Q4 2024 Molina Healthcare Inc Earnings Call

February 6, 2025

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Speaker Change: Now I'll turn the conference over to your host today Jeffrey Guyer. Please go ahead.

Good morning, and welcome to Molina healthcare fourth quarter and full year 2024 earnings call. Joining me today are <unk>, President and CEO, Joe Dobrowski, and our CFO Mark <unk>.

Speaker Change: A press release announcing our fourth quarter and full year 2024 earnings was distributed after the market closed yesterday and is available on our industrial relations website.

Good day and welcome to the Molina healthcare fourth quarter 2024 earnings Conference call.

Speaker Change: Shortly after the conclusion of this call a replay will be available for 30 days.

All participants will be in listen only mode.

Should you need assistance. Please signal conference specialist by pressing the Starkey followed by zero.

Speaker Change: The numbers to access the replay are in the earnings release.

Speaker Change: For those of you who listen to the rebroadcast of this presentation. We remind you that all of the remarks are made as of today Thursday February six 2025 and have not been updated subsequent to the initial earnings call.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.

Your question. Please press Star then two please note this event is being recorded.

Speaker Change: Now I'll turn the conference over to your host today Jeffrey Guyer. Please go ahead.

Speaker Change: On this call we will refer to certain non-GAAP measures.

Speaker Change: A reconciliation of these measures with the most directly comparable GAAP measures can be found in the fourth quarter and full year 2024 earnings release.

Jeffrey Guyer: Good morning, and welcome to Molina healthcare fourth quarter and full year 2024 earnings call. Joining me today are <unk>, President and CEO, Joe Dobrowski, and our CFO Marc Sky.

Speaker Change: During the call, we will be making certain forward looking statements, including but not limited to statements regarding our 2025 guidance the estimated amount of our embedded earnings power and future earnings realization.

Jeffrey Guyer: A press release announcing our fourth quarter and full year 2024 earnings was distributed after the market closed yesterday and is available on our industrial relations website.

Speaker Change: Expected Medicaid rate adjustments and update our projected NCR.

Jeffrey Guyer: Shortly after the conclusion of this call a replay will be available for 30 days.

Speaker Change: Our recent RFP awards, our acquisition and M&A activity revenue growth related to Rfps, and M&A activity and our long term growth strategy.

Jeffrey Guyer: The numbers to access the replay are in the earnings release.

Jeffrey Guyer: For those of you who listen to the rebroadcast of this presentation. We remind you that all of the remarks are made as of today Thursday February six 2025.

Speaker Change: Listeners are cautioned that all of our forward looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from our current expectations.

Jeffrey Guyer: Not been updated subsequent to the initial earnings call.

Jeffrey Guyer: On this call we will refer to certain non-GAAP measures.

Speaker Change: We advise listeners to review the risk factors discussed in our Form 10-K annual report filed with the SEC as well as our risk factors listed in our Form 10-Q, and form 8-K filings with the SEC.

Jeffrey Guyer: A reconciliation of these measures with the most directly comparable GAAP measures can be found in the fourth quarter and full year 2024 earnings release.

Jeffrey Guyer: Yeah.

Jeffrey Guyer: During the call, we will be making certain forward looking statements, including but not limited to statements regarding our 2025 guidance the estimated amount of our embedded earnings power and future earnings realization.

Speaker Change: After the completion of our prepared remarks, we will open the call to take your questions.

I will now turn the call over to our Chief Executive Officer Joseph Gretzky.

Speaker Change: Joe.

Joseph Gretzky: Thank you, Jeff and good morning.

Jeffrey Guyer: Expected Medicaid rate adjustments and update our projected MCR.

Speaker Change: Today I will discuss several topics.

Speaker Change: Our reported financial results for the fourth quarter and full year 2024.

Jeffrey Guyer: Our recent RFP award, our acquisition and M&A activity revenue growth related to Rfps, and M&A activity and our long term growth strategy.

Speaker Change: Our growth initiatives and related increases to embedded earnings.

Speaker Change: And our full year 2025 premium revenue and earnings guidance.

Jeffrey Guyer: Listeners are cautioned that all of our forward looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from our current expectations.

Speaker Change: Let me start with our fourth quarter performance.

Speaker Change: Last night, we reported adjusted earnings per share of $5 five.

Speaker Change: On $10 billion of premium revenue.

Jeffrey Guyer: We advise listeners to review the risk factors discussed in our Form 10-K annual report filed with the SEC as well as the risk factors listed in our Form 10-Q, and form 8-K filings with the SEC.

Speaker Change: Our fourth quarter results and performance metrics did not meet our expectations, but we did demonstrate our continued ability to maintain operating discipline, while navigating industry wide headwinds.

Jeffrey Guyer: After the completion of our prepared remarks, we will open the call to take your questions.

Speaker Change: Our 92% consolidated MCR with higher than expected due to medical cost pressure in our Medicaid and Medicare segments.

Jeffrey Guyer: I will now turn the call over to our Chief Executive Officer Joseph Gretzky.

Jeffrey Guyer: No.

Jeffrey Guyer: Okay.

Jeffrey Guyer: Thank you, Jeff and good morning today, I will discuss several topics our.

Speaker Change: In Medicaid our fourth quarter 2024 guidance assumed a moderate increase in trend off an elevated cost baseline from the third quarter.

Jeffrey Guyer: Our reported financial results for the fourth quarter and full year 2024.

Jeffrey Guyer: Our growth initiatives and related increases to embedded earnings.

Speaker Change: However, the medical cost pressure experienced in the fourth quarter with higher than anticipated with risk corridors, providing no material benefit.

Jeffrey Guyer: And our full year 2025 premium revenue and earnings guidance.

Jeffrey Guyer: Let me start with our fourth quarter performance.

Jeffrey Guyer: Last night, we reported adjusted earnings per share of $5 five.

Speaker Change: Medicare continued to experience higher medical costs, consistent with prior quarters and marketplace performed very well despite the late in year medical cost seasonality, we typically experience.

Jeffrey Guyer: On $10 billion of premium revenue.

Jeffrey Guyer: Our fourth quarter results and performance metrics did not meet our expectations, but we did demonstrate our continued ability to maintain operating discipline, while navigating industry wide headwinds.

Speaker Change: For the full year 2024, we reported adjusted earnings per share of $22 65.

Jeffrey Guyer: Yeah.

Speaker Change: Representing eight 5% year over year growth.

Jeffrey Guyer: Our 92% consolidated MCR with higher than expected due to medical cost pressure in our Medicaid and Medicare segments.

Speaker Change: Our full year premium revenue of $38 6 billion.

Speaker Change: Represents 19% year over year growth in our pre tax margin of four 3% with well within our long term target range.

Jeffrey Guyer: In Medicaid our fourth quarter 2024 guidance assumed a moderate increase in trend off an elevated cost baseline from the third quarter.

Speaker Change: While our fourth quarter performance resulted in our full year results falling below our guidance we.

Jeffrey Guyer: However, the medical cost pressure experienced in the fourth quarter with higher than anticipated with risk corridor risk providing no material benefit.

Speaker Change: We have a solid earnings jump off point heading into 2025 and continue to be very bullish on the growth opportunities within all of our businesses as evidenced by our increased embedded earnings.

Medicare continued to experience higher medical costs, consistent with prior quarters and marketplace performed very well despite the late in year medical cost seasonality, we typically experience.

Speaker Change: And Medicaid our flagship business, representing nearly 80% of revenue we reported a 93% MCR for the full year or 89, 8% when adjusting for the impact of higher MCR is on new stores and the prior year.

Jeffrey Guyer: For the full year 2024, we reported adjusted earnings per share of $22 65.

Jeffrey Guyer: Representing eight 5% year over year growth.

Speaker Change: Before in your retro items.

Our full year premium revenue of $38 6 billion.

Speaker Change: With respect to observe medical cost trend in 2024. It was certainly a tale of two halves.

Jeffrey Guyer: Represents 19% year over year growth in our pre tax margin of four 3% with well within our long term target range.

Speaker Change: In the first half of the year medical cost trend is slightly higher than our initial expectations, primarily due to the acuity shift caused by re determinations.

Jeffrey Guyer: While our fourth quarter performance resulted in our full year results falling below our guidance we.

Speaker Change: However, <unk> remained lower in the first half of the year because the acuity shift impact was moderated by our medical cost management risk corridor protection and rate increases.

Jeffrey Guyer: We have a solid earnings jump off point heading into 2025 and continue to be very bullish on the growth opportunities within all of our businesses as evidenced by our increased embedded earnings.

Speaker Change: In the second half of the year, we experienced higher than expected utilization among the continuing population.

Jeffrey Guyer: In Medicaid our flagship business, representing nearly 80% of revenue we reported a 93% MCR for the full year or 89, 8% when adjusting for the impact of higher MCR is on new stores and the prior year.

Speaker Change: The second half rate increases and risk corridors were not sufficient to completely offset the higher medical cost pressure that continued into the fourth quarter.

Speaker Change: In Medicare the full year MCR was 89, 1% the business performed as well as we could have expected given some of the dynamics the industry has experienced.

Jeffrey Guyer: Before in your retro lineup.

Jeffrey Guyer: With respect to observed medical cost trend in 2024, it was certainly a tale of two halves.

Speaker Change: And marketplace. The MCR was 75, 4% for the full year and significantly outperformed our long term target range.

Jeffrey Guyer: In the first half of the year medical cost trend is slightly higher than our initial expectations, primarily due to the acuity shift caused by redetermination.

This was the second consecutive year marketplace outperformed its long term target margins.

Jeffrey Guyer: However, <unk> remained lower in the first half of the year because the acuity shift impact was moderated by our medical cost management risk corridor protection and rate increases.

Speaker Change: This outperformance allowed us to reinvest excess margin into 2025 pricing to drive higher growth and sustain mid single digit pre tax margins.

Jeffrey Guyer: In the second half of the year, we experienced higher than expected utilization among the continuing population.

Speaker Change: Our G&A ratio performance has been excellent at six 7% for the full year.

Jeffrey Guyer: Second half rate increases and risk corridors were not sufficient to completely offset the higher medical cost pressure that continued into the fourth quarter.

Speaker Change: We continue to have the discipline to harvest fixed cost leverage manner.

Speaker Change: Manage our internal resources effectively increased productivity and negotiate attractive vendor contracts.

Jeffrey Guyer: And Medicare the full year MCR was 89, 1% the business performed as well as we could have expected given some of the dynamics of the industry has experienced.

Speaker Change: Turning now to our growth initiatives.

Speaker Change: 2024 was an extraordinary year for securing future growth on top of the reported 19% premium revenue growth.

Jeffrey Guyer: And marketplace. The MCR was 75, 4% for the full year and significantly outperformed our long term target range.

Speaker Change: Starting with recent acquisitions on.

Speaker Change: On February one we closed our acquisition of Connecticut from emblem health and this year expected $1 2 billion of revenue mostly in marketplace.

Jeffrey Guyer: This was the second consecutive year marketplace outperformed its long term target margins.

Jeffrey Guyer: This outperformance allowed us to reinvest excess margin into 2025 pricing to drive higher growth and sustain mid single digit pre tax margins.

Speaker Change: With respect to new contract wins and.

Speaker Change: In Georgia, the state announced its intent to award a Medicaid managed care services contract.

Speaker Change: This was a significant win with an estimated $2 billion in annual premium revenue based on expected market share.

Jeffrey Guyer: Our G&A ratio performance has been excellent at six 7% for the full year.

Speaker Change: We also had significant new contract wins, and our dual eligible and integrated product businesses.

Jeffrey Guyer: We continue to have the discipline to harvest as fixed cost leverage manage our internal resources effectively increased productivity and negotiate attractive vendor contracts.

Speaker Change: We successfully procured duals contracts that will expand our footprint in Ohio, Michigan, Massachusetts and Idaho.

Jeffrey Guyer: Turning now to our growth initiatives too.

Jeffrey Guyer: 2024 was an extraordinary year after securing future growth on top of the reported 19% premium revenue growth.

Speaker Change: The incremental revenue from these new contracts is over $3 billion.

Speaker Change: An increase from the prior estimate of $1 8 billion.

Speaker Change: We had shared at our November Investor Day.

Jeffrey Guyer: Starting with recent acquisitions.

Jeffrey Guyer: On February one we closed our acquisition of Connecticut from emblem health and this year expect $1 2 billion of revenue mostly in marketplace.

Speaker Change: 2024 was also a year in which we successfully defended rfps in key states.

Speaker Change: We retained traditional Medicaid contracts, and our Michigan, Florida, and Wisconsin businesses.

Jeffrey Guyer: With.

Jeffrey Guyer: Respect to new contract wins in Georgia, The state announced its intent to award of a Medicaid managed care services contract.

Speaker Change: These contracts represent over $2 billion.

Speaker Change: Of renewed premium revenues.

Jeffrey Guyer: This was a significant win with an estimated $2 billion in annual premium revenue based unexpected market share.

Speaker Change: While we are disappointed in the Virginia contract loss. This award is under protest and the current contract will extend well into 2025.

Jeffrey Guyer: We also had significant new contract wins, and our dual eligible and integrated product businesses.

Speaker Change: We are very pleased with the execution of our 2020 for growth initiatives and in that context. We further note when all of the aforementioned contracts or enforce.

Jeffrey Guyer: We successfully procured duals contracts that will expand our footprint in Ohio, Michigan, Massachusetts and Idaho.

