What changed in this filing

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Item 1. Financial Statements

2023-10-18 compared with 2023-07-19 · 242 added, 179 removed, 973 unchanged (30% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

September 30,

2023 December 31,

53 unchanged sentences

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

27 unchanged sentences

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

(In millions) 2023 2022 2023 2022

9 unchanged sentences

Foreign currency translation adjustments ( 4 ) ( 7 ) ( 2 ) ( 15 )

Other comprehensive (loss) income ( 116 ) ( 908 ) 326 ( 1,962 )

Other comprehensive loss ( 348 ) ( 631 ) ( 22 ) ( 2,593 )

Net (income) loss attributable to noncontrolling interests

Other comprehensive loss (income) attributable to noncontrolling interests — 3 ( 2 ) 8

( 11 ) 5 ( 29 ) 18

Other comprehensive loss attributable to noncontrolling interests 2 3 — 11

Total shareholders’ comprehensive income $ 943 $ 975 $ 5,109 $ 2,447

2 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

(In millions) (Restated)

5 unchanged sentences

Depreciation and amortization 1,321 1,202

Impairment of property and equipment

Deferred income taxes ( 361 ) ( 183 )

32 unchanged sentences

Other, net 5 16

Net cash (used in) provided by financing activities ( 1,961 ) 195

Net cash used in financing activities ( 2,955 ) ( 1,060 )

Effect of foreign exchange rates on cash and cash equivalents ( 2 ) ( 16 )

22 unchanged sentences

Net income — — — 1,853 — 3 1,856

Other comprehensive income — — — — ( 116 ) — ( 116 )

Other comprehensive loss

— — — — ( 116 ) — ( 116 )

Repurchase and retirement of common stock, including excise tax ( 1.4 ) — ( 52 ) ( 600 ) — — ( 652 )

2 unchanged sentences

June 30, 2023 235.9 2 8,761 31,608 ( 2,166 ) 107 38,312

Net income — — — 1,289 — 11 1,300

Other comprehensive loss

— — — — ( 346 ) ( 2 ) ( 348 )

Repurchase and retirement of common stock, including excise tax

( 1.1 ) — ( 40 ) ( 445 ) — — ( 485 )

Dividends and dividend equivalents — — — ( 349 ) — — ( 349 )

Issuance of common stock under employee stock plans, net of related tax benefits 0.1 — 109 — — — 109

September 30, 2023 234.9 $ 2 $ 8,830 $ 32,103 $ ( 2,512 ) $ 116 $ 38,539

See accompanying notes.

33 unchanged sentences

June 30, 2022 (restated) 240.0 2 9,134 28,847 ( 2,151 ) 55 35,887

Net income (loss) restated

— — — 1,603 — ( 5 ) 1,598

Other comprehensive loss — — — — ( 628 ) ( 3 ) ( 631 )

Noncontrolling interests adjustment — — — — — 5 5

Repurchase and retirement of common stock

( 1.2 ) — ( 47 ) ( 532 ) — — ( 579 )

Dividends and dividend equivalents

— — — ( 307 ) — — ( 307 )

Issuance of common stock under employee stock plans, net of related tax benefits

0.2 — 103 — — — 103

Convertible debenture repurchases and conversions

— — ( 21 ) — — — ( 21 )

September 30, 2022 (restated)

239.0 $ 2 $ 9,169 $ 29,611 $ ( 2,779 ) $ 52 $ 36,055

See accompanying notes.

1 unchanged sentence

Notes to Consolidated Financial Statements

June 30, 2023

September 30, 2023

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

2 unchanged sentences

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 48 million medical members through our affiliated health plans as of June 30, 2023.

We are one of the largest health insurers in the United States in terms of medical membership, serving over 47 million medical members through our affiliated health plans as of September 30, 2023.

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

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

We serve our members as the Blue Cross licensee for California and as the Blue Cross and Blue Shield (“BCBS”) licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (with the exception of 30 counties in the Kansas City area), Nevada, New Hampshire, New York (in the New York City metropolitan area and upstate New York), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.) and Wisconsin.

We serve our members as the Blue Cross licensee for California and as the Blue Cross and Blue Shield (“BCBS”) licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (in the New York City metropolitan area and upstate New York), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.) and Wisconsin.

In a majority of these service areas, we do business as Anthem Blue Cross, Anthem Blue Cross and Blue Shield, and Empire Blue Cross Blue Shield or Empire Blue Cross.

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Given this evolution, we reviewed and modified how we manage our business, monitor our performance and allocate our resources, and made changes to our reportable segments beginning in the first quarter of 2023.

The results of our operations are now reported in the following four reportable segments:

We now report our results of operations in the following four reportable segments:

Health Benefits (aggregates our previously reported Commercial & Specialty Business and Government Business segments), CarelonRx, Carelon Services (previously included in our Other segment) and Corporate & Other (our businesses that do not individually meet the quantitative thresholds for an operating segment, as well as corporate expenses not allocated to our other reportable

1 unchanged sentence

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

Previously reported information in this Form 10-Q has been reclassified to conform to the new presentation.

Previously reported information in this Quarterly Report on Form 10-Q has been reclassified to conform to the new presentation.

For additional discussion regarding our segments, including the changes made, see Note 15 “Segment Information.”

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We have omitted certain footnote disclosures that would substantially duplicate the disclosures in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report on Form 10-K”), unless the information contained in those disclosures materially changed or is required by GAAP.

In the opinion of management, all adjustments, including normal recurring adjustments, necessary for a fair statement of the consolidated financial statements as of and for the three and six months ended June 30, 2023 and 2022 have been recorded.

The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023, or any other period.

We have filed Exhibit 99.1 to this Quarterly Report on 10-Q to recast certain prior years’ financial information and related disclosures to reflect the changes to our reportable segments beginning in the first quarter of 2023 discussed above, as well as the impact of the adoption of a new accounting standard related to the accounting for long-duration insurance contracts, which we adopted on January 1, 2023, using a modified retrospective transition method as of January 1, 2021.

The recast financial information and related disclosures set forth in Exhibit 99.1 to this Quarterly Report on Form 10-Q present such financial information and related disclosures in these items as they would have appeared had we changed our reportable segments and adopted the new accounting standard prior to January 1, 2023 and do not reflect events or developments that may have occurred subsequent to the filing of our 2022 Annual Report on Form 10-K.

In the opinion of management, all adjustments, including normal recurring adjustments, necessary for a fair statement of the consolidated financial statements as of and for the three and nine months ended September 30, 2023 and 2022 have been recorded.

The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023, or any other period.

The seasonal nature of portions of our health care and related benefits business, as well as competitive and other market conditions, may cause full-year results to differ from estimates based upon our interim results of operations.

These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2022 included in our 2022 Annual Report on Form 10-K.

Certain of our subsidiaries operate outside of the United States and have functional currencies other than the U.S.

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We control a number of bank accounts that are used exclusively to hold customer funds for the administration of customer benefits, and we have cash and cash equivalents on deposit to meet certain regulatory requirements.

