# Elevance Health (ELV) Financial Model Free Excel 3-statement financial model and company analysis for Elevance Health. - Canonical: https://finamodel.com/companies/elevance-health - Industry: Health Insurance - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/ELV.xlsx ## Model Purpose This model provides a comprehensive equity valuation and scenario analysis platform for Elevance Health, enabling an analyst to forecast earnings and cash flows based on medical membership trends, premium pricing, and the expansion of the Carelon healthcare services segment. ## Company Overview Elevance Health (formerly Anthem) is one of the largest managed healthcare companies in the United States, serving approximately 45.2 million medical members as of December 2025. The company operates as a health insurer and healthcare services provider, leveraging Blue Cross and Blue Shield licenses in multiple states alongside its proprietary Carelon brand. Business segments include: * **Health Benefits** (~80% of gross revenue before eliminations): Comprises Commercial, Medicare, Medicaid, and Federal Employee Program health plans. * **Carelon** (~20% of gross revenue before eliminations): Comprises CarelonRx (pharmacy benefit management) and Carelon Services (behavioural health, complex care, and healthcare IT). * **Corporate & Other**: Minor segment capturing unallocated corporate expenses and certain adjustment items. The company operates primarily in the United States. Its business model is asset-light but capital-intensive regarding statutory reserve requirements, relying on underwriting risk (collecting premiums and managing medical costs) and fee-based administrative services. Elevance holds a top-tier competitive position, ranking as the second-largest U.S. health insurer by membership behind UnitedHealth Group. Recent major events include the strategic rebranding to Elevance Health, the consolidation of its services under the Carelon brand, and the acquisition of CareBridge to expand Carelon Services. ## Revenue Deep Dive ### Health Benefits * **Segment name**: Health Benefits * **Revenue driver formula**: Medical Membership x Average Premium Per Member Per Month (PMPM) x 12 * **Historical growth rate**: 5% to 11% CAGR over the last 3 years (FY2025 revenue was $167.1 billion, up 11% year-over-year). * **Key growth levers and headwinds**: Growth is driven by Medicare Advantage market share gains and commercial premium yield increases. Headwinds include Medicaid membership attrition due to state redeterminations following the end of the public health emergency. * **Pricing dynamics**: Highly regulated. Medicare Advantage bids are submitted annually to CMS. Commercial pricing is negotiated annually with employers. Medicaid rates are set by state governments. * **Revenue recognition notes**: Premiums are recognised ratably over the period of coverage. Administrative fees are recognised as services are performed. * **Seasonality**: Premium revenue is relatively stable sequentially, but membership often peaks in the first quarter following the annual open enrolment period. ### Carelon * **Segment name**: Carelon (comprising CarelonRx and Carelon Services) * **Revenue driver formula**: Pharmacy Script Volume x Price per Script (CarelonRx) + Value-Based Care Covered Lives x Capitation Rate (Carelon Services). * **Historical growth rate**: 15% to 33% CAGR (FY2025 revenue was $71.7 billion, up 33% year-over-year). * **Key growth levers and headwinds**: Driven by the acquisition of CareBridge, expansion of risk-based solutions, and increased penetration into the Health Benefits member base. * **Pricing dynamics**: Contractual pricing for PBM services; capitated risk arrangements for complex care services. * **Revenue recognition notes**: Pharmacy revenue is recognised upon prescription adjudication and dispensing. * **Seasonality**: CarelonRx experiences higher volumes in the fourth quarter as members meet their annual deductibles. ## Cost Structure ### Variable Costs / COGS * **Line-by-line breakdown**: The primary equivalent to COGS is "Benefit Expense" (medical costs paid on behalf of members) and "Cost of Products Sold" (pharmacy costs for CarelonRx). * **Gross margin range**: Elevance tracks this inversely via the Benefit Expense Ratio (Medical Loss Ratio). The ratio has ranged from 87.0% to 90.0% over the last 5 years. In FY2025, the Benefit Expense Ratio was 90.0%. * **Key input costs**: Hospital inpatient rates, outpatient facility fees, physician reimbursement rates, and prescription drug costs. * **How COGS scales**: Scales directly with membership and medical utilisation. It is subject to sudden spikes if medical cost trends (e.g., elective surgeries, respiratory illnesses) exceed pricing