Molina Healthcare Inc · NYSE:MOH
Molina Healthcare — Investor Day (November 2024)
88 slides from Molina Healthcare's investor day presentation, Nov 8, 2024
Slide 1: Investor Day 2024: Value Creation: The Next Wave
@e BRRMOLINA HEALTHCARE Investor Day 2024 Value Creation: The Next Wave November 8, 2024
Slide 2: Value Creation: The Next Wave
Value Creation: The Next Wave Topic eaker Welcome and Introduction Jeff Geyer Sustaining Profitable Growth Joe Zubretsky Compeliing Financial Profile Mark Keim Joe Zubretsky aaa Mark Keim Jim Woys
Slide 3: Cautionary Statement
Cautionary Statement Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This presentation and the accompanying oral remarks include forward-looking statements regarding, without linitation, the Company's growth ‘Strategy and long-term growth rate, embedded earnings and
Slide 4: Sustaining Profitable Growth
* em MOLINA nh HEALTHCARE Sustaining Profitable Growth Joe Zubretsky President and Chief Executive Officer
Slide 5: Our Historical Performance
Our Historical Performance Our track record sets the foundation for our long-terms targets What We Said We Would Do What We Delivered What We Will Do (Prior Long-Term Targets) (2019 10 20246) (20246 t0 2027) — 13% - 15% Premium CAGR ~ Organic growth current footprint ~ Strategic initiatives ~ Accret
Slide 6: Performance Outlook
Performance Outlook Our strategy will produce sustainable, profitable growth and industry leading margins What We Will Do ~ The Next 3 Years Premium Revenue Growth Pretax Margin T% - 9% 87.5% - 88.5% 11% - 13% Organic Growth Medical Cost Ratio Earnings Growth Zs <T%h ~2% Acquisitions G&A Ratio Share
Slide 7: Sustaining Profitable Growth
Sustaining Profitable Growth ef Value Creating Franchise The Growth Model @ Retrospective fi Operating Excellence Current Environment Performance Outlook
Slide 8: Value Creating Franchise
Value Creating Franchise
Slide 9: The Molina Franchise
The Molina Franchise Aleading pure-play, government-sponsored managed care franchise with depth, EAR FORTUNE 128 Ranking 5.7M Members YE 2024 a. , breadth, and scale 9% 3 Products Medicaid, Medicare ‘and Marketplace
Slide 10: Diversified and Balanced Portfolio
Diversified and Balanced Portfolio a, Geographically diversified portfolio of complementary product segments Synergistic Medicare and Marketplace Well Diversified 21 State Portfolio Segments Complement Medicaid 6% Marketplace 79% Medicaid Percent of Total Premium Revenue WE stores [510% M10
Slide 11: Portfolio Synergies
Portfolio Synergies Synergistic product segments provide member continuity and leverage common capabilities 400. Marketplace {ow bat) = 2 2 ci : : 5 10 Continuity for = 138 “age ins” and = Integration 3 100 Requirements £ Age 65
Slide 12: Retrospective
Retrospective
Slide 13: Long-Term Value Creation
Long-Term Value Creation Aproven track record of industry-leading profitable growth and shareholder value creation Revenue Growth Adjusted EPS Growth Total Shareholder Return (201910 2024) (201910 2024) (2019 t0 Current) 313% vs. ~69% 19% 15% 12% iiihyouny Moo Peers iiliyouny C0 Peers aiibyouy MoO P
Slide 14: Premium Revenue Growth
Premium Revenue Growth y 19% trailing five-year CAGR was well balanced between organic growth and M&A, more than doubling the size of the Company while maintaining industry leading margins nS Bions Organic $16 Current Footprint Strategic Initiatives. Maa 2024 Guidance
Slide 15: Organic Premium Revenue Growth
Organic Premium Revenue Growth Total organic premium growth of 11% was above the high end of our long-term range led by the Medicaid flagship Prior 2019 - 20246 Long-term Target Achieved = = 12%
Slide 16: RFP Wins and Accretive Acquisitions
RFP Wins and Accretive Acquisitions a A successful history of retaining existing contracts and delivering new store growth through RFP wins and accretive acquisitions ‘Within Current Footprint '$7B Premium Realized 2019-20246 ‘$95 Premium Realized 2019-2024 & SS é « L : eee % Gara. afew When $3.58 P
Slide 17: Adjusted EPS Growth
Adjusted EPS Growth YI Adjusted EPS growth is achieved through current footprint and new store embedded earnings. $6.00 remains for 2025 through 2027. 22350 $20.88 Organic growth sr792 inca $13.54 RealzedNew $10.67 my Soe 2020 2021 202 New Store Realized ($1.00) ($1.50) ($1.00) ($2.00) New Store Adt