These amounts totaled $ 391 and $ 258 at June 30, 2023 and December 31, 2022, respectively, and are included in the cash and cash equivalents line on our consolidated balance sheets.

These amounts totaled $ 300 and $ 258 at September 30, 2023 and December 31, 2022, respectively, and are included in the cash and cash equivalents line on our consolidated balance sheets.

We classify fixed maturity securities in our investment portfolio as “available-for-sale” and report those securities at fair value.

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

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

Furthermore, unrealized losses entirely caused by non-credit-related factors related to fixed

maturity securities for which we expect to fully recover the amortized cost basis continue to be recognized in accumulated other comprehensive loss.

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

1 unchanged sentence

For mortgage-backed and asset-backed securities, cash flow estimates are based on assumptions regarding the underlying collateral, including prepayment speeds, vintage, type of underlying asset, geographic concentrations, default rates, recoveries and changes in value.

For all other securities, cash flow estimates are driven by assumptions regarding

probability of default, including changes in credit ratings and estimates regarding timing and amount of recoveries associated with a default.

For all other securities, cash flow estimates are driven by assumptions regarding probability of default, including changes in credit ratings and estimates regarding timing and amount of recoveries associated with a default.

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

23 unchanged sentences

Premium receivables include the uncollected amounts from employer risk-based groups, individuals and government programs for insurance services.

Premium receivables are reported net of an allowance for doubtful accounts of $ 184 and $ 152 at June 30, 2023 and December 31, 2022, respectively.

Premium receivables are reported net of an allowance for doubtful accounts of $ 188 and $ 152 at September 30, 2023 and December 31, 2022, respectively.

Self-funded receivables include administrative fees, claims and other amounts due from fee-based customers for administrative services.

Self-funded receivables are reported net of an allowance for doubtful accounts of $ 86 and $ 68 at June 30, 2023 and December 31, 2022, respectively.

Self-funded receivables are reported net of an allowance for doubtful accounts of $ 93 and $ 68 at September 30, 2023 and December 31, 2022, respectively.

Other receivables include pharmacy rebates, provider advances, claims recoveries, reinsurance receivables, proceeds due from brokers on investment trades, accrued investment income and other miscellaneous amounts due to us.

These receivables are reported net of an allowance for doubtful accounts of $ 816 and $ 744 at June 30, 2023 and December 31, 2022, respectively.

These receivables are reported net of an allowance for doubtful accounts of $ 875 and $ 744 at September 30, 2023 and December 31, 2022, respectively.

Revenue Recognition:

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 June 30, 2023.

For the three and six months ended June 30, 2023 and 2022, revenue recognized from performance obligations related to prior periods, such as changes in transaction price, were not material.

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 September 30, 2023.

For the three and nine months ended September 30, 2023 and 2022, revenue recognized from performance obligations related to prior periods, such as changes in transaction price, were not material.

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

5 unchanged sentences

2018-12, Financial Services—Insurance (Topic 944):

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

Targeted Improvements to the Accounting for Long-Duration Contracts , which was issued in November 2018.

The amendments in ASU 2020-11 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.

5 unchanged sentences

While the adoption did not have an overall material impact, our prior period financial statements presented in this Form 10-Q have been restated to reflect the impacts of our adoption as required by the new standard.

There were no other new accounting pronouncements that were issued or became effective since the issuance of our 2022 Annual Report on Form 10-K that had, or are expected to have, a material impact on our consolidated financial position, results of operations or cash flows.

Recent Accounting Guidance Not Yet Adopted:

In August 2023, the FASB issued Accounting Standards Update No.

2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement (“ASU 2023-05”).

ASU 2023-05 clarifies existing guidance to reduce diversity in practice and is requiring a joint venture to recognize and initially measure its assets and liabilities using a new basis of accounting, at fair value, upon formation.

These amendments are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025.

We do not believe the adoption of ASU 2023-05 will have a material impact on our consolidated financial statements and disclosures.

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

Business Acquisitions and Divestitures

3 unchanged sentences

Upon closing, we and The Standard will enter into a product distribution partnership.

The divestiture is expected to close by the end of the first quarter of 2024 and is subject to standard closing conditions and customary approvals.

The related net assets held for sale and results of operations for the employee benefits businesses to be divested as of and for the three and six months ending June 30, 2023 were not material.

The divestiture is expected to close in the first half of 2024 and is subject to standard closing conditions and customary approvals.

The related net assets held for sale and results of operations for the life and disability businesses to be divested as of and for the three and nine months ending September 30, 2023 were not material.

Pending Acquisition

1 unchanged sentence

This acquisition aligns with our mission to become a lifetime, trusted health partner as we bring our innovative whole-health solutions to BCBSLA’s members.

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.

The acquisition is expected to close in the first half of 2024 and is subject to standard closing conditions and customary approvals.

Completed Acquisitions

3 unchanged sentences

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

As of June 30, 2023, the purchase price was allocated to the tangible and

intangible net assets acquired based on management’s initial estimates of their fair values, of which $ 820 has been allocated to finite-lived intangible assets and $ 877 to goodwill, including an increase to goodwill for measurement period adjustments of $ 149 during the quarter ended June 30, 2023.

As of September 30, 2023, the purchase price was allocated to the tangible and intangible net assets acquired based on management’s initial estimates of their fair values, of which $ 820 has been allocated to finite-lived intangible assets and $ 877 to goodwill.

There were no changes to goodwill for measurement period adjustments during the three months ended September 30, 2023.

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

As of June 30, 2023, the initial accounting for the acquisition had not been finalized.

As of September 30, 2023, the initial accounting for the acquisition had not been finalized.

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

2 unchanged sentences

The initial accounting for this acquisition was finalized as of June 30, 2023.

The purchase price was allocated to tangible and intangible net assets acquired based on management’s estimates of their fair values, of which $ 89 has been allocated to finite-lived intangible assets, $ 250 to indefinite-lived intangible assets, and $ 139 to goodwill.

Contractual purchase price adjustments during the quarter ended June 30, 2023 were $ 13 and resulted in an increase to goodwill.

The purchase price was allocated to tangible and intangible net assets acquired based on management’s estimates of their fair values, of which $ 89 was allocated to finite-lived intangible assets, $ 250 to indefinite-lived intangible assets, and $ 139 to goodwill.

The majority of goodwill is deductible for income tax purposes.

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

Business Optimization Initiatives

During the third quarter of 2023, based on a strategic review of our operations, assets and investments, management implemented the “2023-2024 Business Efficiency Program” to enhance operating efficiency, refine the focus of our investments, and optimize our physical footprint.

The 2023-2024 Business Efficiency Program includes the write-off of certain information technology assets and contract exit costs, a reduction in staff including the relocation of certain job functions, and the impairment of assets associated with the closure or partial closure of data centers and offices.

The 2023-2024 Business Efficiency Program is expected to be substantially complete by the end of the third quarter of 2024.

Cash outlays associated with this program, which primarily relate to the personnel-related costs, are expected to be paid through 2024.

