Level II securities primarily include corporate securities, securities from states, municipalities and political

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

for similar securities.

subdivisions, mortgage-backed securities, United States Government securities, foreign government securities, and certain other asset-backed securities.

We have controls in place to review the pricing services’ qualifications and procedures used to determine fair values.

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Inputs that are often used in the valuation methodologies include, but are not limited to, broker quotes, benchmark yields, credit spreads, default rates and prepayment speeds.

We also have certain fixed maturity securities, primarily corporate debt securities, that are designated Level III securities.

We also have certain fixed maturity securities, primarily collateralized loan obligation securities and corporate debt securities, that are designated Level III securities.

For these securities, the valuation methodologies may incorporate broker quotes or discounted cash flow analyses using assumptions for inputs such as expected cash flows, benchmark yields, credit spreads, default rates and prepayment speeds that are not observable in the markets.

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Fair value is based on the cash surrender value of the policies as reported by the insurer.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

11 unchanged sentences

Commercial mortgage-backed securities — 1,878 — 1,878

Other securities — 2,888 19 2,907

Other asset-backed securities — 3,382 356 3,738

Total fixed maturity securities, available-for-sale — 26,211 493 26,704

20 unchanged sentences

Commercial mortgage-backed securities — 1,643 — 1,643

Other securities — 1,954 5 1,959

Other asset-backed securities — 2,888 19 2,907

Total fixed maturity securities, available-for-sale — 26,539 360 26,899

1 unchanged sentence

Exchange traded funds 1,750 — — 1,750

Fixed maturity mutual funds — 144 — 144

Common equity securities 8 34 — 42

1 unchanged sentence

Total equity securities 1,758 34 89 1,881

Other invested assets - common equity securities 138 — — 138

Securities lending collateral — 2,155 — 2,155

Derivatives — 43 — 43

Derivatives - other assets — 19 — 19

Total assets $ 4,311 $ 28,747 $ 449 $ 33,507

Derivatives $ — $ ( 5 ) $ — $ ( 5 )

Derivatives - other liabilities $ — $ ( 1 ) $ — $ ( 1 )

Total liabilities $ — $ ( 1 ) $ — $ ( 1 )

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

1 unchanged sentence

Securities Residential

Securities Other

Securities Equity

Securities Other Asset-Backed Securities Equity

Securities Total

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Recognized in net income ( 3 ) — — ( 19 ) ( 22 )

Recognized in accumulated other comprehensive loss

Recognized in accumulated other comprehensive income ( 5 ) — — — ( 5 )

Purchases 85 — — 16 101

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that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances.

As disclosed in Note 3, “Business Acquisitions,” we completed our acquisitions of myNEXUS and MMM during the second quarter of 2021, as well as our acquisition of Beacon during the first quarter of 2020.

The net assets acquired in our acquisitions of myNEXUS,

As disclosed in Note 3, “Business Acquisitions,” we completed our acquisition of Integra in 2022 and the acquisitions of myNEXUS and MMM

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

MMM and Beacon and resulting goodwill and other intangible assets were recorded at fair value primarily using Level III inputs.

The net assets acquired in our acquisitions of Integra, myNEXUS, and MMM and resulting goodwill and other intangible assets were recorded at fair value primarily using Level III inputs.

The majority of assets acquired and liabilities assumed were recorded at their carrying values as of the respective date of acquisition, as their carrying values approximated their fair values due to their short-term nature.

The fair values of goodwill and other intangible assets acquired in our acquisitions of myNEXUS, MMM and Beacon were internally estimated based on the income approach.

The fair values of goodwill and other intangible assets acquired in our acquisitions of Integra, myNEXUS and MMM were internally estimated based on the income approach.

The income approach estimates fair value based on the present value of the cash flows that the assets could be expected to generate in the future.

We developed internal estimates for the expected cash flows and discount rate in the present value calculation.

Other than the assets acquired and liabilities assumed in our acquisitions of myNEXUS, MMM and Beacon described above, there were no material assets or liabilities measured at fair value on a nonrecurring basis during the years ended December 31, 2021 or 2020.

Other than the assets acquired and liabilities assumed in our acquisitions of Integra, myNEXUS and MMM described above, there were no material assets or liabilities measured at fair value on a nonrecurring basis during the years ended December 31, 2022 or 2021.

Our valuation policy is determined by members of our treasury and accounting departments.

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The fair value of our short-term borrowings is based on quoted market prices for the same or similar debt, or if no quoted market prices were available, on the current market interest rates estimated to be available to us for debt of similar terms and remaining maturities.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

11 unchanged sentences

Short-term borrowings 265 — 265 — 265

Commercial paper 300 — 300 — 300

Notes 23,786 — 21,861 — 21,861

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Other invested assets $ 5,087 $ — $ — $ 5,087 $ 5,087

Short-term borrowings 275 — 275 — 275

Commercial paper 300 — 300 — 300

1 unchanged sentence

Convertible debentures 72 — 687 — 687

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

8 unchanged sentences

Federal and state operating loss carryforwards 208 201

Investment basis 340 —

Other 267 207

2 unchanged sentences

Total deferred income tax assets 1,846 1,530

Deferred income tax liabilities:

federal and state intangible assets 2,059 2,071

intangible assets 452 —

Foreign (including Puerto Rico) intangible assets 380 452

Capitalized software 601 777

6 unchanged sentences

Net deferred income tax liabilities $ 1,897 $ 2,702

Deferred tax liabilities, net totaled $ 2,702 and $ 2,019 at December 31, 2021 and 2020, respectively in our consolidated balance sheet.

We recognized $ 137 and $ 103 of deferred tax asset under the caption “Other noncurrent assets” at December 31, 2022 and 2021, respectively.

We recognized $ 2,034 and $ 2,805 of deferred tax liability under the caption “Deferred tax liabilities, net” at December 31, 2022 and 2021.

As of December 31, 2021, and as a result of acquisitions during the year, we established U.S.

As of December 31, 2022, we have established U.S.

deferred taxes for undistributed earnings from certain non-U.S.

subsidiaries, which are included in the Investment basis component above.

As of December 31, 2020, our undistributed earnings from all non-U.S.

subsidiaries were intended to be indefinitely reinvested in non-U.S.

operations, and therefore no U.S.

deferred taxes were recorded.

Notes to Consolidated Financial Statements (continued)

subsidiaries, which are included in the Investment basis component above, consistent with prior years.

Significant components of the provision for income taxes for the years ended December 31, 2022, 2021 and 2020 consist of the following:

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Federal $ 1,469 $ 1,467 $ 1,724

Foreign (including Puerto Rico) 98 18 7

State and local 179 165 461

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Total income tax expense $ 1,750 $ 1,830 $ 1,666

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

State and local current tax expense is reported gross of federal benefit in the preceding table, and includes amounts related to audit settlements, uncertain tax positions, state tax credits and true up of prior years’ tax.

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During the year ended December 31, 2022, we recognized income tax expense of $ 1,750 , or $ 7.21 per diluted share.

The HIP Fee payment was eliminated beginning in 2021.

During the year ended December 31, 2020, we recognized income tax expense of $ 1,666 , or $ 6.55 per diluted share, which included income tax expense of $ 330 , or $ 1.30 per diluted share as a result of the non-tax deductibility of the HIP Fee payment, which was reinstated for 2020.

The decrease in effective income tax rate is primarily due to the impact of geographic changes in the mix of 2022 earnings.

During the year ended December 31, 2021, we recognized income tax expense of $ 1,830 , or $ 7.41 per diluted share.

The HIP Fee payment was suspended for 2019.

The HIP Fee payment was eliminated beginning in 2021.

During the year ended December 31, 2020, we recognized income tax expense of $ 1,666 , or $ 6.55 per diluted share, which included income tax expense of $ 330 , or $ 1.30 per diluted share, as a result of the non-tax deductibility of the HIP Fee payment.

The change in the carrying amount of gross unrecognized tax benefits from uncertain tax positions for the years ended December 31, 2022 and 2021 is as follows:

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Balance at December 31 $ 349 $ 271

Notes to Consolidated Financial Statements (continued)

The table above excludes interest, net of related tax benefits, which is treated as income tax expense (benefit) under our accounting policy.

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Also included in the table above, at December 31, 2022, is $ 2 that would be recognized as an adjustment to additional paid-in capital, which would not affect our effective tax rate.

In addition to the contingent liabilities included in the table above, we filed protective state income tax refund claims of approximately $ 310 during 2017.

In addition to the contingent liabilities included in the table above, we filed protective state income tax refund claims of approximately $ 92 and $ 310 for 2022 and 2017, respectively.

