Elevance beat and raised, and the stock fell — because the beat came from a shrinking, repriced Medicare book and a $935M risk-adjustment charge, not from growth.

Good morning, welcome to Elevance Health second quarter 2026 earnings conference call. My name is Nathan Rich, Vice President of Investor Relations. With us on the earnings call are Gail Boudreaux, President and CEO; Mark Kaye, our CFO; Felicia Norwood, our Chief Health Benefits Officer; Morgan Kendrick, President of our Commercial Health Benefits business; and Aimée Dailey, President of our Government Health Benefits business. Gail will begin with a review of our second quarter results, the progress we have made against our strategic priorities, and targeted investments designed to strengthen the enterprise over time. Mark will then discuss our financial performance and outlook in greater detail. After our prepared remarks, the team will be available for a question-and-answer session. During the call, we will reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available on our website, elevancehealth.com. We will also be making 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 may 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.

Thank you, Gail, and good morning, everyone. Elevance Health reported second quarter adjusted diluted earnings per share of $7.45, which exceeded our outlook. The strength in our operating performance reflected favorable benefit expense performance in Medicare Advantage and individual ACA, disciplined expense management, and continued execution against our care management initiatives. We continue to make targeted investments in the capabilities that support our long-term growth. In the quarter, we also recorded a net below-the-line benefit of $0.80 per share, primarily related to valuation adjustments within net investment income. Importantly, we intend to use this non-recurring benefit to fund one-time investments in the second half of the year that advance the capabilities Gail discussed. These investments are focused on medical cost management, member engagement, provider connectivity, and Carelon's integrated capabilities. They are intended to strengthen our operating model and improve the consistency of our performance over time. Our second quarter operating results support raising our full-year 2026 adjusted diluted earnings per share guidance to at least $27 while preserving appropriate prudence in our outlook. Similarly, we now view at least $26 as the appropriate earnings baseline for modeling purposes, and we remain confident in returning to at least 12% adjusted EPS growth in 2027 off this higher earnings baseline. Now turning to our second quarter results. We ended the quarter with 44.9 million medical members. As expected, the sequential change was primarily driven by a known fee-based customer transition and attrition in our individual ACA and Medicaid businesses. Operating revenue totaled $49.8 billion, an increase of 0.8% year-over-year, driven by higher premium yields and product revenue, partly offset by lower health plan membership. In Medicaid, second quarter performance supports the full-year margin framework we laid out earlier this year. Cost drivers remain elevated and concentrated in the categories we have discussed previously, including behavioral health, specialty pharmacy, outpatient surgery, and emergency department utilization. Our outlook assumes this operating environment persists through the balance of the year. Rate updates received during the quarter were higher than anticipated, and membership and acuity remain broadly aligned with our expectations. We are also acting directly on the cost drivers we are seeing through clinical oversight, enhanced payment integrity, earlier interventions in behavioral health, and network management. Taken together, our full-year Medicaid operating margin outlook of approximately -1.75% remains appropriately prudent based on what we see today. We view 2026 as a trough for Medicaid margins with improvement over time as rates incorporate more recent experience and our care management actions mature. In Medicare Advantage, results were stronger than expected and were a contributor to our outperformance in the quarter. The intentional portfolio actions we took for 2026 are translating to improved performance. Disciplined plan design, a more focused product mix, favorable claims experience, and our capabilities all support our path to an operating margin of at least 2% this year. Our 2027 bid submissions placed an emphasis on plans where we can deliver sustainable value for seniors, particularly dual-eligible members, and appropriate returns for the enterprise. In our individual ACA business, favorability in the quarter reflected the more pronounced seasonality associated with our higher mix of bronze plans, which is contemplated in our outlook. We have now incorporated the final 2025 CMS risk adjustment results, which were favorable to our prior estimate. We are prudently reestablishing the majority of the prior year favorability in our current year risk adjustment accrual given current market dynamics, member mix, and claims experience that is still maturing. Member retention remains modestly ahead of our expectations, and we now expect to end 2026 with at least 1 million individual ACA members. Commercial group performance was in line with our expectations, with cost trend remaining elevated but consistent with the pricing