In the third quarter of 2023, we incurred $ 730 of costs towards the 2023-2024 Business Efficiency Program.

This included $ 446 of pre-tax charges for information technology assets and contract write-offs related to projects that have been de-prioritized and stopped, $ 230 of pre-tax personnel-related charges for the reduction and/or relocation of staff, which includes severance and related costs primarily determined under the Company's existing severance plans, and $ 54 of pre-tax charges from asset impairments related to the closure or partial closure of data centers and offices, including operating lease-related right-of-use assets and other property and equipment.

These charges were recognized in operating expense in the Corporate & Other segment;

see Note 15, “Segment Information.”

In the third quarter of 2023, we also released $ 33 of severance related accruals from our business optimization initiatives introduced in 2020 (“2020 Business Optimization Initiatives”).

A summary of the activity for the nine months ended September 30, 2023 and ending balance at September 30, 2023 related to the liability for employee termination costs, is as follows:

Health Benefits

Carelon Services

2023-2024 Business Efficiency Program

Liabilities for employee termination costs at January 1, 2023

$ — $ — $ — $ — $ —

Payments and releases

Total liabilities for employee termination costs ending balance at September 30, 2023

$ — $ — $ — $ 230 $ 230

Health Benefits

Carelon Services

2020 Business Optimization Initiatives

Liabilities for employee termination costs at January 1, 2023

$ 80 $ 1 $ — $ — $ 81

( 31 ) ( 1 ) — — ( 32 )

( 33 ) — — — ( 33 )

Total liabilities for employee termination costs ending balance at September 30, 2023

$ 16 $ — $ — $ — $ 16

Fixed Maturity Securities

3 unchanged sentences

Given the inherent uncertainty of changes in market conditions and the significant judgments involved, there is a continuing risk that declines in fair value may occur and additional material impairment losses for credit losses on investments may be recorded in future periods.

A summary of current and long-term fixed maturity securities, available-for-sale, at June 30, 2023 and December 31, 2022 is as follows:

A summary of current and long-term fixed maturity securities, available-for-sale, at September 30, 2023 and December 31, 2022 is as follows:

Losses Allowance

Losses Estimated

June 30, 2023

September 30, 2023

Fixed maturity securities:

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

For fixed maturity securities in an unrealized loss position at June 30, 2023 and December 31, 2022, the following table summarizes the aggregate fair values and gross unrealized losses by length of time those securities have continuously been in an unrealized loss position:

For fixed maturity securities in an unrealized loss position at September 30, 2023 and December 31, 2022, the following table summarizes the aggregate fair values and gross unrealized losses by length of time those securities have continuously been in an unrealized loss position:

Less than 12 Months 12 Months or Greater

5 unchanged sentences

Fair Value Gross

June 30, 2023

September 30, 2023

Fixed maturity securities:

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

Unrealized losses on our securities shown in the table above have not been recognized into income because, as of June 30, 2023, 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 maturity or anticipated recovery.

Unrealized losses on our securities shown in the table above have not been recognized into income because, as of September 30, 2023, 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 maturity or 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 $ 7 and $ 9 at June 30, 2023 and December 31, 2022, respectively, for declines in fair value due to unfavorable changes in the credit quality characteristics that impact our assessment of collectability of principal and interest.

The amortized cost and fair value of fixed maturity securities at June 30, 2023, by contractual maturity, are shown below.

Allowances for credit losses have been recorded in the amounts of $ 3 and $ 9 at September 30, 2023 and December 31, 2022, respectively, for declines in fair value due to unfavorable changes in the credit quality characteristics that impact our assessment of collectability of principal and interest.

The amortized cost and fair value of fixed maturity securities at September 30, 2023, by contractual maturity, are shown below.

Expected maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations.

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Total fixed maturity securities $ 31,013 $ 28,627

During the three and six months ended June 30, 2023, we received total proceeds from sales, maturities, calls or redemptions of fixed maturity securities of $ 9,675 and $ 15,085 , respectively.

During the three and six months ended June 30, 2022, we received total proceeds from sales, maturities, calls or redemptions of fixed maturity securities of $ 7,026 and $ 10,672 , respectively.

During the three and nine months ended September 30, 2023, we received total proceeds from sales, maturities, calls or redemptions of fixed maturity securities of $ 6,236 and $ 21,321 , respectively.

During the three and nine months ended September 30, 2022, we received total proceeds from sales, maturities, calls or redemptions of fixed maturity securities of $ 5,281 and $ 15,953 , respectively.

In the ordinary course of business, we may sell securities at a loss for a number of reasons, including, but not limited to:

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Equity Securities

A summary of marketable equity securities at June 30, 2023 and December 31, 2022 is as follows:

June 30, 2023 December 31, 2022

A summary of marketable equity securities at September 30, 2023 and December 31, 2022 is as follows:

September 30, 2023 December 31, 2022

Equity securities:

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Investment Gains and Losses

Net investment (losses) gains for the three and six months ended June 30, 2023 and 2022 are as follows:

Three Months Ended June 30 Six Months Ended June 30

Net investment (losses) gains for the three and nine months ended September 30, 2023 and 2022 are as follows:

Three Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

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Gross realized losses from sales ( 164 ) ( 99 ) ( 377 ) ( 353 )

Impairment losses recognized in income ( 3 ) ( 1 ) ( 10 ) ( 21 )

Impairment recoveries (losses) recognized in income

2 ( 5 ) ( 8 ) ( 25 )

Net realized losses from sales of fixed maturity securities ( 149 ) ( 96 ) ( 351 ) ( 334 )

Equity securities:

Unrealized gains (losses) recognized on equity securities still held at the end of the period 2 ( 83 ) ( 2 ) ( 154 )

Unrealized losses recognized on equity securities still held at the end of the period

— ( 43 ) ( 1 ) ( 192 )

Net realized gains (losses) recognized on equity securities sold during the period 2 4 5 ( 20 )

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Impairment losses recognized in income ( 8 ) ( 12 ) ( 37 ) ( 17 )

Net losses on other investments ( 40 ) ( 6 ) ( 18 ) ( 16 )

Net gains (losses) on other investments

10 81 ( 8 ) 64

Net losses on investments $ ( 137 ) $ ( 54 ) $ ( 355 ) $ ( 482 )

Accrued Investment Income

At June 30, 2023 and December 31, 2022, accrued investment income totaled $ 266 and $ 245 , respectively.

At September 30, 2023 and December 31, 2022, accrued investment income totaled $ 281 and $ 245 , respectively.

We recognize accrued investment income under the caption “Other receivables” on our consolidated balance sheets.

1 unchanged sentence

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.

The fair value of the collateral received at the time of the transactions amounted to $ 2,311 and $ 2,457 at June 30, 2023 and December 31, 2022, respectively.

The value of the collateral represented 102 % of the market value of the securities on loan at each of June 30, 2023 and December 31, 2022.

The fair value of the collateral received at the time of the transactions amounted to $ 2,403 and $ 2,457 at September 30, 2023 and December 31, 2022, respectively.

