Market Overview

Molina Healthcare Announces First Quarter 2018 Results and Increases Fiscal Year 2018 Guidance

Share:

Molina Healthcare, Inc. (NYSE:MOH):

  • Net income increases to $1.64 per diluted share from $1.37 in the
    first quarter of 2017.
  • First quarter results include a net benefit of $0.38 per diluted share
    for the net impact of the reconciliation of 2017 Marketplace cost
    sharing reduction (CSR) subsidies and other items not included in the
    Company's preliminary 2018 guidance. First quarter 2017 results had
    included a benefit of $0.84 per diluted share from the termination fee
    for a proposed acquisition.
  • Premium revenue decreases 7.0% compared with the first quarter of
    2017, as expected with the Company's repositioning of Marketplace
    operations.
  • Medical care ratio decreases to 86.1% from 88.4% in the first quarter
    of 2017.
  • General and administrative expense ratio decreases to 7.6% from 8.9%
    in the first quarter of 2017.
  • 2018 guidance increased by $1.00 per diluted share to a range of
    $4.00–$4.50 net income per diluted share and $4.24–$4.74 adjusted net
    income per diluted share.
  • Revised 2018 guidance includes the net benefit of $0.38 per diluted
    share for items noted above that were not included in the Company's
    preliminary 2018 guidance and $0.62 per diluted share in improved
    performance against the Company's original internal estimates for the
    full year of 2018.

Molina Healthcare, Inc. (NYSE:MOH) today reported its financial results
for the first quarter of 2018 and provided its revised guidance for
fiscal year 2018.

"The financial results that we announced today reflect the progress we
are making towards our goal of sustainable margin recovery," said Joe
Zubretsky, President and CEO. "First quarter results of $1.64 net income
per diluted share are a significant improvement over 2017 and favorable
to our expectations. Whether measured by key operating metrics, product
line or health plan geography, we met or exceeded our expectations in
most areas."

 

First Quarter 2018 Highlights

 
Three Months Ended March 31,
2018   2017
(In millions, except per-share amounts)
Premium revenue $ 4,323 $ 4,648
Operating income $ 222 $ 82
Net income $ 107 $ 77
Net income per diluted share $ 1.64 $ 1.37
 
Diluted weighted average shares outstanding 65.2 56.2
 
Operating Statistics:
Medical care ratio (1) 86.1 % 88.4 %
G&A ratio (2) 7.6 % 8.9 %
Premium tax ratio (1) 2.3 % 2.3 %
Effective income tax expense rate 40.3 % 41.6 %
Net profit margin (2) 2.3 % 1.6 %
 
__________________
(1)   Medical care ratio represents medical care costs as a percentage of
premium revenue; premium tax ratio represents premium tax expenses
as a percentage of premium revenue plus premium tax revenue.
 
(2) G&A ratio represents general and administrative expenses as a
percentage of total revenue. Net profit margin represents net income
as a percentage of total revenue.
 

Summary of Significant Items Affecting Comparative First Quarter
Financial Results

The table below summarizes the impact of certain items significant to
the Company's financial performance in the periods presented. The
individual items presented below increase (decrease) income before
income tax expense.

 
Three Months Ended March 31,
2018   2017
 

Per

 

Per

Diluted

Diluted

Amount

Share(1)

Amount

Share(1)

(In millions, except per diluted share amounts)
Reimbursement of Marketplace CSR subsidies, for 2017 dates of service $ 70 $ 0.83 $ $
Restructuring costs (25 ) (0.30 )
Loss on debt extinguishment (10 ) (0.15 )
Fee received for terminated acquisition     75   0.84
$ 35   $ 0.38   $ 75   $ 0.84
 
__________________
(1)   Except for certain items that are not deductible for tax purposes,
per diluted share amounts are generally calculated at statutory
income tax rates of 22% and 37% for the first quarters of 2018 and
2017, respectively.
 

First Quarter of 2018 Compared With First Quarter of 2017

Net income for the first quarter of 2018 was $107 million, compared with
net income of $77 million for the first quarter of 2017. Net income per
diluted share was $1.64 for the first quarter of 2018 compared with
$1.37 reported for the first quarter of 2017. Improved performance in
the first quarter of 2018 resulted from improved medical and
administrative cost efficiency.

Net income for the first quarter of 2018 included a net benefit of $35
million ($0.38 per diluted share) for items not included in the
Company's preliminary 2018 guidance. Net income for the first quarter of
2017 included a benefit of $75 million ($0.84 per diluted share) for the
receipt of an acquisition termination fee.

Premium revenue decreased approximately 7% when compared with the first
quarter of 2017. Lower premium revenue was driven by a decrease in
Marketplace membership of over 50%, partially offset by Marketplace
premium rate increases. As previously disclosed, the Company has
increased premium rates and reduced its Marketplace presence effective
January 1, 2018, as part of its overall program to improve profitability.

