Centene Corporation

Good day and welcome to the Centene Corporation second quarter 2021 earnings conference call. All participants will be in listen-only mode. Should 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 Michael Neidorf, Chairman, CEO, and President. Please go ahead, sir.

This is Jen. Thank you, Rocco, and good morning, everyone. Thank you for joining us on our second quarter 2021 Earnings Results Conference Call. Michael Neidorf, Chairman, President, and Chief Executive Officer, and Drew Asher, 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 10-Q, filed today, and the Form 10-K, dated February 22, 2021, 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 operation. 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 second quarter 2021 press release, which is available on the company's website under the investor section. Additionally, please mark your calendars for our third quarter earnings conference call to be held on Tuesday, October 26th. With that, I would like to turn the call over to our Chairman, President, and CEO, Michael Neidorf.

Thank you, Jennifer. Good morning, and thank you for joining Centene's second quarter earnings call. You have heard me say, we make decisions based on the facts as they are today. And today, with a continued rise in the highly virulent Delta strain of COVID-19, I must open our call with similar comments to those made this time last year. The environment has changed again in just the last week or so, and the Delta variant is causing a new wave of pandemic. It's a pandemic of the unvaccinated. According to a leading epidemiologist our team has been working with for the past 18 plus months, the Delta variant has 1260 times greater concentration in respiratory material than the original variant. An individual infected with the Delta strain can spread the virus to an average of five to eight individuals, up from an average of 2.4 individuals from the original strain. Eighty-three percent of the COVID cases today in the U.S. are Delta, up from 10% just a month ago. Hospitalizations are up 57% in the last month. The deaths have increased by 19% in the last week alone. And importantly, 97% of people currently hospitalized for COVID-19 are unvaccinated. And 99.5% of the COVID-related deaths or among the unvaccinated. Our additional concern, because of the high concentration in respiratory droplets, this variant seems to be transmissible among children and is more dangerous than the original virus. It is clear that one of the issues we must address is vaccine hesitancy. To stop the transmission of this virus, and to protect those who cannot safely receive the inoculation, including our young children. The variant is real, and we are taking it very seriously. You have seen us execute strongly throughout the pandemic, and that will not change, especially as it remains clear that the pandemic is not over and the environment could remain choppy for the balance of the year. Turning to our second quarter performance, results met our expectations and were consistent with the update we provided in mid-June. We generated revenue of $31 billion, an increase of 12% compared to the year-ago quarter. Adjusted diluted earnings per share was $1.25 versus $2.40 last year. As a reminder, Last year's utilization rate in the second quarter was significantly lower as a result of the pandemic. We entered the quarter with membership of 25.4 million, as several tailwinds we have previously discussed remain in place. These include the suspension of redetermination, which we expect will continue into 2022. and we are aware of discussions extending beyond that into 2023. We continue to participate in an active RFP pipeline. In addition, we are pleased that the Missouri Supreme Court unanimously upheld the will of the people and that Medicaid will be expanded in Missouri. We have been preparing for expansion for months and are fully prepared to bring healthcare access to hundreds of thousands of citizens here in our home state of Missouri. Additionally, yesterday, North Carolina announced the winners of the Tailored Health Plan Awards. We are pleased that our provider-led entity, Carolina Complete Health, with the North Carolina Medical Society, was selected to work with two of the LMEs. and our health plan, WellCare North Carolina, was selected to work with three of them. In Medicare, we delivered another quarter of healthy growth, with membership growing approximately 25% since the beginning of the year. In addition, preparations are well underway for open enrollment beginning this fall. In Marketplace, we added a net 110,000 lives since the beginning of the year, while typically we would have lost members during this period. This represents 6% growth. To this point, Medicaid and Medicare are performing very well and are continuing to normalize in line with our expectations. We talked last month about the dynamics in the marketplace business where we are witnessing continuing COVID-related costs and increased non-COVID utilization, which we believe is still largely driven by some pent-up demand. Drew will provide additional details on non-COVID utilization. Although this is impacting our margins in the short term, we continue to view this environment as transitory, driven by the various dynamics of the pandemic. Importantly, where possible, these trends have been factored into our pricing and strategy for 2022. Overall, we remain confident in the long-term opportunity of our marketplace business. We expect to continue to offer a competitive product and to be in a strong position as the leading provider. And as you look at the healthy growth across our portfolio today, you can see we have the size, scale, and strength to continue to execute on our objectives. With the first half of the year behind us, we are maintaining our full-year 2021 adjusted EPS, This reflects the underlying strength of our business and our demonstrated ability to manage through a dynamic environment. We will continue to provide you transparent updates as the second half of the year unfolds. We remain focused on our business, and we continue to make progress against the margin expansion goals we outlined last month. While we are at the beginning of this process, I am encouraged to see strong alignment across our enterprise and initial transit traction towards these goals, as Drew will discuss. We are also making progress on the Magellan acquisition and remain on track to close on the deal in the second half of 2021, having received Justice Department approval and approval in all but one state. Before I hand the call over to Drew to discuss our results in more detail, I'd like to reiterate a few points that I touched on today. First, the Delta wave of the COVID-19 pandemic is creating a new set of dynamics, particularly for the unvaccinated. We are taking this very seriously and watching the short-term impact on our business. As a healthcare company, our absolute priority is to ensure our members, employees, and communities are healthy. And we are making every effort to provide our members and workforce with opportunities to receive the COVID-19 vaccines. We have made outreach phone calls to nearly 9.5 million members to support them in accessing the vaccine, created PSAs that will air on 160 TV stations across the country, and directly participated in over 80 vaccination events. In addition, our teams have formed innovative partnerships with organizations including NASCAR, the Pro Football Hall of Fame, Walmart, Lyft, and the White House to increase awareness and accessibility of the vaccine. We also continue to evaluate when we can safely return to in-person work. and are ensuring that our office return to work timeline gives employees sufficient time to receive the COVID-19 vaccine. I want to make you aware that this still may not be enough. And if we do not effectively manage this strain, the next one could be even worse. And there may be a need for vaccination requirement implementation by government and industry. As we have done for the past year and a half, we will continue to manage through the dynamic landscape and will provide you with transparent updates based on the information as we see and know it. Our size and scale enable us to navigate an evolving environment as we pursue growth and, most importantly, margin expansion. Together with our margin expansion goals, our capital allocation priorities discussed and our June investors then remain in place. Thank you for your continued interest in supporting Centene. I will now hand the call over to Drew.