The value of the collateral represented 102 % of the market value of the securities on loan at each of September 30, 2023 and December 31, 2022.

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 June 30, 2023 and December 31, 2022, the remaining contractual maturity of our securities lending agreements included overnight and continuous transactions of cash for $ 2,237 and $ 2,221 , respectively, of United States Government securities for $ 73 and $ 224 , respectively, and of Residential Mortgage-Backed securities for $ 1 and $ 12 , respectively.

At September 30, 2023 and December 31, 2022, the remaining contractual maturity of our securities lending agreements included overnight and continuous transactions of cash for $ 2,266 and $ 2,221 , respectively, of United States Government securities for $ 92 and $ 224 , respectively, of States, Municipalities, and Political Subdivisions securities for $ 7 and $ 0 , respectively, and of Residential Mortgage-Backed securities for $ 38 and $ 12 , respectively.

Derivative Financial Instruments

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Any amounts recognized for changes in fair value of these derivatives are included in the captions “Other current assets,” “Other noncurrent assets,” “Other current liabilities” or “Other noncurrent liabilities” in our consolidated balance sheets.

The unrecognized loss for all expired and terminated cash flow hedges included in accumulated other comprehensive loss, net of tax, was $ 214 and $ 229 at June 30, 2023 and December 31, 2022, respectively.

During the three and six months ended months ended June 30, 2023 , we recognized net gains of $ 7 and net losses of $ 15 , respectively, on non-hedging derivatives.

During the three and six months ended months ended June 30, 2022 , we recognized net gains on non-hedging derivatives of $ 24 and $ 46 , respectively.

The unrecognized loss for all expired and terminated cash flow hedges included in accumulated other comprehensive loss, net of tax, was $ 213 and $ 229 at September 30, 2023 and December 31, 2022, respectively.

During the three and nine months ended months ended September 30, 2023 , we recognized net gains of $ 13 and net losses of $ 3 , respectively, on non-hedging derivatives.

During the three and nine months ended months ended September 30, 2022 , we recognized net losses of $ 3 and net gains of $ 43 on non-hedging derivatives, respectively.

For additional information relating to the fair value of our derivative assets and liabilities, see Note 7, “Fair Value,” of this Form 10-Q.

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Derivatives presented within the fair value hierarchy table below are presented on a gross basis and not on a master netting basis by counterparty.

A summary of fair value measurements by level for assets and liabilities measured at fair value on a recurring basis at June 30, 2023 and December 31, 2022 is as follows:

A summary of fair value measurements by level for assets and liabilities measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022 is as follows:

Level I Level II Level III Total

June 30, 2023

September 30, 2023

Cash equivalents $ 7,036 $ — $ — $ 7,036

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Total liabilities $ — $ ( 60 ) $ — $ ( 60 )

A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level III inputs for the three months ended June 30, 2023 and 2022 is as follows:

A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level III inputs for the three months ended September 30, 2023 and 2022 is as follows:

Securities Residential

2 unchanged sentences

Securities Total

Three Months Ended June 30, 2023

Beginning balance at April 1, 2023 $ 142 $ — $ 390 $ 78 $ 610

Three Months Ended September 30, 2023

Beginning balance at July 1, 2023 $ 103 $ — $ 366 $ 75 $ 544

Total gains (losses):

6 unchanged sentences

Transfers out of Level III ( 1 ) — ( 1 ) — ( 2 )

Ending balance at June 30, 2023 $ 103 $ — $ 366 $ 75 $ 544

Change in unrealized losses included in net income related to assets still held at June 30, 2023

Ending balance at September 30, 2023 $ 110 $ 2 $ 419 $ 69 $ 600

Change in unrealized gains (losses) included in net income related to assets still held at September 30, 2023

$ — $ — $ — $ — $ —

Three Months Ended June 30, 2022

Beginning balance at April 1, 2022 $ 341 $ 4 $ 37 $ 99 $ 481

Three Months Ended September 30, 2022

Beginning balance at July 1, 2022 $ 155 $ — $ 218 $ 94 $ 467

Total gains (losses):

Recognized in net income — — — — —

Recognized in accumulated other comprehensive loss 1 — 17 — 18

Purchases 15 — 77 3 95

3 unchanged sentences

Transfers out of Level III ( 6 ) — — — ( 6 )

Ending balance at June 30, 2022 $ 155 $ — $ 218 $ 94 $ 467

Change in unrealized gains included in net income related to assets still held at June 30, 2022

Ending balance at September 30, 2022 $ 129 $ — $ 311 $ 95 $ 535

Change in unrealized gains (losses) included in net income related to assets still held at September 30, 2022

$ — $ — $ — $ — $ —

A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level III inputs for the six months ended June 30, 2023 and 2022 is as follows:

A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level III inputs for the nine months ended September 30, 2023 and 2022 is as follows:

Securities Residential

2 unchanged sentences

Securities Total

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Beginning balance at January 1, 2023 $ 137 $ — $ 356 $ 88 $ 581

Total losses:

Total gains (losses):

Recognized in net income ( 8 ) — — ( 3 ) ( 11 )

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Transfers out of Level III ( 20 ) — — — ( 20 )

Ending balance at June 30, 2023 $ 103 $ — $ 366 $ 75 $ 544

Change in unrealized gains included in net income related to assets still held at June 30, 2023

Ending balance at September 30, 2023 $ 110 $ 2 $ 419 $ 69 $ 600

Change in unrealized losses included in net income related to assets still held at September 30, 2023

$ — $ — $ — $ ( 4 ) $ ( 4 )

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Beginning balance at January 1, 2022 $ 336 $ 5 $ 19 $ 89 $ 449

Total gains (losses):

Recognized in net income — — — 1 1

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Transfers out of Level III ( 12 ) ( 5 ) ( 5 ) — ( 22 )

Ending balance at June 30, 2022 $ 155 $ — $ 218 $ 94 $ 467

Change in unrealized gains included in net income related to assets still held at June 30, 2022

Ending balance at September 30, 2022 $ 129 $ — $ 311 $ 95 $ 535

Change in unrealized gains included in net income related to assets still held at September 30, 2022

$ — $ — $ — $ 1 $ 1

There were no individually material transfers into or out of Level III during the three and six months ended June 30, 2023 or 2022.

There were no individually material transfers into or out of Level III during the three and nine months ended September 30, 2023 or 2022.

Certain assets and liabilities are measured at fair value on a nonrecurring basis;

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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 BioPlus and Integra described above, there were no

material assets or liabilities measured at fair value on a nonrecurring basis during the three and six months ended June 30, 2023 or 2022.

Other than the assets acquired and liabilities assumed in our acquisitions of BioPlus and Integra described above, there were no material assets or liabilities measured at fair value on a nonrecurring basis during the three and nine months ended September 30, 2023 or 2022.

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

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Our analysis includes procedures such as a review of month-to-month price fluctuations and price comparisons to secondary pricing services.

There were no adjustments to quoted market prices obtained from the pricing services during the three and six months ended June 30, 2023 or 2022.