Speaker Change: We are well on our way to meeting our target of $46 billion of premium revenue in 2026, and at least $52 billion in 2027.

Jeffrey Guyer: The incremental revenue from these new contracts is over $3 billion.

Jeffrey Guyer: An increase from the prior estimate of $1 $8 billion, we had shared at our November Investor Day.

Speaker Change: With our current footprint contributing its average annual growth and now fully considering all of our recent growth successes.

Jeffrey Guyer: 2024 was also a year in which we successfully defended rfps in key states.

Speaker Change: To achieve these growth milestones is very clear.

Jeffrey Guyer: We retained traditional Medicaid contracts, and our Michigan, Florida, and Wisconsin businesses.

Speaker Change: And most importantly, all of this recent activity has allowed us to increase our embedded earnings to $7 75 for 2026 and beyond after harvesting $1 50 of embedded earnings and our 2025 guidance.

Jeffrey Guyer: These contracts represent over $2 billion.

Jeffrey Guyer: A renewed premium revenue.

Jeffrey Guyer: While we are disappointed in the Virginia contract loss. This award is under protest and the current contract will extend well into 2025.

Speaker Change: Having embedded earnings of at least 20% to 25% of run rate EPS is an attractive benchmark to support future EPS growth.

Jeffrey Guyer: We are very pleased with the execution of our 2020 for growth initiatives and in that context. We further note when all of the aforementioned contracts or enforce.

Speaker Change: Now at approximately 30%, we are very well positioned to meet our long term targets.

Jeffrey Guyer: We are well on our way to meeting our target of $46 billion with premium revenue in 2026 and at least $52 billion in 2027.

Speaker Change: In short we are solidly on track to achieve the growth outlook, we projected at our recent Investor day.

Jeffrey Guyer: With our current footprint contributing its average annual growth and now fully considering all of our recent growth successes the path to achieve these growth milestones is very clear.

Speaker Change: Turning now to our 2025 guidance.

Speaker Change: We project 2025 premium revenue of approximately $42 billion.

Speaker Change: And adjusted earnings per share of at least $24 50.

Speaker Change: Which is approximately 8% year over year growth.

Jeffrey Guyer: And most importantly, all of this recent activity has allowed us to increase our embedded earnings to $7.75 for 2026 and beyond after harvesting $1.50 of embedded earnings and our 2025 guidance.

Speaker Change: Highlighted by an 88, 7% consolidated MCR and a four 1% pretax margin.

Speaker Change: Similar to the situation we encountered in 2023. This $24 50, EPS guidance is burdened with one dollar of contract implementation costs related to yet another significant future revenue growth cycle, we secured this year.

Jeffrey Guyer: Having embedded earnings of at least 20% to 25% of run rate EPS is an attractive benchmark to support future EPS growth.

Jeffrey Guyer: Now at approximately 30%, we are very well positioned to meet our long term targets.

Speaker Change: These are complex programs with a new contract in Georgia, and fully integrated duals product launches and at least four states. These.

Jeffrey Guyer: In short we are solidly on track to achieve the growth outlook, we projected at our recent Investor day.

Speaker Change: These are not speculative investments, but investments that have near term and certain realizable value.

Jeffrey Guyer: Turning now to our 2025 guidance.

Speaker Change: Mark will take you through the detailed earnings guidance build in a few minutes, but let me offer some high level segment commentary.

Jeffrey Guyer: We project 2025 premium revenue of approximately 42 billion and adjusted earnings per share of at least $24 50.

Speaker Change: First in Medicaid Medicaid is projected to be nearly back to performing within our target ranges with an 89, 9% MCR.

Jeffrey Guyer: Which is approximately 8% year over year growth.

Jeffrey Guyer: Highlighted by an 88, 7% consolidated MCR and a four 1% pretax margin.

Speaker Change: For 2025, we project a continuing elevated medical cost trend during the year.

Jeffrey Guyer: Similar to the situation we encountered in 2023. This $24 50, EPS guidance is burdened with one dollar of contract implementation costs related to yet another significant future revenue growth cycle, we secured this year.

Speaker Change: Our 2025 Medicaid rates most of which are known are expected to be sufficient to capture this elevated trend.

Speaker Change: Whichever 2020 for NCR you observe.

Jeffrey Guyer: These are complex programs with the new contract in Georgia, and fully integrated duals product launches and at least four states.

Speaker Change: Q4 dollars 92 second half at 89 nine full year at 89, eight for our 2025 guidance at $89 nine our flagship business is hovering around the 90% Mark nearly a 100 basis points off our long term MCR target.

Jeffrey Guyer: These are not speculative investments, but investments that have near term and certain realizable value.

Jeffrey Guyer: Yeah.

Jeffrey Guyer: Mark will take you through the detailed earnings guidance build in a few minutes, but let me offer some high level segment commentary.

Speaker Change: The business is expected to produce an excellent pre tax margin of four 3%.

Jeffrey Guyer: First in Medicaid Medicaid is projected to be nearly back to performing within our target ranges with an 89, 9% MCR.

Speaker Change: When the broader market receives the rates it needs to bring itself back into balance we expect to be operating well within our long term ranges and we believe that will be in the very near future.

Jeffrey Guyer: For 2025, we project a continuing elevated medical cost trend during the year.

Speaker Change: Next in Medicare we.

Jeffrey Guyer: Our 2025 Medicaid rates most of which are known are expected to be sufficient to capture this elevated Trent.

Speaker Change: We would characterize 2025 as a year of transition and some early growing pains as the business transforms to serve the increasingly integrated and high growth dual eligible population.

Jeffrey Guyer: Whichever 2020 for MTR you observed.

Jeffrey Guyer: Q4 at 92 second half at $89 nine full year at 89, eight or our 2025 guidance at 89.9, our flagship business is hovering around the 90% Mark nearly a 100 basis points off our long term MCR target.

Speaker Change: We expect our 2025, Medicare MCR to be slightly above our target range for three reasons first utilization pressure from the second half of 2024 is expected to continue into 2025.

Second recent rates have not kept pace with trend.

Speaker Change: And finally, while our long term outlook for a brighter earnings accretion is unchanged, we expect that it will be slightly below breakeven in 2025.

Jeffrey Guyer: The business is expected to produce an excellent pre tax margin of four 3%.

Jeffrey Guyer: When the broader market receives the rates it needs to bring itself back into balance we expect to be operating well within our long term ranges and we believe that will be in the very near future.

Speaker Change: Finally in marketplace, we are projecting to grow premiums at 60% in total half of which is organic.

Speaker Change: Two consecutive years of exceeding target margins have allowed us to reinvest several hundred basis points of excess margin into pricing in order to grow.

Jeffrey Guyer: Next in Medicare we.

Jeffrey Guyer: We would characterize 2025 as a year of transition and some early growing pains as the business transforms to serve the increasingly integrated and high growth dual eligible population.

Speaker Change: Our product is competitively positioned for this year and we are very pleased with our early enrollment results.

Jeffrey Guyer: We expect our 2025, Medicare MCR to be slightly above our target range for three reasons first utilization pressure from the second half of 2024 is expected to continue into 2025.

Speaker Change: We expect the business to produce an MCR in the middle of our target range and a solid pre tax margin of 6% in 2025, while continuing to sustain mid single digit pre tax margins over the long term.

Jeffrey Guyer: Second recent rates have not kept pace with trend.

Jeffrey Guyer: And finally, while our long term outlook for our Brights earnings accretion is unchanged, we expect that it will be slightly below breakeven in 2025.

Speaker Change: Our businesses are positioned to produce an earnings per share outlook of $25 50 in 2025.

Speaker Change: This is a meaningful measure of underlying performance and represents 13% growth on full year 2024 results.

Jeffrey Guyer: Finally in marketplace, we are projecting to grow premiums at 60% in total half of which is organic.

Speaker Change: When we include the new contract implementation costs of $1.

Jeffrey Guyer: Two consecutive years of exceeding target margins have allowed us to reinvest several hundred basis points of excess margin.

Speaker Change: Our adjusted EPS guidance for 2025 is at least $24 50 per share.

This is a solid foundation off of which to grow and realize the embedded earnings power of the opportunities we have already secured.

Jeffrey Guyer: Pricing in order to grow.

Jeffrey Guyer: Our product is competitively positioned for this year and we are very pleased with our early enrollment results.

Speaker Change: Turning now to the political and legislative landscape.

Jeffrey Guyer: We expect the business to produce an MCR in the middle of our target range and a solid pre tax margin of 6% in 2025, while continuing to sustain mid single digit pre tax margins over the long term.

Speaker Change: The facts are the Republicans control Congress with a very narrow majority and have a white house too.

Speaker Change: <unk> budget reconciliation bills are likely to be passed in 2025.

Speaker Change: And political parties in the state legislators and the Governor's offices did not change materially in the last cycle and the states will weigh in heavily on any policy changes.

Jeffrey Guyer: Yeah.

Jeffrey Guyer: Our businesses are positioned to produce an earnings per share outlook of $25 50 in 2025.

Speaker Change: The question and it is a question that has been posed and remains as weather cuts to Medicaid funding will be part of these legislative packages.

Jeffrey Guyer: This is a meaningful measure of underlying performance and represents 13% growth on full year 2024 result.

Jeffrey Guyer: When we include the new contract implementation costs of $1.

Speaker Change: We continue to believe that any changes to the Medicaid program as we know it today will be marginal.

Jeffrey Guyer: Our adjusted EPS guidance for 2025 is at least $24 50 per share.

Speaker Change: Neither side of the aisle wants to see an increase in the number of uninsured a.

Jeffrey Guyer: This is a solid foundation off of which to grow and realize the embedded earnings power of the opportunities we have already secured.

Speaker Change: A reduction in benefits for those relying on government assistance or.

Speaker Change: Or the related impact to providers.

Speaker Change: While our fourth quarter results fell short of our expectations I am pleased with our team's ability to manage through the many industry wide headwinds and all of 2024.

Jeffrey Guyer: Turning now to the political and legislative landscape.

Jeffrey Guyer: The facts are the Republicans control Congress with a very narrow majority and have the whitehouse.

Jeffrey Guyer: <unk> budget reconciliation belts are likely to be passed in 2025 and political parties in the state legislators and the Governor's offices did not change materially in the last cycle and the states will weigh in heavily on any policy changes.

Speaker Change: Our revenue growth has exceeded our long term targets, we have produced a consolidated pre tax margin within our long term target range.

Speaker Change: And embedded earnings has reached a new high.

Speaker Change: The 2025 earnings profile with solid and perhaps industry, leading and managed Medicaid.

Jeffrey Guyer: The question and it is a question that has been posed and remains as weather cuts to Medicaid funding will be part of these legislative packages.

Speaker Change: All of this allows us to remain very confident in our ability to achieve the long term targets that we shared with you at our November Investor Day.

Jeffrey Guyer: We continue to believe that any changes to the Medicaid program as we know it today will be marginal.

Speaker Change: Finally, I want to thank our 18500 dedicated associates, who work tirelessly on behalf of our members and our stakeholders.

Neither side of the aisle wants to see an increase in the number of uninsured a reduction in benefits for those relying on government assistance or the related impact to providers.

Speaker Change: Their day to day efforts, particularly in the face of difficulty danger and natural disasters.

Jeffrey Guyer: While our fourth quarter results fell short of our expectations I am pleased with our team's ability to manage through the many industry wide headwinds in all of 2024.

Speaker Change: In a word heroic.

Mark: With that I will turn the call over to Mark for some additional color on the financials.

Speaker Change: Mark.

Jeffrey Guyer: Our revenue growth has exceeded our long term targets. We have produced a consolidated pre tax margin within our long term target range and embedded earnings has reached a new high.

Mark: Thanks, Joe and good morning, everyone.

Mark: Today I'll discuss some additional details on our fourth quarter and full year performance the balance sheet and our 2025 guidance.

Mark: Beginning with our fourth quarter and full year 2024 results.

Jeffrey Guyer: The 2025 earnings profile is solid and perhaps industry, leading and managed Medicaid.

Mark: For the quarter, we reported approximately $10 5 billion in total revenue and $10 billion of premium revenue with adjusted EPS of $5 <unk>.

Jeffrey Guyer: All of this allows us to remain very confident in our ability to achieve the long term targets that we shared with you at our November Investor Day.

Mark: On a consolidated basis, our fourth quarter MCR was <unk> 92, and our full year MCR was 89, 1%, reflecting higher than expected medical costs in the second half of the year in both Medicaid and Medicare.

Jeffrey Guyer: Finally, I want to thank our 18500 dedicated associates, who work tirelessly on behalf of our members and our stakeholders.

Jeffrey Guyer: Their day to day efforts, particularly in the face of difficulty danger and natural disasters are in a word heroic.

Mark: Yeah.

Mark: In Medicaid our fourth quarter MCR was 92.

Mark: Consistent with the third quarter, the Medicaid MCR reflected higher utilization, particularly for <unk> pharmacy, and behavioral health services.

Jeffrey Guyer: With that I will turn the call over to Mark for some additional color on the financials Mark.

Mark: Thanks, Joe and good morning, everyone.

Today, I will discuss some additional details on our fourth quarter and full year performance the balance sheet and our 2025 guidance.

Mark: We previously expected 50 basis points a trend in the first quarter of what we considered to be an inflated baseline in the third quarter.

