Anthem, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Elevents Health Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session where participants are encouraged to present a single question. If you wish to ask a question, please press star then 1 on your telephone keypad. You will hear a prompt that you have been cued. You may withdraw your question at any time by pressing star then 2. These instructions will be repeated prior to the question and answer portion of this call. As a reminder, today's conference is being recorded. I would now like to turn the conference over to the company's management. Please go ahead.

Good morning and welcome to Elevance Health's fourth quarter 2023 earnings call. This is Steve Tennell, Vice President of Investor Relations. And with us this morning on the earnings call are Gail Boudreau, President and CEO, Mark Kay, our CFO, Peter Haitayan, President of Carillon, Morgan Kendrick, President of our Commercial Health Benefits business, and Felicia Norwood, president of our government health benefits business. Gail will begin the call with a brief discussion of the quarter and year and recent progress against our strategic initiatives. Mark will then discuss our financial results and outlook in greater detail. After our prepared remarks, the team will be available for Q&A. During the call, we will reference certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available on our website, LVanceHealth.com. We will also be making some forward-looking statements on this call. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of Elevance Health. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to carefully review the risk factors discussed in today's press release and in our quarterly filings with the SEC. I will now turn the call over to Gail.

Thanks, Steve, and good morning, everyone. Today, we're pleased to share that Elevance Health delivered a strong end to 2023, demonstrating our ability to execute with agility and the balance and resilience of our enterprise. In the fourth quarter, Elevance Health delivered GAAP diluted earnings per share of $3.63 and adjusted diluted earnings per share of $5.62. For the full year, we reported GAAP diluted earnings per share of $25.22 and adjusted diluted earnings per share of $33.14. 2023 marks the sixth consecutive year in which we grew adjusted diluted earnings per share within or above our 12 to 15 percent long-term target growth rate. with a compound annual growth rate exceeding the high end of the range. This reflects the ongoing execution of our strategy to accelerate capabilities and services, invest in high growth opportunities, and optimize our health benefits business. In 2023, we made significant strides building upon our flywheel for growth. Caroline has and will continue to add attractive capabilities that we can scale rapidly and sustainably over the long term. For example, just a few weeks ago, we announced the acquisition of Paragon Healthcare, a company specializing in infusible and injectable therapies. The acquisition expands our capabilities, catering to consumers with complex and chronic needs. who can benefit the most from our approach to whole person health. Infusion services will complement our suite of pharmacy services, which today include a fast-growing specialty pharmacy business and our advanced home delivery service, which launched at the beginning of this year. Carolin Services is poised for strong growth in 2024. with the onboarding of new clients and continued expansion of services provided to Elevance Health medical members, including the rollout of risk-based oncology products and Carillon Insights, as well as the launch of comprehensive Carillon behavioral health management services to address the whole health needs of Medicaid beneficiaries living with serious mental illness. Turning to our health benefits business, 2023 marked another strong year despite a dynamic operating environment. Performance was led by the optimization of our commercial business, where our operating margins continue to recover from pandemic-era lows, which will continue into 2025. Commercial customers prioritize affordability, experience, and simplicity, and we're delivering on all fronts. In 2023, We launched a series of initiatives designed to improve and simplify the customer experience, including our associates' ability to better serve our members through the integration of AI support and natural language processing, which has significantly improved first call resolution, in addition to enhancing our claims auto adjudication rate. We're also broadening the use of AI to automate certain aspects of our provider directory and other administrative processes, which have improved data accuracy in consumer and provider experiences. Momentum in our national accounts business is a direct result of the unique and differentiated value we offer to large employers. We continue to consolidate business with existing clients, achieving excellent retention and winning over 75% of employers who ultimately switch carriers despite a smaller pipeline of new accounts for 2024. In our individual business, we positioned our products thoughtfully to drive profitable and sustainable growth, and we're pleased with our performance in 2023. We're looking forward to even stronger membership growth this year as we focus on maximizing access to care for redetermined Medicaid beneficiaries. Our relentless