There were no adjustments to quoted market prices obtained from the pricing services during the three and nine months ended September 30, 2023 or 2022.

In addition to the preceding disclosures on assets recorded at fair value in the consolidated balance sheets, FASB guidance also requires the disclosure of fair values for certain other financial instruments for which it is practicable to estimate fair value, whether or not such values are recognized in our consolidated balance sheets.

Non-financial instruments such as real estate, property and equipment, other current assets, deferred income taxes, intangible assets and certain financial instruments, such as policy liabilities, are excluded from the fair value disclosures.

Non-financial instruments such as property and equipment, other current assets, deferred income taxes, intangible assets and certain financial instruments, such as policy liabilities, are excluded from the fair value disclosures.

Therefore, the fair value amounts cannot be aggregated to determine our underlying economic value.

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The fair value of our convertible debentures is based on the quoted market price in the active private market in which the convertible debentures trade.

A summary of the estimated fair values by level of each class of financial instrument that is recorded at its carrying value on our consolidated balance sheets at June 30, 2023 and December 31, 2022 is as follows:

A summary of the estimated fair values by level of each class of financial instrument that is recorded at its carrying value on our consolidated balance sheets at September 30, 2023 and December 31, 2022 is as follows:

Value Estimated Fair Value

Level I Level II Level III Total

June 30, 2023

September 30, 2023

Other invested assets $ 6,016 $ — $ — $ 6,016 $ 6,016

Short-term borrowings 265 — 265 — 265

Notes 24,844 — 21,815 — 21,815

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Convertible debentures 63 — 463 — 463

During the three months ended June 30, 2023 and 2022, we recognized income tax expense of $ 585 an d $ 488 (restated), respectively, which represent effective income tax rates of 24.0 % and 23.0 % (restated), respectively.

The increase in our effective incom e tax rate from the three months ended June 30, 2022 is primarily due to the tax impact of expected geographic changes in our mix of 2023 earnings and reduced investment tax credits.

During the six months ended June 30, 2023 and 2022, we recognized income tax expense of $ 1,200 an d $ 1,015 (restated), respectively, which represent effective income tax rates of 23.7 % and 22.9 % (restated), respectively.

The increase in our effective incom e tax rate from the six months ended June 30, 2022 is primarily related to the tax impact of expected geographic changes in our mix of 2023 earnings and reduced investment tax credits.

Income taxes receivable totaled $ 48 and $ 440 at June 30, 2023 and December 31, 2022, respectively.

We recognize the income receivable as an asset under the caption “Other current assets” in our consolidated balance sheets.

During the three months ended September 30, 2023 and 2022, we recognized income tax expense of $ 354 an d $ 529 (restated), respectively, which represent effective income tax rates of 21.4 % and 24.9 % (restated), respectively.

The decrease in our effective incom e tax rate from the three months ended September 30, 2022 is primarily due to the tax impact of expected geographic changes in our mix of 2023 earnings.

During the nine months ended September 30, 2023 and 2022, we recognized income tax expense of $ 1,554 an d $ 1,544 (restated), respectively, which represent effective income tax rates of 23.1 % and 23.6 % (restated), respectively.

The decrease in our effective incom e tax rate from the nine months ended September 30, 2022 is primarily related to the tax impact of expected geographic changes in our mix of 2023 earnings.

Income taxes receivable totaled $ 258 and $ 440 at September 30, 2023 and December 31, 2022, respectively.

At September 30, 2023, we recognized the income tax receivable as $ 183 under the caption “Other current assets” and as $ 75 under the caption “Other noncurrent assets”.

Medical Claims Payable

A reconciliation of the beginning and ending balances for medical claims payable for the six months ended June 30, 2023 and 2022 is as follows:

A reconciliation of the beginning and ending balances for medical claims payable for the nine months ended September 30, 2023 and 2022 is as follows:

Gross medical claims payable, beginning of period $ 15,348 $ 13,282

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Gross medical claims payable, end of period $ 15,917 $ 15,001

At June 30, 2023, the total of net incurred but not reported liabilities plus expected development on reported claims was $ 597 , $ 2,224 and $ 13,073 for the claim years 2021 and prior, 2022 and 2023, respectively.

The favorable development recognized in the six months ended June 30, 2023 and 2022 resulted primarily from trend factors in late 2022 and late 2021, respectively, developing more favorably than originally expected.

Favorable development in the completion factors resulting from the latter parts of 2022 developing faster than expected also contributed to the favorable development in the six months ended June 30, 2023.

At September 30, 2023, the total of net incurred but not reported liabilities plus expected development on reported claims was $ 481 , $ 1,421 and $ 14,011 for the claim years 2021 and prior, 2022 and 2023, respectively.

The favorable development recognized in the nine months ended September 30, 2023 resulted from trend factors in late 2022 developing more favorably than originally expected and completion factors in the latter parts of 2022 developing faster than expected.

The favorable development recognized in the nine months ended September 30, 2022 resulted primarily from trend factors in late 2021 developing more favorably than originally expected.

The reconciliation of net incurred medical claims to benefit expense included in our consolidated statements of income for the periods in 2023 is as follows:

Three Months Ended Six Months Ended June 30, 2023

March 31, 2023 June 30, 2023

Three Months Ended Nine Months Ended September 30, 2023

March 31, 2023 June 30, 2023 September 30, 2023

Total net incurred medical claims $ 29,683 $ 30,495 $ 29,538 $ 89,716

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The reconciliation of net incurred medical claims to benefit expense included in our consolidated statements of income for the periods in 2022 is as follows:

Three Months Ended Six Months Ended June 30, 2022

March 31, 2022 June 30, 2022

(Restated) (Restated) (Restated)

Three Months Ended Nine Months Ended September 30, 2022

March 31, 2022 June 30, 2022 September 30, 2022

(Restated) (Restated) (Restated) (Restated)

Total net incurred medical claims $ 27,131 $ 27,634 $ 28,511 $ 83,276

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Benefit expense $ 28,231 $ 28,795 $ 29,421 $ 86,447

The reconciliation of the medical claims payable reflected in the tables above to the consolidated ending balance for medical claims payable included in the consolidated balance sheet, as of June 30, 2023 and December 31, 2022, is as follows:

June 30, 2023 December 31, 2022

The reconciliation of the medical claims payable reflected in the tables above to the consolidated ending balance for medical claims payable included in the consolidated balance sheet, as of September 30, 2023 and December 31, 2022, is as follows:

September 30, 2023 December 31, 2022

Net medical claims payable, end of period $ 15,913 $ 15,342

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We generally issue senior unsecured notes for long-term borrowing purposes.

At June 30, 2023 and December 31, 2022, we had $ 24,834 and $ 23,761 , respectively, outstanding under these notes.

At September 30, 2023 and December 31, 2022, we had $ 24,819 and $ 23,761 , respectively, outstanding under these notes.

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.

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On March 15, 2023, we repaid, at maturity, the $ 500 outstanding balance of our 0.450 % senior unsecured notes.

