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Form 8-K MOLINA HEALTHCARE INC For: May 30

May 30, 2019 4:19 PM
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 8-K
______________
Current Report
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 30, 2019 (May 30, 2019)
 
______________
 
MOLINA HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)

Delaware
1-31719
13-4204626
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
 
______________
 
200 Oceangate, Suite 100, Long Beach, California 90802
(Address of principal executive offices)
Registrant’s telephone number, including area code: (562) 435-3666
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.001 Par Value
MOH
New York Stock Exchange
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
  
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company
   
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act.



Item 7.01.    Regulation FD Disclosure.
 
On May 30, 2019, the Company presented and webcast certain slides as part of the Company’s presentation at its Investor Day Conference held in New York City. The slide presentation contains statements regarding, among other things, the Company’s 2019 guidance, its business plans, expectations, growth prospects and aspirations, and longer-term outlook for the future.  The Company cannot guarantee that it will actually achieve the plans, outlook, or expectations described in such statements.  A copy of the Company’s complete slide presentation is included as Exhibit 99.1 to this report.
 
An audio and slide replay of the live webcast of the Company’s Investor Day presentation will be available for 30 days from the date of the presentation at the Company’s website, www.molinahealthcare.com. The information contained in such websites is not part of this current report.
 
Note: The information furnished herewith pursuant to Item 7.01 of this current report on Form 8-K shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
 
Item 9.01.    Financial Statements and Exhibits.
 
(d)       Exhibits:
 
Exhibit No.
Description
99.1
Slide presentation given at the Investor Day Conference of Molina Healthcare, Inc. on May 30, 2019.


 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
   
MOLINA HEALTHCARE, INC.
     
Date:
May 30, 2019
By:
/s/ Jeff D. Barlow
     
Jeff D. Barlow
     
Chief Legal Officer and Secretary
 



EXHIBIT INDEX
 
Exhibit No.
Description
 

Exhibit 99.1


 Molina Healthcare, Inc.Investor Day 2019  May 30, 2019   WIFI: Molina Healthcare Password: #MOH2019 
 

 Agenda  9:30 am  Welcome and Overview  Julie Trudell    Pivot to Growth:      Who We Are  Joe Zubretsky    A Strong Foundation      Margin Sustainability      Disciplined and Steady Growth      Financial Outlook    11:15 am  Break    11:30 am  Panel Discussion:       Margin Sustainability  Jim Woys    Growth Prospects  Pam Sedmak    Financial Profile  Tom Tran    Management Team Q&A    1:00 pm  Lunch   
 

 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 limitation, the Company’s 2019 guidance, its business plans, expectations, and longer-term outlook for the future. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company cannot guarantee that it will actually achieve the plans, outlook, or expectations disclosed in its forward-looking statements and, accordingly, you should not place undue reliance on the Company’s forward-looking statements. Those risks and uncertainties are discussed under Item 1A in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and also in the Company’s quarterly reports and other reports and filings with the Securities and Exchange Commission, or SEC. These reports can be accessed under the investor relations tab of the Company’s website or on the SEC’s website at www.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 the results or events projected or contemplated by its forward-looking statements will in fact occur. All forward-looking statements in this presentation represent management’s judgment as of May 30, 2019, and, except as otherwise required by law, the Company disclaims any obligation to update any forward-looking statements to conform the statement to actual results or changes in its expectations. 
 

 Pivot to Growth  Joe ZubretskyPresident & Chief Executive Officer 
 

 Pivoting to Growth  Margin recovery complete, sustainability well under way, pivot to growth has begun        Margin Recovery      Margin Sustainability  Growth 
 

   Investment Thesis  Focused on sustainable industry leading margins and double digit growth    Double digit revenue growth    Lowest cost / highest margins in the business    Low capital requirements and significant excess cash flow    Return to shareholders in an accretive way    Accomplished management team    Pure play government business   
 

 Outlook: Total Company Long-Term Growth 3 to 5 Years  Long-term, compound annual growth rates - average over time      Premium Revenue Growth  10% - 12%  After-Tax Margin  3.8% - 4.2%  Net Income Growth  9% - 11%  EPS Growth  12% - 15%    Additional upside could be provided through capital deployment   
 