focus on affordable products, superior customer experiences, and simplicity is yielding strong results. After growing commercial membership by over 400,000 members last year, we are poised to grow by another 750,000 in 2024. Medicaid eligibility redeterminations remain ongoing, and many states have accelerated their redetermination processes. To date, over 70% of our members who lost Medicaid coverage were unenrolled for administrative reasons. This is a challenging reality for many families, but we're encouraged that we are nearly two-thirds of the way through the process, with close to 30% of those unenrolled before September 1st having re-enrolled in an Elevance Health product. Our research indicates that many unenrolled members are facing barriers to re-enrollment, including awareness of the process and required actions to maintain coverage. To address this, we're executing an extensive renewal campaign and have reached over 3 million people with our omni-channel approach as we remain committed to supporting them as their trusted health partner. Despite accelerated membership attrition from redeterminations to date, our Medicaid business is performing well. Rates remain actuarially sound for the members we are privileged to serve, and we are innovating to meet their needs. For example, in 2024, we will expand our community-connected care model into eight additional states. This program assists Medicaid members with their health-related social needs by identifying gaps and connecting members to support services in their communities. We will also launch a program in alliance with the Affordable Connectivity Program, major wireless carriers, and Samsung that will help increase equitable access to digital and virtual health tools. The program will provide eligible Medicaid members with a curated selection of digital and virtual health tools via smartphone with no data cap at no cost, along with training materials and ongoing guidance on how to use these tools. Strong performance in 2023 allowed us to invest for the long term. In the fourth quarter, these investments were concentrated in Medicare, where we remain intensely focused on building a strong foundation for sustainable long-term growth. This includes improving our star quality ratings and driving profitable growth in markets where we know we can win over the long term. Unfortunately, pockets of the Medicare Advantage market have remained hyper-competitive despite a more challenging funding environment. While our plans continue to offer attractive and valuable benefits, we took intentional actions as part of our 2024 bid strategy to address product sustainability, and as such, we experience greater than expected attrition in certain markets. As a result, we expect our Medicare Advantage membership to be roughly flat in 2024 on an organic basis, but earnings to improve. Importantly, cost trends in our Medicare Advantage business continue to develop as we expected, and we are confident that the assumptions underlying our bids for 2024 are appropriate. With respect to STARS, we have now fully implemented My Health Advocate, our comprehensive, personalized customer service model for Medicare. This has improved experiences for our members, helping them to easily navigate the healthcare system and their plan benefits. Early proof points reflect an improvement in first call resolution, a key indicator of future quality performance for our Medicare Advantage plans. We are confident that we have a solid foundation in our health benefits business from which we will grow carillon for the long term with many of the building blocks in place to accelerate our enterprise flywheel for growth. We are positioned to deliver another year of strong earnings growth in line with our long-term target in 2024 while continuing to invest in our future. We expect adjusted diluted earnings per share to be greater than $37.10 this year, reflecting growth of at least 12% over 2023. Finally, Advancing health equity is foundational to our efforts to improve the health and lives of the individuals and communities we are privileged to serve. Our industry-leading approach received renewed recognition when the National Committee for Quality Assurance awarded its newly established Health Equity Accreditation Plus to 20 of Elevance Health's affiliated Medicaid health plans, covering over 90% of our Medicaid members and making us the only national plan to have received this distinction to date. We also saw excellent progress on our ambitious goal to improve maternal health equity by reducing the disparity in preterm birth rates between Black and non-Black communities, improving the disparity gap by 5.2% relative to our 2022 baseline. In closing, I want to express my gratitude to our extraordinary team of over 100,000 associates. It is their collective passion and hard work that enables us to deliver on our commitments to all of our stakeholders. This past year alone, our associates logged over 225,000 volunteer hours in our communities, a record high for Elevance Health. This remarkable achievement reflects our deep dedication making a tangible, positive impact on the lives of the people we are privileged to serve and for the communities we call home. As we move forward, we will remain focused on serving our members as their lifetime trusted health partner. With that, I'd like to turn the call over to our new Chief Financial Officer, Mark Kay. Mark?