Slide 18: Current Environment
Current Environment
Slide 19: Government Managed Care Market
Government Managed Care Market My Addressable markets exceed $750 billion in annual spend with attractive, profitable growth opportunities Managed Medicaid Medicare Duals Marketplace 58M $1508 $1488 21M ‘Spend,
Slide 20: Molina Market Share Profile
Molina Market Share Profile " Market shares across all segments are large enough for scale and relevancy but allow for substantial growth opportunity | Medicaid Medicare Duals Marketplace National Market Share #4 Nationally +¥8 Nationally Top 15 Nationally Ce ma Average State Manes SS - -s
Slide 21: Political and Regulatory Environment
Pol ical and Regulatory Environment ey We focus on the possible policy changes and what it would take to make them in any political scenario Policies in Focus Work requirements Dual-eligible integration Medicaid expansion | 2) Federal legislation & Budget Reconciliation Risk adustment & Stars Dual-e
Slide 22: Highly Attractive Business Mix
Highly Attractive Business Mix My The current environment creates a very favorable outlook for all Molina segments Medicare Duals Environment — Duals growth projected to exceed traditional Medicare Medicaid Environment — Actuarially sound rates — Expansion of entitlement — Shift towards integration
Slide 23: The Growth Model
The Growth Model Medicaid / Medicare / Marketplace / Accretive M&A
Slide 24: Long-Term Premium Revenue Growth Targets
Long-Term Premium Revenue Growth Targets Strong, balanced organic growth complemented by a disciplined acquisition strategy Organic Growth | Marketplace 5% with Optionality Organic Acquisitions Total
Slide 25: The Growth Model
The Growth Model The growth model is well-balanced between organic drivers and accretive M&A. ~23 Organic ~1/3 Accretive M&A _—————S EE Pe 1% -13% Industry Leading Bolt-ons in Care Guitte Lines! Profitable Growth, Strategic Initiatives 3% -5% New Contracts Market Share Current Footprint 4% Market Gr
Slide 26: 2027 Premium Revenue Target
2027 Premium Revenue Target a Premium revenue growth target of 11% - 13% is well-balanced and maintains the trajectory to achieve the previous outlook of $46 billion in 2026 $52 to ~' In $ Bittons Organic - 7" = ‘Current Footprint Strategic Initiatives. M&A
Slide 27: 2027 Premium Revenue Target
2027 Premium Revenue Target Of the $9 to $12 billion of premium revenue growth from strategic initiatives and M&A, approximately 50% has already been secured $52 to ~' In $ Bilions ‘Organic - ” = $5 currently in-flight: ConnectiCare: $1.48, TX Star CHIP: $1.38. Mi, OH, NA Duals: $188, TX Stars: $068
Slide 28: Medicaid
Medicaid
Slide 29: Medicaid Long-Term Growth
%, ee Medicaid Long-Term Growth ~ Long-term growth target of 7% - 9% is driven by the current footprint, in-flight initiatives, and projected strategic initiatives Strategic Initiative Opportunity Organic Premium Revenue Opportunity Win new RFP States s:0) [EB irerease market share @ [ED Pursue care
Slide 30: Sizing the New State RFP Opportunity
Sizing the New State RFP Opportunity ee New state RFPs yield $30 billion of revenue opportunity by 2027 with $50 billion in active procurement cycle Total Contract Value Projected Market Share ~15% 2027 Revenue Opportunity ~$5B m kad
Slide 31: Molina's Proven RFP Formula
Molina’s Proven RFP Formula Yer: Our RFP approach is built on execution of proven business development capabilities and a track record of operational excellence Target Selection Criteria Formula Components : . Effective ground game that starts Size and duration of contract ia sears Geto AEE Strength
Slide 32: Increase Market Share
Increase Market Share Sem Focus on fundamental operating tactics will drive significant market share gain opportunity ~ Engage providers to drive membership loyalty — Improve quality scores to drive auto assignment ~ Increase voluntary enrollment through community presence and awareness ~ Redetermin
Slide 33: Pursue Carve-in Opportunities