 Who We Are  Joe ZubretskyPresident & Chief Executive Officer 
 

   Franchise  High-quality healthcare through government programs for disadvantaged people    168Ranking                                $16.4BRevenue2019E    3.4MMembers1Q19    15Markets 
 

 Mission  Commitment to providing high-quality care while delivering value to all stakeholders  Molina provides the disadvantaged with access to high-quality healthcare  The mission is equally balanced among all those we serve        Members  Government Agencies  Employees  Shareholders 
 

 Footprint  Geographically diverse and national in scope  Approximate Premium Revenue by State:  $2.5B    $1.5B    $ 0.8B    ≤$ 0.4B      Puerto Rico  Strong incumbency status, resilient state relationshipsand growth opportunities    Geographically diversified with no state greater than 19% of premium revenue    Presence in many of the nation’s largest managed care markets                                                                                                                                                                                                                                                                                         
 

 Transforming Molina  Transformation addressed each major component of the enterprise    Accountability and ownershipTransparency and trustReliability and commitment The Molina brand  Culture  Operating Model  Self-contained health plan and product line P&L’sClear decision rightsRigorous performance management  Talent  Entirely new at senior executive levelsMiddle management enhancementSeasoned managed care veterans 
 

 Management Team  Team of industry-leading executives with over 20 decades of experience    President & CEOJoe Zubretsky  Chief of StaffRon Kurtz  Health PlansPam Sedmak  Health Plan ServicesJim Woys  Strategy and M&AMark Keim  CFOTom Tran  Human ResourcesLarry Anderson  General CounselJeff Barlow  Policy and Govt. AffairsCarolyn Ingram 
 

 A Strong Foundation 
 

 Full Year 2019 Guidance  Strong financial performance in a high-growth industry  All amounts are estimates and do not include non-recurring significant items. Medical care ratio represents medical costs as a percentage of premium revenueG&A ratio represents general and administrative expenses as a percentage of total revenueSee reconciliation of non-GAAP financial measures at the end of this presentationAfter-tax margin represents net income as a percentage of total revenue      Total Revenue  ~ $16.4B  Medical Care Ratio %(2)  ~ 86%  G&A %(3)  ~7.7%  EBITDA(4)  $1,080M - $1,120M  Net Income  $680M - $710M  After-Tax Margin(5)  4.1% - 4.3%  EPS  $10.50 - $11.00  As of 1Q19(1) 
 

 Strong, Sustainable Margins  Best in class margins produce significant free cash flow     Full Year 2019 Guidance After-Tax Margins      ~3%Medicaid  ~11%Marketplace  ~6%Medicare  4.1 – 4.3%Total Company 
 

 Best in Class ROE Drives EPS  Significant cash generation creates flexibility for deployment      Acquisitions  Share Repurchases  Organic Growth  Significant EPS Growth and AccretionPotential  Excess Cash Flow    Illustration      1  ~4% After-Tax Margins  Capital 10% of Revenue    2  40% Unlevered ROE    3  50% Debt to Capital Ratio    4  ~75% Levered ROE    5 
 

 A Strong and Stable Balance Sheet to Support Growth  In one year, restored a challenging balance sheet, now a strength    1Q19 Credit Stats  Reserve Strength  Liquidity  Capital Levels 1Q19  Parent Company Cash 1Q19  ~$440M  Remaining Subsidiary Dividends 2019E  ~$500M  Debt Capacity as of May 2019  ~$900M  Total Deployable Capital   ~$1.8B  Reserves at 3/31/19  $2.0B  PYD 2018  ~$135M  PYD 2019 YTD  ~$55M  Debt to EBITDA Ratio  1.0x    Interest Coverage Ratio  14.7x    Debt / Capitalization  ~45%    Debt Ratings  S&P: BB-  Moody’s: B2                                                                                                                                                                                                                                                                                              ~460%of RBC 
 

 Excess Cash Flow Will be Invested Prudently  Will deploy capital to achieve stable, consistent growth and accretion  Accretive bolt-on membership acquisitions  Expert acquisition team in placeRobust pipeline, disciplined approachStrategic fit, operational synergies and EPS accretion  Organic growth is the highest priorityMost efficient use of capital to growAll lines of business are high growth  Re-invest in business  Return to Shareholders  Balanced approach to returning capital to shareholdersRetire convertible debtShare repurchase 
 

 Margin Sustainability 
 

   Guidance Increases  Focusing on managed care fundamentals has yielded continued margin improvement   Midpoint of Guidance   $11.00   
 

