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Molina Healthcare Reports Third Quarter 2021 Financial Results

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Reaffirms Full Year 2021 Earnings Guidance

LONG BEACH, Calif., October 27, 2021--(BUSINESS WIRE)--Molina Healthcare, Inc. (NYSE: MOH) (the "Company") today reported third quarter of 2021 GAAP earnings per diluted share of $2.46 and adjusted earnings per diluted share of $2.83. Financial results are summarized below:

Quarter ended

Nine months ended

September 30,

September 30,

2021

2020

2021

2020

(In millions, except per-share results)

Premium Revenue

$6,800

$4,768

$19,689

$13,444

Total Revenue

$7,040

$5,021

$20,362

$14,188

GAAP:

Net Income

$143

$185

$556

$639

EPS – Diluted

$2.46

$3.10

$9.51

$10.65

Medical Care Ratio (MCR)

88.9%

85.9%

88.1%

84.9%

G&A Ratio

7.5%

7.3%

7.3%

7.3%

After-tax Margin

2.0%

3.7%

2.7%

4.5%

Adjusted:

Net Income

$164

$201

$623

$670

EPS – Diluted

$2.83

$3.36

$10.66

$11.15

G&A Ratio

7.3%

7.3%

7.1%

7.2%

After-tax Margin

2.3%

4.0%

3.1%

4.7%

See the Reconciliation of Unaudited Non-GAAP Financial Measures at the end of this release.

Quarter Highlights

  • GAAP net income for the third quarter of 2021 was $143 million, or $2.46 per diluted share.

  • Adjusted net income for the third quarter of 2021 was $164 million, or $2.83 per diluted share.

  • As of September 30, 2021, the Company served approximately 4.8 million members, an increase of 805,000 members, or 20%, compared to September 30, 2020.

  • Premium revenue was approximately $6.8 billion for the third quarter of 2021, an increase of 43% compared to the third quarter of 2020.

  • The net effect of COVID decreased net income by approximately $1.00 per diluted share in the third quarter of 2021.

  • The Company increased its full year 2021 premium revenue guidance to no less than $26.5 billion.

  • The Company reaffirmed its full year 2021 adjusted earnings guidance of no less than $13.25 per diluted share.

"We are pleased with our third quarter and year-to-date performance. With the backdrop of a continuing pandemic, we executed well, delivered solid operating earnings, and continued to drive our growth strategy," said Joseph Zubretsky, president and CEO of Molina Healthcare. "The Nevada contract award and the AgeWell acquisition reflect that the components of our growth engine are well established and working."

New York Acquisitions
On October 7, 2021, the Company announced that it has entered into a definitive agreement to acquire the Medicaid Managed Long Term Care business of AgeWell New York. As of August 31, 2021, AgeWell served approximately 13,000 managed long-term services and supports members, with full-year 2020 premium revenue of approximately $700 million.

On October 25, 2021, the Company announced the closing of its acquisition of Affinity Health Plan.

Premium Revenue
Premium revenue was approximately $6.8 billion for the third quarter of 2021, an increase of 43% compared to the third quarter of 2020. The higher premium revenue reflects increased organic membership in all lines of business, along with the impact of acquisitions.

Net Income
Net income for the third quarter was $143 million, or $2.46 per diluted share, compared to $185 million, or $3.10 per diluted share, in the third quarter of 2020. Adjusted net income for the third quarter was $164 million, or $2.83 per diluted share, compared to $201 million, or $3.36 per diluted share, in the third quarter of 2020.

The year-over-year comparison reflects the negative impact from the net effect of COVID in the third quarter of 2021. In contrast, the prior year third quarter was positively impacted by the net effect of COVID.

Net income for the nine months ended September 30, 2021 was $556 million, or $9.51 per diluted share, compared to $639 million, or $10.65 per diluted share, in the nine months ended September 30, 2020. Adjusted net income for the nine months ended September 30, 2021 was $623 million, or $10.66 per diluted share, compared to $670 million, or $11.15 per diluted share, in the nine months ended September 30, 2020.

Medical Care Ratio
The consolidated MCR for the third quarter was 88.9%, compared to 85.9% in the third quarter of 2020. The net effect of COVID increased the consolidated MCR by approximately 110 basis points and impacted all three lines of business. In the prior year, the net effect of COVID was negligible to slightly positive.