Mark: Beginning with our fourth quarter and full year 2024 results.

Mark: However, fourth quarter net trend was approximately one 2% and we saw no material benefit from risk corridor.

Mark: For the quarter, we reported approximately $10 5 billion in total revenue and 10 billion of premium revenue.

Mark: For the full year the reported Medicaid MCR was 93.

Mark: With adjusted EPS of $5 five sets.

Mark: Which restates the $89 eight when adjusting for the prior year, California retro item.

Mark: And the impact of new store businesses.

Mark: Given the unprecedented challenges of recent trends in the year.

Mark: We demonstrated strong operating performance with that MCR, just 80 basis points above our long term range.

Mark: In Medicaid our fourth quarter MCR was 92.

Mark: Consistent with the third quarter, the Medicaid MCR reflected higher utilization, particularly for L. T S S pharmacy and behavioral health services.

Mark: In Medicare our fourth quarter MCR was $93 eight.

Mark: And our full year MCR.

Mark: Was $89 one.

Mark: Both above our long term range.

Mark: We previously expected 50 basis points a trend in the fourth quarter of what we considered to be an inflated baseline in the third quarter.

Mark: Higher medical costs in the quarter reflect a continued higher utilization of L. TSS in pharmacy, as well as higher outpatient utilization within our D. SNP population.

Mark: However, fourth quarter net trend was approximately one 2% and we saw no material benefit from risk corridor.

Mark: The fourth quarter also reflects the seasonal impact of CMS annual facility fee schedule increases and.

Mark: For the full year the reported Medicaid MCR was 93.

Mark: And the revenue recognition of certain risk adjustment items.

Mark: Which restates the $89 eight when adjusting for the prior year, California retro item.

Mark: As Joe mentioned, we remain confident in our 2025 bids and believe our pricing strategy with conservative enough to protect against higher medical cost trend that occurred in the second half of 2024 and is expected to continue in 2025.

Mark: And the impact of new store businesses.

Mark: Given the unprecedented challenges of recent trends in the year.

Mark: We demonstrated strong operating performance with that MCR, just 80 basis points above our long term range.

Mark: In marketplace, our fourth quarter MCR was 83 three.

Mark: In Medicare our fourth quarter MCR was $93 eight.

Mark: Reflecting normal late in the year seasonality.

Mark: And our full year MCR.

Mark: Was $89 one.

Mark: Our full year marketplace, MCR was 75, four and well below our long term target range for the second consecutive year.

Mark: Both above our long term range.

Mark: Higher medical costs in the quarter reflect a continued higher utilization of L. TSS in pharmacy, as well as higher outpatient utilization within our D. SNP population.

Mark: This allowed us to reinvest excess margin into pricing to achieve significant growth for 2025.

Mark: The fourth quarter also reflects the seasonal impact of CMS annual facility fee schedule increases and.

Mark: Our adjusted G&A ratio for the quarter was $6 three.

Mark: And our full year adjusted G&A ratio was six seven.

Mark: And the revenue recognition of certain risk adjustment items.

Mark: This was the second consecutive quarter, we benefited from a renegotiated vendor contracts and several one time items.

Mark: We are very pleased with a disciplined cost management productivity and leverage we continue to demonstrate.

Mark: And is expected to continue in 2025.

Mark: Turning to the balance sheet.

Mark: Our capital Foundation remains strong.

Mark: In marketplace, our fourth quarter MCR was 83 three <unk>.

Mark: In the quarter, we harvested approximately $327 million of subsidiary dividends.

Mark: Reflecting normal late in the year seasonality.

Mark: Our full year marketplace, MCR was $75 four and well below our long term target range for the second consecutive year.

Mark: Our parent company cash balance was approximately $445 million at the end of the quarter.

Mark: A portion of which was used to fund the Connecticut acquisition, which just closed earlier this week.

Mark: This allowed us to reinvest excess margin into pricing to achieve significant growth for 2025.

Mark: During the.

Mark: <unk>, we repurchased one 7 million shares at a total cost of $500 million.

Mark: Our adjusted G&A ratio for the quarter was $6 three.

Mark: In November we closed a bond offering of $750 million of senior notes due in 2033.

Mark: And our full year adjusted G&A ratio was six seven.

Mark: This was the second consecutive quarter, we benefited from a renegotiated vendor contracts and several one time items.

Mark: Debt at the end of the quarter was one seven times trailing 12 months EBITDA.

Mark: We are very pleased with a disciplined cost management productivity and leverage we continue to demonstrate.

Mark: With our debt to cap ratio at about 41%.

Mark: We continue to have ample cash and access to capital to fuel our growth initiatives.

Mark: Turning to the balance sheet.

Mark: Our capital Foundation remains strong.

Mark: Days and claims payable at the end of the quarter was 48.

Mark: In the quarter, we harvested approximately $327 million of subsidiary dividends.

Mark: <unk> with the third quarter and well within our normal range we remain.

Mark: Our parent company cash balance was approximately $445 million at the end of the quarter.

Mark: Confident in the strength of our reserves.

Mark: Our operating cash flow for the full year 2024 was $644 million.

Mark: A portion of which was used to fund the Connecticut acquisition, which just closed earlier this week.

Mark: This was lower than 2023, and primarily reflects the impact of risk corridor payments made in 2024.

Mark: During the quarter, we repurchased one 7 million shares at a total cost of $500 million.

Mark: Recall that earlier this year, we made several large core corridor settlements related to prior years.

Mark: In November we closed a bond offering of $750 million of senior notes due in 2033.

Mark: Now some additional details on our 2025 guidance beginning with membership.

Mark: Debt at the end of the quarter was one seven times trailing 12 month EBITDA.

Mark: In Medicaid, we expect new membership growth from recent contract wins and growth in our current footprint to add over 100000 members.

Mark: With our debt to cap ratio at about 41%.

Mark: We continue to have ample cash and access to capital to fuel our growth initiatives.

Mark: We expect 2025 year end membership of approximately 5 million members.

Mark: Days and claims payable at the end of the quarter was 48.

Mark: In Medicare we expect to begin 2025 with approximately 217000 members based on strong open enrollment in our D. SNP product somewhat offset by our exit from M. Apd in 13 states for 2025.

Mark: With the third quarter and well within our normal range we remain.

Confident in the strength of our reserves.

Mark: Our operating cash flow for the full year 2024 was $644 million.

Mark: This was lower than 2023, and primarily reflects the impact of risk corridor payments made in 2024.

Mark: The acquisition of kinetic here at 39000 members.

Mark: Combined with organic growth in our Medicare business, we expect to end 2025 with approximately 250000 Medicare members.

Mark: Recall that earlier this year, we made several large core corridor settlements related to prior years.

Mark: Now some additional details on our 2025 guidance beginning with membership.

Mark: And marketplace based on very strong open enrollment.

Mark: We begin 2025 with approximately 546000 members.

Mark: In Medicaid, we expect new membership growth from recent contract wins and growth in our current footprint to add over 100000 members.

Mark: Representing 35% growth in our legacy business.

Mark: To that we add the acquisition of Connecticut area with approximately 66000 members.

Mark: We expect 2025 year end membership of approximately 5 million members.

Mark: Fluctuation rates among renewing members were in line with prior years, while the fluctuation rates on our new members are stronger than in recent years.

Mark: In Medicare we expect to begin 2025 with approximately 217000 members based on strong open enrollment in our D. SNP product somewhat offset by our exit from M. Apd in 13 states for 2025.

Mark: We expect smaller levels of Seb growth throughout the year compared to 2024 and forecast the year to end with approximately 580000 members almost 50% growth year over year.

Mark: The acquisition of kinetic here at 39000 members.

Mark: Combined with organic growth in our Medicare business, we expect to end 2025 with approximately 250000 Medicare members.

Mark: Our 2025 premium revenue guidance is approximately 42 billion.

Representing approximately 9% growth from 2024.

Mark: And marketplace.

Mark: Our expected premium revenue growth is comprised of several items.

Mark: Based on very strong open enrollment.

Mark: We begin 2025 with approximately 546000 members.

Mark: $2 1 billion from growth in our current footprint.

Mark: Representing 35% growth in our legacy business.

Mark: $1 2 billion from the acquisition of kinetic here.

Mark: To that we add the acquisition of Connecticut area with approximately 66000 members.

Mark: And $600 million of revenue tied to recent RFP wins.

Mark: Yeah.

Mark: Partially offsetting these growth drivers are minor headwinds due to the annualized impact of last years, Medicaid Redetermination and reduction in our Medicare MA PD footprint.

Mark: Saturation rates among renewing members were in line with prior years, while the actuation rates on our new members are stronger than in recent years.

Mark: We expect smaller levels of S&P grow throughout the year compared to 2024 and forecast the year to end with approximately 580000 members almost 50% growth year over year.

Mark: Our 2025 guidance assumes the extension of our Virginia, Medicaid contracts well into 2025, while we expect the startup, Texas Star chip contract to be delayed to 2026.

Mark: Our 2025 premium revenue guidance is approximately 42 billion.

Mark: Moving onto earnings guidance.

Mark: We expect 2025 full year adjusted earnings of at least $24 50 per share.

Mark: Representing approximately 9% growth from 2024.

Mark: Our expected premium revenue growth is comprised of several items.

Mark: Our EPS guidance reflects approximately $1 50 for the underlying organic growth in our legacy footprint.

Mark: $2 1 billion from growth in our current footprint.

Mark: Realization of $1 50 of new store embedded earnings.

Mark: $1 2 billion from the acquisition of kinetic here.

Mark: And 90 <unk> benefit from a lower average share count in 2025.

Mark: And $600 million of revenue tied to recent RFP wins.

Mark: Partially offsetting these growth drivers are minor headwinds due to the annualized impact of last years, Medicaid Redetermination and reduction in our Medicare MA PD footprint.

Mark: These items are partially offset by approximately a dollar due to higher interest expense driven by the bond offering we completed in November as well as lower net investment income.

Mark: Yeah.

Mark: Our 2025 guidance assumes the extension of our Virginia Medicaid contract well into 2025, while we expect the startup, Texas Star chip contract to be delayed to 2026.

Mark: These components put our earnings outlook at $25 50, a share an increase of 13% over 2020 for full year.

Mark: When we include the contract implementation cost of one dollar for the recent Georgia and Medicare dual contract wins.

Mark: Moving onto earnings guidance.

Mark: We expect 2025 full year adjusted earnings of at least $24 50 per share.

Mark: Our adjusted EPS guidance for 2025 is at least $24 50.

Mark: I will note that these implementation costs are just 1%.

Mark: Our EPS guidance reflects approximately $1 50 for the underlying organic growth in our legacy footprint.

Mark: Of the more than $5 billion in revenue, we expect to see from the Georgia New contract win in the duals wins in four states.

Mark: Realization of $1 50 of new store embedded earnings.

Mark: And 90 cents benefit from lower average share count in 2025.

Mark: Turning to our 2025% MTR guidance.

Mark: These items are partially offset by approximately a dollar due to higher interest expense driven by the bond offering we completed in November as well as lower net investment income.

Mark: We expect consolidated MCR of $88 seven.

Mark: Medicaid MCR at 89 $9.

Mark: 90 basis points above the high end of our long term range due to known and estimated rate increases just keeping pace with expected trend.

Mark: Yeah.

Mark: These components put our earnings outlook at $25 50, a share an increase of 13% over 2020 for full year.

Mark: This is almost in line with the 2024 normalize MCR of 89, eight which excludes the impact from new store businesses and the California retro item.

Mark: When we include the contract implementation costs of a dollar for the recent Georgia and Medicare dual contract wins.

Mark: We expect full year rate increases of four 5% with 75% of our full year premium already known at approximately 5% and the remaining 25% estimated at two 5%.

Mark: Our adjusted EPS guidance for 2025 is at least $24 50.

Mark: I will note that these implementation costs are just 1% of.

Mark: Of the more than $5 billion in revenue, we expect to see from the Georgia New contract win in the duals wins in four states.

Mark: Our Medicaid MCR guidance includes trend assumption of approximately four 5%.

Mark: Turning to our 2025 MTR guidance.

Mark: And no impact from risk corridors as they remain constant over the two year period.

Mark: We expect consolidated MCR of $88 seven.

Mark: Favorable second half rates versus our conservative estimates.

Mark: Medicaid MCR at 89 nine.

Mark: 90 basis points above the high end of our long term range due to known and estimated rate increases just keeping pace with expected trend.

Mark: Any off cycle rate adjustments and further moderation in trend present upside to our 2025 guidance.

Mark: We expect Medicare MCR of 89% the MCR reflects our conservative approach to 2025 bids and the expectation that utilization experienced in the second half of 2024 will continue into 2025.

Mark: This is almost in line with the 2024 normalize MCR of 89, eight which excludes the impact from new store businesses and the California retro item.

Mark: We expect full year rate increases of four 5% with.

Mark: And marketplace, we expect MCR of 79% squarely within our long term target MCR range of 70% to 80%.

Mark: With 75% of our full year premium already known at approximately 5% and the remaining 25% estimated at two 5%.

Mark: Moving on to select P&L guidance metrics, we expect adjusted G&A ratio of 7%, which reflects 20 basis points of new business implementation costs, and 20 basis points due to a higher mix of marketplace membership par.

Mark: Our Medicaid MCR guidance includes trend assumption of approximately four 5%.

Mark: And no impact from risk corridors as they remain constant over the two year period.

