Molina Healthcare Inc

Good day and welcome to the Molina Healthcare Second Quarter 2026 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 your telephone keypad, and to withdraw your question, please press star then two. We do ask that you please limit yourself to one question. Please also note today's event is being recorded. I would now like to turn the conference over to Jeff Geyer, Vice President, Investor Relations. Please go ahead.

Good morning and welcome to Molina Healthcare's second quarter 2026 earnings call. Joining me today are Molina's President and CEO, Joseph Zubretsky, and our CFO, Mark Keim. A press release announcing our second quarter 2026 earnings was distributed after the market closed yesterday. and is available on our investor relations website. Shortly after the conclusion of this call, a replay will be available for 30 days. The numbers to access the replay are in the earnings release. For those of you who listened to the rebroadcast of this presentation, we remind you that all of the remarks are made as of today, Thursday, July 23rd, 2026, and have not been updated subsequent to the initial earnings call. On this call, we will refer to certain non-GAAP measures. The reconciliation of these measures with the most directly comparable gap measures can be found in the earnings release. During the call, we will be making certain forward-looking statements, including but not limited to statements regarding our 2026 guidance and the expected performance of each one of our business segments, rates, and the medical cost trend, earnings seasonality, and our new Florida CMS contract. our preliminary 2027 financial outlook and earnings building blocks, our 2027 marketplace pricing and business strategy, our longer term outlook, including our 2029 premium revenue and EPS targets, our growth initiatives, the political and regulatory landscape, our M&A activity, the impact of Medicaid work requirements, our RFP awards, and the amount and realization of our embedded earnings. Listeners are cautioned that all of our forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from our current expectations. We advise listeners to review the risk factors discussed in our Form 10-K Annual Report filed with the SEC, as well as our risk factors listed in our Form 10-Q and Form 8-K filings with the SEC. After the completion of our prepared remarks, we will open the call to take your questions. I will now turn the call over to our Chief Executive Officer, Joe Zubretsky. Joe?