A year-over-year comparison is less meaningful than it would be in a typical year due to pandemic related effects. Due to those anomalous effects, a sequential comparison of MCR is more relevant.

On a sequential basis, the consolidated MCR for the third quarter was 88.9%, compared to 88.4% in the second quarter of 2021. The net effect of COVID increased the consolidated MCR by approximately 110 basis points in the second and third quarters of 2021 and was negligible in the first quarter of 2021.

  • The Medicaid MCR increased to 89.6% in the third quarter of 2021 compared to 89.0% in the second quarter of 2021. The increase in the MCR was primarily due to an increase in the net effect of COVID.

  • The Medicare MCR decreased to 82.8% in the third quarter of 2021 compared to 87.6% in the second quarter of 2021. The decrease in the MCR was primarily due to the lower negative net effect of COVID among our Medicare members.

  • The Marketplace MCR increased to 91.3% in the third quarter of 2021 compared to 84.8% in the second quarter of 2021. The increase in the MCR was primarily due to the higher net effect of COVID, normal seasonality, and non-COVID utilization by Special Enrollment Period members.

General and Administrative Expense Ratio
The G&A ratio for the third quarter was 7.5%, compared to 7.3% for the third quarter of 2020. The adjusted G&A ratio for the third quarter was 7.3% and was consistent with the third quarter of 2020 reflecting disciplined cost management, and growth investments.

Balance Sheet
Cash and investments at the parent company amounted to $703 million as of September 30, 2021, compared to $644 million as of December 31, 2020. The increase was due to dividends received from the regulated health plan subsidiaries in the quarter.

In September 2021, the Company’s Board of Directors authorized a stock repurchase program of up to $500 million and continuing through December 31, 2022. This program supersedes the stock repurchase program approved by our Board in September 2020. As of October 27, 2021, no shares have been purchased under this program.

Cash Flow
Operating cash flow for the nine months ended September 30, 2021 amounted to $1.5 billion, and was higher compared to the nine months ended September 30, 2020, primarily due to growth in operations and the net impact of timing differences in governmental receivables and payables.

2021 Guidance
The Company expects its full year 2021 total revenue to be no less than $27.5 billion, an increase of approximately 42% from its full year 2020.

Premium revenue for the full year 2021 is expected to be no less than $26.5 billion, an increase of approximately 45% from the full year 2020.

The Company reaffirmed its full year 2021 adjusted earnings per share guidance to be no less than $13.25 per share.

Guidance reflects:

  • The continuation of the Public Health Emergency period, through mid-January, 2022 and the associated pause on Medicaid membership redeterminations;

  • Underlying outperformance;

  • An offset caused by the estimated net effect of COVID which is expected to be approximately $3.00 per share for the full year 2021; and

  • Continued caution in forecasting utilization trends for the remaining three months of the year due to the COVID pandemic.

The impact of the Cigna Texas membership acquisition is not included in guidance. The Cigna Texas membership acquisition is expected to close in January of 2022.

See the Reconciliation of Unaudited Non-GAAP Financial Measures at the end of this release.

Conference Call
Management is hosting a conference call and webcast to discuss Molina Healthcare’s third quarter 2021 results at 8:00 a.m. Eastern Time on Thursday, October 28, 2021. The number to call for the interactive teleconference is (877) 883-0383 and the confirmation number is 5108692. A telephonic replay of the conference call will be available through Thursday, November 11, 2021, by dialing (877) 344-7529 and entering confirmation number 10160042. A live audio broadcast of this conference call will be available on Molina Healthcare’s website, molinahealthcare.com. A 30-day online replay will be available approximately an hour following the conclusion of the live broadcast.

About Molina Healthcare
Molina Healthcare, Inc., a FORTUNE 500 company, provides managed healthcare services under the Medicaid and Medicare programs and through the state insurance marketplaces. Through its locally operated health plans, Molina Healthcare served approximately 4.8 million members as of September 30, 2021. For more information about Molina Healthcare, please visit molinahealthcare.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This earnings release and the Company’s accompanying oral remarks contain forward-looking statements regarding its 2021 guidance, as well as its plans and expectations regarding future developments. Actual results could differ materially due to numerous known and unknown risks and uncertainties. These risks and uncertainties are discussed under the headings "Forward-Looking Statements," and "Risk Factors," in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which is on file with the SEC, and also in its Quarterly Report on Form 10-Q for the period ended September 30, 2021, which the Company expects to file on or about October 28, 2021.

