Elevance Health Inc

Elevance Health (ELV) was another strong contributor during the quarter, gaining 32.1%. Profitability has begun to turn the corner following a challenging period marked by elevated medical cost inflation across its government-sponsored insurance plans. While medical utilization remains elevated, cost trends have stabilized into a more predictable pattern, and government reimbursement updates were more favorable than expected. We anticipate 2026 will mark the bottom for operating margins, with disciplined repricing and better alignment between premiums and medical expenses driving an earnings recovery in 2027. Our investment thesis remains grounded in the strength of ELV’s commercial health insurance franchise, which continues to perform well and provides a durable foundation for the company’s long-term earnings power.

Elevance Health Inc. (ELV) is the second largest health insurer and one of the largest commercial insurers in the United States. Shares rose during the quarter after the company reported quarterly earnings that beat consensus estimates. It was further supported by news that the US agreed to increase 2027 payments for private Medicare Advantage plans above the initial proposal. The company is priced at a discount to the market, driven by skepticism surrounding margins and growth, despite being a superior business that grows above gross domestic product while returning most of its cash to shareholders.

We have owned Elevance for several years. Like UnitedHealth Group, their government sponsored plans including Medicaid, Medicare Advantage (MA), and the ACA Health Exchanges have faced margin pressure driven by the post-Covid hangover. Elevance is adjusting to this post-Covid environment, and we believe that its earnings should return to double-digit growth next year. Similar to UnitedHealth Group, 'Mr. Market' is beginning to recognize that Elevance’s fundamentals remain strong and its discounted shares are beginning to recover.

We have owned Elevance for several years. Like UnitedHealth Group, their government sponsored plans including Medicaid, Medicare Advantage (MA), and the ACA Health Exchanges have faced margin pressure driven by the post-Covid hangover. Elevance is adjusting to this post-Covid environment, and we believe that its earnings should return to double-digit growth next year. Similar to UnitedHealth Group, 'Mr. Market' is beginning to recognize that Elevance’s fundamentals remain strong and its discounted shares are beginning to recover.

We have owned Elevance for several years. Like UnitedHealth Group, their government sponsored plans including Medicaid, Medicare Advantage (MA), and the ACA Health Exchanges have faced margin pressure driven by the post-Covid hangover. Elevance is adjusting to this post-Covid environment, and we believe that its earnings should return to double-digit growth next year. Similar to UnitedHealth Group, 'Mr. Market' is beginning to recognize that Elevance’s fundamentals remain strong and its discounted shares are beginning to recover.

Elevance Health is one of the largest health insurers in the US. Despite facing pressures on margins due to rising medical costs and lower government reimbursement, we believe the long-term earnings power of the business is positive. The company has benefited from better-than-expected Medicare rate increases announced in early April, which will be helpful for the industry in closing the gap between pricing and cost trends. We are confident in Elevance's ability to navigate these challenges and maintain its strong market position.

We have owned Elevance for several years. Like UnitedHealth Group, their government sponsored plans including Medicaid, Medicare Advantage (MA), and the ACA Health Exchanges have faced margin pressure driven by the post-Covid hangover. Elevance is adjusting to this post-Covid environment, and we believe that its earnings should return to double-digit growth next year. Similar to UnitedHealth Group, 'Mr. Market' is beginning to recognize that Elevance’s fundamentals remain strong and its discounted shares are beginning to recover.

Elevance Health Inc. (ELV) is the second largest health insurer, and one of the largest commercial insurers in the United States. Similar to Humana, shares rose because investors see increasing evidence of a recovery in profitability. Despite the recent move, the company remains priced at a discount to the market despite being a compelling business that grows above GDP while returning most of its cash to shareholders.

Shares of Elevance Health, the health insurer and healthcare-services provider formerly known as Anthem, rallied during the quarter as margins expanded—after a protracted decline—due to declining medical costs, stronger pricing and increased utilization with higher premiums.

Elevance was a detractor for the quarter due to disappointing news regarding proposed 2027 reimbursement rates for Medicare Advantage, which are expected to fall short of keeping up with rising care costs. This situation raises concerns about the potential delay in earnings recovery and poses a threat if the 2027 rates indicate a trend of government efforts to reduce healthcare expenditure. Managed care companies like Elevance are seen as easy targets for such cuts, leading to our decision to sell.