Overall, the medical care ratio decreased to 86.1%, from 88.4% in the
first quarter of 2017. Excluding the benefit of the 2017 CSR
reimbursement, the consolidated medical care ratio was 87.7% in the
first quarter of 2018.

  • The medical care ratio for the Medicaid and Medicare programs combined
    decreased to 90.0%, from 91.0% in the first quarter of 2017. Improved
    performance at the Florida, Illinois, Ohio and South Carolina health
    plans, partially offset by a decline in performance at the Washington
    health plan, drove the decrease in the consolidated medical care ratio
    for Medicaid and Medicare combined. The 2017 CSR reimbursement had no
    impact on the medical care ratio for the Company's Medicaid and
    Medicare programs.
  • The medical care ratio for the Company's Marketplace operations was
    50.6% for the first quarter of 2018. Excluding the impact of the 2017
    Marketplace CSR adjustment noted below, the medical care ratio for
    Marketplace operations decreased to approximately 67%, from 75% in the
    first quarter of 2017. Improved profitability in Marketplace
    operations is primarily the result of premium increases implemented
    effective January 1, 2018.

The general and administrative (G&A) expense ratio decreased to 7.6%,
from 8.9% in the first quarter of 2017. Excluding the impact of
Marketplace broker commissions and exchange fees in both periods, the
G&A ratio decreased to 6.8%, from 7.5% in the first quarter of 2017.

The Company recognized a benefit of approximately $70 million ($0.83 per
diluted share) in reduced medical expense related to 2017 dates of
service as a result of the federal government's confirmation that the
reconciliation of 2017 Marketplace CSR subsidies would be performed on
an annual basis. In the fourth quarter of 2017, the Company had assumed
a nine-month reconciliation of this item pending confirmation of the
time period to which the 2017 reconciliation would be applied.

Approximately $25 million ($0.30 per diluted share) of restructuring
costs were recognized in the first quarter, primarily relating to the
write-off of prepaid and other assets in connection with the continuing
re-design of core processes.

Approximately $10 million ($0.15 per diluted share) loss on debt
extinguishment was recognized in the first quarter in connection with
the issuance of 1.8 million common shares in exchange for $97 million
principal amount of the Company's 1.625% convertible senior notes.

2018 Revised Guidance

The following table summarizes 2018 Revised Guidance (1):

   
Revised Preliminary
Premium revenue ~ $17.4B ~ $17.5B
Service revenue ~ $525M ~ $525M
Premium tax revenue ~ $425M ~ $410M
Health insurer fees reimbursed ~ $280M ~ $295M
Investment income and other revenue   ~ $110M ~ $85M
Total revenue ~ $18.7B ~ $18.8B
Medical care costs ~$15.4B ~$15.6B
Medical care ratio (2) 88% - 89% ~ 89%
Cost of service revenue ~ $480M ~ $480M
General and administrative expenses ~ $1.4B ~ $1.4B
G&A ratio (3) ~ 7.4% ~ 7.3%
Premium tax expenses ~$425M ~$410M
Health insurer fees ~ $300M ~ $310M
Depreciation and amortization ~ $115M ~ $115M
Restructuring and separation costs ~ $25M
Interest expense and other income, net ~ $135M ~ $125M
Income before income taxes $450M - $495M $355M - $400M
Net income $272M - $306M $202M - $236M
EBITDA (4) $724M - $768M $632M - $676M
Effective tax rate 38% - 40% 41% - 43%
Net profit margin (3) 1.5% - 1.6% 1.1% - 1.3%
Diluted weighted average shares ~ 68.0M ~ 67.3M
Net income per share $4.00 - $4.50 $3.00 - $3.50
Adjusted net income per share (4) $4.24 - $4.74 $3.23 - $3.73
End-of-year Marketplace membership 356,000 303,000
End-of-year Non-Marketplace membership 3,674,000 3,738,000
 
__________________
(1)   All amounts are estimates; actual results may differ materially. See
the Company's risk factors as discussed in its 2017 Form 10-K and
other filings and the statements below in this press release after
the heading "Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995."
(2) Medical care ratio represents medical care costs as a percentage of
premium revenue.
(3) G&A ratio represents general and administrative expenses as a
percentage of total revenue. Net profit margin represents net income
as a percentage of total revenue.
(4) See reconciliation of non-GAAP financial measures at the end of this
release.
 

Conference Call

Management will host a conference call and webcast to discuss Molina
Healthcare's first quarter 2018 results at 8:30 a.m. Eastern time on
Monday, April 30, 2018. The number to call for the interactive
teleconference is (877) 270-2148 and entering confirmation number
7249375. A telephonic replay of the conference call will be available
through Friday, May 4, 2018, by dialing (877) 344-7529 and entering
confirmation number 10118429. A live audio broadcast of this conference
call will be available on Molina Healthcare's website, molinahealthcare.com.
A 30-day online replay will be available approximately an hour following
the conclusion of the live broadcast.