We have an unsecured surplus note with an outstanding principal balance of $ 25 at both June 30, 2023 and December 31, 2022.

We have an unsecured surplus note with an outstanding principal balance of $ 25 at both September 30, 2023 and December 31, 2022.

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

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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 June 30, 2023, our debt-to-capital ratio, as defined and calculated under the 5-Year Facility, was 39.6%.

As of September 30, 2023, our debt-to-capital ratio, as defined and calculated under the 5-Year Facility, was 39.2%.

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

As of June 30, 2023, we were in compliance with all of our debt covenants under the 5-Year Facility.

There were no amounts outstanding under the 5-Year Facility at any time during the six months ended June 30, 2023 or the year ended December 31, 2022.

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

The Subsidiary Credit Facilities provided combined credit of up to $ 200 .

As of June 30, 2023, the Subsidiary Credit Facilities have been terminated.

As of September 30, 2023, we were in compliance with all of our debt covenants under the 5-Year Facility.

There were no amounts outstanding under the 5-Year Facility at any time during the nine months ended September 30, 2023 or the year ended December 31, 2022.

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

At June 30, 2023 and December 31, 2022, we had $ 90 and $ 0 , respectively, outstanding under this program.

At both September 30, 2023 and December 31, 2022, we had no amounts outstanding under this program.

Beginning June 30, 2023, we have reclassified our commercial paper balances from long-term debt to short-term debt as our intent is to not replace short-term commercial paper outstanding at expiration with additional short-term commercial paper for an uninterrupted period extending for more than one year.

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

We had $ 175 and $ 265 of outstanding short-term borrowings from the FHLBs at June 30, 2023 and December 31, 2022, respectively.

We had $ 0 and $ 265 of outstanding short-term borrowings from the FHLBs at September 30, 2023 and December 31, 2022, respectively.

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

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(i) there are novel or unsettled legal issues presented, (ii) the proceedings are in early stages, (iii) there is uncertainty as to the likelihood of a class being certified or decertified or the ultimate size and scope of the class, (iv) there is uncertainty as to the outcome of pending appeals or motions, (v) there are significant factual issues to be resolved, and/or (vi) in many cases, the plaintiffs have not specified damages in their complaint or in court filings.

For those legal proceedings where a loss is probable, or reasonably possible, and for which it is possible to reasonably estimate the amount of the possible loss or range of losses, we currently believe that the range of possible losses, in excess of established reserves is, in the aggregate, from $ 0 to approximately $ 250 at June 30, 2023.

This estimated aggregate range of reasonably possible losses is based upon currently available information taking into account our best estimate of such losses for which such an estimate can be made.

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

Those appeals are proceeding in the United States Court of Appeals for the Eleventh Circuit, which has scheduled oral argument on the appeals for September 2023.

Those appeals were heard by a panel of the United States Court of Appeals for the Eleventh Circuit in September 2023.

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.

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In February 2023, the Court denied the defendants’ motion to dismiss based on a statute of limitations defense in Alaska Air and Jet Blue .

In March 2023, pursuant to a stipulation by the parties, the Court denied the

defendants’ motion to dismiss also based on a statute of limitations defense in Bed Bath & Beyond .

In March 2023, pursuant to a stipulation by the parties, the Court denied the defendants’ motion to dismiss also based on a statute of limitations defense in Bed Bath & Beyond .

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

1 unchanged sentence

Blue Cross of California Taxation Litigation

In July 2013, our California affiliate Blue Cross of California (doing business as Anthem Blue Cross) (“BCC”) was named as a defendant in a California taxpayer action filed in Los Angeles County Superior Court (the “Superior Court”) captioned Michael D.

captioned Michael D.

State Board of Equalization, et al.

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The plaintiff filed a petition for review with the California Supreme Court in June 2023, and BCC filed its answer to the petition in the same month.

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

however, the ultimate outcome cannot be presently determined.

In July 2023, the California Supreme Court denied the plaintiff’s petition for review.

This matter is now resolved, and the protective tax refund claims mentioned above have been withdrawn.

Express Scripts, Inc.

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As a result of the summary judgment decision, the only remaining claims as of the filing of this Quarterly Report on Form 10-Q 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 Agreement.

Scripts filed a second motion for summary judgment in June 2022, challenging our remaining operational breach claims, which we opposed, and the District Court denied in March 2023, allowing our operational breach claim to proceed.

Express Scripts filed a second motion for summary judgment in June 2022, challenging our remaining operational breach claims, which we opposed, and the District Court denied in March 2023, allowing our operational breach claim to proceed.

A trial date has been set for December 2023.

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Attorney General and subcommittees of the U.S.

Such investigations, audits, reviews and administrative proceedings could result in the imposition of civil or criminal fines, penalties, other sanctions and additional rules, regulations or other restrictions on our

business operations.

Any liability that may result from any one of these actions, or in the aggregate, could have a material adverse effect on our consolidated financial position or results of operations.

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The agreement superseded certain prior agreements for such services and includes provisions for additional services not provided under those agreements.

Our remaining commitment under this agreement at June 30, 2023 is approximately $ 621 .

Our remaining commitment under this agreement at September 30, 2023 is approximately $ 554 .

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

We formed CarelonRx, formerly known as IngenioRx, to market and offer pharmacy services to our affiliated health plan customers, as well as to external customers outside of the health plans we own, starting in the second quarter of 2019.

We formed CarelonRx, to market and offer pharmacy services to our affiliated health plan customers, as well as to external customers outside of the health plans we own, starting in the second quarter of 2019.

The comprehensive pharmacy services portfolio includes, but is not limited to, formulary management, pharmacy networks, specialty and home delivery pharmacy services and member services.

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The declaration and payment of any dividends or repurchases of our common stock or debt is at the discretion of our Board of Directors and depends upon our financial condition, results of operations, future liquidity needs, regulatory and capital requirements and other factors deemed relevant by our Board of Directors.

A summary of our cash dividend activity for the six months ended June 30, 2023 and 2022 is as follows:

A summary of our cash dividend activity for the nine months ended September 30, 2023 and 2022 is as follows:

Declaration Date Record Date Payment Date Cash

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

January 24, 2023 March 10, 2023 March 24, 2023 $ 1.48 $ 351

April 18, 2023 June 9, 2023 June 23, 2023 $ 1.48 $ 350

Six Months Ended June 30, 2022

July 18, 2023 September 8, 2023 September 22, 2023 $ 1.48 $ 348

Nine Months Ended September 30, 2022

January 25, 2022 March 10, 2022 March 25, 2022 $ 1.28 $ 309

April 19, 2022 June 10, 2022 June 24, 2022 $ 1.28 $ 309

On July 18, 2023, our Audit Committee declared a third quarter 2023 dividend to shareholders of $ 1.48 per share, payable on September 22, 2023 to shareholders of record at the close of business on September 8, 2023 .

July 19, 2022 September 9, 2022 September 23, 2022 $ 1.28 $ 306

On October 17, 2023, our Audit Committee declared a fourth quarter 2023 dividend to shareholders of $ 1.48 per share, payable on December 21, 2023 to shareholders of record at the close of business on December 6, 2023 .