There were no equivalent protective state income tax refund claims filed in 2021, 2020, 2019 or 2018.

For the year ended December 31, 2021, we recognized a net interest expense of $ 9 .

For the years ended December 31, 2020 and 2019, we recognized a net interest expense (benefit) of $ 7 and ($ 11 ), respectively.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

For the years ended December 31, 2022, 2021 and 2020 we recognized net interest expense of $ 13 , $ 9 and $ 7 , respectively.

We had accrued approximately $ 55 and $ 42 for the payment of interest at December 31, 2022 and 2021, respectively.

As of December 31, 2021, as further described below, certain tax years remain open to examination by the Internal Revenue Service (“IRS”) and various state and local authorities.

As of December 31, 2022, as further described below, certain tax years remain open to examination by the Internal Revenue Service (“IRS”) and various state, local and foreign authorities.

As a result of these examinations and discussions with taxing agencies, we have recorded amounts for uncertain tax positions.

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However, the ultimate resolution of these items is dependent on the completion of negotiations with various taxing authorities.

While it is difficult to determine when other tax settlements will actually occur, it is reasonably possible that one could occur in the next twelve months and our unrecognized tax benefits could change within a range of approximately ($ 14 ) to ($ 105 ).

While it is difficult to determine when other tax settlements will actually occur, it is reasonably possible that one could occur in the next twelve months and our unrecognized tax benefits could be reduced within a range of approximately $ 33 to $ 143 .

We are a member of the IRS Compliance Assurance Process (“CAP”).

The objective of CAP is to reduce taxpayer burden and uncertainty while assuring the IRS of the accuracy of tax returns prior to filing, thereby reducing or eliminating the need for post-filing examinations.

As of December 31, 2021, the IRS examination of our 2021 tax year continues to be in process.

As of December 31, 2022, the IRS examination of our 2022 and 2021 tax years continues to be in process.

In certain states, we pay premium taxes in lieu of state income taxes.

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Property and equipment, net $ 4,316 $ 3,919

Notes to Consolidated Financial Statements (continued)

Depreciation expense for 2022, 2021 and 2020 was $ 123 , $ 136 and $ 176 , respectively.

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Capitalized costs related to the internal development of software of $ 5,354 and $ 5,626 at December 31, 2022 and 2021, respectively, are reported with computer software.

Impairment of property and equipment for the years ended December 31, 2021 and 2020 was $ 73 and $ 198 , respectively, which is included in selling, general and administrative expenses.

Included in these amounts was impairment of property and equipment related to our activities as disclosed in Note 4, “Business Optimization Initiatives.” For the years ended December 31, 2021 and 2020, we recorded impairment charges for property and equipment related to these initiatives of $ 66 and $ 198 , respectively.

Impairment of property and equipment for the years ended December 31, 2022, 2021 and 2020 was $ 7 , $ 73 , and $ 198 , respectively, which is included in selling, general and administrative expenses and primarily related to our activities disclosed in Note 4, “Business Optimization Initiatives.”

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

Goodwill and Other Intangible Assets

A summary of the change in the carrying amount of goodwill for our segments (see Note 20, “Segment Information”) for 2022 and 2021 is as follows:

and Specialty

Business Government

Business IngenioRx Other Total

Business CarelonRx Other Total

Balance as of January 1, 2021 $ 11,593 $ 8,331 $ 48 $ 1,719 $ 21,691

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We did not incur any impairment losses in 2022, 2021 or 2020, as the estimated fair values of our reporting units were substantially in excess of their carrying values.

Notes to Consolidated Financial Statements (continued)

The components of other intangible assets as of December 31, 2022 and 2021 are as follows:

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Other intangible assets $ 14,594 $ ( 4,279 ) $ 10,315 $ 14,121 $ ( 3,506 ) $ 10,615

In 2022, due to our acquisition of Integra, we recorded intangible assets and due to our new branding strategy, reclassified $ 308 of trademarks with indefinite lives to Intangible assets with finite lives - Other.

In addition, the amortization period of certain intangible assets was shortened to align with the anticipated dates the new branding will take place.

Intangible assets, along with the related accumulated amortization, are removed from the table above at the end of the fiscal year in which they become fully amortized.

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and 2027, $ 221 .

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

Retirement Benefits

We sponsor various non-contributory employee defined benefit plans through certain subsidiaries.

The Anthem Cash Balance Plan A and the Anthem Cash Balance Plan B are cash balance pension plans covering certain eligible employees of the affiliated companies that participate in these plans.

The Elevance Health Cash Balance Plan A (formerly the Anthem Cash Balance Plan A) and the Elevance Health Cash Balance Plan B (formerly the Anthem Cash Balance Plan B) are cash balance pension plans covering certain eligible employees of the affiliated companies that participate in these plans.

Effective January 1, 2006, benefits were curtailed, with the result that most participants stopped accruing benefits but continue to earn interest on benefits accrued prior to the curtailment.

Certain participants subject to collective bargaining and certain other participants who met grandfathering rules continued to accrue benefits.

Participants who did not receive credits and/or benefit accruals were included in the Anthem Cash Balance Plan A, while employees who were still receiving credits and/or benefits participated in the Anthem Cash Balance Plan B.

Effective January 1, 2019, benefits under the Anthem Cash Balance Plan B were curtailed.

Participants who did not receive credits and/or benefit accruals were included in the Elevance Health Cash Balance Plan A, while employees who were still receiving credits and/or benefits participated in the Elevance Health Cash Balance Plan B.

Effective January 1, 2019, benefits under the Elevance Health Cash Balance Plan B were curtailed.

All grandfathered participants no longer have pay credits added to their accounts but continue to earn interest on existing account balances.

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Calculations were computed using assumptions at the December 31 measurement dates.

Notes to Consolidated Financial Statements (continued)

The reconciliation of the benefit obligation is as follows:

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Benefit obligation at end of year $ 1,415 $ 1,859 $ 277 $ 343

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

The changes in the fair value of plan assets are as follows:

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Such plans had accumulated benefit obligation and fair value of plan assets of $ 44 and $ 0 , respectively.

In addition, certain plans had

Notes to Consolidated Financial Statements (continued)

projected benefit obligations in excess of plan assets.

In addition, certain plans had projected benefit obligations in excess of plan assets.

Such plans had projected benefit obligation and fair value of plan assets of $ 44 and $ 0 , respectively.

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Interest crediting rate 4.25 % 3.82 % 3.89 % 1.56 %

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

The components of net periodic benefit credit included in the consolidated statements of income are as follows:

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Expected return on assets ( 26 ) ( 26 ) ( 25 )

Recognized actuarial loss — — 2

Amortization of prior service credit ( 4 ) ( 4 ) ( 7 )

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Interest crediting rate 1.56 % 0.87 % 1.81 %

Notes to Consolidated Financial Statements (continued)

The assumed healthcare cost trend rates used to measure the expected cost of pre-Medicare (those who are not currently eligible for Medicare benefits) other benefits at our December 31, 2022 measurement date was 8.00 % for 2023, with a gradual decline to 4.50 % by the year 2035 .

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Fixed maturity securities primarily include treasury securities, corporate bonds and asset-backed investments issued by corporations and the U.S.

Other types of investments primarily include insurance contracts designed specifically for employee benefit plans and a commingled fund comprised primarily of equity securities.

As of December 31, 2021, there were no significant concentrations of investments in the pension benefit assets or other benefit assets.

No plan assets were invested in Anthem common stock.

Other types of investments include insurance contracts

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

designed specifically for employee benefit plans, a commingled fund comprised primarily of equity securities and certain partnership interests.

The partnerships hold various types of underlying assets such as real estate and investments in oil and gas companies.

Generally, the partnership interests are not redeemable and are transferable only with the consent of the general partner.

Unfunded commitments related to all partnership interests totaled approximately $ 3 at each of December 31, 2021 and 2020.

Unfunded commitments related to all partnership interests totaled approximately $ 2 and $ 3 at December 31, 2022 and 2021, respectively.

As of December 31, 2022, there were no significant concentrations of investments in the pension benefit assets or other benefit assets.

No plan assets were invested in Elevance Health common stock.

Pension benefit assets and other benefit assets recorded at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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Total other benefit assets $ 25 $ 21 $ 270 $ 316

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

The fair values of our pension benefit assets and other benefit assets by asset category and level inputs at December 31, 2020, excluding cash, investment income receivable and amounts due to/from brokers, resulting in a net asset of $ 64 , are as follows:

The fair values of our pension benefit assets and other benefit assets by asset category and level inputs at December 31, 2021, excluding cash, investment income receivable and amounts due to/from brokers, resulting in a net asset of $ 48 , and excluding estimated claims settlements to be paid from other benefit assets of ($ 29 ), are as follows:

Level I Level II Level III Total

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Total other benefit assets $ 36 $ 24 $ 338 $ 398

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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Actual return on plan assets relating to assets still held at the reporting date

( 22 ) ( 53 ) ( 75 )

Purchases 9 — 9

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2028 - 2032 526 110

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

In addition to the defined benefit plans, we maintain the Anthem 401(k) Plan, which is a qualified defined contribution plan covering substantially all employees.