About Molina Healthcare

Molina Healthcare, Inc., a FORTUNE 500 company, provides managed health
care services under the Medicaid and Medicare programs and through the
state insurance marketplaces. Through its locally operated health plans,
Molina Healthcare served approximately 4.1 million members as of March
31, 2018. For more information about Molina Healthcare, please visit molinahealthcare.com.

Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
: This earnings release contains "forward-looking
statements" regarding the Company's 2018 revised guidance, as well as
its plans, expectations, and anticipated future events. Actual results
could differ materially due to numerous known and unknown risks and
uncertainties. Those known risks and uncertainties include, but are not
limited to, the following:

  • the success of the Company's profit improvement and maintenance
    initiatives, including the timing and amounts of the benefits
    realized, and administrative savings achieved;
  • the numerous political and market-based uncertainties associated
    with the Affordable Care Act (the "ACA") or "Obamacare;"
  • the market dynamics surrounding the ACA Marketplaces, including but
    not limited to uncertainties associated with risk transfer
    requirements, the potential for disproportionate enrollment of higher
    acuity members, the discontinuation of premium tax credits, and the
    adequacy of agreed rates;
  • subsequent adjustments to reported premium revenue based upon
    subsequent developments or new information, including changes to
    estimated amounts payable or receivable related to Marketplace risk
    adjustment/risk transfer;
  • effective management of the Company's medical costs;
  • the Company's ability to predict with a reasonable degree of
    accuracy utilization rates, including utilization rates associated
    with seasonal flu patterns or other newly emergent diseases;
  • significant budget pressures on state governments and their
    potential inability to maintain current rates, to implement expected
    rate increases, or to maintain existing benefit packages or membership
    eligibility thresholds or criteria;
  • the full reimbursement of the ACA health insurer fee, or HIF;
  • the success of the Company's efforts to retain existing government
    contracts, including those in Florida, New Mexico, Puerto Rico, Texas,
    and Washington, including the success of any protest filings;
  • the Company's ability to manage its operations, including
    maintaining and creating adequate internal systems and controls
    relating to authorizations, approvals, provider payments, and the
    overall success of its care management initiatives;
  • the Company's ability to consummate and realize benefits from
    acquisitions or divestitures;
  • the Company's receipt of adequate premium rates to support
    increasing pharmacy costs, including costs associated with specialty
    drugs and costs resulting from formulary changes that allow the option
    of higher-priced non-generic drugs;
  • the Company's ability to operate profitably in an environment where
    the trend in premium rate increases lags behind the trend in
    increasing medical costs;
  • the interpretation and implementation of federal or state medical
    cost expenditure floors, administrative cost and profit ceilings,
    premium stabilization programs, profit sharing arrangements, and risk
    adjustment provisions and requirements;
  • the Company's estimates of amounts owed for such cost expenditure
    floors, administrative cost and profit ceilings, premium stabilization
    programs, profit-sharing arrangements, and risk adjustment provisions;
  • the Medicaid expansion cost corridors in California, New Mexico,
    and Washington, and any other retroactive adjustment to revenue where
    methodologies and procedures are subject to interpretation or
    dependent upon information about the health status of participants
    other than Molina members;
  • the interpretation and implementation of at-risk premium rules and
    state contract performance requirements regarding the achievement of
    certain quality measures, and the Company's ability to recognize
    revenue amounts associated therewith;
  • cyber-attacks or other privacy or data security incidents resulting
    in an inadvertent unauthorized disclosure of protected health
    information;
  • the success of the Company's health plan in Puerto Rico, including
    the resolution of the Puerto Rico debt crisis, payment of all amounts
    due under the Company's Medicaid contract, the effect of the PROMESA
    law, the impact of Hurricane Maria and the Company's efforts to better
    manage the health care costs of its Puerto Rico health plan;
  • the success and renewal of the Company's duals demonstration
    programs in California, Illinois, Michigan, Ohio, South Carolina, and
    Texas;
  • the accurate estimation of incurred but not reported or paid
    medical costs across the Company's health plans;
  • efforts by states to recoup previously paid and recognized premium
    amounts;
  • complications, member confusion, or enrollment backlogs related to
    the annual renewal of Medicaid coverage;
  • government audits and reviews, or potential investigations, and any
    fine, sanction, enrollment freeze, monitoring program, or premium
    recovery that may result therefrom;
  • changes with respect to the Company's provider contracts and the
    loss of providers;
  • approval by state regulators of dividends and distributions by the
    Company's health plan subsidiaries;
  • changes in funding under the Company's contracts as a result of
    regulatory changes, programmatic adjustments, or other reforms;
  • high dollar claims related to catastrophic illness;
  • the favorable resolution of litigation, arbitration, or
    administrative proceedings;
  • the relatively small number of states in which we operate health
    plans, including the greater scale and revenues of the Company's
    California, Ohio, Texas, and Washington health plans;
  • the availability of adequate financing on acceptable terms to fund
    and capitalize the Company's expansion and growth, repay the Company's
    outstanding indebtedness at maturity and meet its liquidity needs,
    including the interest expense and other costs associated with such
    financing;
  • the Company's failure to comply with the financial or other
    covenants in its credit agreements or the indentures governing its
    outstanding notes;
  • the sufficiency of the Company's funds on hand to pay the amounts
    due upon conversion or maturity of its outstanding notes;
  • the failure of a state in which we operate to renew its federal
    Medicaid waiver;
  • changes generally affecting the managed care or Medicaid management
    information systems industries;
  • increases in government surcharges, taxes, and assessments,
    including but not limited to the deductibility of certain compensation
    costs;
  • newly emergent viruses or widespread epidemics, public catastrophes
    or terrorist attacks, and associated public alarm;
  • increasing competition and consolidation in the Medicaid industry;