Pursue Carve-in Opportunities Ne Maximize carve-in opportunities as states increasingly leverage managed cares capabilities Projected Contracts and Value L188 Carvein Opportunities Advocate for and pursue carve-in programs za Win LTSS opportunities within our current Medicaid footprint Foster care C
Slide 34: Medicare
Medicare
Slide 35: Medicare Long-Term Growth
&, Se SS Medicare Long-Term Growth Long-term growth target of 12% - 14% is driven by the current footprint, in-flight initiatives, and projected strategic initiatives Strategic Initiative Opportunity Organic Premium Revenue Opportunity 0% -2% 12% - 14% Maximize MMP conversions into HIDE/FIDE B Incre
Slide 36: Molina Strategic Position
Se Molina Strategic Position Our Medicare segment is largely comprised of Duals products with significant overlap of Medicaid plans in 16 states as we leverage our Medicaid footprint 20246 Product States | Member 6) MMP 5 50 $18 DSNP / HIDE / FIDE 15 120 $3.0 Total Duals 16 170 $4.8 Non-Duals. 15 80
Slide 37: Increasing Duals Alignment
ee Increasing Duals Alignment we CMS and state policies are increasingly focused on alignment of Medicaid and Medicare products. Both scenarios are projected to have attractive high-growth markets, cms — The 2026 Final Rule encourages increased integration of Medicare and Medicaid Guidance ~ The new
Slide 38: Maximize MMP Conversion into HIDE / FIDE
SS Maximize MMP Conversion into HIDE / FIDE “ We have begun to transition our MMP members into HIDE or FIDE product with early success in Michigan and Ohio ~ Successfully procured 2 states (MI & OH) — 4 remaining state-wide procurement where Molina carries strength of incumbency — 2 remaining states
Slide 39: Increase Duals Market Share
Increase Duals Market Share Focus on fundamental operating tactics, product design, distribution expansion and pricing discipline will drive significant market share opportunity r fie 1% ~$0.78 Incremental market 2027 Revenue Opportunity 2 share in current footprint y 2% > ~$0.38 Target market share
Slide 40: Marketplace
Marketplace
Slide 41: Marketplace Long-Term Growth
S Long-term growth target of ~5% is driven by the current footprint with optionality from projected initiatives Strategic Initiative Opportunity Organic Premium Revenue Opportunity Increase market share in current footprint Optionality Marketplace Long-Term Growth Expand service areas in 5% current
Slide 42: Strong Market Growth
ie Strong Market Growth “SS Several market dynamics have driven substantial growth Market Growth Market Dynamics clas — Enhanced subsidies were extended through 2025 — Year-round Special Enrollment Period for under 150% FPL was made permanent — Members transitioned from Medicaid throughout Redetermi
Slide 43: Market Outlook
Market Outlook i Continued organic growth expected to offset disenrollments from the potential expiration of enhanced subsidies Membership Outlook Subst Dyas — Outlook assumes ~20% of enrollees could exit the market if enhanced subsidies expire — Additional buy-downs to Bronze plans vary based on ge
Slide 44: Increase Market Share
Increase Market Share oe Focus on fundamental operating tactics, product design, distribution expansion and pricing discipline will drive significant market share opportunity share in current footprint BS 6% ~$1.68 Incremental market 2027 Revenue ‘Opportunity 4% ~$0.4B Target market share in 2027 Re
Slide 45: Accretive M&A
Accretive M&A
Slide 46: M&A Platform
eae me M&A Platform “S MBA is a key element of the long-term premium growth targets |) ‘Ample excess cash flow internally funds BD Previously announced purchase prices acquisitions are highly capital efficient B We buy long-dated, stable revenue BD Underperforming properties yield streams accretion
Slide 47: M&A Pipeline
M&A Pipeline “is The acquisition pipeline remains robust with many remaining opportunities SER EST AEE Numerous acquisition opportunities are actionable E> Turnarounds provide attractive economics Capitated risk, not services or vertical integration 2027 requires $6 billion of acquired revenue. $1.4
Slide 48: M&A Track Record
as M&A Track Record — Seven completed transactions sequenced for manageable integration and one transaction pending Magellan Afinity ‘AgeWell Bright 3 Complete Care Health Plan New York Healthcare 8 a 3 vaca Cigna Te My oh fourCare igna Texas ly Choice : é Health Plan Medicaid Wisconsin Conners 2 Yo