In addition to the defined benefit plans, we maintain the Elevance Health 401(k) Plan (formerly the Anthem 401(k) Plan), which is a qualified defined contribution plan covering substantially all employees.

Voluntary employee contributions are matched by us subject to certain limitations.

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Gross medical claims payable, end of year $ 4,119 $ 10,930 $ 299 $ 15,348

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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Business Government

Business Total

Business Other Total

Gross medical claims payable, beginning of year $ 3,039 $ 5,608 $ — $ 8,647

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Net medical claims payable, beginning of year 3,025 5,589 — 8,614

Business combinations and purchase adjustments — 141 198 339

Net incurred medical claims:

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This information is compared to the originally established year end liability.

Negative amounts reported for incurred medical claims related to prior years result from claims being settled for amounts less than originally estimated.

The prior year redundancy of $ 1,703 shown above for the year ended December 31, 2021 represents an estimate

Negative amounts reported for incurred medical claims related to prior years result from claims being settled for amounts less than originally

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

based on paid claim activity from January 1, 2021 to December 31, 2021.

The prior year redundancy of $ 869 shown above for the year ended December 31, 2022 represents an estimate based on paid claim activity from January 1, 2022 to December 31, 2022.

Medical claim liabilities are usually described as having a “short tail,” which means that they are generally paid within twelve months of the member receiving service from the provider.

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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 has increased estimation uncertainty on our incurred but not reported liability at December 31, 2021.

Slowdowns in claims submission patterns and increases in utilization levels for COVID-19 testing and treatment during the fourth quarter of 2021 are the primary factors that lead to the increased estimation uncertainty.

We had increased estimation uncertainty on our incurred but not reported liability at December 31, 2022 and December 31, 2021.

Slowdowns in claims submission patterns and increases in utilization levels for COVID-19 testing and treatment are the primary factors that lead to the increased estimation uncertainty.

Favorable Developments

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Total $ ( 869 ) $ ( 1,703 ) $ ( 637 )

The favorable development recognized in 2022 resulted primarily from trend factors in late 2021 developing more favorably than originally expected as well as a smaller contribution from completion factor development.

The favorable development recognized in 2021 resulted primarily from trend factors in late 2020 developing more favorably than originally expected as well as a smaller but significant contribution from completion factor development.

The favorable development recognized in 2020 resulted primarily from trend factors in late 2019 developing more favorably than originally expected as well as a smaller contribution from completion factor development.

The favorable development recognized in 2019 resulted from trend and completion factors developing more favorably than originally expected as well as a smaller but significant contribution from completion factor development.

The reconciliation of net incurred medical claims to benefit expense included in the consolidated statements of income is as follows:

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Benefit expense $ 116,487 $ 102,645 $ 88,045

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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Total $ 215,498

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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The provided claim

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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At each of December 31, 2022 and 2021, $ 0 was outstanding under our Subsidiary Credit Facilities.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

Long-term Debt

The carrying value of long-term debt at December 31, 2021 and 2020 consists of the following:

The carrying value of our long-term debt at December 31, 2022 and 2021 consists of the following:

Senior unsecured notes:

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3.125 %, due 2050

3.600 %, due 2051

4.550 %, due 2052

6.100 %, due 2052

4.850 %, due 2054

Surplus note:

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Long-term debt, less current portion $ 22,349 $ 21,157

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

All debt is a direct obligation of Anthem, Inc., except for the surplus note, the FHLB borrowings and the Subsidiary Credit Facilities.

All debt is a direct obligation of Elevance Health, Inc., except for the surplus note, the FHLB borrowings and the Subsidiary Credit Facilities.

We generally issue senior unsecured notes (“Notes”) for long-term borrowing purposes.

Certain of these Notes may have a call feature that allows us to redeem the Notes at any time at our option and/or a put feature that allows a Note holder to redeem the Notes upon the occurrence of both a change in control event and a downgrade of the Notes below an investment grade rating.

On February 8, 2023, we issued $ 500 aggregate principal amount of 4.900 % Notes due 2026 (the “2026 Notes”), $ 1,000 aggregate principal amount of 4.750 % Notes due 2033 (the “2033 Notes”), and $ 1,100 aggregate principal amount of 5.125 % Notes due 2053 (the “2053 Notes”) under our shelf registration statement.

Interest on the 2026 Notes is payable semi-annually in arrears on February 8 and August 8 of each year, commencing August 8, 2023.

Interest on the 2033 Notes and 2053 Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing August 15, 2023.

We intend to use the proceeds for working capital and general corporate purposes, including, but not limited to, the funding of acquisitions, repayment of short-term and long-term debt and the repurchase of our common stock pursuant to our share repurchase program.

On December 1, 2022, we repaid, at maturity, the $ 750 outstanding balance of our 2.950 % senior unsecured notes.

On November 4, 2022, we issued $ 400 aggregate principal amount of 5.350 % Notes due 2025, $ 650 aggregate principal amount of 5.500 % Notes due 2032 and $ 750 aggregate principal amount of 6.100 % Notes due 2052 under our shelf registration statement.

Interest on these notes is payable semi-annually in arrears on April 15 and October 15 of each year, commencing April 15, 2023.

We used the net proceeds for working capital and general corporate purposes, such as the funding of acquisitions, repayment of short-term and long-term debt and the repurchase of our common stock pursuant to our share repurchase program.

On May 16, 2022, we repaid, at maturity, the $ 850 outstanding balance of our 3.125 % senior unsecured notes.

On April 29, 2022, we issued $ 600 aggregate principal amount of 4.100 % Notes due 2032 and $ 700 aggregate principal amount of 4.550 % Notes due 2052 under our shelf registration statement.

Interest on these notes is payable semi-annually in arrears on May 15 and November 15 of each year, commencing November 15, 2022.

On May 15, 2021, we redeemed the $ 700 outstanding principal balance of our 3.700 % Notes due August 15, 2021 at a redemption price equal to 100% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest.

On March 17, 2021, we issued $ 500 aggregate principal amount of 0.450 % Notes due 2023 (the “2023 Notes”), $ 750 aggregate principal amount of 1.500 % Notes due 2026 (the “2026 Notes”), $ 1,000 aggregate principal amount of 2.550 % Notes due 2031 (the “2031 Notes”) and $ 1,250 aggregate principal amount of 3.600 % Notes due 2051 (the “2051 Notes”) under our shelf registration statement.

Interest on the 2023 Notes, 2026 Notes, 2031 Notes and 2051 Notes is payable semiannually in arrears on March 15 and September 15 of each year, commencing September 15, 2021.

We used the net proceeds for working capital and general corporate purposes, including, but not limited to, the funding of acquisitions, repayment of short-term and long-term debt and the repurchase of our common stock pursuant to our share repurchase program.

On March 17, 2021, we issued $ 500 aggregate principal amount of 0.450 % Notes due 2023, $ 750 aggregate principal amount of 1.500 % Notes due 2026, $ 1,000 aggregate principal amount of 2.550 % Notes due 2031 and $ 1,250 aggregate principal amount of 3.600 % Notes due 2051 under our shelf registration statement.

Interest on these notes is payable semiannually in arrears on March 15 and September 15 of each year, commencing September 15, 2021.

Additionally, during the year ended December 31, 2021, we repurchased $ 52 of outstanding principal amount of certain other senior unsecured notes, plus applicable premium for early redemption plus accrued and unpaid interest, for cash totaling $ 67 .

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We recognized a loss on extinguishment of debt of $ 30 for the repurchase of these notes.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

On May 5, 2020, we issued $ 400 aggregate principal amount of additional senior notes pursuant to a reopening of our existing 2.375 % Notes due 2025 (the “2025 Notes”), $ 1,100 aggregate principal amount of 2.250 % Notes due 2030 (the “2030 Notes”), and $ 1,000 aggregate principal amount of 3.125 % Notes due 2050 (the “2050 Notes”) under our shelf registration statement.

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Interest on the 2030 Notes and 2050 Notes is payable semi-annually in arrears on May 15 and November 15 of each year, commencing November 15, 2020.

The proceeds were used for working capital and general corporate purposes, including, but not limited to, repayment of short-term and long-term debt, repurchase of our common stock pursuant to our share repurchase program and to fund acquisitions.