and numerous other risk factors, including those discussed in the
Company's periodic reports and filings with the Securities and Exchange
Commission. These reports can be accessed under the investor relations
tab of the Company's website or on the SEC's website at
sec.gov.
Given these risks and uncertainties, the Company can give no assurances
that its forward-looking statements will prove to be accurate, or that
any other results or events projected or contemplated by its
forward-looking statements will in fact occur, and the Company cautions
investors not to place undue reliance on these statements. All
forward-looking statements in this release represent the Company's
judgment as of April 30, 2018, and the Company disclaims any obligation
to update any forward-looking statements to conform the statement to
actual results or changes in its expectations.

 
MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
 
Three Months Ended March 31,
2018   2017
(Dollar amounts in millions, except per-share amounts)
Revenue:
Premium revenue $ 4,323 $ 4,648
Service revenue 134 131
Premium tax revenue 104 111
Health insurer fees reimbursed 61
Investment income and other revenue 24   14  
Total revenue 4,646   4,904  
Operating expenses:
Medical care costs 3,722 4,111
Cost of service revenue 120 122
General and administrative expenses 352 439
Premium tax expenses 104 111
Health insurer fees 75
Depreciation and amortization 26 39
Restructuring and separation costs 25    
Total operating expenses 4,424   4,822  
Operating income 222   82  
Other expenses (income), net:
Interest expense 33 26
Other expense (income), net 10   (75 )
Total other expenses (income), net 43   (49 )
Income before income tax expense 179 131
Income tax expense 72   54  
Net income $ 107   $ 77  
 
Net income per diluted share $ 1.64   $ 1.37  
 
Diluted weighted average shares outstanding 65.2   56.2  
 
Operating Statistics:
Medical care ratio 86.1 % 88.4 %
G&A ratio 7.6 % 8.9 %
Premium tax ratio 2.3 % 2.3 %
Effective income tax expense rate 40.3 % 41.6 %
Net profit margin 2.3 % 1.6 %
 
   
MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
March 31, December 31,
2018 2017
(In millions,
except per-share data)
ASSETS
Current assets:
Cash and cash equivalents $ 3,729 $ 3,186
Investments 2,444 2,524
Restricted investments 77 169
Receivables 950 871
Prepaid expenses and other current assets 411 239
Derivative asset 585   522  
Total current assets 8,196 7,511
Property, equipment, and capitalized software, net 318 342
Goodwill and intangible assets, net 250 255
Restricted investments 120 119
Deferred income taxes 114 103
Other assets 135   141  
$ 9,133   $ 8,471  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims and benefits payable $ 2,023 $ 2,192
Amounts due government agencies 1,714 1,542
Accounts payable and accrued liabilities 713 366
Deferred revenue 404 282
Current portion of long-term debt 566 653
Derivative liability 585   522  
Total current liabilities 6,005 5,557
Long-term debt 1,318 1,318
Lease financing obligations 198 198
Other long-term liabilities 59   61  
Total liabilities 7,580   7,134  
Stockholders' equity:
Common stock, $0.001 par value, 150 shares authorized; outstanding:
62 shares at March 31, 2018 and 60 shares at December 31, 2017
Preferred stock, $0.001 par value; 20 shares authorized, no shares
issued and outstanding
Additional paid-in capital 1,153 1,044
Accumulated other comprehensive loss (12 ) (5 )
Retained earnings 412   298  
Total stockholders' equity 1,553   1,337  
$ 9,133   $ 8,471  
 
