Centene Corporation

And welcome to the Centene Corporation fourth quarter and full year 2020 earnings conference call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Jennifer Gilligan, Senior Vice President, Finance and Investment Relations. Please go ahead, ma'am.

Thank you, Rocco, and good morning, everyone. Thank you for joining us on our fourth quarter and full year 2020 Earnings Results Conference Call. Michael Neidorf, Chairman, President, and Chief Executive Officer, and Jeff Schwanicki, Executive Vice President and Chief Financial Officer of Centene, will host this morning's call, which also can be accessed through our website at centene.com. Any remarks that Centene may make about future expectations, plans, and prospects constitute forward-looking statements for the purpose of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors. including those discussed in Centene's most recent Form 10Q, filed in October, and Form 10K, and our previously filed Form 10K, and other public SEC filings, including the risks and uncertainties described with respect to the potential impacts of COVID-19 on our business and results of operations. Centene anticipates that subsequent events and developments may cause its estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. The call will also refer to certain non-GAAP measures. A reconciliation of these measures with the most directly comparable GAAP measures can be found in our fourth quarter 2020 press release, which is available on the company's website at centene.com under the Investors section. Additionally, please mark your calendars for our upcoming first quarter 2021 earnings results call on April 27th, 2021. With that, I would like to turn the call over to our chairman, president, and CEO, Michael Nidor.

Michael? Thank you, Jennifer. Thank you. Good morning, and thank you for joining us. Personally, and on behalf of the corporation, I am very pleased with the results we delivered in 2020. Early in 2020, we stated that the year would be choppy, and it was. We also told you that Centene would manage through the crisis we face, care for our stakeholders, and emerge stronger for it, and we did. In 2020, we added over 10 million members, representing growth of 67%. We delivered full-year revenue of $111 billion, representing 49% growth, and adjusted diluted earnings per share of $5 up 13% over the prior year. Importantly, we continue to invest in the foundational strengths of our enterprise and create long-term pathways for growth. Turning now to 2021. While we continue to operate in a pandemic environment, We intend to demonstrate the same transparency and agility we did during this past year. Last night, we filed an 8K announcing that the Board has authorized up to $1 billion of stock repurchase. This includes the unspent portion of the previous authorizations. Our capital deployment priorities include providing new subsidiaries such as Oklahoma with risk-based capital. reducing debt to further enhance our bond ratings, and facilitating value creation through M&A. The repurchase will be done under a 10b-5, with accretion being the key criteria. Our 2020 financial guidance now includes Panther Rx. One month into the first quarter, our view of 2021 remains largely consistent with what we shared at our December Investor Day. And we are reiterating our adjusted EPS guidance of $5 to $5.30. We are not changing our EPS guidance at this time, but in the spirit of our continued commitment to transparency, we want to provide the head and tailwinds impacting our operational landscape. Among the key potential headwinds additional state rate actions due to COVID-related reductions in utilization beyond the $400 million we've already incorporated. We will remind you that CMS has not approved the previously submitted rate actions. However, as we have said, we have built them into our guidance and cash flows. And CMS maintains that rate actions must be actually sound. The potential for higher than anticipated overall COVID-related costs is a second tailwind. And third, a Medicare physician fee schedule update. Continued membership growth, talking about the tailwinds, continued membership growth as a result of the extension of the Medicaid redetermination suspension. I will note that CMS has indicated they will likely extend the public health emergency through the end of the year. Lower utilization trends in the first half of the year beyond our current projections is another tailwind. Further, the potential for a meaningful increase to the FMAP, which is unlikely to be in the COVID bill, but will be part of subsequent reconciliation bills. And the marketplace special enrollment period, beginning next week. We anticipate the impact of the fee schedule to be approximately $200 million, which is expected to be largely offset by the redetermination tailwind. The other head and tailwinds are difficult to quantify with certainty at this point in time. But taken together, we expect they will tend or trend to the positive. And with a new administration in place, the government's approach to additional pandemic measures may change, and we may see a more supportive environment for expansion of care. With one month under our belt, much remains in motion, and any attempt to update guidance would lack precision. We anticipate being in a better position and that it would be more appropriate position to update our guidance at our first quarter earnings call. During 2021, we intend to further leverage the foundation that we have established in recent years and to set the stage for our next decade of growth and value creation, which will be measured by increasing margins. We will continue to drive growth from our position as a leader in government-sponsored healthcare to product and geographic expansion. We are pleased to have been selected for two statewide managed care contracts in Oklahoma, including a sole source contract in foster care, both of which the state expects to start in October. In addition, we expect continued growth in our Medicare as we leverage our national scale. We have established in this business over the long term and short to medium term. we expect to deliver above-market growth with significant additional opportunities for value creation. To meet our margin expectations and expansion objectives and ensure organizational efficiency, we are also focusing on leveraging our size and scale to unlock the value inherent across our broader whole health platform. To that end, we have today announced an organizational restructuring initiative. that will include a reduction in workforce of approximately 3,000 employees and the elimination of 1,500 open positions. Overall, this represents a workforce reduction of roughly 6%. Please note that the elimination of the 1,500 positions was accounted for at our December Investor Day. The reductions are primarily in areas where we have significant overlap from acquisitions. and where we have opportunities to leverage our size and scale for increased efficiency. Importantly, we remain focused on innovation, growth, and agility, and we are continuing to invest in people and systems that align with key areas of growth for the company. As we look out over the next decade, we will continue to lead the industry by providing the highest level of care at the lowest cost. to meet the evolving needs of our members, especially those with complex care requirements. We are transforming our healthcare model and making material advancements in our technology capabilities. Behavioral health is one of the most underserved areas in the population today, and through the planned addition of Magellan, we are investing in our specialty care capabilities while also focusing on improved integration of behavioral and physical health, resulting in better patient outcomes at lower costs. I'm pleased to note that we are making strong progress on the regulatory process for the Magellan acquisition and filed all required form A's within days of announcing the deal. We have also filed necessary papers for Horace Scott Rodino approval with the Department of Justice. Another area of focus is pharmacy, which represents a large and significant market opportunity. Our growing specialty pharmacy platform will provide enhanced insight into the specialty pharma pipeline, clinical requirements, and cost management opportunities. Importantly, it will also drive additional opportunities for patient engagement, better adherence rates, and ultimately improved outcomes. We're also cementing the organizational structure of our healthcare enterprise platform, which is creating an environment to foster the revolutionary change that is overdue in our healthcare system. For example, Apixio and Interpreter are collaborating on a comprehensive predictive infrastructure that will serve as a foundation for future innovation. All of this combined with our performance in 2020 The strength and scale of our diversified healthcare enterprise and our strong execution provides me and should provide you with great confidence in our outlook and ability to deliver on the opportunities ahead. I also want to thank our employees who continue to move this company forward while always remaining focused on serving our members. And we look forward to welcoming them back into our offices. With that, I'll turn it over to Jeff.