Slide 49: M&A Metrics
M&A Metrics Recent transactions were purchased at capital efficient prices and yield accretion from sweat equity Up Transactions completed ~5.5X Average EV/EBITDA ~$9 Billion Revenue Acquired < 25% Average Purchase Muttiple as % of Premium ~$2.3B Capital Deployed ~$4.00 Embedded Earnings Harvested
Slide 50: Operating Excellence
Operating Excellence
Slide 51: Operating Excellence
Operating Excellence It is not only what we do but how we do it that is important our continued success The Molina Playbook Serving All Constituencies
Slide 52: Our Performance Outlook
Our Performance Outlook
Slide 53: Performance Outlook
Performance Outlook Our strategy will produce sustainable, profitable growth and industry leading margins What We Will Do ~ The Next 3 Years T% - 9% 87.5% - 88.5% 11% - 13% Organic Growth Medical Cost Ratio Earnings Growth Zs <T%h ~2% Acquisitions G&A Ratio Share Repurchases ...while continually ref
Slide 54: Investment Thesis
oy ie, Investment Thesis we Shareholder value is driven by strong growth, sustained margins and disciplined capital management Pure play government sponsored healthcare Attractive margins and operating leverage Legacy and new market opportunities High return capital deployment Double digit revenue g
Slide 55: Compelling Financial Profile
* em MOLINA nh HEALTHCARE Compelling Financial Profile Mark Keim Chief Financial Officer
Slide 56: Compelling Financial Profile
Compelling Financial Profile Molina Margin Mechanics ag Capital Foundation 2024 Guidance FAW Long-Term Financial Targets 2 Bed 2025 Outlook Aly investment Thesis
Slide 57: Molina Margin Mechanics
Molina Margin Mechanics
Slide 58: Industry-leading Medicaid MCRs
Industry-leading Medicaid MCRs Molina consistently outperforms peers due to disciplined medical cost management Medicaid MCR's (Statutory) 28% ~ Rates are established at the market level...each 26% te 3% a MCO gets the same rates = ws 28% 95% is Corridors are established at the market level... = eac
Slide 59: Medical Cost Management
Medical Cost Management Numerous capabilities drive medical cost efficiencies with focus on high-acuity populations Operating Focus & Rik Caw ~ State-of-the-art medical economics platform ee lie ~ Utilization management — High-acuity care management ne — FFS and value-based contracting ~ Payment int
Slide 60: Medicaid Margin Sustainability
Medicaid Margin Sustainability Rate setting on total market population cost base provides Molina opportunity to continually drive MCR: outperformance Market Risk Pool ~ Cost trend included in rates as CMS requires rate setting to be actuarially sound Example Market MCRs ~ State actuarial processes s
Slide 61: Risk Corridors
Risk Corridors Medicaid risk corridor positions are a result of margin outperformance and help mitigate potential inflections in medical cost trends Risk Corridor Dynamics — Molina averaged ~200 basis points of risk corridor expense/protection over the past few years 88.7% — In 2024, risk corridors
Slide 62: G&A Expense Management
G&A Expense Management Continued expense management and operating leverage drive lower G&A ratio while building capabilities for continued outperformance Expense Management i+ Leveraging the Base = Building Capabilities — Fixed cost leverage 50% ~ Artificial intelligence Variab — Productivity gains
Slide 63: 2024 Guidance
2024 Guidance
Slide 64: 2024 Guidance
2024 Guidance Full year 2024 guidance is reaffirmed Current Premium Revenue $32.5B ~$38B ~$38B Adjusted EPS $20.88 223.50 > $23.50 MCR % 88.1% 88.2% 88.7% Medicaid: 88.7% 89.0% 90.0% Medicare 90.7% 88.0% 88.3% Marketplace 75.3% 78.0% 74.0% GBA % 7.2% 7.0% 6.8% Pre-tax Margin % 4.8% 4.6% 4.6% Share C
Slide 65: Medicaid MCR: 2Q24 to 3Q24
Medicaid MCR: 2Q24 to 3Q24 Adjusting for CA retro items, the Medicaid MCR decreased 10 basis points driven by new store improvements and rates and risk corridors offsetting higher trend 2.6% 90.8% 0.5% 90.5% TET] 10.3%) (0.5%) (1.9%) CA Retro Items = (0.2%) Legacy Medicaid (ex. CA retro) = 0.2% 2024
Slide 66: Medicaid MCR: 3Q24 to 4Q24