 
MOLINA HEALTHCARE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Three Months Ended March 31,
2018   2017
(In millions)
Operating activities:
Net income $ 107 $ 77
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 37 49
Deferred income taxes (6 ) (5 )
Share-based compensation 6 6
Non-cash restructuring charges 17
Amortization of convertible senior notes and lease financing
obligations
7 8
Loss on debt extinguishment 10
Other, net 2 3
Changes in operating assets and liabilities:
Receivables (83 ) (32 )
Prepaid expenses and other current assets (239 ) (12 )
Medical claims and benefits payable (163 ) (3 )
Amounts due government agencies 172 373
Accounts payable and accrued liabilities 319 50
Deferred revenue 130 146
Income taxes 78   59  
Net cash provided by operating activities 394   719  
Investing activities:
Purchases of investments (389 ) (733 )
Proceeds from sales and maturities of investments 543 433
Purchases of property, equipment, and capitalized software (4 ) (26 )
Increase in restricted investments held-to-maturity (5 )
Other, net (5 ) (6 )
Net cash provided by (used in) investing activities 145   (337 )
Financing activities:
Cash paid for financing transaction fees (5 )
Proceeds from employee stock plans 1
Other, net   (2 )
Net cash used in financing activities (5 ) (1 )
Net increase in cash, cash equivalents, and restricted cash and cash
equivalents
534 381
Cash, cash equivalents, and restricted cash and cash equivalents at
beginning of period
3,290   2,912  
Cash, cash equivalents, and restricted cash and cash equivalents at
end of period
$ 3,824   $ 3,293  
 
     
MOLINA HEALTHCARE, INC.
UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP
 
March 31, December 31, March 31,
2018 2017 2017
Ending Membership by Program:
Temporary Assistance for Needy Families (TANF) and Children's Health
Insurance Program (CHIP)
2,435,000 2,457,000 2,548,000
Medicaid Expansion 662,000 668,000 684,000
Aged, Blind or Disabled (ABD) 411,000   412,000   401,000
Total Medicaid 3,508,000   3,537,000   3,633,000
Medicare-Medicaid Plan (MMP) - Integrated 56,000 57,000 55,000
Medicare Special Needs Plans 44,000   44,000   43,000
Total Medicare 100,000   101,000   98,000
Excluding Marketplace 3,608,000   3,638,000   3,731,000
Marketplace 453,000   815,000   1,035,000
4,061,000   4,453,000   4,766,000
 
Ending Membership by Health Plan:
California 656,000 746,000 765,000
Florida 414,000 625,000 711,000
Idaho (1) 2,000
Illinois 151,000 165,000 194,000
Michigan 388,000 398,000 417,000
New Mexico 250,000 253,000 270,000
New York 32,000 32,000 34,000
Ohio 328,000 327,000 351,000
Puerto Rico 316,000 314,000 326,000
South Carolina 117,000 116,000 111,000
Texas 476,000 430,000 493,000
Utah 90,000 152,000 172,000
Washington 779,000 777,000 785,000
Wisconsin 62,000   118,000   137,000
4,061,000   4,453,000   4,766,000
 
__________________
(1)   Idaho operations commenced January 1, 2018.
 
 
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA

(In millions, except percentages and per-member per-month
amounts)

 
 
Three Months Ended March 31, 2018

Member

Months (1)

  Premium Revenue   Medical Care Costs   MCR (2)  

Medical

Margin

Total   PMPM Total   PMPM
TANF and CHIP 7.4 $ 1,373 $ 185.14 $ 1,272 $ 171.56 92.7 % $ 101
Medicaid Expansion 2.0 752 372.75 641 317.46 85.2 111
ABD 1.2   1,254   1,014.23 1,155   934.55 92.1 99
Total Medicaid 10.6   3,379   316.69 3,068   287.56 90.8 311
MMP 0.2 357 2,137.88 305 1,824.21 85.3 52
Medicare 0.1   157   1,188.97 131   994.81 83.7 26
Total Medicare 0.3   514   1,718.61 436   1,457.75 84.8 78
Non-Marketplace 10.9   3,893   354.94 3,504   319.48 90.0 389
Marketplace 1.4   430   312.87 218   158.40 50.6 212
12.3   $ 4,323   $ 350.25 $ 3,722   $ 301.55 86.1 % $ 601
 
Three Months Ended March 31, 2017

Member

Months (1)

Premium Revenue Medical Care Costs MCR (2)

Medical

Margin

Total PMPM Total PMPM
TANF and CHIP 7.7 $ 1,402 $ 182.69 $ 1,304 $ 170.02 93.1 % $ 98
Medicaid Expansion 2.0 817 398.70 689 336.51 84.4 128
ABD 1.2   1,196   1,006.84 1,130   951.32 94.5 66
Total Medicaid 10.9   3,415   312.98 3,123   286.35 91.5 292
MMP 0.2 344 2,088.96 307 1,859.41 89.0 37
Medicare 0.1   138   1,068.20 117   902.67 84.5 21
Total Medicare 0.3   482   1,640.63 424   1,439.20 87.7 58
Non-Marketplace 11.2   3,897   347.84 3,547   316.62 91.0 350
Marketplace 2.9   751   262.16 564   196.72 75.0 187
14.1   $ 4,648   $ 330.39 $ 4,111   $ 292.20 88.4 % $ 537
 
__________________
(1)   A member month is defined as the aggregate of each month's ending
membership for the period presented.
(2) The MCR represents medical costs as a percentage of premium revenue.
 