     High-Performing Health Plan Portfolio  Focus on underperforming business has improved portfolio margins  FY 2017  FY 2018   
 

   The Rate Environment and Outlook  Rational and actuarially sound Medicaid rate environment with premium tracking to medical cost trend  3  Carved-in / Carved-out benefits  Risk adjustment  4  Acuity levels and mix  2  1  Medical cost trend   The typical rating dynamics: 
 

 The Profit Improvement Inventory  An actionable inventory of initiatives to improve operating and financial performance   Medical Costs  At-Risk Revenue  Corporate G&A  Areas of Margin Recovery    2020E and Beyond  $450M      Original 2018Midpoint    $500M  +  -    May 2019 Addition    $100M    Recognized2019E    $200M    January 2019 Midpoint    $550M   
 

 Utilization Control  Ensuring members receive the right service, in the right setting, at the right cost  PROFIT IMPROVEMENT  Standardizing business processesEnhancing medical economics engine High-acuity focus; NICU, OUD, BH, LTSS Refining clinical policiesDetailed management of:Inpatient admissionsER utilizationInpatient average length of stayPharmacy utilization trend  Actions:                      Right Service  Right Setting  Right Cost  Analytics  MLTSS  Technology  Network  Pharmacy  Best in Class Partners  Quality  Models  Continuous Process Improvement  
 

 Payment Integrity  Building “best in class” payment integrity capabilities to improve performance  PROFIT IMPROVEMENT        Coordination of Benefits      Pre-Pay      Post-Pay       Fraud, Waste and Abuse      Subrogation      Capabilities  Vendor Partners  Improvement Opportunity    P      P    Significant Opportunity  P  Opportunity 
 

 G&A Cost Scalability and Leverage  Continued cost actions and positive operating leverage fund investments while reducing G&A ratio  PROFIT IMPROVEMENT  Cost Actions  OutsourcingSpans of controlLower cost labor poolsIntroducing automation, process redesign, and digitization  Funding Investments  New business developmentTechnology licensingOutsourcingRent-to-own vendor focusMarketing and media    Leveraging the Base  Variable  Fixed  +  - 
 

 Quality Scores and Risk Adjustment  Consistent quality gap closure and risk score data capture will retain at-risk revenue  PROFIT IMPROVEMENT  Products: Medicaid, Medicare, Marketplace      Enhance:  Data collection and analyticsProspective interventionsRetrospective capabilitiesData submission accuracy and completeness  Capabilities  Complete, Accurate and Timely:  Measurement of health status Data capture Impactful interventions  Objectives  Enhance:  Organizational capabilitiesAnalytical tools and techniquesVendor / partner support  Actions 
 

 Optimal Operating Model  Fully integrated proprietary and rent-to-own operating model provides winning combination  PROFIT IMPROVEMENT    Outsourced/Co-Source  Internal Capabilities    Front Line and Pharmacy Utilization  Provider Contracting / Network  Claims Payment  Member / Provider Services      IT Infrastructure:  Payment Integrity:  PBM:  Risk Adjustment: 
 

 Disciplined and Steady Growth 
 

 Addressable Markets  High growth and synergistic portfolio  Source: NHE, Medicaid Actuarial, Medicaid.gov, Medicare Trustees, CMS, CBO    Government Sector Managed Care Spending Growth (2016 - 2021 CAGR)  5% - 8%   Underlying segment growthIncrease in managed care, high-acuity populations  8% - 12%   Elderly population continues to growIncreasing managed care penetrationMedicare-Medicaid integration  3% - 5%   Stabilized enrollmentGovernment subsidies  Marketplace   Medicaid  Medicare Duals 
 

       Pivot to Growth  Ongoing growth-oriented investments will drive top-line growth while sustaining margins  Rebuilt team Significant managed care deal experienceExpertise in identifying and executing transactionsJoint ventures, member migrationsGrowing pipeline of acquisition targets  New Business Development  RFP Process  Corporate Development  Rebuilt teamRedesigned RFP process Engaged executive team Recent successes: WA, PR, and MS CHIPPending awards: TX  Rebuilt team Focus on high probability targetsPre-RFP boots on the groundRevamped Government Affairs organization 
 