approach we have taken. We have applied the same discipline to the 2027 selling season. Turning to Carelon, performance remains consistent with the outlook we provided at the beginning of the year. In CarelonRx, we are pleased with early progress in the 2027 selling season, reflecting demand for our integrated medical and pharmacy offering. In Carelon Services, near- term earnings reflect ongoing investment in the platform and the scaling of newer risk- based programs, which naturally take time to mature. The capabilities we are building are directly aligned with the operating priorities Gail discussed. Now moving to the balance sheet and operating cash flow. Days in claims payable were 45.4 days as of June 30th, an increase of 2.9 days year-over-year. Operating cash flow totaled $1.9 billion in the quarter, driven by our strong operating performance. Second quarter cash flow also benefited from the timing of the state Medicaid pass- through payment received in the quarter that was remitted in July. Additionally, we made an initial remittance to CMS of $342 million in the second quarter related to the matter discussed last quarter, and our estimate of the potential total financial exposure remains unchanged. As of July 9th, we completed all steps required by CMS and have subsequently received written confirmation from CMS that sanctions will not be imposed and the matter is closed. We are pleased to have reached this resolution and look forward to offering our Medicare Advantage plans to beneficiaries without interruption. Based on the strength of our operating performance and our outlook for the remainder of the year, we are raising our full-year operating cash flow to at least $6 billion. Turning now to our revised outlook. We view our updated 2026 adjusted diluted earnings per share guidance of at least $27 as prudent and appropriate, supported by current operating trends. Beyond our EPS outlook, the principal operating elements of our full-year framework remain unchanged, though we now expect our adjusted operating expense ratio to be in the upper half of our full-year guidance range. With respect to seasonality, we expect third quarter adjusted EPS to represent approximately 17% of our revised full-year guidance. Our confidence in returning to at least 12% adjusted EPS growth in 2027 of our ending 2026 earnings baseline is supported by multiple levers, including continued execution in health benefits, growth in Carelon, operating efficiency, and disciplined capital deployment. With that, operator, please open the line for questions.

Good morning, thank you for joining us. Elevance Health delivered second quarter results ahead of our outlook, reflecting favorable benefit expense performance, disciplined execution, and the actions we are taking to manage healthcare costs more effectively across the enterprise. Today, we are raising our 2026 adjusted diluted earnings per share guidance to at least $27, and we remain confident in our ability to return to at least 12% adjusted EPS growth in 2027, off our ending 2026 earnings baseline. Importantly, our confidence is not based on a single line of business or a single quarter. We are seeing progress across the breadth of our portfolio. Medicare Advantage reflects the deliberate actions we took to improve performance. Our Commercial and Individual ACA businesses are developing as anticipated, and Carelon and our AI-enabled capabilities are becoming more meaningful contributors. We remain focused on disciplined management of the Medicaid business as the operating environment remains dynamic. The broader enterprise is performing against the framework we laid out, and the targeted investments underway are designed to strengthen the durability of that performance. Healthcare should be easier to navigate and more responsive to the people it serves. Consumers expect more from the healthcare system, greater transparency, better connectivity, and more personalized support that meets their needs, and we share that expectation. At Elevance Health, trust is earned through every interaction. To be our members' lifetime trusted health partner, we must continue to make healthcare simpler, more personal, and more affordable. That's why we're accelerating investments in capabilities that directly support our strategy. These capabilities are tied to the operating levers that drive performance, earlier detection of medical cost trend, more precise clinical intervention, a simpler member experience, and better provider connectivity. Let me share a few examples. First, we are managing medical cost trend with greater speed and precision. In a dynamic environment, we're improving our ability to detect cost pressures earlier and respond quickly with targeted action plans across our clinical, network, payment integrity, and operating teams. In many cases, we've compressed months of work into days. These capabilities are already helping us identify emerging cost drivers more quickly and deploy more focused interventions across the enterprise. Second, we're improving how members access care and support. Through Sydney Health, Concierge Care, and proactive member engagement, we're using data, digital tools, and dedicated care teams to help members navigate benefits, schedule care, manage conditions, and close gaps in care. The result is a more proactive, seamless, and personal experience. Third, we're expanding Carelon's value-based solutions to address complex and fast- growing