 
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL
DATA—NON-MARKETPLACE

(In millions, except percentages and per-member per-month
amounts)

 
Three Months Ended March 31, 2018

Member

Months

  Premium Revenue   Medical Care Costs   MCR  

Medical

Margin

Total   PMPM Total   PMPM
California 1.8 $ 494 $ 272.61 $ 412 $ 227.31 83.4 % $ 82
Florida 1.0 382 351.58 345 317.41 90.3 37
Idaho (1) 4 960.33 4 977.00 101.8
Illinois 0.5 141 298.17 122 257.50 86.4 19
Michigan 1.1 376 336.64 331 296.19 88.0 45
New Mexico 0.7 319 466.17 310 453.30 97.2 9
New York 0.1 46 468.91 39 396.76 84.6 7
Ohio 0.9 551 576.60 460 481.26 83.5 91
Puerto Rico 1.0 186 193.13 174 181.39 93.9 12
South Carolina 0.3 122 348.08 104 297.52 85.5 18
Texas 0.7 562 809.90 519 747.53 92.3 43
Utah 0.3 92 339.71 77 284.61 83.8 15
Washington 2.3 584 256.66 574 252.41 98.3 10
Wisconsin 0.2 34 183.97 29 154.53 84.0 5
Other (2)     4   (4 )
10.9   $ 3,893   $ 354.94 $ 3,504   $ 319.48 90.0 % $ 389  
 
 
Three Months Ended March 31, 2017

Member

Months

Premium Revenue Medical Care Costs MCR

Medical

Margin

Total PMPM Total PMPM
California 1.8 $ 572 $ 308.57 $ 484 $ 261.31 84.7 % $ 88
Florida 1.1 364 339.30 352 328.45 96.8 12
Idaho (1)
Illinois 0.6 161 276.58 180 310.08 112.1 (19 )
Michigan 1.2 382 327.41 333 284.58 86.9 49
New Mexico 0.7 308 422.87 299 410.75 97.1 9
New York 0.1 46 441.19 42 409.63 92.8 4
Ohio 1.0 520 527.79 462 469.04 88.9 58
Puerto Rico 1.0 183 186.51 165 168.18 90.2 18
South Carolina 0.3 105 317.07 98 293.34 92.5 7
Texas 0.7 527 751.86 489 696.43 92.6 38
Utah 0.3 89 313.20 72 253.75 81.0 17
Washington 2.2 605 273.18 535 241.77 88.5 70
Wisconsin 0.2 33 165.40 27 135.91 82.2 6
Other (2)   2   9   (7 )
11.2   $ 3,897   $ 347.84 $ 3,547   $ 316.62 91.0 % $ 350  
 
__________________
(1)   Idaho operations commenced January 1, 2018.
(2) "Other" medical care costs include primarily medically related
administrative costs at the parent company.
 
 
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—MARKETPLACE

(In millions, except percentages and per-member per-month
amounts)

 
Three Months Ended March 31, 2018

Member

Months

  Premium Revenue   Medical Care Costs   MCR  

Medical

Margin

Total   PMPM Total   PMPM
California 0.2 $ 49 $ 253.93 $ 31 $ 162.64 64.0 % $ 18
Florida 0.2 45 271.12 (16 ) (95.60 ) (35.3 ) 61
Michigan 0.1 13 224.11 9 144.16 64.3 4
New Mexico 0.1 34 438.67 19 246.50 56.2 15
Ohio 0.1 26 403.44 17 262.87 65.2 9
Texas 0.7 229 308.74 146 196.89 63.8 83
Utah (1) (3 ) NM (10 ) NM NM 7
Washington 39 526.36 30 405.40 77.0 9
Wisconsin (1) (2 ) NM (8 ) NM NM 6
Other        
1.4   $ 430   $ 312.87 $ 218   $ 158.40 50.6 % $ 212  
 
 
Three Months Ended March 31, 2017

Member

Months

Premium Revenue Medical Care Costs MCR

Medical

Margin

Total PMPM Total PMPM
California 0.4 $ 72 $ 184.34 $ 26 $ 65.53 35.5 % $ 46
Florida 1.0 292 292.80 206 205.91 70.3 86
Michigan 0.1 11 149.23 6 95.92 64.3 5
New Mexico 0.1 22 265.06 19 232.50 87.7 3
Ohio 0.1 21 334.26 17 273.72 81.9 4
Texas 0.7 157 222.40 113 161.02 72.4 44
Utah 0.2 45 202.48 51 228.20 112.7 (6 )
Washington 0.1 37 302.51 46 365.94 121.0 (9 )
Wisconsin 0.2 94 453.39 81 389.80 86.0 13
Other     (1 ) 1  
2.9   $ 751   $ 262.16 $ 564   $ 196.72 75.0 % $ 187  
 

__________________

(1)   We terminated Marketplace operations at our Utah and Wisconsin
health plans effective January 1, 2018, so the ratios for 2018
periods are not meaningful for those health plans.
 