On September 9, 2019, we issued $ 850 aggregate principal amount of the 2025 Notes, $ 825 aggregate principal amount of 2.875 % Notes due 2029 (the “2029 Notes”), and $ 825 aggregate principal amount of 3.700 % Notes due 2049 (the “2049 Notes”) under our shelf registration statement.

Interest on the 2025 Notes is payable semi-annually in arrears on January 15 and July 15 of each year, commencing January 15, 2020.

Interest on the 2029 Notes and the 2049 Notes is payable semi-annually in arrears on March 15 and September 15 each year, commencing March 15, 2020.

The proceeds were used for working capital and general corporate purposes, including, but not limited to, the repurchase of our common stock pursuant to our share repurchase program, repayment of short-term and long-term debt and to fund acquisitions.

On August 15, 2019, we repaid, at maturity, the $ 850 outstanding balance of our 2.250 % senior unsecured notes.

Notes to Consolidated Financial Statements (continued)

The proceeds were used for working capital and general corporate purposes, such as the funding of acquisitions, repayment of short-term and long-term debt and the repurchase of our common stock pursuant to our share repurchase program.

The surplus note is an unsecured obligation of Anthem Insurance Companies, Inc.

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We have a senior revolving credit facility (the “5-Year Facility”) with a group of lenders for general corporate purposes.

The 5-Year Facility provides credit up to $ 2,500 and matures in June 2024.

On June 3, 2021, we terminated our 364-day senior revolving credit facility, which was scheduled to mature in June 2021 (the “prior 364-Day Facility”), and entered into a new 364-day senior revolving credit facility (the “new 364-Day Facility,” and together with the 5-Year Facility, the “Credit Facilities”) with a group of lenders for general corporate purposes.

The new 364-Day Facility provides for credit in the amount of $ 1,000 and matures in June 2022.

Our ability to borrow under these credit facilities 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 applicable credit agreement.

As of December 31, 2021, our debt-to-capital ratio, as defined and calculated under the credit facilities, was 38.9%.

We do not believe the restrictions contained in any of our credit facility covenants materially affect our financial or operating flexibility.

As of December 31, 2021, we were in compliance with all of the debt covenants under these credit facilities.

There were no amounts outstanding under the prior 364-Day Facility or the new 364-day Facility at any time during the years ended December 31, 2021 or the year ended December 31, 2020.

At December 31, 2021 and December 31, 2020, there were no amounts outstanding under our 5-Year Facility.

On April 18, 2022, we amended and restated the credit agreement for the 5-Year Facility to, among other things, extend the maturity date of the 5-Year Facility from June 2024 to April 2027 and increase the amount of credit available under the 5-Year Facility from $ 2,500 to $ 4,000 .

Also on April 18, 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”).

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.

As of December 31, 2022, our debt-to-capital ratio, as defined and calculated under the 5-Year Facility, was 39.9%.

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

As of December 31, 2022, we were in compliance with all of our debt covenants under the 5-Year Facility.

There were no amounts outstanding under the 5-Year Facility, the 2021 364-Day Facility or the prior 364-Day Facility at any time during the years ended December 31, 2022 or 2021.

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

At December 31, 2021, we had $ 300 outstanding under our commercial paper program with a weighted-average interest rate of 0.150 %.

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

At December 31, 2022, we had $ 0 outstanding under our commercial paper program.

At December 31, 2021, we had $ 300 outstanding under our commercial paper program with a weighted-average interest rate of 0.150 %.

Commercial paper borrowings have been classified as long-term debt at December 31, 2021 and 2020, as our general practice and intent is to replace short-term commercial paper outstanding at expiration with additional short-term commercial paper for an uninterrupted period extending for more than one year, and we have the ability to redeem our commercial paper with borrowings under the senior revolving credit facilities described above.

Commercial paper borrowings have been classified as long-term debt at December 31, 2022 and 2021, as our general practice and intent is to replace short-term commercial paper outstanding at expiration with additional short-term commercial paper for an uninterrupted period extending for more than one year, and we have the ability to redeem our commercial paper with borrowings under the credit facilities described above.

Convertible Debentures

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The Debentures bear interest at a rate of 2.750 % per year, payable semi-annually in arrears in cash on April 15 and October 15 of each year, and mature on October 15, 2042, unless earlier redeemed, repurchased or converted into shares of common stock at the applicable conversion rate.

The Debentures also have a contingent interest feature that will require us to pay additional interest based on certain thresholds and for certain events, as defined in the Indenture, beginning on October 15, 2022.

The Debentures also have a contingent interest feature that requires us to pay additional interest based on certain thresholds and for certain events, as defined in the Indenture, beginning on October 15, 2022.

As of October 15, 2022, one of these events had occurred and contingent interest began accruing on the Debentures at a rate of 0.50% of the average trading price of a Debenture for the ten consecutive trading days ended October 14, 2022.

Contingent interest will be payable on April 15, 2023, to holders of the Debentures as of the April 1, 2023 record date.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

Holders may convert their Debentures at their option prior to the close of business on the business day immediately preceding April 15, 2042, only under the following circumstances:

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(2) during the five business day period after any 10 consecutive trading day period (the “measurement period”) in which the trading price per $ 1,000 (whole dollars) principal amount of Debentures for each trading day of that measurement period was less than 98 % of the product of the last reported sale price of our common stock and the applicable conversion rate on each such day;

(3) if we call any or all of the Debentures for redemption, at any time prior to the close of business on the third scheduled trading day prior to the redemption date;

(3) if we call any or all of the Debentures for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date;

or (4) upon the occurrence of specified corporate events, as defined in the Indenture.

1 unchanged sentence

The Debentures are redeemable at our option at any time on or after October 20, 2022 , upon the occurrence of certain events, as defined in the Indenture.

Notes to Consolidated Financial Statements (continued)

On February 13, 2023, we delivered notice to redeem all of the outstanding Debentures.

The Debentures will be redeemed on March 15, 2023 at a redemption price equal to 100 % of the principal amount of the Debentures plus accrued and unpaid interest to, but excluding, the date of redemption.

Upon conversion of the Debentures, we will deliver cash up to the aggregate principal amount of the Debentures converted.

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During the year ended December 31, 2022, $ 41 aggregate principal amount of the Debentures was surrendered for conversion by certain holders in accordance with the terms and provisions of the Indenture.

We elected to settle the excess of the principal amount of the conversion with cash for total payments of $ 299 .

During the year ended December 31, 2021, $ 54 aggregate principal amount of the Debentures was surrendered for conversion by certain holders in accordance with the terms and provisions of the Indenture.

We elected to settle the excess of the principal amount of the conversions with cash for total payments of $ 302 .

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We recognized a loss on the extinguishment of debt related to the Debentures of $ 6 , based on the fair values of the debt on the conversion settlement dates.

During the year ended December 31, 2019, we repurchased $ 15 of the aggregate principal balance of the Debentures.

In addition, $ 57 aggregate principal amount of the Debentures was surrendered for conversion by certain holders in accordance with the terms and provisions of the Indenture.

We elected to settle the excess of the principal amount of the repurchases and conversions with cash for total payments of $ 273 .

We recognized a loss on the extinguishment of debt related to the Debentures of $ 2 .

As of December 31, 2022, our common stock was last traded at a price of $ 512.97 per share.

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The Debentures and underlying shares of our common stock have not been and will not be registered under the Securities Act, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

We have accounted for the Debentures in accordance with the cash conversion guidance in FASB guidance for debt with conversion and other options.

As a result, the value of the embedded conversion option, net of deferred taxes and equity issuance costs, has been bifurcated from its debt host and recorded as a component of additional paid-in capital in our consolidated balance sheets.

We accounted for the Debentures in accordance with the FASB cash conversion guidance for debt with conversion and other options at the time of issue.

As a result, the value of the embedded conversion option, net of deferred taxes and equity issuance costs, was bifurcated from its debt host and recorded as a component of additional paid-in capital in our consolidated balance sheets.We adopted ASU 2020-06 on January 1, 2022 using the modified retrospective transition method, which resulted in an increase to our reported debt outstanding of $ 31 , a decrease of our deferred tax liabilities of $ 8 and a corresponding cumulative-effect reduction to our opening retained earnings of $ 23 , eliminating the bifurcation of the embedded conversion option.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

The following table summarizes, at December 31, 2022, the related balances, conversion rate and conversion price of the Debentures:

Outstanding principal amount $ 63

Unamortized debt discount $ 32

Net debt carrying amount $ 63

Equity component carrying amount $ 38

Conversion rate (shares of common stock per $1,000 of principal amount) 14.3238

Effective conversion price (per $1,000 of principal amount) $ 69.8139

The remaining amortization period of the unamortized debt discount as of December 31, 2021 is approximately 21 years.