areas of healthcare spend. CareBridge extends Carelon's whole health model into the home, where better coordination can improve outcomes and lower costs. CareBridge can generate medical savings in the mid-teens for these members, and we're expanding it to new markets. Finally, we're reducing friction for care providers and members. With Health OS, we collaborate with providers earlier in the care journey to review care plans, reduce delays, and support better clinical decisions. In health systems where these workflows have been deployed, we've seen significant reduction in avoidable denials, documentation requests, and administrative friction. Together, these investments strengthen our ability to manage trend and improve the experience for members and care providers. They're directly tied to the areas that matter most to long-term performance, earlier trend detection, more precise intervention, and a scalable operating model. Turning now to our performance by line of business. Let me start with Medicaid, because I know it's an important area of focus for investors. The Medicaid environment continues to be dynamic, and we're managing it with discipline. Second quarter performance supports our full-year framework, reflecting stronger than expected rate updates, membership, and acuity that remain broadly aligned with our assumptions, and targeted actions against known areas of elevated trend. Based on what we see today, our Medicaid operating margin outlook remains appropriately prudent and unchanged from our prior guidance. Our outlook reflects a balanced view of the second half, an elevated trend environment, improving rate alignment, acuity that remains broadly consistent with our expectations, and the growing impact of the actions we are taking to manage healthcare costs. We continue to see 2026 as the trough year for our Medicaid margin, with improvement over time supported by better rate alignment and the maturation of our care management actions. Medicaid remains an important part of our portfolio, and we are managing it with clear strategic and financial discipline. We regularly assess each market based on strategic fit, operational requirements, and the ability to generate an appropriate return on capital. We recently reached a mutual agreement with the District of Columbia to exit the D.C. Medicaid market. As we continue our assessment, we expect to exit additional Medicaid markets over the next 12-18 months where we do not see a path to sustainable performance. They do not change our commitment to serving Medicaid members in markets where we can deliver value for states, members, and shareholders. In Medicare Advantage, we are seeing clear evidence that the deliberate actions we took to reposition the portfolio are translating into stronger performance. Disciplined plan design, a more focused mix of D-SNP and HMO products, favorable claims experience, and the growing impact of our care management programs support our path to at least a 2% operating margin this year. Our 2027 bids were developed with the same discipline, reflecting a prudent view of cost trend, continued focus on margin improvement, and stability in the benefits that members value most. We will continue to manage this business with focus on delivering long-term value for seniors and sustainable performance for the enterprise. In the individual ACA business, performance is developing broadly consistent with how we priced and planned the year. The composition of the risk pool remains broadly aligned with our assumptions. As expected, the higher mix of bronze plans creates more pronounced seasonality, we are not extrapolating early year favorability. As we prepare for 2027, our focus remains on offering value for consumers while improving the long-term financial sustainability of this business. In commercial, the market is focused on affordability and experience, that aligns directly with our differentiated offerings. Employers are looking for solutions that lower healthcare costs, simplify navigation, and better support their employees. Our integrated medical and pharmacy model is resonating, we're seeing strong demand for our patient advocacy, behavioral health, and digital engagement capabilities. Turning to Carelon, performance remains in line with our expectations, we're focused on scaling solutions that improve outcomes for members with complex and chronic needs. Behavioral health is a clear example. When members need additional support, our programs help identify those needs earlier, connect them to appropriate care, coordinate services more effectively. Through stronger member engagement and fewer adverse events, these programs have delivered 10% cost savings on average. As we expand these capabilities across new populations and external client relationships, Carelon is becoming an increasingly important durable driver of enterprise growth over time. In summary, our second quarter performance gives us increased confidence in the year. We're raising our earnings guidance, managing the business with discipline, scaling Carelon's value-based capabilities investing in the areas that matter most to our future financial performance. Before closing, I want to thank our associates. The progress we are making is a direct reflection of their focus, discipline, and commitment to the people we serve. With that, I'll turn the call over to Mark to review our second quarter financial results and outlook in greater detail.