     Medicaid  Market Share Opportunity  Current national and local market shares present significant upside opportunity    Duals  Marketplace  #5 Nationally  #6 Nationally  #8 Nationally  Average State Market Share  National Market Share  Molina    Top Competitors Average    15% - 20%  9%  8%  10% - 30%  6%  10% - 30%  ~  ~  ~  ~  ~  ~    ~5%    ~3%    ~3% 
 

 Molina’s Growth Strategy 
 

 Molina’s Multi-Dimensional Growth Strategy Framework  A disciplined and steady approach to growth  Dimensions  Characteristics  Lenses      Win NewTerritories    Long-term Annual Growth    Inorganic Opportunities    Bolt-on Membership Opportunities  Opportunistic Capital Deployment    Leverage the Existing Portfolio  Actionability  Geography  Product  Predictable Annual Growth Rates  Create proprietary target listRespond to banker auctions  Strategic fitExecute  Addressable marketCustomer controls timing  Prioritizing opportunitiesDisciplined approach  Winning capabilitiesTable stakes and innovation  Medicaid Market shareAdjacent Medicaid geographiesMedicaid carve-insMarket share and penetration of other products  Extensive actionability in existing statesDrive local health plan execution   MedicaidMedicareMarketplaceDualsLTSS    Customer controls timing  Addressable Market    Winning Capabilities  Table stakes and innovation    Prioritizing Opportunities  Disciplined approach 
 

 Leverage the Existing Portfolio 
 

 Molina’s Multi-Dimensional Growth Strategy Framework  A disciplined and steady approach to growth  Dimensions  Characteristics  Lenses      Leverage the Existing Portfolio  Actionability  Geography  Product  Predictable Annual Growth Rates  Win NewTerritories    Long-term Annual Growth    Inorganic Opportunities    Bolt-on Membership Opportunities  Opportunistic Capital Deployment      Addressable Market    Winning Capabilities    Prioritizing Opportunities 
 

   Growth Lens One: Actionability…The “How”  Execute on highly actionable opportunity sets  LEVERAGE THE EXISTING PORTFOLIO > ACTIONABILITY  Opportunity Set:    1    2    3  Increase Medicaid market share    4  Add adjacent Medicaid geographies  Pursue Medicaid benefit carve-ins  Increase market share and penetration of other products in existing Medicaid footprint 
 

   Opportunity Set One: Increase Medicaid Market Share  Capture Medicaid market share through tactical operating changes  LEVERAGE THE EXISTING PORTFOLIO > ACTIONABILITY > MEDICAID MARKET SHARE  Opportunity  Actions  National market share: 5%In-state market share ~9%; half of market share leaders Service area market share: 16%#2 - #4 player in most existing service areas  Capture eligibility re-determinationsDeliver quality score improvement to capture more auto assignmentEnhance voluntary selection through community involvementLocal branding and marketingEnhance provider relationships  1%Service Area Market Share  =  $750MRevenue 
 

   Opportunity Set Two: Add Adjacent Medicaid Geographies  Achieve adjacent Medicaid geography growth through successful procurements in existing markets  LEVERAGE THE EXISTING PORTFOLIO > ACTIONABILITY > ADJACENT GEOGRAPHIES  Opportunity  Actions  Service area market share ~16% In-state market share is ~9%Ability to leverage fixed costs New potential regions in several states including TX  Enhance business development and RFP capabilitiesActively evaluate every RFP expansion opportunityFoster relationships with community based organizations Continue to maintain strong standing within the state 
 

   Opportunity Set Three: Increase Medicaid Benefit Carve-Ins  Drive Medicaid benefit carve-ins with state partners and capture with capabilities  LEVERAGE THE EXISTING PORTFOLIO > ACTIONABILITY > MANAGED CARE / CARVE-INS  Opportunity  Actions  Work with states to drive mandatory managed care movement legislativelyLeverage the $2B MLTSS platformLeverage BH integration capabilities in WAWork with states to ensure carve-ins are attached to existing Medicaid contractsRecent “wins” in OH and WA behavioral  Managing MLTSS benefits for 225K+ members$40B+ of LTSS spend in Molina service areasCarve-in opportunities: MLTSS and BHMinimal MLTSS penetration in 6 Molina statesNear-term opportunities for MLTSS in: IL, MI, SC, WINear-term opportunity for BH in MI 
 