 
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—TOTAL

(In millions, except percentages and per-member per-month
amounts)

 
Three Months Ended March 31, 2018

Member

Months

  Premium Revenue   Medical Care Costs   MCR  

Medical

Margin

Total   PMPM Total   PMPM
California 2.0 $ 543 $ 270.80 $ 443 $ 221.03 81.6 % $ 100
Florida 1.2 427 340.91 329 262.65 77.0 98
Idaho 4 960.33 4 977.00 101.8
Illinois 0.5 141 298.17 122 257.50 86.4 19
Michigan 1.2 389 331.08 340 288.68 87.2 49
New Mexico 0.8 353 463.33 329 431.94 93.2 24
New York 0.1 46 468.91 39 396.76 84.6 7
Ohio 1.0 577 565.62 477 467.41 82.6 100
Puerto Rico 1.0 186 193.13 174 181.39 93.9 12
South Carolina 0.3 122 348.08 104 297.52 85.5 18
Texas 1.4 791 551.28 665 463.37 84.1 126
Utah 0.3 89 328.83 67 246.78 75.0 22
Washington 2.3 623 265.20 604 257.25 97.0 19
Wisconsin 0.2 32 172.09 21 110.91 64.4 11
Other     4   (4 )
12.3   $ 4,323   $ 350.25 $ 3,722   $ 301.55 86.1 % $ 601  
 
 
Three Months Ended March 31, 2017

Member

Months

Premium Revenue Medical Care Costs MCR

Medical

Margin

Total PMPM Total PMPM
California 2.2 $ 644 $ 286.92 $ 510 $ 227.19 79.2 % $ 134
Florida 2.1 656 316.86 558 269.33 85.0 98
Idaho
Illinois 0.6 161 276.58 180 310.08 112.1 (19 )
Michigan 1.3 393 316.80 339 273.36 86.3 54
New Mexico 0.8 330 406.90 318 392.72 96.5 12
New York 0.1 46 441.19 42 409.63 92.8 4
Ohio 1.1 541 516.00 479 457.14 88.6 62
Puerto Rico 1.0 183 186.51 165 168.18 90.2 18
South Carolina 0.3 105 317.07 98 293.34 92.5 7
Texas 1.4 684 486.96 602 428.55 88.0 82
Utah 0.5 134 264.73 123 242.57 91.6 11
Washington 2.3 642 274.74 581 248.40 90.4 61
Wisconsin 0.4 127 311.30 108 264.53 85.0 19
Other   2   8   (6 )
14.1   $ 4,648   $ 330.39 $ 4,111   $ 292.20 88.4 % $ 537  
 
 
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA

(In millions, except percentages and per-member per-month
amounts)

 

The following tables provide the details of our medical care costs
for the periods indicated:

 
Three Months Ended March 31,
2018   2017
    % of     % of
Amount PMPM Total Amount PMPM Total
Fee for service $ 2,745 $ 222.38 73.8 % $ 3,086 $ 219.32 75.1 %
Pharmacy 583 47.25 15.6 616 43.76 15.0
Capitation 312 25.28 8.4 324 23.06 7.9
Other 82   6.64   2.2   85   6.06   2.0  
$ 3,722   $ 301.55   100.0 % $ 4,111   $ 292.20   100.0 %
 
   

The following table provides the details of our medical claims and
benefits payable as of the dates indicated:

 
March 31, December 31,
2018 2017
Fee-for-service claims incurred but not paid (IBNP) $ 1,586 $ 1,717
Pharmacy payable 127 112
Capitation payable 62 67
Other (1) 248   296
$ 2,023   $ 2,192
 
__________________
(1)   "Other" medical claims and benefits payable include amounts payable
to certain providers for which we act as an intermediary on behalf
of various state agencies without assuming financial risk. Such
receipts and payments do not impact our consolidated statements of
income. As of March 31, 2018 and December 31, 2017, we had recorded
non-risk provider payables of approximately $146 million and $122
million, respectively.
 