The unamortized discount will be amortized into interest expense using the effective interest method based on an effective interest rate of 5.130 %, which represents the market interest rate for a comparable debt instrument that does not have a conversion feature.

During the years ended December 31, 2022, 2021 and 2020, we recognized $ 2 , $ 4 and $ 6 , respectively, of interest expense related to the Debentures, of which $ 2 , $ 3 and $ 5 , respectively, represented interest expense recognized at the stated interest rate of 2.750 % and $ 0 , $ 1 and $ 1 , respectively, represented interest expense resulting from amortization of the debt discount.

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We were in compliance with all applicable covenants under all of our outstanding debt agreements at December 31, 2022 and 2021.

Notes to Consolidated Financial Statements (continued)

Future maturities of all long-term debt outstanding at December 31, 2022 are as follows:

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We are a defendant in multiple lawsuits that were initially filed in 2012 against the BCBSA and Blue Cross and/or Blue Shield licensees (the “Blue plans”) across the country.

Cases filed in twenty-eight states were consolidated into a single, multi-district proceeding captioned In re Blue Cross Blue Shield Antitrust Litigation that is pending in the United States District Court for the Northern District of Alabama (the “Court”).

Generally, the suits allege that the BCBSA and the Blue plans have conspired to horizontally allocate geographic markets through license agreements, best efforts rules that limit the percentage of non-Blue revenue of each plan, restrictions on acquisitions, rules governing the BlueCard ® and National Accounts programs and other arrangements in violation of the Sherman Antitrust Act (“Sherman Act”) and related state laws.

Cases filed in twenty-eight states were consolidated into a single, multi-district proceeding captioned In re Blue Cross Blue Shield Antitrust Litigation that is pending in the U.S.

District Court for the Northern District of Alabama (the “Court”).

Generally, the suits allege that the BCBSA and the Blue plans have

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

conspired to horizontally allocate geographic markets through license agreements, best efforts rules that limit the percentage of non-Blue revenue of each plan, restrictions on acquisitions, rules governing the BlueCard ® and National Accounts programs and other arrangements in violation of the Sherman Antitrust Act (“Sherman Act”) and related state laws.

The cases were brought by two putative nationwide classes of plaintiffs, health plan subscribers and providers.

In April 2018, the Court issued an order on the parties’ cross motions for partial summary judgment, determining that the defendants’ aggregation of geographic market allocations and output restrictions are to be analyzed under a per se standard of review, and the BlueCard ® program and other alleged Section 1 Sherman Act violations are to be analyzed under the rule of reason standard of review.

The Court also found that there remain genuine issues of material fact as to whether the defendants operate as a single entity with regard to the enforcement of the Blue Cross Blue Shield trademarks.

With respect to whether the defendants operate as a single entity with regard to the enforcement of the Blue Cross Blue Shield trademarks, the Court found that summary judgment was not appropriate due to the existence of genuine issues of material fact.

In April 2019, the plaintiffs filed motions for class certification, which defendants opposed.

The BCBSA and Blue plans have approved a settlement agreement and release (the “Subscriber Settlement Agreement”) with the subscriber 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 contain certain terms imposing non-monetary obligations including (i) eliminating the “national best efforts” rule in the BCBSA license agreements (which rule limits the percentage of non-Blue revenue permitted for each Blue plan) and (ii) allowing for some large national employers with self-funded benefit plans to request a bid for insurance coverage from a second Blue plan in addition to the

Notes to Consolidated Financial Statements (continued)

local Blue plan.

As of December 31, 2021, the liability balance accrued for our estimated payment obligation was $ 507 , net of payments made.

The BCBSA and Blue plans approved a settlement agreement and release with the subscriber plaintiffs (the “Subscriber Settlement Agreement”), which agreement required the Court’s approval to become effective.

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

In November 2020, the Court issued an order preliminarily approving the Subscriber Settlement Agreement, following which members of the subscriber class were provided notice of the Subscriber Settlement Agreement and an opportunity to opt out of the class.

All terms of the Subscriber Settlement Agreement are subject to final approval by the Court.

The deadline for objections to the settlement as well as the deadline for those who wish to opt-out from the settlement was in July 2021 and a small number of subscribers submitted valid opt outs by the deadline.

The claims deadline was in November 2021 and in excess of eight thousand claims were submitted.

A final approval hearing was held in October 2021.

The Court took the request for approval under advisement and requested supplemental briefing that has been submitted.

If the Court grants approval of the Subscriber Settlement Agreement, and after all appellate rights have expired or have been exhausted in a manner that affirms the Court’s final order and judgment, the defendants’ payment and non-monetary obligations under the Subscriber Settlement Agreement will become effective.

A small number of subscribers submitted valid opt-outs by the July 2021 opt-out deadline.

A fairness hearing was held in October 2021 and the Court took the request for final approval under advisement.

In February 2022, the Court ordered the issuance of a supplemental notice to self-funded account class members.

The notice process was completed in March 2022.

In August 2022, the Court issued a final order approving the Subscriber Settlement Agreement (the “Final Approval Order”).

The Court amended its Final Approval Order in September 2022, further clarifying the injunctive relief that may be available to subscribers who submitted valid opt-outs.

In September 2022, an objector filed a motion to amend the Final Approval Order, which the Court denied.

In compliance with the Subscriber Settlement Agreement, the Company paid $ 506 into an escrow account in September 2022, for an aggregate and full settlement payment by the Company of $ 596 , which was previously accrued in 2020.

Four notices of appeal of the Final Approval Order were filed by the September 2022 appeal deadline.

Those appeals are proceeding in the United States Court of Appeals for the Eleventh Circuit.

In the event that all appellate rights are exhausted in a manner that affirms the Court’s Final Approval Order, the defendants’ payment and non-monetary obligations under the Subscriber Settlement Agreement will become effective and the funds held in escrow will be distributed in accordance with the Subscriber Settlement Agreement.

In October 2020, after the Court lifted the stay as to the provider litigation, provider plaintiffs filed a renewed motion for class certification, which defendants opposed.

In March 2021, the Court issued an order terminating the pending motion for class certification until the Court determines the standard of review applicable to providers’ claims.

In May 2021, the defendants and provider plaintiffs filed renewed standard of review motions, which are now fully briefed.

In June 2021, the parties filed summary judgment motions not critically dependent on class certification, which are now fully briefed and no decision has been rendered.

We intend to continue to vigorously defend the provider suit, which we believe is without merit;

In March 2021, the Court issued an order terminating the pending motion for class certification until the Court determines the standard of review applicable to the providers’ claims.

In May 2021, the defendants and provider plaintiffs filed renewed standard of review motions.

In June 2021, the parties filed summary judgment motions not critically dependent on class certification.

In February 2022, the Court issued orders (i) granting certain defendants’ motion for partial summary judgment against the provider plaintiffs who had previously released claims against such defendants, and (ii) granting the provider plaintiffs’ motion for partial summary judgment, holding that Ohio v.

American Express Co .

does not affect the standard of review in this case.

In August 2022, the Court issued orders (i) granting in part the defendants’ motion regarding the antitrust standard of review, holding that for the period of time after the elimination of the “national best efforts” rule, the rule of reason applies to the provider plaintiffs’ market allocation conspiracy claims, and (ii) denying the provider plaintiffs’ motion for partial summary judgment on the standard of review, reaffirming its prior holding that the providers’ group boycott claims are subject to the rule of reason.

In November 2022, the Court issued an order requiring the parties to submit supplemental briefs on certain questions related to providers’ renewed motion for class certification.

We intend to continue to vigorously defend the provider litigation, which we believe is without merit;

however, its ultimate outcome cannot be presently determined.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

A number of follow-on cases involving entities that opted out of the Subscriber Settlement Agreement have been filed.

Those actions are:

Alaska Air Group, Inc., et al.

Anthem, Inc., et al., No.

2:21-cv-01209-AMM (N.D.

JetBlue Airways Corp., et al.

Anthem, Inc., et al.

2:22-cv-00558-GMB (N.D.

Metropolitan Transportation Authority v.

Blue Cross and Blue Shield of Alabama et al.

2:22-cv-00265-RDP (N.D.

Bed Bath & Beyond Inc.

2:22-cv-01256-SGC (N.D.

Hoover, et al.

Blue Cross Blue Shield Association, et al.

2:22-cv-00261-RDP (N.D.

and VHS Liquidating Trust v.

Blue Cross of California, et al.

RG21106600 (Cal.