Mark: Partially offset by leverage and increased scale of our business nor.

Mark: Favorable second half rates versus our conservative estimates.

Mark: Normalizing for these items our guidance G&A ratio falls to six six again, demonstrating continued operating leverage year over year.

Mark: He off cycle rate adjustments and further moderation in trend present upsides to our 2025 guidance.

Mark: We expect Medicare MCR of 89% the MCR reflects our conservative approach to 2025 bids and the expectation that utilization experienced in the second half of 2024 will continue into 2025.

Mark: And other guidance metrics, we expect the effective tax rate of 25, 3%.

Mark: Adjusted pre tax margin of four 1% within our long term range.

Mark: Weighted average share count of $55 6 million shares and we expect quarterly earnings to be evenly distributed throughout the year.

Mark: And marketplace, we expect MCR of 79% squarely within our long term target MCR range of 78% to 80%.

Mark: Turning to embedded earnings.

Mark: At our recent Investor day, we had $6 of new store embedded earnings to this we add $1 25 for the Georgia Medicaid RFP win.

Mark: Moving on to select P&L guidance metrics, we expect adjusted G&A ratio of 7%.

Mark: Which reflects 20 basis points of new business implementation costs, and 20 basis points due to a higher mix of marketplace membership, partially offset by leverage and increased scale of our business.

Mark: A dollar for our additional dose contract wins in four states.

Mark: And the contract implementation costs of $1.

Mark: Leaving us with $9 25 <unk>.

Mark: Normalizing for these items our guidance G&A ratio falls to six six again, demonstrating continued operating leverage year over year.

Mark: From acquisitions and new contracts.

Mark: Our 2025 guidance includes the realization of $1 50 to yield embedded earnings of approximately $7 75.

Mark: And other guidance metrics, we expect the effective tax rate of 25, 3%.

Mark: Going into 2026 gig.

Mark: Giving us high confidence in our 13% to 15% long term growth rate.

Mark: Adjusted pre tax margin of four 1% within our long term range.

Mark: This concludes our prepared remarks.

Mark: Weighted average share count of $55 6 million shares and we expect quarterly earnings to be evenly distributed throughout the year.

Speaker Change: Operator, we're now ready to take questions.

Speaker Change: Yes. Thank you.

Speaker Change: Now begin the question and answer session.

Speaker Change: Ask a question you May press Star then one on your telephone keypad.

Mark: Turning to embedded earnings.

Speaker Change: Youre using a speakerphone please pick up your handset before pressing the keys.

Mark: At our recent Investor day, we had $6 of new store embedded earnings.

Speaker Change: You would like to withdraw your question you May Press Star then two.

Mark: To this we add $1 25 for the Georgia Medicaid RFP win.

Speaker Change: And we ask that in consideration of the other you limit yourself to one question and a follow up if you have additional questions you may reenter the question queue.

Mark: A dollar for our additional dose contract wins in four states.

Mark: And the contract implementation costs of a dollar.

Speaker Change: I'm just trying to it's a mine we will pause momentarily to assemble the roster.

Leaving us with $9 25 for.

Mark: Acquisitions and new contracts.

Speaker Change: And this morning's first question comes from Andrew Mok with Barclays.

Mark: Our 2025 guidance includes the realization of $1 50 to yield embedded earnings of approximately $7 75.

Andrew Mok: Hi, good morning at the Investor Day, I think you gave us some illustration of what's needed to deliver on 89% Medicaid MLR in 2025 can you give us a little bit more color on the components within that between the rates trend in card or is that came in better or worse than expectations, resulting in Medicaid MLR of 90 basis up 90 basis points above that.

Mark: Going into 2026 gig.

Mark: Giving us high confidence in our 13% to 15% long term growth rate.

Mark: This concludes our prepared remarks.

Mark: Operator, we're now ready to take questions.

Speaker Change: Thanks.

Speaker Change: Yes. Thank you we will now begin the question and answer session.

Speaker Change: Sure.

Speaker Change: Andrew.

Speaker Change: Frame it and then I'll turn it to Mark.

Speaker Change: Ask a question you May press Star then one on your telephone keypad.

Speaker Change: The.

Speaker Change: MLR guide for 2025, and Medicaid is basically flat with 2024.

Speaker Change: You're using a speaker phone please pickup your handset before pressing the keys. So anytime you would wish to withdraw your question you May Press Star then two.

Speaker Change: We have good visibility into rates, we're projecting a four 5% rate increase and a four 5% trend off of the 2024 baseline.

Speaker Change: And we ask that in consideration of the other you limit yourself to one question and a follow up if you have additional questions. You may reenter the question queue. So those distractions in mind, we will pause momentarily to assemble the roster.

Speaker Change: That rate increased 75% of it is known at 5%.

Speaker Change: 25% of it is estimated at two 5% blending to four and a half.

Speaker Change: And this morning's first question comes from Andrew Mok with Barclays.

Andrew Mok: Hi, good morning at the Investor Day, I think you gave us an illustration of what's needed to deliver on 89% Medicaid MLR in 2025 can you give us a little bit more color on the components within that between the rates trend in card or is that came in better or worse than expectations, resulting in Medicaid MLR of 90 basis up 90 basis points above that.

Speaker Change: On the trend number.

Speaker Change: We fully considered the second half pressure as we trended into 2025, all the pressures we saw in the second half of the year continuing into the fourth quarter. We included in our outlook for medical cost in 2025.

Speaker Change: That puts us only 90 basis points above the high end of our long term range, which.

Speaker Change: Thanks.

Speaker Change: Sure.

Speaker Change: Which we feel really good that we're maybe a rate action or two not a rate cycle, but our rate action or two away from being at the top end of our long term range at 89.

Speaker Change: Andrew.

Speaker Change: Frame it and then I'll turn it to Mark.

Speaker Change: The.

Speaker Change: MLR guide for 2025 and Medicaid increase.

Speaker Change: Really flat with 2024.

Speaker Change: Mark any color.

Speaker Change: Yes, I'll just do a quick reconciliation of where we are now versus what we said at IR day.

Speaker Change: We have good visibility into rates, we're projecting a four 5% rate increase and a four 5% trend off of the 2024 baseline.

Speaker Change: The IR day, we were jumping off the second half of the year and we wound up 60 basis points higher in.

Speaker Change: That rate increased 75% of it is known at 5% 25% of it is estimated at two 5% blending to four and a half.

Speaker Change: In the second half of the year for the results of the fourth quarter.

Speaker Change: Per Joe's comment we also thought that the combination of rates corridors and trends would give us about 20 bps, they wound up being pretty much breakeven. So we got about zero out of that so about 60 basis points worse on the jump off point and pretty much didn't get.

Speaker Change: On the trend number.

Speaker Change: The rate versus trend a benefit at 20 bps that I was looking forward to Investor day.

Speaker Change: That puts us only 90 basis points above the high end of our long term range.

Speaker Change: Got it and then in the <unk>.

Speaker Change: Paired remarks, I think you said risk Carter's did it provide a material benefit.

Speaker Change: Which we feel really good that were may be a rate action or two got a rate cycle, but our rate action or two away from being at the top end of our long term range of <unk> 89, Mark any color.

Speaker Change: Can you help us understand how the geographic pressure played out such that there was no quarter benefit in the quarter, but I think you cited about 100 basis points remaining.

Speaker Change: Third quarter call. Thanks.

Mark: Yeah, I'll just do a quick reconciliation of where we are now versus what we said at IR day.

Speaker Change: It's a matter of geography, as we've always said wearables move to give a number of how deep we are in the corridor is because while it is a hedge it's an imperfect hedge if you have underperformance it depends on where that underperformance happens whether you get the benefit of the corridor and in the fourth quarter. This year, while we had forecasted I believe 50 base.

Mark: At IR day, we were jumping off the second half of the year and we wound up 60 basis points higher.

Mark: In the second half of the year for the results of the fourth quarter.

Mark: Her Joe's comment we also thought that through a combination of rates corridors and trends would give us about 20 bps, they wound up being pretty much breakeven. So we got about zero out of that so about 60 basis points worse on the jump off point and pretty much didn't get.

Speaker Change: This point of trend pressure absorbed by the corridor.

Mark: It didn't pan out that way Mark anything to add no that's exactly right.

Speaker Change: In 21 states.

Speaker Change: And the benefit of the corridor, it's not evenly distributed across 21 states. So what really matters is where does the trend pressures show up versus where is corridor protection remaining and that can either help you significantly or it can lead you know benefit which is more or less what happened in the fourth quarter.

Mark: The rate versus trend a benefit of 20 bps that I was looking forward to investor day.

Mark: Got it.

Mark: Prepared remarks, I think you said risk Carter's didn't provide a material benefit.

Mark: Can you help us understand how the geographic pressure played out such that there was no corridor benefit in the quarter because I think you cited about 100 basis points remaining.

Speaker Change: Thank you and our next question comes from Stephen Baxter with Wells Fargo.

Mark: The third quarter call. Thanks.

Stephen Baxter: Hi, Thanks, I appreciate the color on the full year Medicaid MLR in the components impacting it I was hoping you could give us.

Mark: As a matter of geography, as we've always said, we always loathed to give a number how deep we are in the corridor is because while it is a hedge it's an imperfect hedge if you have underperformance it depends where that underperformance happens whether you get the benefit of the corridor and in the fourth quarter. This year, while we had forecasted I believe 50.

Stephen Baxter: Also the fourth quarter breakdown, if theres any lingering impact from new store any impact from retro is either positive or negative and then to the extent maybe there was any negative development in the quarter to potentially spike out of Medicaid just trying to understand the jump off point and a little bit more clearly to think about the achievability of guidance. Thank you.

Mark: <unk> point of trend pressure absorbed by the corridor.

Mark: It didn't it didn't pan out that way Mark anything to add no that's exactly right.

Stephen Baxter: Right.

Stephen Baxter: On the Medicaid MCR in the fourth quarter. It actually was merely a case not to oversimplify it.

Mark: We're in 21 states and the benefit of the corridor, it's not evenly distributed across 21 states. So what really matters is where does the trend pressures show up versus where is corridor protection remaining and that can either help you significantly or it can lead you know benefit which is more or less what happened in the fourth quarter.

Stephen Baxter: Of <unk>.

Stephen Baxter: Fourth quarter dates of service are trending at one 2% versus the forecast at $50.

Stephen Baxter: <unk> points.

Stephen Baxter: There was no one time items there were no retro was anticipated or received.

Stephen Baxter: It was from an accounting perspective, very very clean trend outpaced our estimate quarters protection provided no benefit.

Stephen Baxter: Thank you and the next question comes from Stephen Baxter with Wells Fargo.

Stephen Baxter: Hi, Thanks, I appreciate the color on the full year Medicaid MLR in the components impacting it I was hoping you could give us all.

Stephen Baxter: The typical suspects higher utilization.

Stephen Baxter: Among the stairs population, particularly for LTE S. S. A pharmacy and BH BH inpatient was up.

Stephen Baxter: Also the fourth quarter breakdown, if theres any lingering impact from new store any impact from retro is either positive or negative and then to the extent maybe there was any negative development in the quarter to potentially spike out in Medicaid just trying to understand the jump off point and a little bit more clearly think about the achievability of guidance. Thank you.

Stephen Baxter: And look it.

Stephen Baxter: The pharmacy side, it's not only <unk> ones that are causing the pressure by other high cost.

Stephen Baxter: Therapies.

The trend pressure in the fourth quarter was the same as we experienced in the third quarter and was not muted benefited or detrimental by any onetime items or artifacts.

Stephen Baxter: All right.

Stephen Baxter: On the Medicaid MCR in the fourth quarter. It actually was merely a case not to oversimplify it.

Stephen Baxter: Of <unk>.

Speaker Change: Fourth quarter dates of service trending up one 2% versus the forecast at 50.

Speaker Change: Okay, and then just as a follow up would you be able to share the IV in our balance at the end of the year just to help us evaluate the reserve picture. Thank you.

Stephen Baxter: At this point.

There was no one time items there were no retro was anticipated or received.

Stephen Baxter: Absolutely.

Stephen Baxter: It was from accounting perspective, very very clean trend outpaced our estimate quarters protection provided no benefit.

Stephen Baxter: On medical claims payable.

Stephen Baxter: You might have seen we were at $4 6 billion.

Stephen Baxter: The DCP, which is an imperfect measure, but I know why you guys use it was 48.

The typical suspects higher utilization.

Stephen Baxter: Among the stairs population, particularly for L. P. S S far.

Stephen Baxter: To put that in context over the last three years DCP averaged 49 at.

Stephen Baxter: Pharmacy NPH.

Stephen Baxter: <unk> patient was up.

Stephen Baxter: At the low was 47, one quarter at the high was 51, one quarter, but averaged 49, the biggest driver of volatility around DCP and <unk> is how fast cash goes out the door right because the actuaries have a very consistent process of accruing liability, having said that cash payments are a little.

Stephen Baxter: And look it.

Stephen Baxter: On the pharmacy side, it's not only <unk> ones that are causing the pressure, but other high cost of therapy.

Stephen Baxter: Therapies.

Stephen Baxter: The trend pressure in the fourth quarter was.

Stephen Baxter: The same as we experienced in the third quarter and was not muted benefited or detrimental by any onetime items or artifacts.

Stephen Baxter: Lumpy. So we're at 48, that's the same sequentially quarter over quarter, well within the middle of our range I think thats a good proxy for the IV.

