Centene Corporation

And welcome to the Centene Corporation 2025 Third Quarter Financial Results 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 your telephone keypad, and to withdraw your question, please press star then two. Please note, today's event is being recorded. Well, now I turn the conference over to Jennifer Gilligan, Senior Vice President, Investment Relations. Please go ahead, ma'am.

Thank you, Rocco, and good morning, everyone. Thank you for joining us on our third quarter 2025 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. 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. Specifically, our discussion today of our expectations for the drivers of adjusted diluted earnings per share for 2025 and any commentary on expected adjusted diluted earnings per share for 2025 are forward-looking statements. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in our third quarter 2025 press release, Centene's most recent Form 10-Q filed this morning, and its 10-K filed on February 18, 2025. Additionally, other public SEC filings, which are available on the company's website under the Investor sections. 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. Paul will also refer to certain non-gap measures. A reconciliation of these measures with the most directly comparable gap measures can be found in our third quarter 2025 press release. With that, I will turn the call over to our CEO, Sarah London. Sarah?

Thanks, Jen. And thanks, everyone, for joining us to review our third quarter 2025 financial results and updated full-year outlook. We are driving significant progress against the milestones we provided to investors in July, yielding a better-than-expected adjusted EPS result in the period. This morning, we reported third quarter adjusted EPS of 50 cents, ahead of our previous expectation. In these results, our Medicaid business delivered anticipated HBR improvement in the period, that was further aided by a positive 2025 retroactive revenue adjustment in our Florida business. SG&A and performance within our non-core segment were both slightly favorable. Net investment income was stronger than we previously expected, and we experienced a lower effective tax rate in the quarter than originally forecasted. Marketplace experienced additional medical cost pressure in the last month of the quarter, but the segment still produced an on-track result for the period. and our Medicare segment, including MA and PDP, performed in line with expectations we shared on our second quarter call. With three quarters of the year complete, we are increasing our adjusted EPS forecast to at least $2, up from our previous forecast of $1.75 per share. When we came to you in July with recalibrated earnings expectations, we laid out six key assumptions that bridged us from our April outlook to the $1.75 per share forecast. We'd like to take a moment to update you on how those six factors evolved during the quarter and are now treated within our new adjusted EPS outlook of at least $2. One, relative to marketplace morbidity and its corresponding impact on risk adjustment assumptions, we received the second tranche of weekly data in September, improving our visibility with industry-level paid claims through July. We are pleased this data was consistent with our previous estimates, and we have therefore made no changes to our original full-year assumption of a $2.4 billion pre-tax earnings impact within this new forecast. As a reminder, the next update from Wakely is expected in December.