 Opportunity Set Four: Penetration of Medicare Products in Medicaid Footprint  Achieve growth in existing and additional counties through enhanced offering  LEVERAGE THE EXISTING PORTFOLIO > ACTIONABILITY > PRODUCT PENETRATION  Opportunity  Actions  Increase market share in existing markets Offer DSNP in 400+ Medicaid-only countiesLeverage Medicaid operational infrastructure  File DSNP in 150 new counties in 2019Develop products with competitive features and supplemental benefitsPrice competitively, balance margin and membershipLeverage broker relationships and footprint 
 

 Opportunity Set Four: Penetration of Marketplace Products in Medicaid Footprint  Drive Marketplace growth in existing and additional counties with focused products and pricing  LEVERAGE THE EXISTING PORTFOLIO > ACTIONABILITY > PRODUCT PENETRATION  Opportunity  Actions  Unique Marketplace product serving working poorExtension of, and priced off, Medicaid network Specialized broker channel specific to the Company’s populationRoom to grow: Marketplace revenue previously $4 billion gross in 2017  Tailor network unit cost to match pricingRefresh product suiteRe-focus on high value metallic tiersRenew focus on outstanding broker relationshipsIntense analysis of pricing strategy vs. competitor position 
 

 Full Year 2019Guidance  Market Share Gain     Margin Optimization  Opportunity Set Four: Marketplace Profit Pool Illustration  There are many possible paths to growing the profit pool longer-term  LEVERAGE THE EXISTING PORTFOLIO > ACTIONABILITY > PRODUCT PENETRATION  Scenario 1:  Scenario 2:  Premium Revenue (Net of Risk Adjustment)  ~$1.5B  ~ $2.4B  ~ 3.8B  After-Tax Income  ~$165M  ~ $216M  ~ $235M  After-Tax Margin %  ~11%  ~ 9%  ~ 6%  Illustration 
 

 Molina’s Multi-Dimensional Growth Strategy Framework  A disciplined and steady approach to growth  Dimensions  Characteristics  Lenses      Leverage the Existing Portfolio  Actionability  Geography  Product  Predictable Annual Growth Rates  Win NewTerritories    Long-term Annual Growth    Inorganic Opportunities    Bolt-on Membership Opportunities  Opportunistic Capital Deployment      Addressable Market    Winning Capabilities    Prioritizing Opportunities 
 

 Growth Lens Two: Geography…The “Where”  Geographic growth presents multiple opportunity sets  LEVERAGE THE EXISTING PORTFOLIO > GEOGRAPHY    Opportunity Set:    1    2    3  Across all forms of actionability, the growth prospects in existing states are robust    4  Each local health plan has a growth mandate and action plan  Centralized product expertise and capability executed locally is a winning model  Scaled but still underpenetrated, even in major geographies 
 

 Growth Lens Two: Geography…The “Where” (cont’d)  Each local health plan has a growth mandate and the opportunities are compelling  LEVERAGE THE EXISTING PORTFOLIO > GEOGRAPHY > ALL FORMS OF ACTIONABILITY IN EXISTING STATES  Actionable Opportunities    = Small Membership Size    = Large Membership Size    = Medium Membership Size  = Significant Opportunity    1  Medicaid market share    2  Adjacent Medicaid geographies    3  Medicaid benefit carve-Ins    4  Market share and penetration in existing Medicaid footprint                                                                                                                                                                                                                                                                                                                                   
 

   Growth Lens Two: Geography… Case Studies  Washington and Illinois case studies are instructive  LEVERAGE THE EXISTING PORTFOLIO > GEOGRAPHY > ALL FORMS OF ACTIONABILITY IN EXISTING STATES        Washington  Illinois  Case Study  Washington:  Won re-procurement    Increased Medicaid market share    Carved-in benefits    Offered DSNP and Marketplace products    Illinois:  Won Re-procurement expanded footprint    Increased market share – bonus auto-assigns    Carved-in benefits    Expanding MMP   
 

 Molina’s Multi-Dimensional Growth Strategy Framework  A disciplined and steady approach to growth  Dimensions  Characteristics  Lenses      Leverage the Existing Portfolio  Actionability  Geography  Product  Predictable Annual Growth Rates  Win NewTerritories    Long-term Annual Growth    Inorganic Opportunities    Bolt-on Membership Opportunities  Opportunistic Capital Deployment      Addressable Market    Winning Capabilities    Prioritizing Opportunities 
 