Stephen Baxter: Okay, and then just as a follow up would you be able to share the IV in our balance at the end of the year just to help us evaluate the reserve picture. Thank you.

Stephen Baxter: Thank you and the next question comes from Josh Raskin with <unk> research.

Stephen Baxter: Absolutely.

Stephen Baxter: On medical claims payable you might have seen we were at $4 6 billion.

Josh Raskin: Hi, Thanks, good morning it.

Josh Raskin: It seems like the marketplace MLR was worse in the fourth quarter I'm not hearing much commentary around that so maybe what the specific drivers where there relative to what you guys have put up an investor day, and then just back on the Medicare advantage, maybe if you could give us a little bit more of the specifics on the Medicare advantage pressures in <unk>.

Stephen Baxter: The DCP, which is an imperfect measure, but I know why you guys use it was 48.

To put that in context over the last three years DCP averaged 49 at.

Josh Raskin: Actually in the acquired book from Bright and maybe what changes you made in 2025 that give me confidence in the pits.

Josh Raskin: I'll turn it to mark for the marketplace commentary in Q4, Mark absolutely Hey, good morning, Josh.

Josh Raskin: Look nothing more on marketplace the normal seasonality.

Josh Raskin: As you know because of deductibles co pays and things like that.

Stephen Baxter: A bit lumpy. So we're at 48, that's the same sequentially quarter over quarter, well within the middle of our range I think thats a good proxy for the IV NR.

Josh Raskin: Marketplaces fairly seasonal seasonable and tends to be running hotter later in the year look we were at 83, three maybe it's a little bit higher than we thought to but on a full year basis coming in at a 75% we feel pretty good about the year just chalk it up to a little seasonal noise.

Speaker Change: Thank you and the next question comes from Josh Raskin with <unk> research.

Josh Raskin: Hi, Thanks, good morning it.

Josh Raskin: And the only thing I'll add to that is when you are coming in at <unk> 75 for the full year.

Josh Raskin: We now have two consecutive years of being able to invest what we call excess margins margins that came in.

At 10% pretax.

Josh Raskin: In to the growth of the product.

Josh Raskin: We're now one or two priced silver and 50% of our geographies as Mark said.

Josh Raskin: Actually in the acquired book from Bright and maybe what changes you made in 2025%. It gives me confidence in the bids.

Josh Raskin: Ended the year with 400, we're going to start the year with 600 and the year with 580000 members.

Josh Raskin: I'll turn it to mark for the marketplace commentary in Q4, Mark absolutely Hey, good morning, Josh.

Speaker Change: Look nothing more on marketplace than normal seasonality.

Josh Raskin: Great story, and we believe that given the dampening effect of special enrollment during the year. Unlike last year that it's a very stable book of business and we have high confidence in the 6% pre tax margin and a 79% MCR with projected for next year for.

Speaker Change: As you know because of deductibles co pays things like that.

Speaker Change: Marketplaces fairly seasonal seasonable and tends to be running hotter later in the year look we were at 83, three maybe it's a little bit higher than we thought to but on a full year basis coming in at a 75, we feel pretty good about the year just chalk it up to a little seasonal noise.

Josh Raskin: For 2025.

Mark: The Medicare question, Mark Yes, absolutely.

Mark: We reported a 93 eight on Medicare.

Speaker Change: And the only thing I'll add to that is when you are coming in at <unk> 75 for the full year.

Speaker Change: Part of that is just the industry wide trend that everybody is seeing Joe mentioned the drivers of trended Medicare.

Speaker Change: We now have two consecutive years of being able to invest what we call excess margins margins that came in.

Speaker Change: <unk>, both skilled nursing facility and in home.

Speaker Change: At 10% pretax.

Speaker Change: A variety of pharmaceuticals.

Speaker Change: In to the growth of the product.

Speaker Change: And then the inpatient and outpatient that both have a number of drivers in them again thats not unique to Molina I think we're seeing that just about everywhere.

Speaker Change: We're now one or two priced silver and 50% of our geographies as Mark said, where you ended.

Speaker Change: We ended the year with 400, we're going to start the year with 600 and the year with 580000 members. It's a great story and we believe that given the dampening effect of special enrollment during the year. Unlike last year that it's a very stable book of business and we have high confidence in the 6% pre tax margin in the 79% in <unk>.

Speaker Change: Part of the story too which compounds the MLR is on the revenue side.

Speaker Change: We wound up.

Speaker Change: Adjusting some of our risk adjustment ultimate the way risk adjustment works is obviously you do a lot of provider in office risk adjustment. We also do a lot of in home assessments the combination of those.

Speaker Change: We adjusted our ultimate and took down some of the revenue a little bit that's kind of a onetime item.

Speaker Change: We are projecting for next year.

Speaker Change: For 2025.

Speaker Change: The Medicare question, Mark Yes, absolutely.

Josh Raskin: The knock on question, Josh, which I would expect you to ask is how does that tie you up for next year and I think look rates aren't great for next year, we're pretty conservative on trend based on what we saw Q3 Q4, so what youre seeing is not a strong move in MLR year over year just reflecting.

Speaker Change: We reported a 93 eight on Medicare.

Speaker Change: Part of that is just the industry wide trend that everybody is seeing Joe mentioned the drivers of trended Medicare L.

Speaker Change: L T S S. Both skilled nursing facility and in home.

Speaker Change: A variety of pharmaceuticals.

Josh Raskin: A lot of that Youll see us pretty much a little bit over the top end of our range for guidance, but nevertheless, we feel we're pretty conservative on trend just given what we saw Q3 Q4, the only other comment I would add on Medicare as the bright business, while we have full confidence in the <unk> hundred basis point turnaround to get to the full dollar of accretion.

Speaker Change: And then the inpatient and outpatient both have a number of drivers in them again, that's not unique to Molina I think we're seeing that just about everywhere.

Speaker Change: Part of the story too which compounds the MLR is on the revenue side.

We wound up just in some of our risk adjustment ultimate the way risk adjustment works is obviously you do a lot of provider in office risk adjustment. We also do a lot of in home assessments the combination of those.

Josh Raskin: <unk> not going to be quite at breakeven. This year will be slightly lower which is putting a little bit of pressure on the margins, but at 89% MCR for next year or two 2% pre tax margin nearly $6 billion of revenue Tees us up nicely to take advantage of the growth aspects of the duals and the <unk>.

Speaker Change: We adjusted our ultimate and took down some of the revenue a little bit that's kind of a onetime item.

Josh Raskin: The grade products. So we're quite bullish on our prospects here Medicare and with the early 2026 rate notice I think we're teed up for margin expansion in 2026 and beyond.

Speaker Change: Thank you.

Speaker Change: Thank you and the next question comes from Sarah James with Cantor Fitzgerald.

Josh Raskin: A lot of that you'll see is pretty much a little bit over the top end of our range for guidance, but nevertheless, we feel we're pretty conservative on trend just given what we saw Q3 Q4, the only other comment I would add on Medicare as the bright business, while we have full confidence in the <unk> hundred basis point turnaround to get to the full dollar of accretion.

Thank you.

Speaker Change: I guess first on cost trends in 25 down from the 6% ex granting them. Thank you.

Speaker Change: What was for key cost trend and what's driving your assumption of costs from Boeing and 25.

Josh Raskin: <unk> not going to be quite at breakeven. This year will be slightly lower which is putting a little bit of pressure on the margins, but at 89% MCR for next year or two 2% pre tax margin on nearly $6 billion of revenue Tees us up nicely to take advantage of the growth aspects of the duals and the <unk>.

Mark: Let me do full year over year, and then I'll kick it to mark because it can get quite complicated depending on which period you're comparing.

Speaker Change: In 2024 and.

Speaker Change: In Medicaid.

Speaker Change: Our full our cost trend was six 5%.

Speaker Change: Half of which was the acuity shift due to redetermination and half of which is what we call core utilization high utilization of the continued population.

Josh Raskin: Grated products. So we're quite bullish on our prospects here Medicare and with the early 2026 rate notice I think we're teed up for margin expansion in 2026 and beyond.

Speaker Change: Comparing that to the four 5% trend in 2025, the acuity shift doesn't recur so we're actually <unk>.

Josh Raskin: Yes.

Josh Raskin: Thank you.

Speaker Change: Projecting a four 5% core utilization trend in 2025 compared to a 3.25% core utilization trend in 2023, which is 125 basis points higher now depending on what period you compare but we think that is a very clean and clear way of looking at it.

Josh Raskin: Thank you and the next question comes from Sarah James with Cantor Fitzgerald.

Sarah James: Thank you.

Sarah James: I guess, one 5% cost from 25 down from the 6% Youre expanding them. Thank you.

Sarah James: What was for key cost trend and what's driving your assumption of costs from Boeing and 25.

Speaker Change: We considered every nuance of utilization trend in the third and fourth quarters to inform that trend property by property.

Let me do full year over year, and then I'll kick it to mark because it can get quite complicated depending on which period you're comparing.

Mark: By DRG and we're very confident in that projection mark anything to add I would just repeat that Joe because it's a big point last year was six 5% trend half of it was directly because of mix of Redetermination. So the other half was just hot users the stairs so three in a quarter call. It.

Sarah James: In 'twenty 'twenty four and <unk>.

K R. R Cross trend was six 5%.

Sarah James: Half of which was the acuity shift you to Redetermination and half of which is what we call core utilization high utilization of the continuing population.

Mark: This year, we're projecting four 5% trend, which is directly comparable to that three and a quarter number last year. So you can see we've got pretty strong trend baked into our 2025 outlook now I think thats prudent based on where we are but if the second half of last year was the new normal.

Sarah James: Comparing that to the four 5% trend in 2025, the acuity shift doesn't recur so we're actually.

Sarah James: Projecting a four 5% core utilization trend in 2025 compared to a 3.25% core utilization trend in 2023, which is 125 basis points higher now depending on what period you compare but we think that is a very clean and clear way of looking at it.

Mark: That's assuming a pretty strong trend above what we've seen in other kind of normal quote unquote years, so pretty strong trend at four and a half.

Mark: And as we've also mentioned offsetting that trend to four and a half in 2025 is roughly four 5% of rates.

Speaker Change: We considered every nuance of utilization trend in the third and fourth quarters to inform that trend property by property DRG by DRG and we're very confident in that projection mark anything to add I would just repeat that Joe because it's a big point last year was six 5% trend half of it was directly because of mix.

Mark: Now when we think about rates, we parse known.

Mark: Versus estimated 75% of our rates are known for 2025 at 5%.

Speaker Change: Of Redetermination. So the other half was just hot users the stairs so three in a quarter call. It.

Mark: 25%, we're still estimating but we feel conservative at those rates at two 5%. So they waited averaged four five I know most of them and I'm pretty conservative on what im estimating but the high level news for 2025 is four 5% trend assumption four 5% rate, mostly known some assumed.

Speaker Change: This year, we're projecting four 5% trend, which is directly comparable to that three and a quarter number last year. So you can see we've got pretty strong trend baked into our 2025 outlook now I think thats prudent based on where we are but if the second half of last year was the new normal that's assuming a pretty strong trend.

Speaker Change: That's helpful. Maybe just one more clarification since you know 75 Christina <unk>.

Above what we've seen in other kind of normal quote unquote years, so pretty strong trend at four and a half.

Speaker Change: And you have a pretty good deal for a margin play does that mean that you could get in tier long term goals for Medicaid margins for the whole of 2025 or would it be more exiting 2025.

Speaker Change: And as we've also mentioned offsetting that trend of four and a half in 2025 is roughly four 5% of rates.

Speaker Change: We would need.

Speaker Change: Now when we think about rates, we parse known <unk>.

Speaker Change: We conservatively estimated the 25% of rates, we don't know at two and a half.

Speaker Change: First is estimated at 75% of our rates are known for 2025 at 5%.

Speaker Change: And the 75% we do know it came in at five.

Speaker Change: 25%, we're still estimating but we feel conservative at those rates at two 5%. So they waited averaged four and a half I know most of them and I'm pretty conservative on what I'm estimating but the high level news for 2025 is four 5% trend assumption four 5% rate, mostly known some assumed.

Speaker Change: Is it conservative perhaps.

Speaker Change: So there could be some upside if we get rate increases north of the two and a half that we estimated.

By the way, we never forecast retrofit, where our rig advocacy process, which is really robust.

Speaker Change: Advocating for Actuarially sound rates and all of our contracts could provide some retroactivity in 'twenty five 'twenty four but we never forecast that that would be additional upside if we achieve that.

Speaker Change: Okay.

Speaker Change: That's helpful. Maybe just for my clarification. Thank you know 75 personal commentary.

Speaker Change: Thank you have a pretty good view from a margin play does that mean that you could get in tier long term goals for our Medicaid margins for the whole of 2025 or would it be more exiting 2025.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Justin Lake with Wolfe Research.

Speaker Change: Thanks, Good morning, I'll ask another question on spread because you guys have done such a good job, we've kind of laid it out for us at the Investor day and today the.

Speaker Change: Yeah.

Speaker Change: We would need.

We.

Speaker Change: If I look at the Investor day deck, Youre, saying in the third quarter sequentially, you had a two 6% increase in trend.

Speaker Change: <unk>, we estimated the 25% of rates, we don't know at two and a half.

Speaker Change: And the 75% we do know it came in at five.