We intend to continue to vigorously defend these follow-on cases, which we believe are without merit;

however, their ultimate outcome cannot be presently determined.

Blue Cross of California Taxation Litigation

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In March 2018, the Superior Court denied BCC’s motion for judgment on the pleadings and similar motions brought by other entities.

BCC filed a motion for summary judgment with the Superior Court, which was heard in October 2020.

In December 2020, the Superior Court granted BCC’s motion for summary judgment, dismissing the plaintiff’s lawsuit.

In November 2021, the plaintiff appealed the order granting our motion for summary judgment.

Our responding brief is due in February 2022.

We estimate that the appeal will be heard some time in 2022.

In November 2021, the plaintiff appealed the summary judgment order.

BCC’s responding brief was filed in March 2022 and Plaintiff’s reply was filed in May 2022.

We estimate that the appeal will be heard in March 2023.

We intend to vigorously defend the appeal of this lawsuit.

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, in the U.S.

District Court for the Southern District of New York.

District Court for the Southern District of New York (the “District Court”).

The lawsuit seeks to recover over $ 14,800 in damages for pharmacy pricing that is higher than competitive benchmark pricing under the agreement between the parties (the “ESI PBM Agreement”), over $ 158 in damages related to operational breaches, as well as various declarations under the ESI PBM Agreement, including that Express Scripts:

(i) breached its obligation to negotiate in good faith and to agree in writing to new pricing terms;

(ii) was required to provide competitive

Notes to Consolidated Financial Statements (continued)

benchmark pricing to us through the term of the ESI PBM Agreement;

(ii) was required to provide competitive benchmark pricing to us through the term of the ESI PBM Agreement;

(iii) has breached the ESI PBM Agreement;

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In the alternative, Express Scripts claims that we have been unjustly enriched by its payment of $ 4,675 at the time we entered into the ESI PBM Agreement.

In March 2017, the court granted our motion to dismiss Express Scripts’ counterclaims for (i) breach of the implied covenant of good faith and fair dealing, and (ii) unjust enrichment with prejudice.

The only remaining claims are for breach of contract and declaratory relief.

In March 2017, the District Court granted our motion to dismiss Express Scripts’ counterclaims for (i) breach of the implied covenant of good faith and fair dealing, and (ii) unjust enrichment with prejudice.

After such ruling, Express Scripts’ only remaining claims were for breach of contract and declaratory relief.

In August 2021, Express Scripts filed a motion for summary judgment, which we opposed.

Express Scripts’ motion for summary judgment is now fully briefed and no decision has been rendered.

We intend to vigorously pursue our claims and defend against any counterclaims, which we believe are without merit;

however, the ultimate outcome cannot be presently determined.

In re Express Scripts/Anthem ERISA Litigation

We are a defendant in a class action lawsuit that was initially filed in June 2016 against Anthem, Inc.

and Express Scripts, which has been consolidated into a single multi-district lawsuit captioned In Re Express Scripts/Anthem ERISA Litigation, in the U.S.

District Court for the Southern District of New York.

The consolidated complaint was filed by plaintiffs against Express Scripts and us on behalf of all persons who are participants in or beneficiaries of any ERISA or non-ERISA healthcare plan from December 1, 2009 to December 31, 2019 in which we provided prescription drug benefits through the ESI PBM Agreement and paid a percentage based co-insurance payment in the course of using that prescription drug benefit.

The plaintiffs allege that we breached our duties, either under ERISA or with respect to the implied covenant of good faith and fair dealing implied in the health plans, (i) by failing to adequately monitor Express Scripts’ pricing under the ESI PBM Agreement, (ii) by placing our own pecuniary interest above the best interests of our insureds by allegedly agreeing to higher pricing in the ESI PBM Agreement in exchange for the purchase price for our NextRx PBM business, and (iii) with respect to the non-ERISA members, by negotiating and entering into the ESI PBM Agreement that was allegedly detrimental to the interests of such non-ERISA members.

Plaintiffs seek to hold us and Express Scripts jointly and severally liable and to recover all losses suffered by the proposed class, equitable relief, disgorgement of alleged ill-gotten gains, injunctive relief, attorney’s fees and costs and interest.

In April 2017, we filed a motion to dismiss the claims brought against us, and it was granted, without prejudice, in January 2018.

Plaintiffs pursued an appeal with the United States Court of Appeals for the Second Circuit (the “Second Circuit”).

In December 2020, the Second Circuit affirmed the trial court’s order dismissing the ERISA complaint.

Plaintiffs filed a Petition for Rehearing and Rehearing En Banc, which was denied.

Plaintiffs filed a writ of certiorari with the United States Supreme Court, which we opposed.

In December 2021, the United States Supreme Court requested that the Solicitor General submit a brief “expressing the views of the United States” as to whether the Court should grant plaintiffs’ writ.

We intend to vigorously defend this suit, which we believe is without merit;

however, its ultimate outcome cannot be presently determined.

In March 2022, the District Court granted in part and denied in part Express Scripts’ motion for summary

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

The District Court dismissed our declaratory judgment claim, our breach of contract claim for failure to prove damages and most of our operational breach claims.

As a result of the summary judgment decision, the only remaining claims as of the filing of this Annual Report on Form 10-K are (i) our operational breach claim based on Express Scripts’ prior authorization processes and (ii) Express Scripts’ counterclaim for breach of the market check provision of the ESI PBM Agreement.

Express Scripts filed a second motion for summary judgment in June 2022, challenging our remaining operational breach claims, which we opposed in July 2022.

We intend to appeal the earlier summary judgment decision at the appropriate time, vigorously pursue our claims and defend against counterclaims, which we believe are without merit;

however, the ultimate outcome of this litigation cannot be presently determined.

Medicare Risk Adjustment Litigation

In March 2020, the U.S.

Department of Justice (“DOJ”) filed a civil lawsuit against Anthem, Inc.

District Court for the Southern District of New York in a case captioned United States v.

Department of Justice (“DOJ”) filed a civil lawsuit against Elevance Health, Inc.

(f/k/a Anthem, Inc.) in the U.S.

District Court for the Southern District of New York (the “New York District Court”) in a case captioned United States v.

Anthem, Inc .

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The DOJ further alleges that, as a result of these purported acts, we caused CMS to calculate the risk-adjustment payments based on inaccurate diagnosis information, which enabled us to obtain unspecified amounts of payments in Medicare funds in violation of the False Claims Act.

The DOJ filed an amended complaint in July 2020, alleging the same causes of action but revising some of its allegations.

The DOJ filed an amended complaint in July 2020, alleging the same causes of action but revising some of its factual allegations.

In September 2020, we filed a motion to transfer the lawsuit to the Southern District of Ohio, a motion to dismiss part of the lawsuit, and a motion to strike certain allegations in the amended complaint.

The motions are fully briefed and no decision has been rendered.

In an opinion and order issued October 3, 2022, the New York District Court denied our motions, and the case will now proceed in that court.

In November 2022, we filed an answer.

We intend to continue to vigorously defend this suit, which we believe is without merit;

however, the ultimate outcome cannot be presently determined.

Notes to Consolidated Financial Statements (continued)

Investigations of CareMore and HealthSun

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We have also asserted indemnity claims for escrowed funds under the HealthSun purchase agreement for, among other things, breach of healthcare and financial representation provisions, based on the conduct discovered during our investigation.

In the fourth quarter of 2021, we resolved matters with both groups of sellers related to our indemnity claims for escrowed funds under the HealthSun purchase agreement based on conduct discovered during our investigation.

While certain elements of the escrow claims were resolved in the fourth quarters of 2021 and 2022, litigation in the Delaware Court of Chancery related to the remaining indemnity claims for escrowed funds remains ongoing.

Other Contingencies

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In addition, the risk of potential liability under punitive damage theories may increase significantly the difficulty of obtaining reasonable reimbursement of coverage claims.

In addition to the lawsuits described above, we are also involved in other pending and threatened litigation of the character incidental to our business, and are from time to time involved as a party in various governmental investigations, audits, reviews and administrative proceedings.

In addition to the lawsuits described above, we are also involved in other pending and threatened litigation of the character incidental to our business and are from time to time involved as a party in various governmental investigations,

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

audits, reviews and administrative proceedings.

These investigations, audits, reviews and administrative proceedings include routine and special inquiries by state insurance departments, state attorneys general, the U.S.

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We will have the ability to terminate the agreement upon the occurrence of certain events, subject to early termination fees.

In the second quarter of 2019, we began using our pharmacy benefits manager IngenioRx to market and offer PBM services to our affiliated health plan customers, as well as to external customers outside of the health plans we own.

The comprehensive prescription benefits management services portfolio includes, but is not limited to, formulary management, pharmacy networks, prescription drug database, member services and mail order capabilities.