Thank you, Jeff, and good morning. Today, I will discuss several topics. Our reported financial results for the second quarter, an update on our full year 2026 guidance, early commentary on our 2027 outlook for premium and earnings per share, Our growth initiatives and strategy for sustaining profitable growth and some commentary on the political and regulatory landscape. Let me start with our second quarter performance. Last night, we reported adjusted earnings per share of $1.51 on $10.2 billion of premium revenue. Our 92.2% consolidated MCR reflects solid operating performance, as we continue to navigate a challenging medical cost environment. We produced a 1% adjusted pre-tax margin in the quarter and 1.3% year to date. In Medicaid, the business produced an MCR of 92.7% in the second quarter, which was in line with our expectations. Medical cost trend in the quarter remained stable and was consistent with our full year guidance of 5%. In Medicare, we reported a second quarter MCR of 90.7%, very favorable to our expectations as our duals business performed much better than expected. Recall, with $2 billion of MMP premium being converted to new products and incremental premium from RFP wins, we were initially very cautious about margins in our duals business. These early results position us well to achieve target margins Sooner than originally expected. In Marketplace, the second quarter MCR was 88.9%, higher than our expectations. We were again impacted by prior year items related to risk adjustment and member reconciliations. Our performance was also affected by unfavorable current year member acuity mix. Turning now to our 2026 guidance. Our full-year 2026 premium revenue guidance is unchanged at approximately $42 billion. We have increased our full-year 2026 adjusted earnings guidance by 25 cents to at least $5.25 per share. This increase to our earnings guidance reflects first-half performance in Medicaid. Excluding the downward revision in our marketplace guidance, our full-year guidance would have increased to $6.75 per share. Now some color on the segments. In Medicaid, our guidance assumes a full year MCR of 92.9% and is unchanged from prior guidance. Rate updates we received are consistent with our guidance of 4%. Full year medical cost trend is unchanged at 5%. The imbalance between rates and trend appears to have stabilized and is well positioned to be corrected with future rate increases. Medicaid is expected to produce a 1.2% pre-tax margin in 2026, or approximately $5.75 per share. This is up 25 cents from our prior guidance due to first half performance. We continue to believe that 2026 represents a trough year for Medicaid margins, and we remain optimistic about the 2027 rate setting process as state actuaries take account of more recent periods of observed medical cost trend. In Medicare, our full year MCR guidance is now 92.2%, a 180 basis point improvement from our previous guidance, reflecting lower medical cost trend in our duals products. Medicare is now expected to contribute 25 cents per share this year, anchored by stronger performance in our duals products, which will now yield Thank you for joining us today. and current year unfavorable member acuity mix. Looking forward, we plan to again reduce our footprint in volumes in 2027 to minimize our exposure to this segment. In summary, our updated 2026 earnings per share guidance at at least $5.25 includes the following elements and revisions from prior guidance. Medicaid is 25 cents better due to first half performance. Excluding the implementation of the new Florida CMS contract, Medicaid is projected to produce a 1.6% pre-tax margin and contribute $7.25 per share. Medicare guidance increases by $1.50 per share with the increase driven by our duals products. Excluding MAPD, Medicare duals is projected to contribute a 1.4% pre-tax margin in $1.25 per share. However, marketplace guidance decreases by $1.50 of earnings per share as our process of de-emphasizing and downsizing this business in the portfolio bears the cost of higher member acuity mix. We are pleased that the Medicaid and Medicare duals businesses which represent the flagship and the future of the enterprise are producing strong results. Excluding the 2026 losses from our Florida CMS contract and MAPD product, the 2026 earnings power is $7.75 per share. Now, some updated commentary on the outlook for 2027 that we have provided at our investor day. While it is too early to provide full detailed guidance for 2027, we revisit a few of the building blocks that inform our early views. The reduction in our volume and footprint in Marketplace and California's decision to pull undocumented members into fee-for-service account for approximately a $1.5 billion reduction in premium. Our premium outlook for 2027 is now approximately $46.5 billion before capturing any remaining items. This is 11% growth year over year. The earnings per share building blocks for 2027 sum to more than $10 per share before considering any MCR improvement in Medicaid. Mark will elaborate on the 2027 building blocks in a moment. Now, some comments on recent RFP wins and our growth initiative. We remain confident in achieving the $64 billion premium revenue mark in 2029 that was detailed at our investor day. During the second quarter, we re-procured two significant contracts. First, we retained our $2 billion managed Medicaid contract in Illinois, a very large Medicaid state for us. We also renewed a regional contract in Wisconsin that provides additional opportunity to grow our integrated duals business. These wins continue our highly successful track record of retaining contracts where our historical win rate on re-procurements has now increased to above 90%. With respect to M&A activity, our acquisition pipeline contains many actionable opportunities, and we remain opportunistic in deploying capital to accretive acquisitions. This current challenging operating environment has been a catalyst for many smaller and less diverse health plans to consider their strategic options. Turning now to the political and legislative landscape, the interim final rule from CMS on Medicaid work requirements and biannual re-verifications does not change our long-term view of enrollment reductions. We expect membership reductions will emerge gradually and result in only a minor acuity shift. There is still some ambiguity surrounding many of the features of the rule, including the definition of medical frailty, and the use of self-attestation, not to mention legal challenges to the rule itself. We are working closely with our state partners on the administrative requirements needed to implement these new policies. In Medicare, we do not expect the recent STARS court rulings to have a material impact on our business or product offerings. In summary, our second quarter results and full year guidance reflect solid performance in our Medicaid business and strong performance in our Medicare duals products in a challenging environment. The imbalance between Medicaid rates and medical cost trend appears to have stabilized and is well positioned to be corrected with future rate increases. This reinforces our belief that 2026 is the trough year for Medicaid pre-tax margins. We remain confident in our disciplined approach to medical cost management and believe the premium and earnings per share building blocks position us well for profitable growth in 2027. This year and next are the first steps to achieving the financial targets we outlined at our investor day. The path to our $25 earnings per share target in 2029 is predicated on a few assumptions. First, We expect the MCRs on our current business to improve over three years. This is led by Medicaid, which assumes 90 basis points of MCR improvement over three years, which is a modest improvement in the current rate and trend imbalance. Second, future revenue growth from announced revenue wins, projected initiatives, and M&A will achieve target margins, as they have done in the past. Our operating discipline will help realize the benefit of operating leverage as we grow our business. These expected value creating components underpin our 2029 financial targets while continuing to refresh embedded earnings to support the long-term growth of our franchise. With that, I will turn the call over to Mark for some additional color on the financials. Mark?