Speaker Change: Quarter, now, you're saying one or two.

Speaker Change: Is it conservative perhaps.

Speaker Change: Right. So just annualizing back that back half into the first half of next year.

Speaker Change: So there could be some upside if we get rate increases north of the two and a half that we estimated.

Speaker Change: If I'm doing the math in my head correctly should be like a 2%.

Speaker Change: By the way, we never forecast retrofit, where our rate advocacy process, which is really robust.

Speaker Change: Ryan you know kind of just catch up.

Speaker Change: Advocating for Actuarially sound rates and all of our contracts could provide some retroactivity in 20 524, but we never forecast that that would be additional upside if we achieve that.

Speaker Change: So if you annualize so I'm just trying to think Joe like maybe you could you could drop to us.

Speaker Change: Similar way.

Speaker Change: The Investor day.

Speaker Change: Today I'd like just like what are you really expecting for quarterly trends. If you think about it a little bit of a kind of green bars, you put it would be about their day deck.

Speaker Change: Thank you and the next question comes from Justin Lake with Wolfe Research.

Justin Lake: Thanks, Good morning, So I'll ask another question on right because you guys have done such a good job, we've kind of laid it out for us at the Investor day and today the.

Speaker Change: <unk> would you like I would think they might only be 50 basis points a quarter.

Speaker Change: To get the four 5% because you still got to annualize the back half of this year.

Justin Lake: If I look at the Investor day deck, Youre, saying in the third quarter sequentially, you had a two 6% increase in trends fourth quarter, and now you're saying one or two.

Speaker Change: There might be to run that incorrectly.

As I've said, what's your answer your question it gets really complicated depending on what period you want to use obviously, if you use just the second half.

Justin Lake: Right. So just annualizing that that back half into the first half of next year.

The four 5% trend number is a lower number for 2025 it is for 2024.

Justin Lake: If I'm doing the math in my head correctly should be like a 2%.

Two to oversimplify the case alternative tomorrow right.

Justin Lake: Ryan you know kind of just catch up.

Justin Lake: As you annualize so I'm just trying to think Joe like maybe you could you could talk to us.

Speaker Change: Sort of analysis on the quarterly progression of this Mark Hey, Justin So last year.

Joe: Well our way.

Speaker Change: We mentioned six 5% trend across the year full year, but at Investor day to your point, we also jumped off a second half of the year view, just because we said Gee maybe the second half is the new normal so let the baseline off of that.

Speaker Change: David the Investor day.

Speaker Change: Like just like what are you really expecting for quarterly trends. If you think about you know kind of green bars.

Speaker Change: It would be about their day deck.

Speaker Change: Brad would you like I would think they might only be 50 basis points a quarter.

Speaker Change: If you look at our guidance.

Speaker Change: Full year over year, we said four and a half of rates for 5% of trend.

Speaker Change: To get the four 5% because you still got to annualize the back half of this year.

Speaker Change: If you jump off a second half in the framework like we did at Investor day, It would be more like 2% rates, 2% trend and now that 2% you can start to think more like in quarterly increments and youre, probably closer to your 50 bps a quarter that youre thinking about.

Speaker Change: There might be or unmet at Berkeley.

Speaker Change: As I've said, what's your answer your question it gets really complicated depending on what period you want to use obviously, if you use just the second half.

Speaker Change: The four 5% trend number is a lower number for 2025 it is for 2024.

Speaker Change: Perfect. Thanks, and then.

Speaker Change: Two to oversimplify the case alternative tomorrow right. We do have a lot of analysis on the quarterly progression of this Mark Hey, Justin So last year.

Just a couple of quick numbers questions here, you talked about some one time benefit in SG&A can you can you give us some more color on that and then Joe you said, you're not rates. The way you said your rate actions away in one or two places.

Speaker Change: Can you tell us like can you give us any specificity is like it sounds like it's a couple of states, but you need some rate updates so probably those larger states.

If you look at our guidance full.

Speaker Change: Or are there smaller states, where you need big rates of larger states, where you're just waiting for for some drops there.

Speaker Change: Full year over year, we said four and a half of rates for 5% of trend.

Speaker Change: If you jump off a second half in the framework like we did at Investor day, It would be more like 2% rates, 2% trend and now that 2% you can start to think more like a quarterly increments and youre probably closer to your 50 bps a quarter that youre thinking about.

Speaker Change: First thing I would say is the two 5%.

Speaker Change: That we projected on rates that we don't know about is perhaps conservative, but let me let me frame. It this way.

Speaker Change: The rate actions versus cycle comment was merely to reflect where operating no matter, which way you cut it a second half Q4 full year 2025 guidance, we're operating a 100 basis points above the high end of our long term range of 100.

Speaker Change: Perfect. Thanks, and then.

Speaker Change: Just a couple of quick numbers questions here, you talked about one time benefit in SG&A can you can you give us some more color on that and then Joe you said, you're not rates. The way you said your rate actions away in one or two places.

Speaker Change: Based on analysis that we've done.

Speaker Change: External reports.

Speaker Change: <unk> filings, we believe that many market participants are operating at two.

Speaker Change: Can you tell us like can you give us any specificity is like it sounds like it's a couple of states, but you need some rate updates are probably those larger states.

Speaker Change: Two three maybe even 400 basis points above an acceptable.

Speaker Change: Our range.

Speaker Change: Hum.

Speaker Change: Might take a rate cycle, but when you're a 100 basis points above.

Speaker Change: Or are there smaller states, where you need big rates of larger states, where you're just waiting for a person drops there.

Speaker Change: The long term at a good range.

Speaker Change: First thing I would say is the two 5%.

Speaker Change: Maybe a rate accurate two will get you. There. That's my point I don't think this has to cycle through one or two times in order to get there.

Speaker Change: That we projected on rates that we don't know about is perhaps conservative, but let me let me frame. It this way.

Speaker Change: 90 basis points to four Bucks a share on $32 billion of revenue.

Speaker Change: The rate actions versus cycle comment was merely to reflect where operating no matter, which way you cut it.

Speaker Change: So if we can get back to the top end of our range when the market gets the right it needs to get back into balance we will comfortably be operating in the high eighties paying into the quarters like we were before all this happened and Thats exactly where we want to be high eighty's and paying into the corridor is to provide a 200 basis points of protection.

Speaker Change: Second half Q4 full year 2025 guidance, we're operating a 100 basis points above the high end of our long term range of 100.

Speaker Change: Based on analysis that we've done.

Speaker Change: External reports regulatory filings, we believe that many market participants are operating at two three maybe even 400 basis points above an acceptable.

Speaker Change: Thank you and our next question comes from AJ Rice with UBS.

Speaker Change: Hi, everybody.

Speaker Change: First just wanted to ask about.

Speaker Change: <unk> range.

Speaker Change: Quarterly progression across 25, if there's anything you can do to help us think about that obviously you guys have a dollar of startup costs I assume that's more back end loaded.

Speaker Change: That might take a rate cycle, but when you're a 100 basis points above.

Speaker Change: The long term at a good range.

Speaker Change: Maybe a rate accurate to forget either that's my point I don't think you have to cycle through one or two times in order to get there.

Speaker Change: The rate updates, which you've been talking about Medicaid.

Speaker Change: You will have a positive progression there contributing to EPS and then you've got more public exchange business, which.

Speaker Change: 90 basis points as against four Bucks a share on $32 billion of revenue.

Speaker Change: Just going to exasperate, the fourth quarter it sounds like.

Speaker Change: Any way you can give us a little bit of a flavor for how you think quarterly.

Speaker Change: Our earnings lay out over the course of the year.

Speaker Change: Sure I'll turn it to Mark.

Speaker Change: Have the items appropriately captured that that factor into the seasonality projections of the business Mark color Hey, Jay Good morning.

Speaker Change: So normally were a little bit front end loaded with EPS and what im saying. This year is will be 50, 50, very evenly distributed quarter to quarter. So what's different.

Speaker Change: Thank you and our next question comes from AJ Rice with UBS.

Speaker Change: Hi, everybody.

Speaker Change: First just wanted to ask about.

Speaker Change: Big driver is you've got a specific accounting of where we are on rates within the year quarter to quarter, we talked about how we know 75% of them, but we also know specifically when they come in we also have a specific view on that trend number of four and a half how it seasonally <unk>.

Speaker Change: Quarterly progression across 25, if there's anything you can do to help us think about that obviously you guys have a dollar of startup costs I assume that's more back end loaded you've got the rate updates, which you had been talking about Medicaid maybe you would have a positive progression there contributing to EPS and then you've got more.

Speaker Change: So you've got that as one of the bigger drivers.

Speaker Change: Public exchange business, which.

Speaker Change: I'm, just going to exasperate, the fourth quarter it sounds like.

Speaker Change: Next you've got just a little bit of carryover from new stores last year, it's not it's not as big a phenomenon as it was last year. So we're not going to call significant attention to it but you've still got a little bit of that going on so that more or less levels.

Speaker Change: Any way you can give us a little bit of a flavor for how you think quarterly.

Speaker Change: Our earnings lay out over the course of the year.

Mark Hey: Sure I'll turn it to Mark.

Speaker Change: The items appropriately captured that that factor into the seasonality projection of the business Mark color Hey, Jay Good morning, Yes, So normally were a little bit front end loaded.

Speaker Change: MLR quarter to quarter in the year now the other thing Thats going on is G&A I heard your statement, but believe it or not we're front end loaded on G&A. This year with a lot of the initiatives. We have we have a bunch of go readies.

With EPS and what I am saying this year is will be 50, 50, very evenly distributed quarter to quarter. So what's different.

Speaker Change: January one of 2026.

Speaker Change: The first big driver is you've got.

Speaker Change: And a lot of the it spend a lot of the upfront investment comes in early which front ends our G&A.

Speaker Change: Specific accounting of where we are on rates.

Speaker Change: Within the year quarter to quarter, we talked about how we know 75% of them, but we also know specifically when they come in we also have a specific view on that trend number of four and a half how its seasonal lies so.

Speaker Change: So those things are a little bit different this year I'd take your point on more marketplace, which is typically a little bit backend loaded on MLR, yes, thats true, but you put our three businesses together, we've got a pretty even outlook on our margins and therefore, our EPS.

Speaker Change: So you've got that as one of the bigger drivers.

Speaker Change: Next you've got just a little bit of carryover from new stores last year, it's not it's not as big a phenomena as it was last year. So we're not going to call significant attention to it but you've still got a little bit of that going on so that more or less levels MLP.

Okay, Alright, that's helpful.

I just wanted to ask I know.

Speaker Change: You guys mentioned in the prepared remarks about keeping an eye on what's going on in Washington, Obviously, there's a lot of chatter about potential Medicaid reform.

Speaker Change: MLR quarter to quarter in the year now the other thing that's going on is G&A I heard your statement, but believe it or not we're front end loaded on G&A. This year with a lot of the initiatives. We have we have a bunch of go readiness.

Speaker Change: Or is it a situation where at this point you are having some discussions with the states about how they might respond to some of these scenarios.

Speaker Change: And maybe relying on history.

Speaker Change: Then you worry first of 2026.

Speaker Change: Does it tend to push the states to put more of the people that they haven't put it in managed Medicaid to managed Medicaid.

Speaker Change: And a lot of the it spend a lot of the upfront investment comes in early which front ends our G&A.

Speaker Change: Is there enough flexibility in the benefit design that it puts pressure on Medicaid funding.

Speaker Change: So those things are a little bit different this year I'd take your point on more marketplace, which is typically a little bit backend loaded on MLR, yes, that's true like you've put our three businesses together, we've got a pretty even outlook on our margins and therefore, our EPS.

<unk> benefits and how does how does that impact your business any any thoughts you can give us along those lines.

Speaker Change: I can't I can't give you any answers, but I can give you our thinking and youre absolutely right about the way you're focused on it with the market really focuses on the how.

Speaker Change: Okay, Alright, that's helpful.

Speaker Change: And then I just wanted to ask I know.

Speaker Change: If you come up with a per capita cap scheme.

Speaker Change: You guys mentioned in the prepared remarks about keeping an eye on what's going on in Washington, Obviously, Theres a lot of chatter about potential Medicaid reform.

Speaker Change: Matched for a reduction F match reduction on expansion block grants whatever the mechanism is the CBO score.

Speaker Change: Or is it a situation where at this point you are having some discussions with the states about how they might respond to some of these scenarios.

Speaker Change: That's not the issue.

Speaker Change: The issue is.

Speaker Change: What are you going to reduce in terms of where the money goes you've got 25 million people in marketplace, 92% subsidized 20 million people and expansion.

And maybe relying on history.

Speaker Change: 3rd% subsidized at 90%.

Speaker Change: Does it tend to push the states to put more of the people that they haven't put it in managed Medicaid to managed Medicaid is there enough flexibility in the benefit design that if there's pressure on Medicaid funding that.

Speaker Change: And 25 million uninsured population, 95% of the eligible tell me, which number you want to see change neither side of the aisle wants to see more uninsured.

Speaker Change: It's below 10% of eligible for the first time in decades.

Speaker Change: Tweaked benefits and how does how does that impact your business any any thoughts you can give us along those lines.

Speaker Change: Reduction in benefits.

Speaker Change: Reduction in enrollment.

Speaker Change: Can I can't give you any answers back and give you our thinking and Youre absolutely right about the way you're focused on it with the market really focuses on the how.