These reports can be accessed under the investor relations tab of the Company’s website or on the SEC’s website at sec.gov. Given these risks and uncertainties, the Company can give no assurances that its forward-looking statements will prove to be accurate, or that any other results or developments projected or contemplated by its forward-looking statements will in fact occur, and the Company cautions investors not to place undue reliance on these statements. All forward-looking statements in this release represent the Company’s judgment as of October 27, 2021, and, except as otherwise required by law, the Company disclaims any obligation to update any forward-looking statement to conform the statement to actual results or changes in its expectations.

MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

(In millions, except per-share amounts)

Revenue:

Premium revenue

$

6,800

$

4,768

$

19,689

$

13,444

Premium tax revenue

204

170

576

477

Health insurer fees reimbursed

69

206

Investment income

20

10

39

48

Other revenue

16

4

58

13

Total revenue

7,040

5,021

20,362

14,188

Operating expenses:

Medical care costs

6,049

4,098

17,342

11,412

General and administrative expenses

532

368

1,489

1,030

Premium tax expenses

204

170

576

477

Health insurer fees

70

209

Depreciation and amortization

32

23

96

64

Other

2

3

30

9

Total operating expenses

6,819

4,732

19,533

13,201

Operating income

221

289

829

987

Other expenses, net:

Interest expense

30

27

90

72

Other expense, net

5

Total other expenses, net

30

27

90

77

Income before income tax expense

191

262

739

910

Income tax expense

48

77

183

271

Net income

$

143

$

185

$

556

$

639

Net income per share – Diluted

$

2.46

$

3.10

$

9.51

$

10.65

Diluted weighted average shares outstanding

58.5

59.6

58.5

60.0

Operating Statistics:

Medical care ratio

88.9

%

85.9

%

88.1

%

84.9

%

G&A ratio

7.5

%

7.3

%

7.3

%

7.3

%

Premium tax ratio

2.9

%

3.4

%

2.8

%

3.4

%

Effective income tax rate

24.8

%

29.5

%

24.7

%

29.8

%

After-tax margin

2.0

%

3.7

%

2.7

%

4.5

%

MOLINA HEALTHCARE, INC.
CONSOLIDATED BALANCE SHEETS

September 30,

December 31,

2021

2020

Unaudited

(Dollars in millions,

except per-share amounts)

ASSETS

Current assets:

Cash and cash equivalents

$

4,357

$

4,154

Investments

2,900

1,875

Receivables

1,912

1,672

Prepaid expenses and other current assets

197

175

Total current assets

9,366

7,876

Property, equipment, and capitalized software, net

385

391

Goodwill and intangible assets, net

915

941

Restricted investments

156

136

Deferred income taxes

83

69

Other assets

128

119

Total assets

$

11,033

$

9,532

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Medical claims and benefits payable

$

3,191

$

2,696

Amounts due government agencies

2,081

1,253

Accounts payable, accrued liabilities and other

797

641

Deferred revenue

1

375

Total current liabilities

6,070

4,965

Long-term debt

2,130

2,127

Finance lease liabilities

220

225

Other long-term liabilities

95

119

Total liabilities

8,515

7,436

Stockholders’ equity:

Common stock, $0.001 par value, 150 million shares authorized; outstanding: 58 million shares at September 30, 2021, and 59 million shares at December 31, 2020

Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding

Additional paid-in capital

205

199

Accumulated other comprehensive income

17

37

Retained earnings

2,296

1,860

Total stockholders’ equity

2,518

2,096

Total liabilities and stockholders’ equity

$

11,033

$

9,532

MOLINA HEALTHCARE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

2021

2020

(in millions)

Operating activities:

Net income

$

556

$

639

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

96

64

Deferred income taxes

(8

)

(3

)

Share-based compensation

49

43

Loss on debt repayment

5

Other, net

9

2

Changes in operating assets and liabilities:

Receivables

(247

)