 Growth Lens Three: Growth Trajectory by Product Offering…The “What”  Even without new RFP wins, long-term growth trajectories by line of business are strong  LEVERAGE THE EXISTING PORTFOLIO > GEOGRAPHY > ALL FORMS OF ACTIONABILITY IN EXISTING STATES      14% - 16%  14% - 16%  7% - 8%  Marketplace  Medicare  Medicaid Growth without RFPs  Long Term Premium Revenue Growth Rates(1)  Long-term premium revenue growth rates represent 3 - 5 year CAGR off 2019E Guidance 
 

 Win New Territories 
 

 Molina’s Multi-Dimensional Growth Strategy Framework  A disciplined and steady approach to growth  Dimensions  Characteristics  Lenses      Leverage the Existing Portfolio  Actionability  Geography  Product  Predictable Annual Growth Rates  WIN NEW TERRITORIES   Win NewTerritories    Long-term Annual Growth    Inorganic Opportunities    Bolt-on Membership Opportunities  Opportunistic Capital Deployment    Addressable marketCustomer controls timing  Prioritizing opportunitiesDisciplined approach  Winning capabilitiesTable stakes and innovation    Addressable Market    Winning Capabilities    Prioritizing Opportunities 
 

   Win New Territories: 2020 Addressable Market  WIN NEW TERRITORIES > ADDRESSABLE MARKET  Remain selective in choosing new states to pursue  ~$33B    2020                                                                                                                                                                                                                                                                                                            Minnesota  Pennsylvania  Kentucky  Louisiana  Hawaii 
 

   Win New Territories: 2021 - 2022 Addressable Market  WIN NEW TERRITORIES > ADDRESSABLE MARKET  Remain selective in choosing new states to pursue  ~$17B    2021 - 2022                                                                                                                                                                                                                                                                                                            Georgia  Tennessee  Missouri  West Virginia  Indiana 
 

   Win New Territories: 2023 Addressable Market  WIN NEW TERRITORIES > ADDRESSABLE MARKET  Remain selective in choosing new states to pursue  ~$10B    2023                                                                                                                                                                                                                                                                                                              District of Columbia  Delaware  Iowa  Nevada 
 

 Win New Territories: Foreseeable Addressable Market is ~$60 Billion  WIN NEW TERRITORIES > ADDRESSABLE MARKET  Will target opportunities based on probabilities of success  2023    ~$10 Billion  2021 - 2022    ~$17 Billion  2020    ~$33 Billion  Minnesota  Louisiana  Pennsylvania  Hawaii  Kentucky  Georgia  Tennessee  Missouri  Indiana  West Virginia  DC  Delaware  Iowa  Nevada 
 

 Molina’s Multi-Dimensional Growth Strategy Framework  A disciplined and steady approach to growth  Dimensions  Characteristics  Lenses      Leverage the Existing Portfolio  Actionability  Geography  Product  Predictable Annual Growth Rates  WIN NEW TERRITORIES   Win NewTerritories    Long-term Annual Growth    Inorganic Opportunities    Bolt-on Membership Opportunities  Opportunistic Capital Deployment    Addressable marketCustomer controls timing  Prioritizing opportunitiesDisciplined approach  Winning capabilitiesTable stakes and innovation    Addressable Market    Winning Capabilities    Prioritizing Opportunities 
 

 Disciplined approach to selecting opportunities based on probability of success  Win New Territories: Prioritizing Opportunities  WIN NEW TERRITORIES > PRIORITIZING OPPORTUNITIES      1  Size and duration of contract    5  Rational rate environment    2  Strength of incumbents    6  Future organic growth prospects    3  Number of awardees    7  Local, political, and regulatory relationships    4  Ability to build high quality low cost network  Key Criteria 
 

 Molina’s Multi-Dimensional Growth Strategy Framework  A disciplined and steady approach to growth  Dimensions  Characteristics  Lenses      Leverage the Existing Portfolio  Actionability  Geography  Product  Predictable Annual Growth Rates  WIN NEW TERRITORIES   Win NewTerritories    Long-term Annual Growth    Inorganic Opportunities    Bolt-on Membership Opportunities  Opportunistic Capital Deployment    Addressable marketCustomer controls timing  Prioritizing opportunitiesDisciplined approach  Winning capabilitiesTable stakes and innovation    Addressable Market    Winning Capabilities    Prioritizing Opportunities 
 