MOLINA HEALTHCARE, INC.
UNAUDITED CHANGE IN MEDICAL
CLAIMS AND BENEFITS PAYABLE

(Dollars in millions, except
per-member amounts)

Our claims liability includes a provision for adverse claims deviation
based on historical experience and other factors including, but not
limited to, variations in claims payment patterns, changes in
utilization and cost trends, known outbreaks of disease, and large
claims. Our reserving methodology is consistently applied across all
periods presented. The amounts displayed for "Components of medical care
costs related to: Prior period" represent the amount by which our
original estimate of claims and benefits payable at the beginning of the
period was (more) less than the actual amount of the liability based on
information (principally the payment of claims) developed since that
liability was first reported. The following table presents the
components of the change in medical claims and benefits payable for the
periods indicated:

   
Three Months Ended March 31,

Year Ended

December 31,

2017

2018   2017
Medical claims and benefits payable, beginning balance $ 2,192 $ 1,929 $ 1,929
Components of medical care costs related to:
Current period 3,963 4,253 17,037
Prior period (241 ) (142 ) 36  
Total medical care costs 3,722   4,111   17,073  
 
Change in non-risk provider payables 45   (96 ) (106 )
Payments for medical care costs related to:
Current period 2,498 2,683 15,130
Prior period 1,438   1,335   1,574  
Total paid 3,936   4,018   16,704  
Medical claims and benefits payable, ending balance $ 2,023   $ 1,926   $ 2,192  
 
Benefit from prior period as a percentage of:
Balance at beginning of period 11.0 % 7.4 % (1.9 )%
Premium revenue, trailing twelve months 1.3 % 0.8 % (0.2 )%
Medical care costs, trailing twelve months 1.4 % 0.9 % (0.2 )%
 
Days in claims payable, fee for service (1) 53 45 54
 
__________________
(1)   Claims payable includes primarily IBNP. Additionally, it includes
certain fee-for-service payables reported in "Other" medical claims
and benefits payable amounting to $22 million, $119 million and $99
million, as of March 31, 2018, 2017 and December 31, 2017,
respectively.
 

MOLINA HEALTHCARE, INC.
UNAUDITED NON-GAAP FINANCIAL
MEASURES

We use non-generally accepted accounting principles, or non-GAAP,
financial measures as supplemental metrics in evaluating our financial
performance, making financing and business decisions, and forecasting
and planning for future periods. For these reasons, management believes
such measures are useful supplemental measures to investors in comparing
our performance to the performance of other public companies in the
health care industry. These non-GAAP financial measures should be
considered as supplements to, and not as substitutes for or superior to,
GAAP measures. See further information regarding non-GAAP measures below
the tables (in millions, except per diluted share amounts).

 
Three Months Ended March 31,
2018   2017
 
Net income $ 107 $ 77
Adjustments:
Depreciation, and amortization of intangible assets and capitalized
software
34 46
Interest expense 33 26
Income tax expense 72   54  
EBITDA $ 246   $ 203  
 
Three Months Ended March 31,
2018   2017
Amount  

Per

Diluted

share

Amount  

Per

Diluted

share

Net income $ 107 $ 1.64 $ 77 $ 1.37
Adjustment:
Amortization of intangible assets 5 0.08 9 0.16
Income tax effect (1) (1 ) (0.01 ) (3 ) (0.06 )
Amortization of intangible assets, net of tax effect 4   0.07   6   0.10  
Adjusted net income $ 111   $ 1.71   $ 83   $ 1.47  
 
__________________
(1)   Income tax effect of adjustments calculated at the blended federal
and state statutory tax rate of 22% and 37% for the first quarters
of 2018 and 2017, respectively.
 

The following are descriptions of the adjustments made to GAAP measures
used to calculate the non-GAAP measures used in this news release:

Earnings before interest, taxes, depreciation and amortization (EBITDA):
Net income (GAAP) less depreciation, and amortization of intangible
assets and capitalized software, interest expense and income tax
expense. We believe that EBITDA is helpful in assessing our ability to
meet the cash demands of our operating units.

Adjusted net income: Net income (GAAP) less amortization of
intangible assets, net of income tax effect calculated at the statutory
tax rate. We believe that adjusted net income is helpful in assessing
our financial performance exclusive of the non-cash impact of the
amortization of purchased intangibles.

Adjusted net income per diluted share: Adjusted net income
divided by weighted average common shares outstanding on a fully diluted
basis.

   
MOLINA HEALTHCARE, INC.
2018 REVISED GUIDANCE
 
Reconciliation of Non-GAAP Financial Measures

(in millions, except per-share amounts)

 
Low End High End
Net income $ 272 $ 306
Adjustments:
Depreciation, and amortization of intangible assets and capitalized
software
148 148
Interest expense 125 125
Income tax expense 179   189  
EBITDA $ 724   $ 768  
 
Low End High End
Amount   Per share (2) Amount Per share (2)
Net income $ 272 $ 4.00 $ 306 $ 4.50
Adjustments:
Amortization of intangible assets 21 0.31 21 0.31
Income tax effect (1) (5 ) (0.07 ) (5 ) (0.07 )
Amortization of intangible assets, net of tax effect 16   0.24   16   0.24  
Adjusted net income $ 288   $ 4.24   $ 322   $ 4.74  
 
__________________
(1)   Income tax effect calculated at the statutory tax rate of 22%.
(2) Computation assumes 68.0 million diluted weighted average shares
outstanding.
 

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