(369

)

Prepaid expenses and other current assets

(43

)

(98

)

Medical claims and benefits payable

522

431

Amounts due government agencies

810

(24

)

Accounts payable, accrued liabilities and other

129

63

Deferred revenue

(374

)

(188

)

Income taxes

23

34

Net cash provided by operating activities

1,522

599

Investing activities:

Purchases of investments

(2,018

)

(670

)

Proceeds from sales and maturities of investments

965

891

Purchases of property, equipment, and capitalized software

(56

)

(64

)

Net cash paid in business combinations

(62

)

Other, net

3

3

Net cash (used in) provided by investing activities

(1,106

)

98

Financing activities:

Common stock purchases

(128

)

(453

)

Common stock withheld to settle employee tax obligations

(52

)

(8

)

Contingent consideration liabilities settled

(20

)

Proceeds from senior notes offering, net of issuance costs

789

Repayment of term loan facility

(600

)

Proceeds from borrowings under term loan facility

380

Other, net

(4

)

(47

)

Net cash (used in) provided by financing activities

(204

)

61

Net increase in cash, cash equivalents, and restricted cash and cash equivalents

212

758

Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period

4,223

2,508

Cash, cash equivalents, and restricted cash and cash equivalents at end of period

$

4,435

$

3,266

MOLINA HEALTHCARE, INC.
UNAUDITED SEGMENT DATA
(Dollars in millions)

September 30,

December 31,

September 30,

2021 (1)

2020

2020

Ending Membership by Segment:

Medicaid

3,981,000

3,599,000

3,595,000

Medicare

138,000

115,000

113,000

Marketplace

719,000

318,000

325,000

Total

4,838,000

4,032,000

4,033,000

______________________________
(1) Approximately 200,000 members, from the Magellan Complete Care acquisition that closed on December 31, 2020, are included in the totals as of September 30, 2021, but not in prior periods.

Three Months Ended June 30,

2021

2020

Premium

Revenue

Medical

Margin

MCR (1)

Premium

Revenue

Medical

Margin

MCR (1)

Medicaid

$

5,034

$

551

89.0

%

$

3,375

$

553

83.6

%

Medicare

814

101

87.6

630

125

80.0

Marketplace

735

112

84.8

367

96

74.0

Consolidated

$

6,583

$

764

88.4

%

$

4,372

$

774

82.3

%

Three Months Ended September 30,

2021

2020

Premium

Revenue

Medical

Margin

MCR (1)

Premium

Revenue

Medical

Margin

MCR (1)

Medicaid

$

5,146

$

532

89.6

%

$

3,754

$

509

86.4

%

Medicare

875

151

82.8

632

91

85.6

Marketplace

779

68

91.3

382

70

81.6

Consolidated

$

6,800

$

751

88.9

%

$

4,768

$

670

85.9

%

Nine Months Ended September 30,

2021

2020

Premium

Revenue

Medical

Margin

MCR (1)

Premium

Revenue

Medical

Margin

MCR (1)

Medicaid

$

15,020

$

1,687

88.8

%

$

10,415

$

1,427

86.3

%

Medicare

2,488

329

86.8

1,896

333

82.4

Marketplace

2,181

331

84.8

1,133

272

76.0

Consolidated

$

19,689

$

2,347

88.1

%

$

13,444

$

2,032

84.9

%

______________________________
(1) The MCR represents medical costs as a percentage of premium revenue.

MOLINA HEALTHCARE, INC.
CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE
(Dollars in millions)

The Company’s claims liabilities include additional reserves to account for moderately adverse conditions based on historical experience and other factors including, but not limited to, variations in claims payment patterns, changes in utilization and cost trends, known outbreaks of disease, and large claims. The Company’s reserving methodology is consistently applied across all periods presented. The amounts displayed for "Components of medical care costs related to: Prior year" represent the amounts by which the original estimates of claims and benefits payable at the beginning of the year were more than the actual liabilities based on information (principally the payment of claims) developed since those liabilities were first reported. The following table presents the components of the change in medical claims and benefits payable for the periods indicated:

Nine Months Ended

September 30,

2021

2020

Unaudited

Medical claims and benefits payable, beginning balance

$

2,696

$

1,854

Components of medical care costs related to:

