Centene Corporation

Good day and welcome to the Centene First Quarter 2024 Financial Results 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 your telephone keypad. 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 Investor Relations. Please go ahead.

Thank you, Rocco, and good morning, everyone. Thank you for joining us on our first quarter 2024 earnings results conference call. Sarah London, 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. And Fasola, Centene's President, will also be available as a participant during Q&A. 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-K, filed on February 20, 2024, and other public SEC filings. 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 first quarter 2024 press release, which is available on the company's website under the Investors section. With that, I would like to turn the call over to our CEO, Sarah London. Sarah?

Thanks, Jen, and thanks, everyone, for joining us as we discuss our first quarter 2024 results. This morning we reported first quarter adjusted EPS of $2.26, ahead of our previous expectations for the period. As a result of this strong start to the year, we are increasing our full year 2024 adjusted EPS guidance to greater than $6.80. Drew will cover the quarter and our updated financial outlook in further detail in a few moments. While there is still more work to do, we are pleased with the first quarter results and will look to harness the positive momentum we are generating in our core businesses as we move through the balance of the year. In 2024, Centene's focus remains on our work to streamline and modernize the underlying infrastructure of our company and to assemble the people, processes, and tools necessary to deliver best-in-class experiences to our members, providers, regulators, and state partners. Let me share a couple of examples of progress here. During the first quarter, we completed an important initiative to simplify our prior authorization process by automating our real-time source data. This simplification improves the timeliness of authorization decisions, ensuring our members get the care they need quickly, and removing friction from the process overall for both members and providers. Q1 also saw the accumulation of months of thoughtful and thorough go-live preparation in Oklahoma. Our team obtained perfect scores in our readiness review from the state, and we are thrilled to be serving Oklahomans statewide as of April 1. Finally, our improved operational agility also allowed Centene to mobilize quickly in support of our members and provider partners in the wake of the change healthcare cybersecurity incidents. This included launching a national provider outreach campaign that spans Centene's provider network across all products, Medicaid, Medicare, and Marketplace, and has included targeted efforts to support those disproportionately impacted by the outage, including FQHCs, safety net hospitals, rural health clinics, and behavioral health providers. We appreciate the focus on and support for last-mile providers from HHS and CMS throughout this process. as these clinicians represent a critical component of the infrastructure through which our members access high-quality healthcare. Now onto our business lines. We are roughly 90% of the way through redeterminations, and our Medicaid franchise continues to demonstrate resilience as we navigate the complexities of this unprecedented process. As you can see from today's release, our first quarter membership tracks slightly higher than our expectation at Investor Day in December. Overall, we continue to be well-guided with respect to membership and rate by the projection model we built state by state more than a year ago and that we continue to refine as we move through the redeterminations process. As we've noted before, 2024 represents an important year for blocking and tackling through acuity shifts and corresponding rate discussions with our state partners to ensure we are positioned to provide high-quality services for our members. We are actively engaged in that process and are seeing solid results thus far with opportunities still ahead. As we move through the remainder of the year, we expect these discussions to increasingly represent the regular back and forth dialogue we maintain with our state partners in the normal course of managing the dynamics around each individual Medicaid program we serve. At the same time, we have been executing on important re-procurements and the early months of 2024 delivered notable data points. Most of the key RFP results are now public, positioning us well to generate continued Medicaid growth in a post-redeterminations world. Centene re-procured one of our largest contracts with a recent announcement of intended awards by the state of Florida. Although the protest period is ongoing, Centene is well-positioned based on Florida's determination that Sunshine Health is among those that will provide best value to the state. In Michigan, we were thrilled to be selected to continue serving the vast majority of our existing membership with some opportunity to grow, and we look forward to our continued collaboration with the state. In Texas, our protest remains ongoing. We are honored to have served Texans for 25 years and intend to defend superior health stability to provide access to affordable and high-quality health care for our members in the Lone Star State. We are proud of the way our health plans and business development team have delivered so far during this critical cycle of re-procurements. The Centene value proposition remains a powerful one, built on more than four decades of experience serving Medicaid communities, an unwavering local approach, and a commitment to innovation in the services and support we bring to our members. We are honored to provide access to care as well as community-based support to improve the lives of those we serve in 31 states across the country. Moving to Medicare. The Medicare Advantage macro landscape remains challenging. Consistent with our prior view, we see final 2025 funding levels as insufficient with respect to general medical cost trend expectations. Drew will provide some early commentary around our strategy to navigate Medicare in 2025 as a result. Medicare Advantage star ratings remain the single most powerful lever to drive performance in this vital business and continue to represent a top priority across the organization. As we drive to our goal of 85% of members in three and a half star contracts by October of 2025, we continue to see improved progress and stability in our performance and expect those to be reflected in our results come October. We are tracking year over year improvements in our core operations as well as in the ways we support our members as they receive care. And we are carrying forward this positive momentum into 2024 as our teams are clearly focused and aligned on quality. Longer term, Medicare Advantage remains an important business for Centene. The strategic link between Medicare and Medicaid has only become more explicit since our last earnings call. Recent CMS rulemaking included final requirements to better coordinate dual special needs plans, or DSNP, participation, with important milestones beginning in 2027. By the end of the decade, a Medicaid footprint will be a prerequisite to DSNP growth. Centene is perfectly positioned to gain positive momentum from this growing bond between Medicare and Medicaid. Finally, Marketplace. This business continues to represent a unique and powerful growth segment for Centene, and our teams are executing well against the opportunity. With approximately 4.3 million marketplace lives at the end of the first quarter, Centene's marketplace membership has more than doubled in size compared to just two short years ago. This exceptional growth has been accompanied by consistent margin expansion. as our deep product knowledge and staying power in the market enable us to forecast pre-tax margins well within our targeted range of 5% to 7.5% for 2024. We are pleased with the traction our Ambetter Health products are generating and see additional room to expand the reach of health insurance marketplace offerings overall. In 2024, the source of our membership growth is widely diversified. Based on a survey we conducted following open enrollment, nearly 40% of new members identify as previously uninsured. Approximately 25% joined us from another Marketplace carrier. And approximately 10% chose Ambetter after losing access to an employer sponsored plan. This is in addition to those members who selected Ambetter after losing Medicaid coverage. As we look to the future of Marketplace, We expect new member growth to be driven by an increasingly addressable and accessible uninsured population and the evolution occurring as employers consider alternative options for providing employer sponsored insurance. Centene has been rapidly evolving as an organization over the last two years. We have been resolute in creating focus, trimming the organization down to the core strategic assets that give us the strongest platform for future growth. We are executing against our strategic plans, fortifying and modernizing our infrastructure, and successfully delivering access to affordable, high-quality healthcare for millions of Americans. Our strong first quarter results demonstrate the power of our diversified earnings drivers as we deliver on our financial commitments, maintain our posture of disciplined capital deployment, and continue to invest to support long-term growth. As always, we want to thank our nationwide workforce of nearly 60,000 for showing up every day committed to improving the lives of our members and transforming the health of the communities we serve. This SEND team is the engine that ultimately powers our results and amplifies our impact. With that, let's turn the call over to Drew for more details around our performance in the first quarter and our updated financial outlook for 2024. Drew? Thank you, Sarah.