IngenioRx delegates certain PBM administrative functions, such as claims processing and prescription fulfillment, to CaremarkPCS Health, L.L.C., which is a subsidiary of CVS Health Corporation, pursuant to a five-year agreement.

With IngenioRx, we retain the responsibilities for clinical and formulary strategy and development, member and employer experiences, operations, sales, marketing, account management and retail network strategy.

Notes to Consolidated Financial Statements (continued)

In the second quarter of 2019, we began using our pharmacy benefits manager CarelonRx, formerly known as IngenioRx, to market and offer PBM services to our affiliated health plan customers, as well as to external customers outside of the health plans we own.

The comprehensive PBM services portfolio includes, but is not limited to, formulary management, pharmacy networks, prescription drug database, member services and mail order capabilities.

CarelonRx delegates certain PBM administrative functions, such as claims processing and prescription fulfillment, to CaremarkPCS Health, L.L.C., which is a subsidiary of CVS Health Corporation, pursuant to a five-year agreement, which is set to terminate on December 31, 2024.

With CarelonRx, we retain the responsibilities for clinical and formulary strategy and development, member and employer experiences, operations, sales, marketing, account management and retail network strategy.

Vulnerability from Concentrations

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Stock Incentive Plan s

Our Board of Directors has adopted the 2017 Anthem Incentive Compensation Plan (“2017 Incentive Plan”), which has been approved by our shareholders.

Our Board of Directors has adopted the 2017 Elevance Health Incentive Compensation Plan, formerly known as the 2017 Anthem Incentive Compensation Plan (“2017 Incentive Plan”), which has been approved by our shareholders.

The term of the 2017 Incentive Plan is such that no awards may be granted on or after May 18, 2027.

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Awards of restricted stock or restricted stock units are issued at the fair value of the stock on the grant date and may also include one or more performance measures that must be met for the award to vest.

For restricted stock or restricted stock units without performance measures, the restrictions lapse in three equal annual installments.

For restricted stock or restricted stock

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

units without performance measures, the restrictions lapse in three equal annual installments.

Restricted stock or restricted stock units with performance measures vest in three year installments.

15 unchanged sentences

The intrinsic value of options exercised during the years ended December 31, 2022, 2021 and 2020 amounted to $ 120 , $ 121 and $ 147 , respectively.

We recognized tax benefits of $ 32 , $ 40 and $ 52 during the years ended December 31, 2021,

Notes to Consolidated Financial Statements (continued)

2020 and 2019, respectively, from option exercises and disqualifying dispositions.

We recognized tax benefits of $ 31 , $ 32 and $ 40 during the years ended December 31, 2022, 2021 and 2020, respectively, from option exercises and disqualifying dispositions.

During the years ended December 31, 2022, 2021 and 2020, we received cash of $ 120 , $ 148 and $ 129 , respectively, from exercises of stock options.

11 unchanged sentences

As of December 31, 2022, there were approximately 14.0 shares of common stock available for future grants under the 2017 Incentive Plan.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

We use a binomial lattice valuation model to estimate the fair value of all stock options granted.

Expected volatility assumptions used in the binomial lattice model are based on an analysis of implied volatilities of publicly traded options on our stock and historical volatility of our stock price.

Expected volatility assumptions used in the binomial lattice model are based on an analysis of implied volatility of publicly traded options on our stock and historical volatility of our stock price.

The risk-free interest rate is derived from the U.S.

10 unchanged sentences

Weighted-average expected life (years) 5.10 5.50 4.30

Notes to Consolidated Financial Statements (continued)

The following weighted-average fair values were determined for the years ending December 31, 2022, 2021 and 2020:

2 unchanged sentences

Restricted stock awards granted during the year 453.70 317.70 272.37

The binomial lattice option-pricing model requires the input of highly subjective assumptions including the expected stock price volatility.

The binomial lattice option-pricing model requires the input of subjective assumptions including the expected stock price volatility.

Because our stock option grants have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in our opinion, existing models do not necessarily provide a reliable single measure of the fair value of our stock option grants.

Employee Stock Purchase Plan

We have registered 14.0 shares of common stock for the Employee Stock Purchase Plan (the “Stock Purchase Plan”), which is intended to provide a means to encourage and assist employees in acquiring a stock ownership interest in Anthem.

Pursuant to the terms of the Stock Purchase Plan, an eligible employee is permitted to purchase no more than $ 25,000 (actual dollars) worth of stock in any calendar year, based on the fair value of the stock at the end of each plan quarter.

3 unchanged sentences

The Stock Purchase Plan discount was recognized as compensation expense for the year ended December 31, 2022, based on GAAP guidance.

There were 0.1 shares issued during the year ended December 31, 2021.

During the years ended December 31, 2022, 2021 and 2020, we issued 0.1 , 0.1 and 0.2 shares, respectively, under the Stock Purchase Plan, and we received cash of $ 62 , $ 55 and $ 47 , respectively, for such shares.

As of December 31, 2022, 4.3 shares were available for issuance under the Stock Purchase Plan.

2 unchanged sentences

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.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

A summary of the cash dividend activity for the years ended December 31, 2022 and 2021 is as follows:

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Under our Board of Directors’ authorization, we maintain a common stock repurchase program.

On January 26, 2021, our Audit Committee, pursuant to authorization granted by the Board of Directors, authorized a $ 5,000 increase to our

Notes to Consolidated Financial Statements (continued)

common stock repurchase program.

On January 26, 2021, our Audit Committee, pursuant to authorization granted by the Board of Directors, authorized a $ 5,000 increase to our common stock repurchase program.

On January 24, 2023, our Audit Committee, pursuant to authorization granted by the Board of Directors, authorized a $ 5,000 increase to our common stock repurchase program.

No duration has been placed on our common stock repurchase program, and we reserve the right to discontinue the program at any time.

We intend to utilize this authorization over a multi-year period, subject to market and industry conditions.

Repurchases may be made from time to time at prevailing market prices, subject to certain restrictions on volume, pricing and timing.

The repurchases are effected from time to time in the open market, through negotiated transactions, including accelerated share repurchase agreements, and through plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

The repurchases are affected from time to time in the open market, through negotiated transactions, including accelerated share repurchase agreements, and through plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

Our stock repurchase program is discretionary, as we are under no obligation to repurchase shares.

9 unchanged sentences

For additional information regarding the use of capital for debt security repurchases, see Note 13, “Debt.”

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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Beginning of year balance ( 239 ) ( 250 ) ( 262 )

Other comprehensive income (loss), net of tax (expense) benefit of $( 3 ), $( 3 ), and $ 4 , respectively

Other comprehensive income, net of tax expense of $( 6 ), $( 3 ), and $( 3 ), respectively

End of year balance ( 229 ) ( 239 ) ( 250 )

2 unchanged sentences

Other comprehensive income (loss), net of tax expense of $( 23 ), $( 36 ), and $( 2 ), respectively

( 70 ) 123 ( 1 )

End of year balance ( 499 ) ( 429 ) ( 552 )

2 unchanged sentences

Other comprehensive (loss) income, net of tax benefit (expense) of $ 6 , $ 2 , and $( 2 )

( 13 ) ( 9 ) 7

End of year balance ( 17 ) ( 4 ) 5

Total beginning of year accumulated other comprehensive income (loss) 150 ( 296 ) ( 986 )

Total beginning of year accumulated other comprehensive (loss) income ( 178 ) 150 ( 296 )

Total other comprehensive (loss) income, net of tax benefit (expense) of $ 809 , $ 110 , and $( 154 ), respectively

( 2,336 ) ( 330 ) 446

Total other comprehensive loss attributable to noncontrolling interests, net of tax benefit of $ 1 , $ 0 , and $ 0 , respectively

Total other comprehensive loss attributable to noncontrolling interests, net of tax (expense) benefit of $( 3 ), $ 1 , and $ 0 , respectively

Total end of year accumulated other comprehensive (loss) income $ ( 2,503 ) $ ( 178 ) $ 150

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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Net benefit expense $ 116,487 $ 102,645 $ 88,045

The effect of reinsurance on certain assets and liabilities at December 31, 2021 and 2020 is as follows:

Policy liabilities, assumed $ 500 $ 490

Unearned income, assumed 96 85

Premiums payable, ceded 14 12

Premiums receivable, assumed 248 347

Notes to Consolidated Financial Statements (continued)

We lease office space and certain computer and related equipment using noncancelable operating leases.