Current year

17,558

11,478

Prior year

(216

)

(66

)

Total medical care costs

17,342

11,412

Payments for medical care costs related to:

Current year

14,880

9,500

Prior year

2,008

1,527

Total paid

16,888

11,027

Change in acquired balances

(27

)

Change in non-risk and other provider payables

68

50

Medical claims and benefits payable, ending balance

$

3,191

$

2,289

Days in claims payable, fee for service (1)

49

52

______________________________
(1) Claims payable includes primarily claims incurred but not paid, or IBNP. It also includes certain fee-for-service payables reported in medical claims and benefits payable amounting to $148 million and $79 million, as of September 30, 2021, and 2020, respectively.

MOLINA HEALTHCARE, INC.
RECONCILIATION OF UNAUDITED NON-GAAP FINANCIAL MEASURES
(In millions, except per diluted share amounts)

The Company believes that certain non-GAAP (generally accepted accounting principles) financial measures are useful supplemental measures to investors in comparing the Company’s performance to the performance of other public companies in the health care industry. The non-GAAP financial measures are also used internally to enable management to assess the Company’s performance consistently over time. These non-GAAP financial measures, presented below, should be considered as supplements to, and not as substitutes for or superior to, GAAP measures.

Adjustments represent additions and deductions to GAAP net income as indicated in the table below, which include the non-cash impact of amortization of acquired intangible assets, acquisition-related expenses, and the impact of certain expenses and other items that management believes are not indicative of longer-term business trends and operations.

Adjusted G&A Ratio represents the GAAP G&A ratio, recognizing adjustments.

Adjusted net income represents GAAP net income recognizing the adjustments, net of tax. The Company believes that adjusted net income is helpful to investors in assessing the Company’s financial performance.

Adjusted net income per diluted share represents adjusted net income divided by weighted average common shares outstanding on a fully diluted basis.

Adjusted after-tax margin represents adjusted net income, divided by total revenue.

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Amount

Per

Diluted

Share

Amount

Per

Diluted

Share

Amount

Per

Diluted

Share

Amount

Per

Diluted

Share

Net income

$

143

$

2.46

$

185

$

3.10

$

556

$

9.51

$

639

$

10.65

Adjustments:

Acquisition-related expenses (1)

17

0.28

4

0.07

44

0.75

4

0.06

Amortization of intangible assets

11

0.20

4

0.06

35

0.60

12

0.19

Loss on debt repayment

5

0.08

Other (2)

13

0.21

9

0.16

19

0.32

Subtotal, adjustments

28

0.48

21

0.34

88

1.51

40

0.65

Income tax effect

(7

)

(0.11

)

(5

)

(0.08

)

(21

)

(0.36

)

(9

)

(0.15

)

Adjustments, net of tax

21

0.37

16

0.26

67

1.15

31

0.50

Adjusted net income

$

164

$

2.83

$

201

$

3.36

$

623

$

10.66

$

670

$

11.15

______________________________
(1) Beginning in the third quarter of 2020, reflects non-recurring costs associated with acquisitions, including various transaction and integration costs.

(2) The nine months ended September 30, 2021 includes change in premium deficiency reserves, loss on sale of property, and restructuring costs. The nine months ended September 30, 2020 includes premium deficiency reserves, and restructuring costs.

MOLINA HEALTHCARE, INC.
RECONCILIATION OF UNAUDITED NON-GAAP FINANCIAL MEASURES (CONTINUED)
2021 GUIDANCE

Net income per diluted share (1)

$

11.61

Adjustments:

Acquisition-related expenses

1.18

Amortization of intangible assets

0.81

Other

0.16

Subtotal, adjustments

2.15

Income tax effect (2)

(0.51

)

Adjustments, net of tax

1.64

Adjusted net income per diluted share

$

13.25

______________________________
(1) Computations assume approximately 58.6 million diluted weighted average shares outstanding.

(2) Income tax effect calculated at the statutory tax rate of 23.8%.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211027006069/en/

Contacts

Investor Contact: Joseph Krocheski, Joseph.Krocheski@molinahealthcare.com, 562-951-8382
Media Contact: Caroline Zubieta, Caroline.Zubieta@molinahealthcare.com, 562-951-1588

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