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

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The excess cost of the repurchased shares over par value is charged on a pro rata basis to additional paid-in capital and retained earnings.

A summary of common stock repurchases for the six months ended June 30, 2023 and 2022 is as follows:

Six Months Ended June 30

A summary of common stock repurchases for the nine months ended September 30, 2023 and 2022 is as follows:

Nine Months Ended September 30

Shares repurchased 3.8 3.7

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Authorization remaining at the end of the period $ 5,128 $ 2,444

For additional information regarding the use of capital for debt security repurchases, see Note 9, “Debt,” included in this Form 10-Q and Note 13, “Debt,” to our audited consolidated financial statements as of and for the year ended December 31, 2022 included in our 2022 Annual Report on Form 10-K.

For additional information regarding the use of capital for debt security repurchases, see Note 10, “Debt,” included in this Quarterly Report on Form 10-Q and Note 13, “Debt,” to our audited consolidated financial statements as of and for the year ended December 31, 2022 included in Exhibit 99.1 to this Quarterly Report on Form 10-Q.

Stock Incentive Plan s

A summary of stock option activity for the six months ended June 30, 2023 is as follows:

A summary of stock option activity for the nine months ended September 30, 2023 is as follows:

Shares Weighted-

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Forfeited or expired ( 0.1 ) 399.28

Outstanding at June 30, 2023 3.2 323.85 6.51 $ 402

Exercisable at June 30, 2023 2.1 265.51 5.31 $ 376

A summary of the status of nonvested restricted stock activity, including restricted stock units and performance units, for the six months ended June 30, 2023 is as follows:

Outstanding at September 30, 2023 3.1 324.74 6.25 $ 370

Exercisable at September 30, 2023 2.0 266.01 5.07 $ 346

A summary of the status of nonvested restricted stock activity, including restricted stock units and performance units, for the nine months ended September 30, 2023 is as follows:

and Units Weighted-

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Forfeited ( 0.1 ) 413.59

Nonvested at June 30, 2023 1.2 422.67

During the six months ended June 30, 2023, we granted approximately 0.2 restricted stock units that are contingent upon us achieving earnings targets over the three-year period from 2023 to 2025.

Nonvested at September 30, 2023 1.1 423.34

During the nine months ended September 30, 2023, we granted approximately 0.2 restricted stock units that are contingent upon us achieving earnings targets over the three-year period from 2023 to 2025.

These grants have been included in the activity shown above but will be subject to adjustment at the end of 2025 based on results in the three-year period.

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

For a more detailed discussion of our stock incentive plan fair value methodology, see Note 15, “Capital Stock,” to our audited consolidated financial statements as of and for the year ended December 31, 2022 included in our 2022 Annual Report on Form 10-K.

The following weighted-average assumptions were used to estimate the fair values of options granted during the six months ended June 30, 2023 and 2022:

Six Months Ended June 30

The following weighted-average assumptions were used to estimate the fair values of options granted during the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30

Risk-free interest rate 3.95 % 1.97 %

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Weighted-average expected life (years) 4.40 5.10

The following weighted-average fair values per option or share were determined for the six months ended June 30, 2023 and 2022:

Six Months Ended June 30

The following weighted-average fair values per option or share were determined for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30

Options granted during the period $ 127.08 $ 116.85

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Accumulated Other Comprehensive Loss

A reconciliation of the components of accumulated other comprehensive loss at June 30, 2023 and 2022 is as follows:

A reconciliation of the components of accumulated other comprehensive loss at September 30, 2023 and 2022 is as follows:

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

2 unchanged sentences

Beginning of period balance $ ( 1,449 ) $ ( 1,489 ) $ ( 1,755 ) $ 494

Other comprehensive (loss) gain before reclassifications, net of tax benefit (expense) of $ 61 , $ 323 , $( 25 ) and $ 677 , respectively

Other comprehensive loss before reclassifications, net of tax benefit (expense) of $ 145 , $ 220 , $ 119 and $ 896 , respectively

( 464 ) ( 719 ) ( 317 ) ( 2,914 )

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112 80 273 284

Other comprehensive (loss) income ( 119 ) ( 922 ) 308 ( 1,991 )

Other comprehensive loss

( 352 ) ( 639 ) ( 44 ) ( 2,630 )

Other comprehensive loss (income) attributable to noncontrolling interests, net of tax benefit (expense) of $( 1 ), $( 1 ), $( 1 ) and $( 4 ), respectively

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Beginning of period balance ( 6 ) ( 2 ) ( 3 ) —

Other comprehensive loss, net of tax benefit of $ 0 , $ 0 , $ 1 and $ 1 , respectively

Other comprehensive income (loss), net of tax benefit of $( 1 ), $ 0 , $ 0 and $ 1 , respectively

2 ( 1 ) ( 1 ) ( 3 )

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Beginning of period balance 12 ( 2 ) 13 ( 19 )

Other comprehensive (loss) income, net of tax expense of $ 1 , $ 0 , $ 1 and $ 0 , respectively

( 3 ) 8 ( 1 ) 17

Other comprehensive income, net of tax expense of $ 0 , $( 2 ), $ 0 and $( 7 ), respectively

End of period balance 15 5 15 5

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Beginning of period balance ( 15 ) ( 12 ) ( 17 ) ( 4 )

Other comprehensive income (loss), net of tax benefit of $( 5 ), $ 1 , $( 3 ) and $ 2 , respectively

Other comprehensive loss, net of tax benefit of $ 1 , $ 2 , $ 0 and $ 4 , respectively

( 4 ) ( 7 ) ( 2 ) ( 15 )

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Total beginning of period accumulated other comprehensive loss ( 2,166 ) ( 2,151 ) ( 2,490 ) ( 197 )

Total other comprehensive (loss) income, net of tax benefit (expense) of $ 32 , $ 285 , $( 72 ), and $ 617 , respectively

Total other comprehensive loss, net of tax benefit (expense) of $ 109 , $ 196 , $ 37 , and $ 808 , respectively

( 348 ) ( 631 ) ( 22 ) ( 2,593 )

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

Total other comprehensive loss attributable to noncontrolling interests, net of tax benefit (expense) of $( 1 ), $( 1 ), $( 1 ) and $( 4 ) respectively

Total end of period accumulated other comprehensive loss $ ( 2,512 ) $ ( 2,779 ) $ ( 2,512 ) $ ( 2,779 )

Earnings per Share

The denominator for basic and diluted earnings per share for the three and six months ended June 30, 2023 and 2022 is as follows:

The denominator for basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022 is as follows:

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

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236.5 242.2 238.0 243.3

During the three months ended June 30, 2023 and 2022, weighted-average shares related to certain stock options of 1.0 and 0.5 respectively, were excluded from the denominator for diluted earnings per share because the stock options were anti-dilutive.

During the six months ended June 30, 2023 and 2022, weighted-average shares related to certain stock options of 0.7 and 0.4 , respectively, were excluded from each of the denominators for diluted earnings per share because the stock options were anti-dilutive.