Speaker Change: Reduction in payments to providers or none of the above and I either have to out of state or decrease my education budget or raise taxes. None of those solutions is politically tenable, that's what to focus on.

Speaker Change: If you come up with a per capita cap scheme F map match for a reduction after that match reduction on expansion block against whatever the mechanism is the CBO score. It that's not the issue the issue is.

Speaker Change: The way to cut cost is actually actuarially and financially determinable.

Speaker Change: That would go is where the political tension exists it's either got to be membership.

Speaker Change: What are you going to reduce in terms of where the money goes.

Speaker Change: Benefits to existing management membership reductions of payments to providers are higher taxes for the citizens and Interstate.

Speaker Change: You've got 25 million people in marketplace, 92% subsidized 20 million people and expansion, 100% subsidized at 90%.

Speaker Change: Neither of those approaches is politically tenable, that's why we conclude that any changes to managed Medicaid as we know what today would be marginal.

Speaker Change: And 25 million uninsured population, 95% of the eligible tell me, which number you want to see change neither side of the aisle wants to see more uninsured.

Speaker Change: Thank you and the next question comes from add wrong with Bank of America.

Speaker Change: It's below 10% of eligible for the first time in decades.

Speaker Change: Hey, Thanks, if I could ask two cleanup questions first I think you mentioned in for period and get a lot of benefit from the risk corridor as I talked about 2024, So if you could.

Speaker Change: Reduction in benefits.

Speaker Change: The reduction in enrollment.

Speaker Change: Reduction in payments to providers or none of the evolve and I either have to out of state or decrease my education budget or raise taxes. None of those solutions is politically tenable, that's what to focus on.

Speaker Change: Update your thinking around that and how you know if you have any cushion for 2025 on risk corridor still on what it would take to realize them and then second if I could just squeeze the second question I know.

Speaker Change: On Medicare I think you mentioned, the MLR would be flat year over year versus 2024, but you grew membership in Q4 was a little hot in terms of utilization and you have United guiding up MLR on presumably Medicare. So curious what gives you comfort there. Thanks.

Speaker Change: The way to cut cost is actually actuarially and financially determinable, where that would go is where the political tension exists it's either got to be membership.

Speaker Change: <unk> to existing management membership reductions of payments to providers are higher taxes for the citizens of Interstate neither of those approaches is politically tenable. That's why we conclude that any changes to managed Medicaid as we know it today would be marginal.

Speaker Change: I'll.

Speaker Change: That's the first.

Speaker Change: Question first and I'll kick it tomorrow on risk quarters, what we're saying is the amount of quarter liability. We have year over year is unchanged and therefore, it's not providing a benefit or detriment to the P&L.

Speaker Change: Thank you and the next question comes from add wrong with Bank of America.

Speaker Change: And when we're operating a 100 basis points above our target range, we're not going to be deep into them, but we are into them in certain places now bear in mind.

Speaker Change: Hey, Thanks, if I could ask two cleanup questions first I think you mentioned four clear you Didnt get a lot of benefit from the risk corridor is that you talked about 2024, so if you could.

Speaker Change: During a year if you don't have a lot of corridor protection, because youre not keep into them.

Speaker Change: Update your thinking around that and how you know if you have any cushion for 2025 on risk corridor still on what it would take to realize Bob and then second if I could just squeeze the second question I know.

Speaker Change: They are actually at least potential for oxide.

Speaker Change: If you outperform your.

Speaker Change: Your forecast Youll get to keep a lot of it or some of it.

Speaker Change: On Medicare I think you mentioned MLR would be flat year over year versus 2024, but you grew membership in Q4 was a little hot in terms of utilization.

Speaker Change: And so.

Speaker Change: If we project if we're looking at upside during the year and.

Mark: And we're not deep into the quarter or was there any places and we're in the middle of them. Then at least you get some of it to drop through to your bottom line, that's where we are on risk quarters year over year, Mark you want to take the Medicare question, Yeah, absolutely. So on Medicare we reported an $89 one for 2024.

Speaker Change: United guiding up MLR on presumably Medicare So curious what gives you comfort there. Thanks.

Speaker Change: Oh.

Speaker Change: That's the first.

Speaker Change: Question first and I'll kick it tomorrow on risk quarters, what we're saying is the amount of quarter liability, we have year over year as unchanged. Therefore, it is not providing a benefit or a detriment to the P&L and when we're operating 100 basis points above our target range, we're not going to be deep into them, but we are into them in certain places.

Mark: When you walk you through a couple of things to help the thinking on that the first is recall we exited <unk>.

Mark: Traditional Medicare advantage prescription drug.

Mark: In 13 states for 2025.

Mark: While the revenue impact was not meaningful the MLR impact was so take 40 bps off the $89, one and normalize the jumping off point to $88 seven.

Speaker Change: Bear in mind.

Speaker Change: During a year if you don't have a lot of corridor protection, because youre not deep into them.

Speaker Change: They are actually at least potential for oxide.

Mark: To that.

Mark: We've got rates like everybody not that great for 2025 call. It two 5% for us.

Speaker Change: If you outperform.

Speaker Change: Our forecast Youll get to keep a lot of it or some of it.

Speaker Change: And so.

Mark: And I've got trend a little warmer than that now part of that is mitigated by our bid strategy part of it is mitigated by our medical cost management.

Mark: If we projected if we're looking at upside during the year and we're not deep into the quarter or was there any places and we're in the middle of them. Then at least you get some of it to drop through to your bottom line, that's where we are on risk quarters year over year, Mark do you want to take the Medicare question, Yeah, absolutely. So on Medicare We reported an 89 one for 2024.

Mark: But $2 seven ish on trend, which nets you back to 89, so it's a lot about.

Mark: Low rates, it's a lot about us I think being conservative on trend and that 40 basis points benefit of jumping off helps us, but I think no matter, who you talk to next year is a tough year in Medicare advantage.

Mark: Let me walk you through a couple of things to help the thinking on that the first is recall we exited <unk>.

Mark: Traditional Medicare advantage and prescription drug.

Mark: In 13 states for 2025.

Speaker Change: Thank you and our next question comes from Brian Weinstein with TD Cowen.

Mark: While the revenue impact was not meaningful the MLR impact was so take 40 bps off the $89, one and normalize the jumping off point to $88 seven.

Hi, Good morning, This is Christian Borgwarner on for Ryan.

Speaker Change: Could you remind us what your assumptions are in the marketplace membership attrition should EQT substrates, but we've not been extended and then following that is there any reason to expect that the marketplace members picked up through this year's open enrollment could be perhaps any more or less sensitive to changes in strategy.

Mark: Okay to that.

Mark: We've got rates like everybody not that great for 2025 call. It two 5% for us.

Mark: And I've got trend a little warmer than that now part of that is mitigated by our bid strategy part of it is mitigated by our medical cost management.

Speaker Change: Okay.

We took all the factors into consideration and our marketplace membership projection and whether that's SVP membership during the year the natural attrition rate.

Mark: But $2 seven ish on trend, which nets you back to 89. So it's a lot about low rates. It's a lot about us I think being conservative on trend and that 40 basis points benefit of jumping off helps us, but I think no matter, who you talk to next year is a tough year in Medicare advantage.

Speaker Change: The FTR all those assumptions factor into a 4% reduction on a monthly basis, 4% reduction in membership throughout the year marketing together, yes, I think thats fair.

Speaker Change: When people talk about the impacts of program integrity changes the agent of record luck is largely behind us FTR everyone's debating that but we really believe the quality of our membership because we have a lot of renewals.

Brian Weinstein: Thank you and the next question comes from Brian Weinstein with TD Cowen.

Christian Borgwarner: Hi, Good morning, This is Christian Borgwarner on for Ryan.

Speaker Change: Could you remind us what your assumptions are in marketplace membership attrition should ACG themed substrates, but theres nothing extended and then following that is there any reason to expect that the marketplace members picked up during this year's open enrollment could be perhaps any more or less sensitive to changes in strategy.

Speaker Change: 70% retention rate this year in spite of a huge growth rate on the top line of membership we have 70% retention in our renewal book.

Speaker Change: That and the enhanced integrity around agent of record we feel very good about the integrity of our membership so what we see a little impact of FTR, maybe but I don't think it's dramatic and Joe summarized at best you've got FTR, you've got a fluctuation you've got normal attrition and don't forget SVP good guys keep coming.

Christian Borgwarner: Okay.

Christian Borgwarner: We took all the factors into consideration and our marketplace membership projection and whether that's SVP membership during the year the natural attrition rate.

Christian Borgwarner: FTR all those assumptions factor into a 4% reduction on a monthly basis, 4% reduction in membership throughout the year marketing together, yes, I think thats fair.

Speaker Change: You roll all that together, we're modeling about 4% attrition of months, we feel pretty good about it.

Speaker Change: Thank you and the next question comes from Michael Hall with Baird.

Christian Borgwarner: When people talk about the impacts of program integrity changes the agent of record luck is largely behind us FTR everyone's debating that but we really believe the quality of our membership because we have a lot of renewals.

Speaker Change: Alright, thank you.

Speaker Change: And the MLR back half pressure I wanted to ask about the risk adjustment true up first like how much of that actually impact your MLR and then just trying to understand tomorrow, Mark you'd provided great color on the trends on <unk>, how much cotton MA bids since you are paring down here, how many PD exposure.

Christian Borgwarner: 70% retention rate this year in spite of a huge growth rate on the top line of membership we have 70% retention in our renewal book.

Speaker Change: Third some states Conversely, increasing your D SNP it almost feels like the.

Christian Borgwarner: That and the enhanced integrity around agent of record we feel very good about the integrity of our membership so will we see a little impact of MTR, maybe but I don't think its dramatic and Joe summarized at best you've got FTR, you've got a fluctuation you've got normal attrition and don't forget SCP good guys keep coming.

Speaker Change: The book is now more shifted towards that elevated.

Speaker Change: CSS outpatient utilization, so I'm, just trying to gain overall better comfort.

Speaker Change: And your pricing your bids and your margins for next year. Thank you.

Speaker Change: Absolutely so on <unk>, yes, we're increasing our exposure there a little bit.

Christian Borgwarner: You roll all that together, we're modeling about 4% attrition of months, we feel pretty good about it.

Speaker Change: That's offset by the bright book and now some of the kinetic care book, but remember these trends in D. SNP that we solve rear up.

Speaker Change: Thank you and the next question comes from Michael Hall with Baird.

Speaker Change: Largely in Q3 and Q4.

Speaker Change: We've been conservative on our outlook for decent pricing and I think a lot of competitors in the market have.

Christian Borgwarner: Alright, thank you.

Speaker Change: The MLR back half pressure I wanted to ask about the risk adjustment true up first like how much of that actually impact your MLR I'm just trying to understand tomorrow, Mark you'd provided great color on the trends into next year, just how much cotton MAA bids since you are paring down here, how many PD exposure.

Because our competitive positioning among many brokers has not changed.

Speaker Change: So I think a lot of people are dialing back in that way, we believe our benefit design anticipated a lot of this.

Speaker Change: We've got guidance going to 89% next year.

Speaker Change: We think we picked up a lot of this trend.

Christian Borgwarner: Certain states, Conversely, increasing or D SNP it almost feels like.

Speaker Change: And more importantly that seem book of business, we have yielding a little bit over 2% pre tax. So we think in spite of these headwinds. These are still attractive and maybe it's a bigger point. Michael is these D. Snips will get we'll get by I believe was 89% MLR, 2% pretax are such a big segue, though into 2026 when.

Christian Borgwarner: Can you bucket now more shifted towards that elevated obviously SaaS application utilization. So I'm just trying to gain overall better comfort.

Christian Borgwarner: And your pricing your bids and your margins for next year. Thank you.

Christian Borgwarner: Absolutely so on <unk>, yes, we're increasing our exposure there a little bit.

We move into the fighting and Heidi environment, which just becomes a growth engine for us with significantly more revenue significantly bigger footprint. So we like 2025 as a jumping off year into a lot of transition, which I think bodes very well for the future.

Christian Borgwarner: That's offset by the bright book and now some of the kinetic care book, but remember these trends in D. SNP that we solve rear up.

Christian Borgwarner: Largely in Q3 and Q4.

Christian Borgwarner: We've been conservative on our outlook for decent pricing and I think a lot of competitors in the market have.

Speaker Change: Got it thank you and just one more on exchange marketplace, yeah. It sounds like you're very confident on achieving.

Christian Borgwarner: Because our competitive positioning among many brokers has not changed.

Achieving mid single digit pretax margin, 44%, that's a pretty strong and I know you're investing are reinvesting actual margin, but was that the level of growth.

Christian Borgwarner: So I think a lot of people are dialing back in that way, we believe our benefit design anticipated a lot of this.

Christian Borgwarner: We've got guidance going to 89% next year, we think we picked up a lot of this trend.

Speaker Change: <unk> had been expecting heading in.

Speaker Change: And it sounds like you are starting the year at like 612000 tracking down to $5 80, and I think you mentioned, 4% reduction in monthly.

Speaker Change: And more importantly that same book of business, we have yielding a little bit over 2% pre tax. So we think in spite of these headwinds. These are still attractive and maybe it's a bigger point. Michael is these D. Snips will get we'll get by I believe was 89% MLR, 2% pretax are such a big segue, though into 2026.

Speaker Change: Specifically related to the FTR re checks.

Speaker Change: How much fluctuation rate.

