News Release

Raises Full Year 2019 Earnings Guidance

LONG BEACH, Calif.--(BUSINESS WIRE)--Jul. 30, 2019-- Molina Healthcare, Inc. (NYSE: MOH) today reported net income for the second quarter of 2019 of $196 million, or $3.06 per diluted share compared to net income of $202 million, or $3.02 per diluted share, in the second quarter of 2018. Financial results for the second quarter of 2019, are summarized below:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
	(In millions, except per share results)
Premium Revenue	$4,049			$4,514			$8,001			$8,837
Total Revenue	$4,193			$4,883			$8,312			$9,529
Pre-Tax Income	$257			$305			$517			$484
Net Income	$196			$202			$394			$309
EPS - Diluted	$3.06			$3.02			$6.04			$4.68
MCR	85.6	%		85.3	%		85.5	%		85.7	%
G&A Ratio	7.8	%		6.9	%		7.6	%		7.2	%
Pre-Tax Margin	6.1	%		6.2	%		6.2	%		5.1	%
Effective Tax Rate	24.0	%		33.8	%		23.9	%		36.2	%
After-Tax Margin	4.7	%		4.1	%		4.7	%		3.2	%

Highlights include:

• Premium revenue was $4.0 billion in the second quarter of 2019, a 10.3% decrease compared with the second quarter of 2018, which was in line with the Company’s expectations.
• Medical care ratio (MCR) was 85.6% in the second quarter of 2019, and 85.3% for the second quarter of 2018.
• General and administrative (G&A) expense ratio increased to 7.8% in the second quarter, compared to 6.9% for the second quarter of 2018.
• The second quarter results benefited from $12 million, or $0.15 per share, net gain for the repayment of convertible notes and restructuring costs.
• After-tax margin was 4.7% for the second quarter of 2019 compared to 4.1% in the second quarter of 2018. Excluding the net gain, after tax margin would have been 4.4% for the second quarter of 2019.
• Cash at the parent company amounted to $467 million as of June 30, 2019.
• Operating cash flows for the six months ended June 30, 2019, was $156 million.
• Raised full year 2019 earnings guidance to $11.20 - $11.50 from $10.50 - $11.00, which does not include any future prior-period reserve development.

“We are very pleased with our strong start to the year, a year in which we intend to demonstrate that we can sustain our attractive margin profile while pivoting to growth,” said Joe Zubretsky, president and CEO. “The business continues to generate significant excess cash flow and our revenue growth initiatives are well under way. Our quarter and year to date results, and the earnings trajectory of our entire portfolio of businesses leading into the second half of the year, give us the confidence to raise full year guidance.”

Premium Revenue

Premium revenue for the second quarter of 2019 decreased 10.3% to $4.0 billion compared to $4.5 billion in the second quarter of 2018, which was in line with Company expectations.

For the six months ended June 30, 2019, premium revenue decreased 9.5% to $8.0 billion from $8.8 billion for the comparable period in 2018. In both periods, the lower premium revenue is primarily a result of lower Medicaid membership due to the previously announced loss of the New Mexico Medicaid contract, along with the resizing of the Florida Medicaid contract and the related transition out of all but two Florida regions as reported throughout 2018.

Medical Care Ratio

The consolidated MCR for the second quarter of 2019 was 85.6% compared to 85.3% in the second quarter of 2018. Favorable prior period development for the second quarter was $28 million pre-tax.

The MCR for the six months ended June 30, 2019, improved to 85.5% compared to 85.7% for the comparable period in 2018, due to a combination of the following:

• The Medicaid MCR improved to 88.3% compared to 90.3% for the six months ended June 30, 2018, primarily due to improvement in the TANF and ABD programs, partially offset by an increased MCR in the Medicaid Expansion program, primarily in California.
• The Medicare MCR was relatively stable at 85.0% compared to 84.9% for the six months ended June 30, 2018.
• The Marketplace MCR was 64.7% compared to 54.4% for the six months ended June 30, 2018. The prior period was positively impacted by the Cost Sharing Reduction (CSR) reimbursement. In addition, the current year was impacted by a relatively smaller benefit from prior year Marketplace risk adjustment compared to 2018.

General and Administrative Expense Ratio

The general and administrative expenses were 7.8% of total revenues in the second quarter of 2019 compared to 6.9% in the second quarter of 2018.

For the six months ended June 30, 2019, the G&A ratio was 7.6% compared to 7.2% in the comparable prior-year period. In both periods, the year-over-year increases are mainly associated with the decrease in premium revenue.

Interest Expense

The second quarter interest expense was $22 million compared to $32 million in the second quarter of 2018. The decline was due to continued repayment of debt.

Restructuring Costs/Other Income and Expenses

The second quarter results benefited from a $14 million gain on the repayment of convertible notes in the current period, offset somewhat by $2 million in restructuring costs, resulting in a $0.15 net benefit per diluted share.