assumptions. ### Operating Expenses * **R&D**: Not explicitly reported as a separate line item; technology and clinical development costs are embedded in operating expenses. * **SG&A**: Reported as "Operating Expense". This includes broker commissions, administrative payroll, marketing, and IT infrastructure. * **Depreciation & Amortisation**: Typically runs at 1.0% to 1.5% of total revenue, heavily weighted towards amortisation of acquired intangibles. * **Stock-Based Compensation**: Runs at approximately 0.2% to 0.3% of revenue. * **Restructuring / one-time charges**: Occasional business optimisation charges, usually excluded from "Adjusted Operating Gain". ### Margin Profile * **Benefit Expense Ratio**: 88.5% in FY2024, rising to 90.0% in FY2025. * **Adjusted Operating Expense Ratio**: 10.6% in FY2024, improving to 10.5% in FY2025. * **Operating Margin**: Consolidated adjusted operating margin was 3.8% in FY2025. * **Segment Margins**: Health Benefits operates at a 2.5% to 4.0% operating margin. Carelon operates at a higher 4.5% to 5.5% operating margin (4.7% in FY2025). ## Balance Sheet Structure * **Total assets**: Approximately $110 billion to $115 billion. * **Key asset categories**: Cash and investments (held at the parent and regulated subsidiary levels), premium receivables, and goodwill. * **Goodwill & intangibles**: Represents over 35% of total assets, reflecting a long history of acquisitions (e.g., WellPoint, Amerigroup, CareBridge). * **Working capital profile**: * **Days in Claims Payable**: A critical metric for insurers. Stood at 41.3 days at the end of FY2025. * **Days Sales Outstanding (DSO)**: Typically 15 to 20 days (premiums are often billed in advance). * **Net working capital**: Structurally negative. The company collects premiums upfront and pays medical claims later, generating a float. * **PP&E**: Relatively small (under 5% of assets), consisting of corporate real estate, IT hardware, and Carelon clinical centres. * **Right-of-use assets**: Material but manageable, primarily related to leased office space and clinics. ## Capital Expenditure & Investment * **Capex as % of revenue**: Very light, typically 0.5% to 0.8% of total operating revenue. * **Maintenance vs. growth**: Heavily skewed towards growth and technology (digital platforms like Sydney Health, AI integration, and Carelon clinic build-outs). * **Capitalised software**: A significant portion of total capex is capitalised internal-use software development. * **M&A pattern**: Serial acquirer. Elevance uses bolt-on acquisitions to expand Carelon Services (e.g., CareBridge) and regional health plans to bolster Medicare/Medicaid density. ## Debt & Capital Structure * **Total debt**: Approximately $25 billion to $28 billion. * **Debt/EBITDA ratio**: Typically managed around 2.5x to 3.0x. * **Credit rating**: Investment grade (typically A- range for senior unsecured debt). * **Key debt instruments**: Senior notes with staggered maturities, supported by a commercial paper programme and revolving credit facility. * **Interest rate profile**: Predominantly fixed-rate senior notes. * **Share repurchase programme**: Highly active. The company repurchased $471 million in Q4 2025 and returned a total of $4.1 billion to shareholders via buybacks and dividends in FY2025. * **Dividend policy**: Quarterly dividend of $1.71 per share in FY2025 (annualised $6.84), representing a payout ratio of approximately 20% to 25% of adjusted earnings. ## Cash Flow Characteristics * **Operating cash flow conversion**: OCF was $4.3 billion in FY2025, representing approximately 0.8x GAAP net income. This conversion ratio fluctuates based on the timing of CMS payments and claims processing. * **Free cash flow margin**: Typically 2.5% to 3.5% of total revenue. * **Major non-cash items**: Depreciation, amortisation of acquired intangibles, and changes in medical claims payable reserves. * **Working capital cash flow impact**: Growth in medical membership naturally generates operating cash flow as premium collection outpaces the payment of claims (float expansion). * **Cash tax rate**: Generally tracks closely to the statutory rate of 21% to 23%, adjusted for non-deductible executive compensation and tax-exempt investment income. ## Sheet Structure 1. **Assumptions**: Global drivers, macroeconomic inputs, tax rates, and share count projections. 2. **Membership & Premiums**: Row-level detail for Commercial, Medicare, Medicaid, and FEP membership. Calculates PMPM rates and generates Health Benefits premium revenue. 3. **Carelon Build**: Projects CarelonRx script volumes, Carelon Services covered lives, and intercompany eliminations. 4. **Consolidated Income Statement**: Mirrors the 10-K. Key lines include Premiums, Product Revenue, Service Fees, Benefit Expense, Cost of Products Sold, and Operating Expense. 