Speaker Change: Identified and embedded in your guide specifically for Mike now through April or May when it doesn't meet checks finished thank you.

Speaker Change: So whenever we give you numbers, we give it net of our actuation and other forms of attrition.

Speaker Change: When we move into the fighting and Heidi environment, which just becomes a growth engine for us with significantly more revenue significantly bigger footprint. So we like 2025 as a jumping off year into a lot of transition, which I think bodes very well for the future.

Speaker Change: So that you don't have to do additional math and hedge it we believe we've hedged it with our best judgments on all those items now I heard you mentioned, a 44% statistic a lot of people are throwing that around I believe that quarter, one versus quarter, one a year ago, and that's a little bit of a dangerous growth number because what happened.

Speaker Change: Got it thank you and just one more on exchange marketplace, yeah. It sounds like you're very confident on shell achieving mid single digit pretax margin, 44%, that's still pretty strong and I know, you're investing or reinvesting actual margin, but would that the level of growth.

Speaker Change: Last year as <unk> was so strong through the year that the Q1 number naturally grew dramatically across the year. So if you really look at jumping off of Q4, because we grew during the year with all of the S&P gains from from Redetermination, It's a significantly lower growth number Q4.

Speaker Change: Had been expecting heading in.

Speaker Change: And it sounds like Youre, starting the year at like 612000 tracking down to $5 80, and I think you mentioned, 4% reduction in monthly.

Speaker Change: Specifically related to the FTR re checks.

Speaker Change: Q1, it's still a very nice growth number, but its not 44, it's more like half that.

Speaker Change: Much of the saturation rate have you identified.

Embedded in your guide specifically for Mike now through April or May when it doesn't meet checks finished thank you.

Speaker Change: Now the good thing is once again, that's still a lot of growth.

Speaker Change: But with 70% renewal retention.

Speaker Change: So whenever we give you numbers, we give it net of our actuation and other forms of attrition.

Speaker Change: A lot of growth, but it's also a lot of continuity with many of the same members, which as you know from so many perspectives gives us more confidence in our margins.

Speaker Change: So that you don't have to do additional math and hedges, we believe we've hedged it with our best judgments on all of those items now I heard you mentioned the 44% statistic a lot of people are throwing that around I believe that quarter, one versus quarter, one a year ago, and that's a little bit of a dangerous growth number because would have.

Speaker Change: So yes, a lot of growth, but if you look at all the growth that we put on Q2 Q3 Q4, not such a big statement and a lot of continuity coming into it with a really good renewal rate.

Speaker Change: Now we at right now probably a fluctuation rates in the mid eighties, we feel really good about that that's much higher than normal and I think for two reasons. One we've got much more renewal retention.

Speaker Change: And last year as <unk> was so strong through the year that the Q1 number naturally grew dramatically across the year. So if you really look at jumping off of Q4, because we grew during the year with all the S&P gains from from Redetermination, It's a significantly lower growth number Q4.

Speaker Change: Which means the situations going to be higher but the other thing is I believe the agent of record luck really created a lot more quality of new membership.

Speaker Change: Four to Q1, it's still a very nice growth number but its not 44, it's more like half of that now.

Speaker Change: We're not churn membership so that members knew they were being signed up we're very active in the process you are less likely to have lapses non payments things like that so I think boding well for this year, both on greatest actuation rates, but also great renewal retention rates.

Speaker Change: Now the good thing is once again, that's still a lot of growth.

Speaker Change: But with 70% renewal retention it has a lot of growth, but it's also a lot of continuity with many of the same members, which as you know from so many perspectives gives us more confidence in our margins.

Scott Fidel: Thank you and the next question comes from Scott Fidel with Stephens.

Scott Fidel: Hi, Thanks, good morning.

Speaker Change: So yes, a lot of growth, but if you look at all the growth that we put on Q to Q.

Scott Fidel: Wanted to just actually just follow back up on the last question just still on the exchange margin expectation.

Speaker Change: Q3, Q4, not such a big statement and a lot of continuity coming into it with a really good renewal rate.

Scott Fidel: And I'm not sure if I'm missing something but maybe you could help us with the bridge jobs cause you guys talked about around 70% of the enrollment being.

Scott Fidel: Being from retention and where we saw your rates.

Scott Fidel: In terms of your same store rates I think they were sort of flat to down in terms of yields.

Speaker Change: Which means the situation is going to be higher but the other thing is I believe the agent of record luck really created a lot more quality of new membership.

Scott Fidel: For 2000, and 425, so just trying to get to sort of the comfort with the 6% margin.

Scott Fidel: Around sort of I guess the view on trend that you may have on those retained members or.

Speaker Change: We're not churn membership so that members knew they were being signed up we're very active in the process you are less likely to have lapses non payments things like that so I think boding well for this year, both on great effectuate rates, but also great renewal retention rates.

Scott Fidel: Anything else around the product design that would sort of bridge, given given pretty minimal yield year over year on those members.

Scott Fidel: Well I'll kick it to market, but we consciously when youre producing 10% to 11% pretax margins two years in a row.

Scott Fidel: Thank you and the next question comes from Scott Fidel with Stephens.

Scott Fidel: Hi, Thanks, good morning.

Scott Fidel: One you got to remain competitive if too if you keep it there youre going to run into the three year minimum MLR. So.

Scott Fidel: Why don't just actually just follow back up on the last question just still on the exchange margin expectations.

Scott Fidel: It makes perfect sense to invest the excess margin and growth.

Scott Fidel: And I'm not sure if I'm missing something but maybe you could help us with the bread job because you know you guys talked about around 70% of the enrollment being.

Scott Fidel: It's a calibration you try to fit your product to be competitive and competitively positioned as I said, we were number one or two silver priced.

Scott Fidel: Being from retention and then when we saw you know your rates.

Scott Fidel: In terms of your same store rates I think they were sort of flat to down in terms of yield.

Scott Fidel: And 50% of our geographies.

Scott Fidel: We made it a 130000 members in open enrollment we had I think 260000 ads and 130 terms.

Scott Fidel: For 2025, so just trying to get to sort of the comfort with the 6% margin.

Scott Fidel: Which gave us a nice jumping off point.

Scott Fidel: So we have high confidence in the mid single digit margin.

Scott Fidel: Around sort of the I guess the view on trend that you may have on those retained members or.

Scott Fidel: The membership as Mark said being more stable higher percentage of it being renewal.

Scott Fidel: Anything else around the product design that would sort of bridge, given given pretty minimal yield year over year on those members.

Scott Fidel: It means that you know the member you know there there are clinical history.

Scott Fidel: Which gives you higher confidence in obtaining an appropriate risk tour. So the fact that we have more stability in the book.

Scott Fidel: Well I'll take it to market, but we consciously when youre producing 10% to 11% pre tax margins two years in a row.

Scott Fidel: Less special enrollment during the year.

Scott Fidel: One you got to remain competitive and to if you keep it there youre going to run into the three year minimum MLR. So it makes perfect sense to invest the excess margin and growth.

Scott Fidel: And consciously invested a double digit margin into growth makes all the sense in the world and we believe the strategy is going to work for 2025 markets or anything GAAP, yes.

Scott Fidel: It's a calibration you try to fit your product to be competitive and competitively positioned as I said, we are number one or two silver priced.

Scott Fidel: Scott So we're coming off a 75 in 2024 MLR.

Scott Fidel: I have got is targeting a 79% for 2025, which means by definition, we're putting less rate into the market than trend and that's exactly what's happening.

Scott Fidel: And 50% of our geographies, we netted 130000 members in open enrollment we had I think 260000 ads in 130 terms.

Speaker Change: I've got a trend a couple of hundred basis points above rate quite purposeful because as Joe mentioned, there is a minimum MLR out there and I'd, rather invest back into pricing and drive growth then do rebates.

Scott Fidel: Which gave us a nice jumping off point.

Scott Fidel: So we have high confidence in the mid single digit margin.

Scott Fidel: The membership as Mark said being more stable higher percentage of it being renewal.

Speaker Change: So we're seeing nice growth, we're seeing really good price positioning and its quite purposeful, putting less rate into the market than we anticipate trend.

Scott Fidel: Means that you know the member you know their their clinical history.

Scott Fidel: Which gives you higher confidence in obtaining an appropriate risk short so the fact that we have more stability in the book.

Speaker Change: Okay and then just on the follow up was hoping to get just to two numbers on your <unk> 'twenty.

Scott Fidel: Less special enrollment during the year.

Speaker Change: 25.

Speaker Change: Four I don't think we saw investment income and the.

Scott Fidel: And consciously invested a double digit margin into growth makes all defense in the world and we believe this strategy is going to work for 2025 markets or anything to add.

Speaker Change: Unless I'm mistaken I would love if you could give us any investment income expectation that also.

Speaker Change: How you think about operating cash flow after 25 as well thanks.

Scott Fidel: Scott So we're coming off a 75 in 2024 MLR.

Speaker Change: Sure absolutely so.

Speaker Change: Call it about $400 million would.

Scott Fidel: I have got is targeting a 79 for 2025, which means by definition, we're putting less rate into the market than trend and that's exactly what's happening.

Speaker Change: Would be my implied investment income number within guidance, which is a little bit lower than we saw in 2024, but I'm sure you understand the drivers of that given.

Scott Fidel: I've got a trend a couple of hundred basis points above rate quite purposeful because as Joe mentioned, there is a minimum MLR out there and I'd, rather invest back into pricing and drive growth then do rebates.

Speaker Change: The fed's actions in this interest rate environment, so a little bit conservative there on investment income.

Speaker Change: And on operating cash flow.

Speaker Change: Get this question a lot.

Scott Fidel: So we're seeing nice growth, we're seeing really good price positioning and its quite purposeful, putting less rate into the market than we anticipate trend.

Speaker Change: On a full year 2024 basis operating cash flow is down versus 2023 that is true.

Speaker Change: But if you think about it the vast majority of the explanation is simply the corridors.

Speaker Change: Okay and then just on the follow up I was hoping to get just to two numbers on your tech side.

Speaker Change: In 2023, I accrued significant corridors and didn't pay much down in cash.

Scott Fidel: 25.

Scott Fidel: For Us I don't think we saw investment income.

Scott Fidel: Guide unless im mistaken so I would love if you could give us any of that from an income expectation that also.

Speaker Change: In 2024, we accrued significantly lower corridor as Youre, all familiar with that story, yet paid down significant prior year at corridors with cash therefore that explains the vast majority of my operating cash flow.

Scott Fidel: How you think about operating cash flow after twenty-five as well thanks.

Scott Fidel: Sure absolutely so.

Scott Fidel: Called about $400 million.

Speaker Change: Now for US a growing company operating cash flow should always be higher than net income.

Scott Fidel: <unk> would be my implied investment income number within guidance, which is a little bit lower than we saw in 2024, but im sure you understand the drivers of that given.

Speaker Change: And what you saw in 2023 it was the ratio was one four.

Speaker Change: Last year operating cash flow was below for the reasons I mentioned and I think youll see a swing in that back in 2025, what's more important though is cash flow at the parent.

Scott Fidel: The fed's actions in this interest rate environment, so a little bit conservative there on investment income.

Scott Fidel: And on operating cash flow.

Scott Fidel: I get this question a lot.

Scott Fidel: On a full year 2024 basis operating cash flow is down versus 2023 that is true.

Speaker Change: And we have a really good history of moving cash from the subsidiaries up to the parent which is where you can really use it to be clear operating cash flow isn't usable when it's in the subs.

Scott Fidel: But if you think about it the vast majority of the explanation is simply the corridors.

Speaker Change: Our track record of dividend to the parent is very efficient so I feel very good about the cash flow to the parent that I gave you in our ability to deploy capital.

Scott Fidel: In 2023, I accrued significant corridors and didn't pay much down in cash.

Scott Fidel: In 2024, we accrued significantly lower corridor as Youre, all familiar with that story, yet paid down significant prior year corridors with cash therefore that explains the vast majority of my operating cash flow.

Speaker Change: Thank you and that's it.

Speaker Change: Concludes question and answer session as well as todays event. Thank you for dialing into today's presentation. You may now disconnect your lines.

Scott Fidel: Now for US a growing company operating cash flow should always be higher than net income.

Scott Fidel: And what you saw in 2023 it was the ratio was one four.

Scott Fidel: Last year operating cash flow was below for the reasons I mentioned and I think youll see a swing in that back in 2025, what's more important though is cash flow at the parent.

Scott Fidel: And we have a really good history of moving cash from the subsidiaries up to the parent which is where you can really use it to be clear operating cash flow isn't usable when it's in the subs our track record of dividend to the parent is very efficient. So I feel very good about the cash flow to the parent that I gave you in our ability to deploy capital.

Speaker Change: Thank you and this concludes question and answer session as well as todays event. Thank you dialing into today's presentation. You may now disconnect your lines.

Scott Fidel: Okay.

Scott Fidel: [music].

Scott Fidel: Sure.

Scott Fidel: [music].

Scott Fidel: Hum.

Scott Fidel: Yeah.

Scott Fidel: [music].

Scott Fidel: Okay.

Scott Fidel: [music].

Scott Fidel: Okay.

Scott Fidel: Yes.

Scott Fidel: [music].

Scott Fidel: Oh.

Scott Fidel: Yes.

Scott Fidel: [music].

Q4 2024 Molina Healthcare Inc Earnings Call

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