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Operating Leases

Right-of-use assets Other noncurrent assets $ 628 $ 646

ROU assets Other noncurrent assets $ 604 $ 628

Lease liabilities, current Other current liabilities 181 133

Lease liabilities, noncurrent Other noncurrent liabilities 751 864

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

Years Ended December 31

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Operating lease expense $ 143 $ 261 $ 438

Short-term lease expense 45 50 46

Short-term and variable lease expense 35 45 50

Sublease income ( 3 ) ( 4 ) ( 9 )

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Operating cash paid for amounts included in the measurement of lease liabilities, operating leases $ 204 $ 198

Right-of-use assets obtained in exchange for new lease liabilities, operating leases

ROU assets obtained in exchange for new lease liabilities, operating leases $ 113 $ 334

Weighted average remaining lease term in years, operating leases 7 7

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Total lease liabilities $ 932

Notes to Consolidated Financial Statements (continued)

Earnings per Share

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During the years ended December 31, 2022, 2021 and 2020, weighted-average shares related to certain stock options of 0.4 , 0.2 and 1.2 , respectively, were excluded from the denominator for diluted earnings per share because the stock options were anti-dilutive.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

During the years ended December 31, 2022, 2021 and 2020, we issued approximately 0.2 , 0.3 and 0.3 restricted stock units, respectively, of which vesting was contingent upon us meeting certain earnings targets.

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Segment Information

Beginning in 2020, IngenioRx met the quantitative threshold for a reportable segment based on the FASB guidance.

The results of our operations are now described through four reportable segments:

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

Through December 31, 2022, we managed and presented our operations through four reportable segments:

Commercial & Specialty Business, Government Business, CarelonRx (formerly known as IngenioRx) and Other.

Our Commercial & Specialty Business segment offers plans and services to our Individual, Group risk-based, Group fee-based and BlueCard ® members.

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Our Government Business segment includes our Medicare and Medicaid businesses, National Government Services (“NGS”) and services provided to the federal government in connection with the FEHB business.

Our IngenioRx segment includes our PBM business.

IngenioRx markets and offers PBM services to our affiliated health plan customers, as well as to external customers outside of the health plans we own.

IngenioRx has a comprehensive PBM services portfolio, which includes services such as formulary management, pharmacy networks, prescription drug database, member services and mail order capabilities.

Our Other segment includes our Diversified Business Group, which is our health services business focused on lowering the cost and improving the quality of healthcare by enabling and creating new care delivery and payment models, with a special emphasis on serving those with complex and chronic conditions.

Our CarelonRx segment includes our PBM business.

CarelonRx markets and offers PBM services to our affiliated health plan customers, as well as to external customers outside of the health plans we own.

CarelonRx has a comprehensive PBM services portfolio, which includes services such as formulary management, pharmacy networks, prescription drug database, member services and mail order capabilities.

Our Other segment includes our Diversified Business Group, now known as Carelon Services, which is our health services business focused on lowering the cost and improving the quality of healthcare by enabling and creating new care delivery and payment models, with a special emphasis on serving those with complex and chronic conditions.

This segment also includes certain eliminations and corporate expenses not allocated to our other reportable segments.

As discussed in Note 1 “Organization”, we will be organizing our brand portfolio into three core go-to-market brands over the next several years.

As we continue our journey to evolve our business from a traditional health insurance company into a lifetime, trusted health partner, we are evaluating and making changes to how we manage our business.

This included a review of the products in each of our operating segments, which resulted in restructurings between some of our operating segments.

Therefore, our reportable segment presentation in 2023 and its composition will reflect how we began managing our operations and monitoring performance, aligning strategies and allocating resources on January 1, 2023.

As a result of these changes, beginning with our Quarterly Report on Form 10-Q for the first quarter of 2023, we will report our results in the following four reportable segments:

(i) Health Benefits, which will combine our existing Commercial & Specialty Business and Government Business segments;

(ii) our existing CarelonRx segment;

(iii) Carelon Services (our former Diversified Business Group), which will be carved out from our existing Other segment;

and (iv) Corporate and Other, which will include businesses that do not individually meet the quantitative thresholds for an operating segment, as well as corporate expenses not allocated to our other reportable segments.

We expect to reclassify previously reported information to conform to the new presentation.

We define operating revenues to include premium income, product revenue and administrative fees and other revenues.

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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.

Affiliated revenues represent revenues or costs for services provided to our subsidiaries by IngenioRx and our Diversified Business Group, as well as certain back-office services provided by our international businesses, and are recorded at cost or management’s estimate of fair market value.

Affiliated revenues represent revenues or costs for services provided to our subsidiaries by CarelonRx and Carelon Services, as well as certain back-office services provided by our international businesses, and are recorded at cost or management’s estimate of fair market value.

These affiliated revenues are eliminated in consolidation.

For segment reporting, we present all capitation risk arrangements on a gross basis;

therefore, eliminations also include adjustments for capitated risk arrangements that are recognized on a net basis under GAAP.

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

Through our participation in various federal government programs, we generated approximately 20.7 %, 20.3 % and 20.7 % of our total consolidated revenues from agencies of the U.S.

government for the years ended December 31, 2021, 2020, and 2019, respectively.

These revenues are contained in the Government Business segment.

The accounting policies of the segments are consistent with those described in the summary of significant accounting policies in Note 2, “Basis of Presentation and Significant Accounting Policies,” except that certain shared administrative expenses for each segment are recognized on a pro rata allocated basis, which in the aggregate approximates the consolidated expense.

Any difference between the allocated expenses and actual consolidated expense is included in other expenses not allocated to reportable segments.

Through our participation in various federal government programs, we generated approximately 28 % of our total consolidated revenues from agencies of the U.S.

government for each of the years ended December 31, 2022, 2021, and 2020.

The majority of these revenues are contained in our Government Business segment.

An immaterial amount of our total consolidated revenues is derived from activities outside of the U.S.

and Puerto Rico.

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

We evaluate performance of the reportable segments based on operating gain or loss as defined above.

We evaluate net investment income, net gains (losses) on financial instruments, interest expense, amortization expense, gain or loss on extinguishment of debt, income taxes and assets and liabilities on a consolidated basis, as these items are managed in a corporate shared service environment and are not the responsibility of segment operating management.

For our 2019 segment reporting, operating gain generated from IngenioRx activities was allocated and included in our Commercial & Specialty Business and Government Business based upon their utilization of those services, which aligns with the method by which we assessed the 2019 operating performance of our reportable segments.

Beginning January 1, 2020, we are managing the operating performance of each of our segments on a standalone basis.

Prior year 2019 allocations were not restated to conform to the 2020 presentation;

however, operating margins for IngenioRx were approximately 8 % in 2019.

Financial data by reportable segment for the years ended December 31, 2022, 2021 and 2020 is as follows:

Commercial & Specialty Business Government Business IngenioRx Other Eliminations Total

Commercial & Specialty Business Government Business CarelonRx Other Eliminations Total

Year ended December 31, 2022

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— — 13,552 11,092 ( 24,644 ) —

Operating gain (loss)

2,753 3,061 1,684 ( 9 ) — 7,489

Operating gain 2,933 3,297 1,868 354 — 8,452

Depreciation and amortization of property and equipment

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— — — 638 — 638

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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The classification between managed care products and managed care services in the above table primarily distinguishes between the levels of risk assumed.

Managed care products represent insurance products where we bear the insurance risk, whereas managed care services represent product offerings where we provide claims adjudication and other administrative services to the customer, but the customer principally bears the insurance risk.

Managed care products represent insurance products where we bear the insurance risk, whereas managed care services represent fee-based product offerings where we provide claims adjudication and other administrative services to the customer, but the customer principally bears the insurance risk.

Asset, liability and equity details by reportable segment have not been disclosed, as we do not internally report such information.

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Net investment income 1,485 1,378 877

Net gains on financial instruments 318 182 67

Net (losses) gains on financial instruments ( 550 ) 318 182

Total revenues $ 156,595 $ 138,639 $ 121,867

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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2022 2021 2020

Reportable segments’ operating gain $ 7,489 $ 6,360 $ 5,999

Income before income tax expense $ 7,769 $ 7,925 $ 6,238

Net investment income ( 1,485 ) ( 1,378 ) ( 877 )

Net gains on financial instruments 318 182 67

Net losses (gains) on financial instruments 550 ( 318 ) ( 182 )

Interest expense 851 798 784

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Loss on extinguishment of debt — 21 36

Income before income tax expense $ 7,925 $ 6,238 $ 5,985

Reportable segments’ operating gain $ 8,452 $ 7,489 $ 6,360

Related Party Transactions

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During 2022, our insurance and HMO

Elevance Health, Inc.

Notes to Consolidated Financial Statements (continued)

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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-K

Item 8. Financial Statements and Supplementary Data