5. **Claims & Reserving**: Calculates the Medical Claims Payable liability based on the Benefit Expense and Days in Claims Payable assumptions. 6. **Balance Sheet**: Standard asset and liability categories, highlighting Cash, Premium Receivables, Medical Claims Payable, and Unearned Income. 7. **Cash Flow Statement**: Indirect method, bridging Net Income to OCF via changes in Medical Claims Payable and other working capital items. 8. **Debt & Equity Schedule**: Tracks senior notes, interest expense, share repurchases, and dividend payouts. 9. **DCF Valuation**: Unlevered free cash flow calculation, WACC derivation, and terminal value using the perpetuity growth method. ## Key Financial Relationships 1. `Health Benefits Revenue = Total Medical Membership x Average Blended PMPM x 12` 2. `Carelon Gross Revenue = CarelonRx Revenue + Carelon Services Revenue` 3. `Consolidated Operating Revenue = Health Benefits Revenue + Carelon Gross Revenue - Intercompany Eliminations` 4. `Benefit Expense = Health Benefits Premium Revenue x Benefit Expense Ratio` 5. `Cost of Products Sold = CarelonRx Product Revenue x Pharmacy Cost Ratio` 6. `Operating Expense = Consolidated Operating Revenue x Operating Expense Ratio` 7. `Medical Claims Payable = Benefit Expense x (Days in Claims Payable / 365)` 8. `Health Benefits Operating Gain = Health Benefits Revenue - Benefit Expense - Allocated Operating Expenses` 9. `Carelon Adjusted Operating Gain = Carelon Gross Revenue x Carelon Adjusted Operating Margin` 10. `Adjusted Net Income = GAAP Net Income + Amortisation of Intangibles + Net Investment Losses - Tax Impact of Adjustments` 11. `Ending Share Count = Beginning Share Count - (Share Repurchase Amount / Average Share Price)` ## Cross-Sheet Dependencies The **Membership & Premiums** and **Carelon Build** sheets are the foundational drivers of the model. They feed directly into the top line of the **Consolidated Income Statement**. The Benefit Expense calculated on the Income Statement feeds into the **Claims & Reserving** sheet to determine the Medical Claims Payable balance. This liability balance then feeds the **Balance Sheet** and the change in the liability flows through the **Cash Flow Statement**. The cash generated dictates the capacity for share buybacks on the **Debt & Equity Schedule**, which loops back to calculate EPS on the Income Statement. ## Sign Convention * **Income Statement**: Revenues are positive. Expenses (Benefit Expense, Operating Expense, Interest Expense) are negative. * **Balance Sheet**: Assets are positive. Liabilities and Equity are positive. * **Cash Flow Statement**: Cash inflows are positive. Cash outflows (Capex, dividends, share repurchases) are negative. * **Ratios**: Benefit Expense Ratio and Operating Expense Ratio are expressed as positive percentages. ## Things Most Likely to Go Wrong 1. **Intercompany Eliminations**: Carelon provides significant services to the Health Benefits segment. Failing to model intercompany eliminations will double-count consolidated revenue. 2. **Benefit Expense Ratio Sensitivity**: A 50 basis point error in the Benefit Expense Ratio assumption will drastically alter operating profit. This ratio must be modelled with extreme precision. 3. **Days in Claims Payable Disconnect**: If the model holds Medical Claims Payable flat while Benefit Expense grows, it will artificially depress operating cash flow. The liability must scale with expenses. 4. **Medicaid Redeterminations**: Historical Medicaid growth rates from 2020-2023 are invalid due to the resumption of eligibility redeterminations in 2024/2025. Membership must reflect recent attrition. 5. **Medicare Part D Seasonality**: The Inflation Reduction Act has altered Medicare Part D seasonality, pushing higher costs into the fourth quarter. Quarterly models must account for this shift. 6. **Adjusted vs. GAAP Metrics**: Elevance guides to *Adjusted* EPS and *Adjusted* Operating Gain. The model must clearly bridge GAAP to Adjusted figures by adding back intangible amortisation and one-time items. 7. **Float Income**: The company generates significant net investment income from its cash and investment portfolio. This must be modelled as a function of the parent company cash and statutory reserve balances. 8. **Share Count Circularity**: Aggressive share repurchases reduce the share count, which increases EPS, which often drives the share price assumption, which changes the number of shares repurchased. Use a simple average price assumption to break the loop. ## Validation Checks 1. "Benefit Expense Ratio must remain between 89.0% and 91.0%; flag if outside this band." 2. "Adjusted Operating Expense Ratio should be between 10.0% and 11.0%." 