Medicaid MCR: 3Q24 to 4Q24 Adjusting for CA retro items, we expect the Medicaid MCR to decrease 100 basis points driven by new store improvements, known rates, and risk corridors offsetting moderating trend 90.5% (0.2%) (0.8%) (0.5%) Legacy Medicaid (ex. CA retro) = (0.8%) 3Q24MCR cA3Q New Store Rat
Slide 67: Medicaid MCR: Full Year Guidance
5 Medicaid MCR: Full Year Guidance - Increased MCR guidance driven by higher trend partially offset by rates and risk corridors ~3.0% 90.0% 89.0% ~ (1.5%) Legacy Medicaid (ex. CA retro) = 0.7% FY24 Guidance CARetroltems — New Store Rates Trend Corridors FY24 Guidance na 202s Gussance ‘so 1004 Earnin
Slide 68: Medicaid Medical Cost Trend
Me ‘aid Medical Cost Trend Full year 2024 trend is now expected to be 6% and reflects equal contribution from the acuity shift and core trend Medicaid Trend Progression =3% __ -6% ~6% 3% cae tend RE Acuity Shit Initial 2024 Core Trend+ Current 2024 Initial 2024 Current 2024 Net Trend Acuity Shift _—
Slide 69: 2024 EPS Guidance
< 2024 EPS Guidance We reaffirm guidance of at least $23.50 with Marketplace, G&A ratio, and NII offsetting higher MCR’s in Medicaid and Medicare 2$23.50 $23.50 r r-- ($0.75) $0.30) | $2.70 ($2.70) FY24 Marketplace = G&A Net Medicaid Q3cA Medicare FY24 ior Leverage Investment Retro Item Guidance Gui
Slide 70: 2025 Outlook
2025 Outlook
Slide 71: Medicaid Rate Environment
Medicaid Rate Environment The rate cycle is well-timed with 55% of premium renewing on January 1* ~ Known on-cycle rates were 4.5% in 3Q24 and 9% in 4Q24 — Off-cycle rates were 1.5% in 3Q24 Core Rates ~ 55% of revenues reset January 1° — Known January rates are in draft form ~ We continue to expect
Slide 72: 2025 Premium Revenue Outlook
2025 Premium Revenue Outlook Known building blocks provide current outlook of ~8% premium revenue growth nS one 2841 $1.1 ae me en 2024 2025 Current RFP Wins ConnectiCare Strategic Guidance Headwinds Footprint 4s 03024 Eanigs Cat Initiatives
Slide 73: Realization of Embedded Earnings
Realization of Embedded Earnings Embedded earnings of $6.00 remain balanced between acquisitions and new contracts, with less than half expected to be realized in 2025 | omer | store oa aie $2.65 ($0.90) ($1.75) $3.35 ($1.10) ($2.25) ($2.00) ($4.00)
Slide 74: 2025 Medicaid MCR Components
2025 Medicaid MCR Components q Achieving the high-end of the long-term MCR target range requires 20 basis points of benefit off 2H 2024 guidance from the combination of rates, trend, and risk corridors 89.7% (0.3%) (0.2%) 2H 20246 CA 3024 New Store Rates Trend Risk High-End of LT Medicaid Retro Item
Slide 75: 2025 Adjusted EPS Building Blocks
2025 Adjusted EPS Building Blocks Medicaid margin is the largest driver of our outlook for current footprint and relies heavily on rates and trends $0.40 = $23.50 (2024 Current Embedded Share Repurchase Net Investment Guidance Footprint Earnings Benefit in 3024 Income 5 9084 Earn
Slide 76: Capital Foundation
Capital Foundation
Slide 77: Strong Capital Foundation
Strong Capital Foundation % Strong balance sheet provides foundation for stability and growth 3Q 2024 Credit Stats Reserve Strength Net Debt to EBITDA Ratio 14x Reserves at 9/30/24 $4.78 Net Debt / Capitalization ~35% Days in Claims Payable 48 Days Revolver Capacity $1,258 Recurring Parent Cash Flow
Slide 78: Capital Deployment Discipline
Capital Deployment Discipline Capital deployment is prioritized to opportunities with the highest returns Re-invest in Business “= Accretive Acquisitions Return to Shareholders |— Organic growth is the highest priority | Most efficient use of capital to. grow |— All ines of business are high growth
Slide 79: Long-Term Financial Targets
Long-Term Financial Targets
Slide 80: Long-Term Targets
Long-Term Targets Molina has a clear formula to deliver organic premium growth and sustainable MCR to achieve pre- tax margins Organic Medical Premium Cost Growth Ratio _ 5% with Marketplace Optionality ighted Total Medical Care Ratio Adj.G&A Ratio Pre-Tax Margin
Slide 81: 2027 Premium Revenue Target
Slide 82: 2027 Strategic Initiative Opportunity
Slide 83: Long-Term EPS Growth
Slide 84: Investment Thesis
Slide 85: Performance Outlook
Slide 86: Investment Thesis
Slide 87: Q&A
Slide 88: Reconciliation of Non-GAAP Financial Measures