Balance Sheet

Cash at the parent company amounted to $467 million as of June 30, 2019, compared to $443 million as of March 31, 2019.

During the quarter the Company received $345 million of dividends from the regulated health plan subsidiaries.

The Company made $139 million in principal repayments on the convertible notes during the quarter and $185 million in repayments since the beginning of the year. The impact of capital deployment actions in the quarter resulted in lower interest expense, a gain on repayment of the convertible notes and a lower share count.

Cash Flow

Operating cash flows for the six months ended June 30, 2019, was $156 million and is lower compared to the six months ended June 30, 2018, primarily due to timing of government payments.

Outlook

The Company raised its full year 2019 earnings guidance range to $11.20 to $11.50 per diluted share, with a midpoint of $11.35, from previously issued guidance of $10.50 to $11.00.

Guidance is based on the following:

• Assumes no future restructuring or one-time significant items; and
• Assumes no future prior period development.

			July 30, 2019 (1)		April 29, 2019 (1)
			(current)		(previous)
	Premium revenue		$16.1B		$15.9B
	Medicaid		$12.3B		$12.2B
	Medicare		$2.2B		$2.2B
	Marketplace		$1.6B		$1.5B
	Premium tax revenue		$450M		$425M
	Investment income and other revenue		$115M		$115M
	Total revenue		$16.7B		$16.4B
	Medical care costs		$13.8B		$13.6B
	General and administrative expenses		$1.3B		$1.3B
	Premium tax expenses		$450M		$425M
	EBITDA (2)		$1,135M - $1,160M		$1,080M - $1,120M
	Depreciation and amortization		$90M		$90M
	Interest expense and other expenses, net		$90M		$90M
	Income before income taxes		$955M - $980M		$900M - $940M
	Net income		$725M - $740M		$680M - $710M
	Net income per share		$11.20 - $11.50		$10.50 - $11.00
	Diluted weighted average shares		64.5M		64.7M
	End-of-year membership:
	Medicaid and Medicare		3.1M		3.1M
	Marketplace		270K - 280K		270K - 280K
	Operating Statistics:
	Medical care ratio		86%		86%
	G&A ratio		7.7%		7.7%
	Effective income tax expense rate		24.2%		24.5%
	After-tax margin		4.2% - 4.4%		4.1% - 4.3%
	Medicaid		3%		3%
	Medicare		7%		6%
	Marketplace		11%		11%
__________________
(1)	All amounts are rounded and approximations.
(2)	See reconciliation of non-GAAP financial measures at the end of this release.

Conference Call

Management will host a conference call and webcast to discuss Molina Healthcare’s second quarter 2019 results at 8:00 a.m. Eastern time on Wednesday, July 31, 2019. The number to call for the interactive teleconference is (877) 883-0383 and the confirmation number is 0428160. A telephonic replay of the conference call will be available through Wednesday, August 7, 2019, by dialing (877) 344-7529 and entering confirmation number 10132714. 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 health care services under the Medicaid and Medicare programs and through the state insurance marketplaces. Through its locally operated health plans, Molina Healthcare served approximately 3.4 million members as of June 30, 2019. 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 contains forward-looking statements regarding the Company’s revised 2019 guidance, as well as its plans, expectations, and anticipated future events. Actual results could differ materially due to numerous known and unknown risks and uncertainties. Those risks and uncertainties are discussed in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and the section entitled “Forward-Looking Statements” in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2019.

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 events 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 July 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.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2019				2018				2019				2018
	(In millions, except per-share amounts)
Revenue:
Premium revenue	$	4,049			$	4,514			$	8,001			$	8,837
Premium tax revenue	110				106				248				210
Health insurer fees reimbursed	—				104				—				165
Service revenue	—				127				—				261
Investment income and other revenue	34				32				63				56
Total revenue	4,193				4,883				8,312				9,529
Operating expenses:
Medical care costs	3,466				3,850				6,837				7,572
General and administrative expenses	328				335				630				687
Premium tax expenses	110				106				248				210
Health insurer fees	—				99				—				174
Depreciation and amortization	22				25				47				51
Restructuring costs	2				8				5				33
Cost of service revenue	—				118				—				238
Total operating expenses	3,928				4,541				7,767				8,965
Operating income	265				342				545				564
Other expenses, net:
Interest expense	22				32				45				65
Other (income) expenses, net	(14		)		5				(17		)		15
Total other expenses, net	8				37				28				80
Income before income tax expense	257				305				517				484
Income tax expense	61				103				123				175
Net income	$	196			$	202			$	394			$	309
Net income per share, diluted	$	3.06			$	3.02			$	6.04			$	4.68
Diluted weighted average shares outstanding	64.0				66.7				65.1				66.0
Operating Statistics:
Medical care ratio	85.6		%		85.3		%		85.5		%		85.7		%
G&A ratio	7.8		%		6.9		%		7.6		%		7.2		%
Premium tax ratio	2.6		%		2.3		%		3.0		%		2.3		%
Effective income tax expense rate	24.0		%		33.8		%		23.9		%		36.2		%
After-tax margin	4.7		%		4.1		%		4.7		%		3.2		%
Medicaid	3.1		%		2.3		%		3.0		%		1.6		%
Medicare	7.1		%		5.7		%		7.4		%		4.9		%
Marketplace	11.2		%		16.9		%		13.6		%		17.4		%

CONSOLIDATED BALANCE SHEETS
	June 30,				Dec. 31,
	2019				2018
	Unaudited
	(Dollars in millions, except per-share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	2,253			$	2,826
Investments	2,070				1,681
Receivables	1,239				1,330
Prepaid expenses and other current assets	132				149
Derivative asset	169				476
Total current assets	5,863				6,462
Property, equipment, and capitalized software, net	373				241
Goodwill and intangible assets, net	180				190
Restricted investments	98				120
Deferred income taxes	70				117
Other assets	106				24
	$	6,690			$	7,154
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable	$	1,767			$	1,961
Amounts due government agencies	984				967
Accounts payable and accrued liabilities	373				390
Deferred revenue	30				211
Current portion of long-term debt	65				241
Derivative liability	169				476
Total current liabilities	3,388				4,246
Long-term debt	1,241				1,020
Finance lease liabilities	232				197
Other long-term liabilities	93				44
Total liabilities	4,954				5,507
Stockholders’ equity:
Common stock, $0.001 par value, 150 million shares authorized; outstanding: 63 million shares at June 30, 2019 and 62 million shares at December 31, 2018	—				—
Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding	—				—
Additional paid-in capital	240				643
Accumulated other comprehensive income (loss)	5				(8		)
Retained earnings	1,491				1,012
Total stockholders’ equity	1,736				1,647
	$	6,690			$	7,154

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2019				2018				2019				2018
	(In millions)
Operating activities:
Net income	$	196			$	202			$	394			$	309
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	22				36				47				73
Deferred income taxes	4				—				19				(6		)
Share-based compensation	10				7				19				13
Amortization of convertible senior notes and finance lease liabilities	1				6				4				13
(Gain) loss on debt extinguishment	(14		)		5				(17		)		15
Non-cash restructuring costs	—				—				—				17
Other, net	—				2				3				4
Changes in operating assets and liabilities:
Receivables	120				(232		)		91				(315		)
Prepaid expenses and other current assets	(2		)		58				18				(181		)
Medical claims and benefits payable	(228		)		(104		)		(194		)		(267		)
Amounts due government agencies	52				33				17				205
Accounts payable and accrued liabilities	(31		)		30				(61		)		349
Deferred revenue	(177		)		(172		)		(181		)		(42		)
Income taxes	(46		)		49				(3		)		127
Net cash (used in) provided by operating activities	(93		)		(80		)		156				314
Investing activities:
Purchases of investments	(977		)		(525		)		(1,162		)		(914		)
Proceeds from sales and maturities of investments	425				792				791				1,335
Purchases of property, equipment, and capitalized software	(14		)		(10		)		(20		)		(14		)
Other, net	2				(4		)		(2		)		(9		)
Net cash (used in) provided by investing activities	(564		)		253				(393		)		398
Financing activities:
Repayment of principal amount of 1.125% Convertible Notes	(139		)		(89		)		(185		)		(89		)
Cash paid for partial settlement of 1.125% Conversion Option	(358		)		(134		)		(473		)		(134		)
Cash received for partial termination of 1.125% Call Option	358				134				473				134
Cash paid for partial termination of 1.125% Warrants	(321		)		(113		)		(424		)		(113		)
Proceeds from borrowings under Term Loan Facility	120				—				220				—
Repayment of Credit Facility	—				(300		)		—				(300		)
Other, net	26				4				27				(1		)
Net cash used in financing activities	(314		)		(498		)		(362		)		(503		)
Net (decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents	(971		)		(325		)		(599		)		209
Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period	3,298				3,824				2,926				3,290
Cash, cash equivalents, and restricted cash and cash equivalents at end of period	$	2,327			$	3,499			$	2,327			$	3,499

	HEALTH PLANS SEGMENT MEMBERSHIP
		June 30, 2019			Dec. 31, 2018			June 30, 2018
	Ending Membership by Government Program:
	TANF and CHIP	2,008,000			2,295,000			2,464,000
	Medicaid Expansion	595,000			660,000			675,000
	ABD	359,000			406,000			415,000
	Total Medicaid	2,962,000			3,361,000			3,554,000
	MMP - Integrated	57,000			54,000			55,000
	Medicare Special Needs Plans	43,000			44,000			45,000
	Total Medicare	100,000			98,000			100,000
	Total Medicaid and Medicare	3,062,000			3,459,000			3,654,000
	Marketplace	308,000			362,000			409,000
		3,370,000			3,821,000			4,063,000
	Ending Membership by Health Plan:
	California	590,000			608,000			639,000
	Florida (1)	142,000			313,000			398,000
	Illinois	221,000			224,000			219,000
	Michigan	360,000			383,000			397,000
	New Mexico (1)	26,000			222,000			241,000
	Ohio	297,000			302,000			320,000
	Puerto Rico	200,000			252,000			326,000
	South Carolina	130,000			120,000			114,000
	Texas	360,000			423,000			450,000
	Washington	811,000			781,000			776,000
	Other (2)	233,000			193,000			183,000
		3,370,000			3,821,000			4,063,000
__________________
(1)	The Company’s Medicaid contracts in New Mexico and in all but two regions in Florida terminated in late 2018 and early 2019. During 2019, the Company continues to serve Medicare and Marketplace members in both Florida and New Mexico, as well as Medicaid members in two regions in Florida.
(2)	“Other” includes the Idaho, Mississippi, New York, Utah and Wisconsin health plans, which are not individually significant to the Company’s consolidated operating results.

UNAUDITED SELECTED FINANCIAL DATA (In millions, except percentages and per-member per-month amounts) HEALTH PLANS SEGMENT FINANCIAL DATA — BY GOVERNMENT PROGRAM
	Member Months (1)			Premium Revenue								Medical Care Costs								MCR (2)			Medical Margin
				Total				PMPM				Total				PMPM
	Three Months Ended June 30, 2019
TANF and CHIP	6.1			$	1,196			$	196.36			$	1,048			$	172.13			87.7	%		$	148
Medicaid Expansion	1.8			695				384.94				594				328.85				85.4			101
ABD	1.1			1,176				1,088.48				1,061				981.84				90.2			115
Total Medicaid	9.0			3,067				341.72				2,703				301.15				88.1			364
MMP	0.1			406				2,421.89				356				2,118.95				87.5			50
Medicare	0.2			166				1,296.99				132				1,034.43				79.8			34
Total Medicare	0.3			572				1,934.17				488				1,648.73				85.2			84
Total Medicaid and Medicare	9.3			3,639				392.52				3,191				344.14				87.7			448
Marketplace	0.9			410				440.20				275				295.71				67.2			135
	10.2			$	4,049			$	396.87			$	3,466			$	339.72			85.6	%		$	583

	Three Months Ended June 30, 2018
TANF and CHIP	7.5			$	1,393			$	186.18			$	1,205			$	161.13			86.5	%		$	188
Medicaid Expansion	2.1			761				372.04				676				330.83				88.9			85
ABD	1.3			1,288				1,033.34				1,209				969.27				93.8			79
Total Medicaid	10.9			3,442				319.52				3,090				286.89				89.8			352
MMP	0.1			367				2,224.30				313				1,893.91				85.1			54
Medicare	0.2			157				1,168.40				133				989.33				84.7			24
Total Medicare	0.3			524				1,751.49				446				1,488.85				85.0			78
Total Medicaid and Medicare	11.2			3,966				358.23				3,536				319.37				89.2			430
Marketplace	1.2			548				440.93				314				253.04				57.4			234
	12.4			$	4,514			$	366.57			$	3,850			$	312.68			85.3	%		$	664

	Six Months Ended June 30, 2019
TANF and CHIP	12.3			$	2,369			$	192.83			$	2,070			$	168.56			87.4	%		$	299
Medicaid Expansion	3.6			1,359				377.30				1,188				329.65				87.4			171
ABD	2.2			2,343				1,078.40				2,103				967.59				89.7			240
Total Medicaid	18.1			6,071				336.20				5,361				296.85				88.3			710
MMP	0.3			794				2,388.88				689				2,073.30				86.8			105
Medicare	0.3			329				1,290.88				265				1,041.06				80.6			64
Total Medicare	0.6			1,123				1,911.98				954				1,624.97				85.0			169
Total Medicaid and Medicare	18.7			7,194				385.82				6,315				338.67				87.8			879
Marketplace	1.9			807				415.94				522				269.14				64.7			285
	20.6			$	8,001			$	388.66			$	6,837			$	332.11			85.5	%		$	1,164

	Six Months Ended June 30, 2018
TANF and CHIP	14.9			$	2,766			$	185.66			$	2,477			$	166.32			89.6	%		$	289
Medicaid Expansion	4.1			1,513				372.39				1,317				324.19				87.1			196
ABD	2.5			2,542				1,023.83				2,364				951.99				93.0			178
Total Medicaid	21.5			6,821				318.11				6,158				287.22				90.3			663
MMP	0.3			724				2,180.86				618				1,858.87				85.2			106
Medicare	0.3			314				1,178.58				264				992.05				84.2			50
Total Medicare	0.6			1,038				1,735.05				882				1,473.30				84.9			156
Total Medicaid and Medicare	22.1			7,859				356.59				7,040				319.43				89.6			819
Marketplace	2.6			978				373.67				532				203.34				54.4			446
	24.7			$	8,837			$	358.40			$	7,572			$	307.11			85.7	%		$	1,265

__________________

(1) A member month is defined as the aggregate of each month’s ending membership for the period presented.

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

HEALTH PLANS SEGMENT FINANCIAL DATA — MEDICAID AND MEDICARE
	Member Months			Premium Revenue								Medical Care Costs								MCR			Medical Margin
				Total				PMPM				Total				PMPM
	Three Months Ended June 30, 2019
California	1.6			$	499			$	305.40			$	415			$	253.85			83.1	%		$	84
Florida	0.3			126				417.10				120				399.22				95.7			6
Illinois	0.6			242				364.15				215				323.96				89.0			27
Michigan	1.1			403				376.39				332				310.08				82.4			71
Ohio	0.9			630				701.22				553				615.59				87.8			77
Puerto Rico	0.6			122				198.95				109				177.56				89.2			13
South Carolina	0.4			140				362.24				125				322.55				89.0			15
Texas	0.7			598				916.74				551				844.02				92.1			47
Washington	2.4			611				257.79				535				225.67				87.5			76
Other (1) (2)	0.7			268				394.85				236				347.43				88.0			32
	9.3			$	3,639			$	392.52			$	3,191			$	344.14			87.7	%		$	448
	Three Months Ended June 30, 2018
California	1.8			$	517			$	289.80			$	441			$	247.36			85.4	%		$	76
Florida	1.2			377				353.81				362				339.31				95.9			15
Illinois	0.6			203				311.60				170				261.59				84.0			33
Michigan	1.2			388				342.45				331				292.20				85.3			57
New Mexico (2)	0.7			313				469.88				290				435.36				92.7			23
Ohio	1.0			535				571.08				482				514.57				90.1			53
Puerto Rico	0.9			184				188.26				165				168.20				89.3			19
South Carolina	0.4			123				350.22				107				304.20				86.9			16
Texas	0.7			576				835.66				510				740.55				88.6			66
Washington	2.2			571				252.61				526				232.49				92.0			45
Other (1)	0.5			179				322.99				152				274.59				85.0			27
	11.2			$	3,966			$	358.23			$	3,536			$	319.37			89.2	%		$	430
	Six Months Ended June 30, 2019
California	3.3			$	998			$	302.59			$	863			$	261.66			86.5	%		$	135
Florida	0.7			288				399.86				247				343.24				85.8			41
Illinois	1.3			469				356.16				400				303.50				85.2			69
Michigan	2.2			798				369.66				658				305.00				82.5			140
Ohio	1.8			1,220				680.20				1,090				607.85				89.4			130
Puerto Rico	1.2			224				181.91				199				161.40				88.7			25
South Carolina	0.8			276				362.68				240				315.84				87.1			36
Texas	1.3			1,197				909.59				1,083				822.59				90.4			114
Washington	4.8			1,225				258.10				1,121				236.19				91.5			104
Other (1) (2)	1.3			499				383.07				414				317.56				82.9			85
	18.7			$	7,194			$	385.82			$	6,315			$	338.67			87.8	%		$	879
	Six Months Ended June 30, 2018
California	3.6			$	1,011			$	281.14			$	853			$	237.26			84.4	%		$	158
Florida	2.2			759				352.68				707				328.26				93.1			52
Illinois	1.1			344				305.94				292				259.87				84.9			52
Michigan	2.3			764				339.56				662				294.19				86.6			102
New Mexico	1.4			632				468.00				600				444.44				95.0			32
Ohio	1.9			1,086				573.87				942				497.75				86.7			144
Puerto Rico	1.9			370				190.68				339				174.74				91.6			31
South Carolina	0.7			245				349.15				211				300.87				86.2			34
Texas	1.4			1,138				822.72				1,029				744.05				90.4			109
Washington	4.5			1,155				254.64				1,100				242.48				95.2			55
Other (1)	1.1			355				318.94				305				273.97				85.9			50
	22.1			$	7,859			$	356.59			$	7,040			$	319.43			89.6	%		$	819

__________________

(1) “Other” includes the Idaho, Mississippi, New York, Utah and Wisconsin health plans, which are not individually significant to the Company’s consolidated operating results.

(2) In 2019, “Other” includes the New Mexico health plan. The New Mexico health plan’s Medicaid contract terminated on December 31, 2018, and therefore its 2019 results are not individually significant to the Company’s consolidated operating results.

HEALTH PLANS SEGMENT FINANCIAL DATA — MARKETPLACE
	Member Months			Premium Revenue								Medical Care Costs								MCR			Medical Margin
				Total				PMPM				Total				PMPM
	Three Months Ended June 30, 2019
California	0.2			$	61			$	382.22			$	35			$	220.31			57.6	%		$	26
Florida	0.1			50				390.03				30				236.50				60.6			20
Michigan	—			10				521.67				6				308.37				59.1			4
Ohio	0.1			24				754.67				19				565.69				75.0			5
Texas	0.3			167				379.29				117				267.12				70.4			50
Washington	0.1			51				803.11				35				548.48				68.3			16
Other (1)	0.1			47				527.41				33				376.04				71.3			14
	0.9			$	410			$	440.20			$	275			$	295.71			67.2	%		$	135
	Three Months Ended June 30, 2018
California	0.2			$	73			$	426.16			$	21			$	117.92			27.7	%		$	52
Florida	0.1			100				698.31				38				269.86				38.6			62
Michigan	—			15				288.67				7				146.97				50.9			8
New Mexico	—			31				418.82				18				247.06				59.0			13
Ohio	—			31				518.64				23				381.46				73.6			8
Texas	0.7			222				330.12				160				238.72				72.3			62
Washington	0.2			56				787.80				41				572.48				72.7			15
Other (2)	—			20					NM			6					NM			NM			14
	1.2			$	548			$	440.93			$	314			$	253.04			57.4	%		$	234
	Six Months Ended June 30, 2019
California	0.3			$	117			$	361.73			$	68			$	210.71			58.2	%		$	49
Florida	0.3			111				406.52				56				205.17				50.5			55
Michigan	—			20				492.23				11				255.98				52.0			9
Ohio	0.1			54				805.96				34				505.10				62.7			20
Texas	0.9			315				341.18				226				245.82				72.0			89
Washington	0.1			98				756.26				64				490.84				64.9			34
Other (1)	0.2			92				501.13				63				344.61				68.8			29
	1.9			$	807			$	415.94			$	522			$	269.14			64.7	%		$	285
	Six Months Ended June 30, 2018
California	0.4			$	122			$	334.47			$	52			$	141.73			42.4	%		$	70
Florida	0.3			145				468.36				22				73.13				15.6			123
Michigan	0.1			28				254.69				16				145.49				57.1			12
New Mexico	0.1			65				429.19				37				246.77				57.5			28
Ohio	0.1			57				458.48				40				319.53				69.7			17
Texas	1.4			451				318.93				306				216.83				68.0			145
Washington	0.2			95				653.89				71				486.90				74.5			24
Other (2)	—			15					NM			(12		)			NM			NM			27
	2.6			$	978			$	373.67			$	532			$	203.34			54.4	%		$	446

__________________
(1)	“Other” includes the New Mexico, Utah and Wisconsin health plans, which are not individually significant to the Company’s consolidated operating results in 2019.
(2)	“Other” includes the Utah and Wisconsin health plans, where the Company did not participate in the Marketplace in 2018. Therefore, the ratios for 2018 periods are not meaningful (NM).

HEALTH PLANS SEGMENT FINANCIAL DATA — TOTAL
	Member Months			Premium Revenue								Medical Care Costs								MCR			Medical Margin
				Total				PMPM				Total				PMPM
	Three Months Ended June 30, 2019
California	1.8			$	560			$	312.21			$	450			$	250.87			80.4	%		$	110
Florida	0.4			176				408.99				150				350.47				85.7			26
Illinois	0.6			242				364.15				215				323.96				89.0			27
Michigan	1.1			413				378.86				338				310.05				81.8			75
Ohio	1.0			654				703.09				572				613.85				87.3			82
Puerto Rico	0.6			122				198.95				109				177.56				89.2			13
South Carolina	0.4			140				362.24				125				322.55				89.0			15
Texas	1.0			765				700.15				668				611.53				87.3			97
Washington	2.5			662				271.96				570				234.05				86.1			92
Other (1) (2)	0.8			315				410.27				269				350.76				85.5			46
	10.2			$	4,049			$	396.87			$	3,466			$	339.72			85.6	%		$	583
	Three Months Ended June 30, 2018
California	2.0			$	590			$	301.73			$	462			$	236.04			78.2	%		$	128
Florida	1.3			477				394.38				400				331.13				84.0			77
Illinois	0.6			203				311.60				170				261.59				84.0			33
Michigan	1.2			403				340.08				338				285.78				84.0			65
New Mexico (2)	0.7			344				464.90				308				416.99				89.7			36
Ohio	1.0			566				567.96				505				506.66				89.2			61
Puerto Rico	0.9			184				188.26				165				168.20				89.3			19
South Carolina	0.4			123				350.22				107				304.20				86.9			16
Texas	1.4			798				585.50				670				492.23				84.1			128
Washington	2.4			627				268.84				567				242.80				90.3			60
Other (1)	0.5			199				360.90				158				285.65				79.1			41
	12.4			$	4,514			$	366.57			$	3,850			$	312.68			85.3	%		$	664
	Six Months Ended June 30, 2019
California	3.6			$	1,115			$	307.88			$	931			$	257.10			83.5	%		$	184
Florida	1.0			399				401.69				303				305.23				76.0			96
Illinois	1.3			469				356.16				400				303.50				85.2			69
Michigan	2.2			818				371.91				669				304.10				81.8			149
Ohio	1.9			1,274				684.77				1,124				604.12				88.2			150
Puerto Rico	1.2			224				181.91				199				161.40				88.7			25
South Carolina	0.8			276				362.68				240				315.84				87.1			36
Texas	2.2			1,512				675.34				1,309				584.90				86.6			203
Washington	4.9			1,323				271.34				1,185				242.96				89.5			138
Other	1.5			591				397.61				477				320.90				80.7			114
	20.6			$	8,001			$	388.66			$	6,837			$	332.11			85.5	%		$	1,164
	Six Months Ended June 30, 2018
California	4.0			$	1,133			$	286.07			$	905			$	228.44			79.9	%		$	228
Florida	2.5			904				367.18				729				296.29				80.7			175
Illinois	1.1			344				305.94				292				259.87				84.9			52
Michigan	2.4			792				335.59				678				287.23				85.6			114
New Mexico	1.5			697				464.11				637				424.58				91.5			60
Ohio	2.0			1,143				566.77				982				486.79				85.9			161
Puerto Rico	1.9			370				190.68				339				174.74				91.6			31
South Carolina	0.7			245				349.15				211				300.87				86.2			34
Texas	2.8			1,589				567.95				1,335				477.43				84.1			254
Washington	4.7			1,250				267.01				1,171				250.05				93.6			79
Other	1.1			370				333.35				293				263.24				79.0			77
	24.7			$	8,837			$	358.40			$	7,572			$	307.11			85.7	%		$	1,265

__________________
(1)	“Other” includes the Idaho, Mississippi, New York, Utah and Wisconsin health plans, which are not individually significant to the Company’s consolidated operating results.
(2)	In 2019, “Other” includes the New Mexico health plan. The New Mexico health plan’s Medicaid contract terminated on December 31, 2018, and therefore its 2019 results are not individually significant to the Company’s consolidated operating results.

SELECTED FINANCIAL DATA

The following table provides details of the Company’s medical care costs for the periods indicated:

	Three Months Ended June 30,
	2019											2018
	Amount				PMPM				% of Total			Amount				PMPM				% of Total
Fee for service	$	2,594			$	254.36			74.8	%		$	2,861			$	232.40			74.4	%
Pharmacy	429				42.06				12.4			567				46.05				14.7
Capitation	288				28.17				8.3			282				22.89				7.3
Other	155				15.13				4.5			140				11.34				3.6
	$	3,466			$	339.72			100.0	%		$	3,850			$	312.68			100.0	%

	Six Months Ended June 30,
	2019											2018
	Amount				PMPM				% of Total			Amount				PMPM				% of Total
Fee for service	$	5,108			$	248.18			74.7	%		$	5,606			$	227.38			74.1	%
Pharmacy	842				40.88				12.3			1,150				46.66				15.2
Capitation	573				27.81				8.4			594				24.09				7.8
Other	314				15.24				4.6			222				8.98				2.9
	$	6,837			$	332.11			100.0	%		$	7,572			$	307.11			100.0	%

The following table provides details of the Company’s medical claims and benefits payable as of the dates indicated:

	June 30,				Dec. 31,
	2019				2018
Fee-for-service claims incurred but not paid (IBNP)	$	1,346			$	1,562
Pharmacy payable	117				115
Capitation payable	63				52
Other (1)	241				232
	$	1,767			$	1,961

______________________

(1)

“Other” medical claims and benefits payable include amounts payable to certain providers for which the Company acts as an intermediary on behalf of various state agencies without assuming financial risk. Such receipts and payments do not impact the Company’s consolidated statements of income. As of June 30, 2019 and December 31, 2018, the Company had recorded non-risk provider payables of approximately $112 million and $107 million, respectively.

CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE
(Dollars in millions)

The Company’s claims liability includes a provision for adverse claims deviation 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 period” represent the amount by which the original estimate of claims and benefits payable at the beginning of the period was more than the actual amount of the liability based on information (principally the payment of claims) developed since that liability was first reported. The following table presents the components of the change in medical claims and benefits payable for the periods indicated:

	Six Months Ended								Year Ended
	June 30,								Dec. 31, 2018
	2019				2018
Medical claims and benefits payable, beginning balance	$	1,961			$	2,192			$	2,192
Components of medical care costs related to:
Current period	7,069				7,870				15,478
Prior period (1)	(232		)		(298		)		(341		)
Total medical care costs	6,837				7,572				15,137
Change in non-risk and other provider payables	4				56				13
Payments for medical care costs related to:
Current period	5,585				6,248				13,671
Prior period	1,450				1,652				1,710
Total paid	7,035				7,900				15,381
Medical claims and benefits payable, ending balance	$	1,767			$	1,920			$	1,961
Days in claims payable, fee for service (2)	48				49				53

(1)	The June 30, 2018, amount includes the 2018 benefit of the 2017 Marketplace CSR reimbursement of $76 million. December 31, 2018, includes the 2018 benefit of the 2017 Marketplace CSR reimbursement of $81 million.
(2)	Claims payable includes primarily IBNP. It also includes certain fee-for-service payables reported in “Other” medical claims and benefits payable amounting to $35 million, $33 million and $43 million, as of June 30, 2019, June 30, 2018, and December 31, 2018, respectively.

SUMMARY OF NON-RUN RATE ITEMS AFFECTING CURRENT QUARTER AND YEAR-TO-DATE FINANCIAL RESULTS
(In millions, except per diluted share amounts)

The table below summarizes the impact of certain expenses and other items that management believes are not indicative of longer-term business trends and operations. The individual items presented below increase (decrease) income before income tax expense.

	Three Months Ended June 30,																Six Months Ended June 30,
	2019								2018								2019								2018
	Amount				Per Diluted Share (1)				Amount				Per Diluted Share (1)				Amount				Per Diluted Share (1)				Amount				Per Diluted Share (1)
Restructuring costs	$	(2	)		$	(0.02	)		$	(8	)		$	(0.10	)		$	(5	)		$	(0.05	)		(33		)		(0.39		)
Gain (loss) on debt extinguishment	14				0.17				(5		)		(0.06		)		17				0.21				(15		)		(0.21		)
	$	12			$	0.15			$	(13	)		$	(0.16	)		$	12			$	0.16			$	(48	)		$	(0.60	)

______________________
(1)	Except for permanent differences between GAAP and tax (such as certain expenses that are not deductible for tax purposes), per diluted share amounts are generally calculated at the statutory income tax rate of 22.6% and 22% for 2019 and 2018, respectively.

NON-GAAP FINANCIAL MEASURES

The Company uses non-generally accepted accounting principles, or non-GAAP, financial measures as supplemental metrics in evaluating the Company’s financial performance, making financing and business decisions, and forecasting and planning for future periods. For these reasons, management believes such 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. These non-GAAP financial measures should be considered as supplements to, and not as substitutes for or superior to, GAAP measures. See further information regarding non-GAAP measures below the tables.

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2019				2018				2019				2018
Net income	$	196			$	202			$	394			$	309
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software	22				33				47				67
Interest expense	22				32				45				65
Income tax expense	61				103				123				175
EBITDA	$	301			$	370			$	609			$	616

Adjustments made to GAAP measures used to calculate the non-GAAP measures used in this news release follow:

Earnings before interest, taxes, depreciation and amortization (“EBITDA”): Net income on a GAAP basis less depreciation, and amortization of intangible assets and capitalized software, interest expense and income tax expense. The Company believes that EBITDA is helpful in assessing the Company’s ability to meet the cash demands of its operating units.

NON-GAAP FINANCIAL MEASURES (CONTINUED)

	Three Months Ended June 30,																Six Months Ended June 30,
	2019								2018								2019								2018
	Amount				Per Diluted Share				Amount				Per Diluted Share				Amount				Per Diluted Share				Amount				Per Diluted Share
Net income	$	196			$	3.06			$	202			$	3.02			$	394			$	6.04			$	309			$	4.68
Adjustment:
Amortization of intangible assets	4				0.07				5				0.08				9				0.14				10				0.16
Income tax effect (1)	(1		)		(0.02		)		(1		)		(0.02		)		(2		)		(0.03		)		(2		)		(0.04		)
Amortization of intangible assets, net of tax effect	3				0.05				4				0.06				7				0.11				8				0.12
Adjusted net income	$	199			$	3.11			$	206			$	3.08			$	401			$	6.15			$	317			$	4.80

________________________
(1)	Income tax effect of adjustments calculated at the blended federal and state statutory tax rate of 22.6% and 22% for 2019 and 2018, respectively.

Adjustments made to GAAP measures used to calculate the non-GAAP measures used in this news release follow:

Adjusted net income: Net income on a GAAP basis less amortization of intangible assets, net of income tax effect calculated at the statutory tax rate. The Company believes that adjusted net income is helpful in assessing the Company’s financial performance exclusive of the non-cash impact of the amortization of purchased intangibles.

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

2019 REVISED GUIDANCE

Reconciliation of Non-GAAP Financial Measures

	Low End				High End
	(In millions)
Net income	$	725			$	740
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software	90				90
Interest expense	90				90
Income tax expense	230				240
EBITDA	$	1,135			$	1,160

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20190730005967/en/

Source: Molina Healthcare, Inc.

Investor Contact: Julie Trudell, Julie.Trudell@molinahealthcare.com, 562-912-6720
Media Contact: Laura Murray, Laura.Murray@molinahealthcare.com, 562-506-9208