3. "Days in Claims Payable should remain between 40.0 and 43.0 days based on historical reserving practices." 4. "Consolidated Operating Margin should reconcile to approximately 3.5% to 4.5%." 5. "OCF / Net Income conversion should be between 0.8x and 1.2x." 6. "Intercompany Eliminations must be negative and should approximate 10% to 15% of total gross segment revenues." 7. "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period." 8. "Dividend payout ratio should remain near 20% to 25% of adjusted net income." ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Total Medical Membership | 45.2 | Millions | FY2025 actual ending membership | | Health Benefits Revenue Growth | 4.0 | % | Blended growth reflecting premium yield increases offset by Medicaid attrition | | Carelon Revenue Growth | 15.0 | % | Reflects strong continued growth in CarelonRx and Carelon Services | | Benefit Expense Ratio | 90.2 | % | Midpoint of management's FY2026 guidance (90.2% +/- 50 bps) | | Adjusted Operating Expense Ratio | 10.6 | % | Midpoint of management's FY2026 guidance (10.6% +/- 50 bps) | | Days in Claims Payable | 41.3 | Days | FY2025 actual ending figure | | Effective Tax Rate | 22.5 | % | Typical blended federal and state statutory rate | | Annual Share Repurchases | 2,500 | $ Millions | Conservative baseline based on recent capital return trends | | Quarterly Dividend per Share | 1.71 | $ | FY2025 actual quarterly dividend rate | | Capex as % of Revenue | 0.6 | % | Historical average for technology and clinic investments | | Cost of Debt | 4.5 | % | Estimated weighted average interest rate on senior notes | | WACC | 7.5 | % | Standard discount rate for large-cap managed care | | Terminal Growth Rate | 2.0 | % | Long-term GDP-aligned growth rate | ## Data Sources & Benchmarks * **Filings**: SEC EDGAR (Elevance Health, Inc. CIK: 0001156039), Elevance Investor Relations website. * **Key Peers**: UnitedHealth Group (UNH), Humana (HUM), CVS Health / Aetna (CVS), The Cigna Group (CI), Centene (CNC). * **Industry Data**: Centers for Medicare & Medicaid Services (CMS) for Medicare Advantage rate notices and Star Ratings data; Kaiser Family Foundation (KFF) for Medicaid enrolment trends. * **Consensus Estimates**: FactSet or Bloomberg for forward EPS and Benefit Expense Ratio estimates. ## Sources * Elevance Health Q4 and Full Year 2025 Earnings Release (January 28, 2026) * Elevance Health Q4 and Full Year 2024 Earnings Release (January 23, 2025) * Elevance Health 2025 10-K Filing Summary * Becker's Payer Issues: "Elevance posts $5.7B profit in 2025" (January 28, 2026) * Elevance Health Q3 2025 Earnings Presentation (October 21, 2025) --- ## Frequently asked questions ### What does Elevance Health do? Elevance Health is one of the largest managed healthcare companies in the United States, operating as a health insurer and healthcare services provider. It serves approximately 45.2 million medical members, leveraging Blue Cross and Blue Shield licenses and its proprietary Carelon brand. ### How does Elevance Health generate its revenue? Elevance Health primarily generates revenue through its Health Benefits segment, which accounts for approximately 80% of gross revenue, offering commercial, Medicare, Medicaid, and Federal Employee Program health plans. The remaining revenue comes from its Carelon segment, which includes pharmacy benefit management and various healthcare services. ### What is Elevance Health's capital expenditure strategy? Elevance Health's capital expenditure is relatively light, typically ranging from 0.5% to 0.8% of total operating revenue. This expenditure is heavily skewed towards growth and technology, including digital platforms, AI integration, and the build-out of Carelon clinical centers. ### Why does Elevance Health have negative net working capital? Elevance Health structurally maintains negative net working capital due to its business model. The company collects premiums from its members upfront and pays medical claims later, effectively generating a float. ### What is the purpose of the Elevance Health financial model? The Elevance Health financial model provides a comprehensive platform for equity valuation and scenario analysis. It enables analysts to forecast earnings and cash flows based on medical membership trends, premium pricing, and the expansion of the Carelon healthcare services segment. ### Can I download an Excel financial model for Elevance Health? Yes, an Excel financial model for Elevance Health is available for download. This model offers a forecast horizon from FY2026 to FY2030, providing detailed assumptions for various financial metrics. [Interactive forecast calculator](https://finamodel.com/companies/elevance-health/forecast)