     Procurement is a technical sale; Molina has proven capabilities and solutions to win  Win New Territories: Winning Capabilities  InnovationLong-term services and supports (LTSS)Complex care managementPBM and Rx transparencyBehavioral integrationSocial determinants of health Opioid use disorder  Table Stake CapabilitiesMember experienceProvider experienceCompliance excellenceLow frictionHigh quality and access to healthcareManaging high acuity members  WIN NEW TERRITORIES > WINNING CAPABILITIES 
 

 Molina’s Value Proposition  Partner of choice by delivering cost effective, reliable and seamless service  WIN NEW TERRITORIES > WINNING CAPABILITIES  Partner of Choice  Low Cost  Effective, High Quality, and Appropriate Access to Care  Reliable Service and Seamless Experience       
 

     Win New Territories: Reprocurement Pipeline  WIN NEW TERRITORIES > WINNING CAPABILITIES  A conservative view of RFP success still drives incremental long-term revenue growth    2020    2021 - 2022    2023                                                                                                                                                                                                                                                                                                              Major RFP opportunities  ~$60B  Pursue subset of opportunities  ~40%  Projected competitive win rate  ~40%  Projected market share  15% - 20%  Incremental Medicaid revenue from RFPs in 2023  $1.5B - $2B 
 

 Inorganic Growth Opportunities 
 

 Molina’s Multi-Dimensional Growth Strategy Framework  A disciplined and steady approach to growth  Dimensions  Characteristics  Lenses      Leverage the Existing Portfolio  Actionability  Geography  Product  Predictable Annual Growth Rates  INORGANIC OPPORTUNITIES  Win NewTerritories    Long-term Annual Growth    Inorganic Opportunities    Bolt-on Membership Opportunities  Opportunistic Capital Deployment    Addressable marketCustomer controls timing  Prioritizing opportunitiesDisciplined approach  Winning capabilitiesTable stakes and innovation    Addressable Market    Winning Capabilities    Prioritizing Opportunities 
 

         Well-Positioned for Responsible Capital Deployment   INORGANIC OPPORTUNITIES > BOLT-ON MEMBERSHIP OPPORTUNITIES    1  Molina’s margins are highest in industry    2  Medicaid capital requirements are low relative to healthcare industry    4  EPS accretion can be higher under multiple deployment scenarios  Significant cash generation creates flexibility for deployment    3  Excess capital at the parent is substantial    1  Organic growth opportunities    2  Targeted and focused acquisitions    3  Return to investors  Uses of Cash  Sources of Cash   
 

 Capital Requirements and Capacity for Growth  INORGANIC OPPORTUNITIES > BOLT-ON MEMBERSHIP OPPORTUNITIES  Molina’s strong cash flow make acquisitions actionable      Net income Full-Year 2019E  ~$700M   Statutory Capital Required for 10% Growth  ~$(150)M  Remaining Deployable Capital   ~$550M   Leverage  ~2x  Levered Deployable Capital   ~$1.1B   Incremental Annual Revenue Potential at 0.5x Multiple   ~$2.0B   Annual Capital Deployment Illustration 
 

   Inorganic Growth Opportunities  INORGANIC OPPORTUNITIES > BOLT-ON MEMBERSHIP OPPORTUNITIES    1  Attractive bolt-on membership opportunities in current states    4  Competitor divestitures present new opportunities    2  More than 200 provider owned plans across the country    5  Opportunities pursued will lead to incremental EPS accretion    3  Turning around under-performing plans  Focus on strategic fit, operational synergies and EPS accretion    6  Will not pursue capability plays 
 

 Financial Outlook 
 

 Outlook: 2020 Premium Revenue Guidance  Growth Ranges  Business model provides good revenue visibility into 2020      Premium Revenue  $17.0B - $17.3B  % Growth  7% - 9%  Assumptions  Growth in all three lines of business    Does not include new RFP wins    Assumes steady state in Texas    Premium yield ~2%    Volume and mix ~6%    Health insurer fees not included   
 

 Outlook: Total Company Long-Term Growth 3 to 5 Years  Long-term, compound annual growth rates - average over time      Premium Revenue Growth  10% - 12%  After-Tax Margin  3.8% - 4.2%  Net Income Growth  9% - 11%  EPS Growth  12% - 15%    Additional upside could be provided through capital deployment   
 