During the three and six months ended June 30, 2023, we issued approximately 0.0 and 0.6 restricted stock units under our stock incentive plans, 0.0 and 0.2 of which vesting is contingent upon us meeting specified annual earnings targets for the three-year period of 2023 through 2025.

During the three and six months ended months ended June 30, 2022, we issued approximately 0.0 and 0.5 restricted stock units under our stock incentive plans, 0.0 and 0.2 of which vesting is contingent upon us meeting specified annual earnings targets for the three-year period of 2022 through 2024.

During the three months ended September 30, 2023 and 2022, weighted-average shares related to certain stock options of 0.9 and 0.5 respectively, were excluded from the denominator for diluted earnings per share because the stock options were anti-dilutive.

During the nine months ended September 30, 2023 and 2022, weighted-average shares related to certain stock options of 0.8 and 0.4 , respectively, were excluded from each of the denominators for diluted earnings per share because the stock options were anti-dilutive.

During the three and nine months ended September 30, 2023, we issued approximately 0.0 and 0.6 restricted stock units under our stock incentive plans, 0.0 and 0.2 of which vesting is contingent upon us meeting specified annual earnings targets for the three-year period of 2023 through 2025.

During the three and nine months ended months ended September 30, 2022, we issued approximately 0.0 and 0.6 restricted stock units under our stock incentive plans, 0.0 and 0.2 of which vesting is contingent upon us meeting specified annual earnings targets for the three-year period of 2022 through 2024.

The contingent restricted stock units have been excluded from the denominators for diluted earnings per share and will be included only if and when the contingency is met.

Segment Information

As discussed in Note 1 “Organization”, we are reorganizing our brand portfolio into three core go-to-market brands over the next several years.

Our branding strategy reflects the evolution of our business from a traditional health insurance company to a lifetime, trusted health partner.

Given this evolution, we reviewed and modified how we manage our business and the products in each of our operating segments, which has resulted in restructurings between some of our operating segments.

As a result of these changes, we have changed our reportable segment presentation and its composition to reflect how we began managing our operations and monitoring performance, aligning strategies and allocating resources beginning on January 1, 2023.

The results of our operations are now reported in the following four reportable segments:

As discussed in Note 1 “Organization”, we have changed our reportable segment presentation and its composition to reflect how we began managing our operations and monitoring performance, aligning strategies and allocating resources beginning on January 1, 2023.

We now report our results of operations in the following four reportable segments:

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

Previously reported information throughout this Form 10-Q has been reclassified to conform to the new presentation.

Previously reported information throughout this Quarterly Report on Form 10-Q has been reclassified to conform to the new presentation.

Our Health Benefits segment offers a comprehensive suite of health plans and services to our Individual, Employer Group risk-based, Employer Group fee-based, BlueCard ® , Medicare, Medicaid and FEHB program members.

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CarelonRx offers a comprehensive pharmacy services portfolio, which includes services such as formulary management, pharmacy networks, specialty and home delivery pharmacy services and member services.

Our Carelon Services segment is 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

Carelon Services offers a broad array of healthcare-related services and capabilities to internal and external customers including integrated care delivery, behavioral health, palliative care, utilization management, payment integrity services and subrogation services, as well as health and wellness programs.

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These affiliated revenues are eliminated in consolidation.

Financial data by reportable segment for the three months ended June 30, 2023 and 2022 is as follows:

Financial data by reportable segment for the three months ended September 30, 2023 and 2022 is as follows:

Benefits CarelonRx Carelon

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& Other Eliminations Total

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Premiums $ 34,934 $ — $ 422 $ 422 $ — $ ( 97 ) $ 35,259

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Operating gain (loss) $ 1,847 $ 477 $ 173 $ 650 $ ( 741 ) $ — $ 1,756

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Premiums $ 33,376 $ — $ 412 $ 412 $ — $ ( 66 ) $ 33,722

5 unchanged sentences

Operating gain (loss) (restated) $ 1,634 $ 516 $ 125 $ 641 $ ( 24 ) $ — $ 2,251

Financial data by reportable segment for the six months ended June 30, 2023 and 2022 is as follows:

Financial data by reportable segment for the nine months ended September 30, 2023 and 2022 is as follows:

Benefits CarelonRx Carelon

1 unchanged sentence

& Other Eliminations Total

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Premiums $ 106,701 $ — $ 1,261 $ 1,261 $ — $ ( 246 ) $ 107,716

5 unchanged sentences

Operating gain (loss) $ 6,154 $ 1,485 $ 518 $ 2,003 ( 942 ) — 7,215

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Premiums $ 98,626 $ — $ 1,105 $ 1,105 $ — $ ( 148 ) $ 99,583

7 unchanged sentences

therefore, eliminations also include adjustments for unaffiliated capitated risk arrangements that are recognized on a net basis under GAAP, as well as affiliated eliminations.

A reconciliation of reportable segments’ operating revenue to the amounts of total revenues included in our consolidated statements of income for the three and six months ended June 30, 2023 and 2022 is as follows:

A reconciliation of reportable segments’ operating revenue to the amounts of total revenues included in our consolidated statements of income for the three and nine months ended September 30, 2023 and 2022 is as follows:

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

3 unchanged sentences

Total revenues $ 42,849 $ 39,939 $ 128,693 $ 116,666

A reconciliation of income before income tax expense to reportable segments’ operating gain included in our consolidated statements of income for the three and six months ended June 30, 2023 and 2022 is as follows:

A reconciliation of income before income tax expense to reportable segments’ operating gain included in our consolidated statements of income for the three and nine months ended September 30, 2023 and 2022 is as follows:

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

9 unchanged sentences

The information related to our leases is as follows:

Balance Sheet Location June 30, 2023 December 31, 2022

Balance Sheet Location September 30, 2023 December 31, 2022

Operating Leases

3 unchanged sentences

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

7 unchanged sentences

Right-of-use assets obtained in exchange for new lease liabilities, operating leases $ — $ 23 $ 47 $ 62

As of June 30, 2023 and December 31, 2022, the weighted average remaining lease term of our operating leases was 7 years for each period.

The lease liabilities reflect a weighted average discount rate of 3.28 % at June 30, 2023 and 2.98 % at December 31, 2022.

As of September 30, 2023 and December 31, 2022, the weighted average remaining lease term of our operating leases was 7 years for each period.

The lease liabilities reflect a weighted average discount rate of 3.53 % at September 30, 2023 and 2.98 % at December 31, 2022.

Our activities as disclosed in Note 4, “Business Optimization Initiatives”, include reducing our office space footprint.

As a result, during the quarter ended September 30, 2023 we recorded impairment charges of $ 23 for abandonment of right-of-use assets which are included in the operating lease expense shown above.

Future lease payments for noncancellable operating leases with initial or remaining terms of one year or more are as follows:

2023 (excluding the six months ended June 30, 2023) $ 110

2023 (excluding the nine months ended September 30, 2023)

Thereafter 335

3 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements