Company: ELV
Filing Date: 2025-07-17
Form Type: 10-Q
Source: 0001156039-25-000114
Chunk: 94

Company: Elevance Health, Inc.
Filing Date: 2025-07-17
Form: 10-Q
Item: Item 2
Chunk 94
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 result of higher medical cost trend in our Medicaid and Affordable Care Act health plans. 

Cost of products sold reflects the cost of pharmaceuticals dispensed by CarelonRx for our unaffiliated pharmacy customers. Cost of products sold increased as a result of higher script utilization.

Operating expense increased primarily due to premium tax expenses, some of which were out of period. The increase was partially offset by disciplined cost management. 

Our operating expense ratio decreased primarily due to operating expense leverage associated with growth in operating revenue and ongoing cost management, partially offset by an increase in premium taxes and assessments. 

Other expense increased primarily due to higher interest expense related to our issuances of senior secured notes during the latter half of 2024. The increase also reflects higher amortization expense on the intangible assets recognized from the acquisitions we completed in the fourth quarter of 2024.

Our effective tax rate decreased primarily due to the impact of certain investment-related activities, partially offset by the non-recurrence of a favorable resolution of an uncertain tax position recognized during the six months ended June 30, 2024.

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Our shareholders’ net income as a percentage of total revenues decreased in the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 as a result of all factors discussed above.

Reportable Segments Results of Operations

Our results of operations discussed throughout this MD&A are determined in accordance with U.S. generally accepted accounting principles (“GAAP”). We also calculate operating gain and operating margin to further aid investors in understanding and analyzing our core operating results and comparing them among periods. We define operating revenue as premium income, product revenue and service fees. Operating gain is calculated as total operating revenue less benefit expense, cost of products sold and operating expense. It does not include net investment income, net losses on financial instruments, loss/gain on sale of business, interest expense, amortization of other intangible assets or income taxes, as these items are managed in our corporate shared service environment and are not the responsibility of operating segment management. Operating margin is calculated as operating gain divided by operating revenue. We use these measures as a basis for evaluating segment performance, allocating resources, forecasting future operating periods and setting incentive compensation targets. This information is not intended to be considered in isolation or as a substitute for income before income tax expense, shareholders’ net income or EPS prepared in accordance with GAAP, and may not be comparable to similarly titled measures reported by other companies. For a reconciliation of reportable segments’ operating