   Outlook: Premium Revenue Growth by Line of Business  Remain disciplined, as the opportunity is significant even without inorganic growth  Long-Term Growth 3 - 5 Years  Total        7% - 8%  14% - 16%  14% - 16%  $1.5B - 2.0B  9% – 11%  Medicare  Marketplace  10% - 12%    Medicaid Growth Without RFPs  Medicaid Growth From RFPs  Total Medicaid Growth 
 

 Strategic initiatives that drive long-term growth in Medicaid    Outlook: Drivers of Long-Term Growth  ~  ~  ~  Medicaid Premium Revenue(Long Term Growth 9% - 11%)  Strategic Initiatives:      1  Increase Medicaid market share    2  Add adjacent Medicaid geographies    3  Pursue Medicaid benefit carve-ins    4  Win Medicaid RFPs in new states  ~     
 

 Strategic initiatives that drive long-term growth in Medicare    Outlook: Drivers of Long-Term Growth      ~  ~  ~  Medicare Premium Revenue(Long Term Growth 14% - 16%)  Strategic Initiatives:    ~    1  Increase market share    2  Increase penetration in existing Medicaid footprint 
 

 Strategic initiatives that drive long-term growth in Marketplace    Outlook: Drivers of Long-Term Growth      ~  ~  Marketplace Premium Revenue(Long Term Growth 14% - 16%)  Strategic Initiatives:      1  Increase market share    2  Increase penetration in existing Medicaid footprint  ~ 
 

         Outlook: Long-Term After-Tax Margin Ranges  Long-term after-tax margins are expected to be attractive  Assumptions  After-Tax Margin  2019 Guidance  3 - 5 Year Target  Medicaid  ~3%  2.8% - 3.2%  Medicare  ~6%  5.0% - 5.5%  Marketplace  ~11%  8.5% - 9.5%  Total Company  4.1% - 4.3%  3.8% - 4.2%    1    2    3  Good revenue visibility into 2020 and beyond  Rate environment: rational and actuarially sound  Margin improvement opportunities remain abundant     G&A leverage continues as top-line revenue grows  4 
 

 Outlook: Total Company Long-Term EPS Growth 3 to 5 Years  Excess cash at the parent of ~$45 per share provides upside to outlook     Growth Ranges (Assumes no Acquisitions)   Included in EPS Growth of 12% - 15%  Outlook generates ~$4B of cash    Outlook assumes ~35% of cash for share repurchase or ~300 bps of EPS accretion    Excess cash at the parent of ~$45 per share provides potential for additional EPS accretion    Upside to EPS Growth of 12% - 15%  Debt to capitalization ratio maintained at ~45%      Net Income Growth  9% - 11%  EPS Growth  12% - 15% 
 

 Pivoting to Growth  With margin recovery complete, sustainability well under way, pivot to growth has already begun        Margin Recovery      Margin Sustainability  Growth 
 

 Panel Discussion 
 

 Jim WoysMargin Sustainability 
 

 Payment Integrity 
 

 Risk and Quality 
 

 Utilization Management 
 

 IT Capabilities 
 

 Pam SedmakGrowth Prospects 
 

 RFP Pipeline and Evaluation Process 
 

 Approach to Medicaid RFPs 
 

 Reprocurement 
 

 Why Molina? 
 

 Market Share 
 

 Tom TranFinancial Profile 
 

 ROE Model 
 

 Long-Term Capital Deployment 
 

 Marketplace 
 

 Outlook 
 

 Executive Q&A 
 

   Investment Thesis  Focused on sustainable industry leading margins and double digit growth    Double digit revenue growth    Lowest cost / highest margins in the business    Low capital requirements and significant excess cash flow    Return to shareholders in an accretive way    Accomplished management team    Pure play government business   
 

 Reconciliation of Non-GAAP Financial Measures 
 

 Reconciliation of Non-GAAP Financial Measures  2019 revised guidance as of 1Q19  Net Income  $680M  $710M  Adjustments:      Depreciation, and Amortization of Intangible Assets and Capitalized Software  $90M  $90M  Interest Expense  $90M  $90M  Income Tax Expense  $220M  $230M  EBITDA  $1,080  $1,120  Low End  High End 
 

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