Molina Healthcare (MOH) 8-K Fourth Quarter and Year-end 2015 Results

News Release

Contact:

Juan José Orellana

Investor Relations

562-435-3666, ext. 111143

MOLINA HEALTHCARE REPORTS

FOURTH QUARTER AND YEAR-END 2015 RESULTS

• Full year 2015 net income per diluted share of $2.57, up nearly 100% over 2014.

• Full year 2015 total revenue of $14.1 billion, up 46% over 2014.

• Aggregate membership up 35% over 2014.

• Excluding a contract settlement charge of $0.16 per diluted share, diluted net income per share for the fourth quarter of 2015 would have been $0.67 compared with $0.69 for the fourth quarter of 2014.

Long Beach, California (February 8, 2016) - Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the fourth quarter of 2015.

“The fourth quarter of 2015 capped off a very strong year for Molina Healthcare. Net income more than doubled compared with 2014, and we are making progress toward our goal of a 1.5% to 2% net income margin by the end of 2017,” said J. Mario Molina M.D., chief executive officer of Molina Healthcare, Inc. “The in-market ‘tuck-in’ acquisitions already announced give us strong momentum going into 2016 and complement the already strong revenue growth we experienced over the past two years. I want to thank all of our employees for a great year.”

2016 Business Outlook and Investor Meeting

As has been the Company’s past practice, it will discuss its 2016 business outlook and strategy at its Investor Day Conference webcast and presentation to be held on February 11, 2016, at the Le Parker Meridien Hotel in New York City from 12:30 p.m. to 4:30 p.m. Eastern Time. The Company will webcast the presentations offered by its management team, which will be followed by question-and-answer sessions. A 30-day online replay of the Investor Day meeting will be available approximately one hour following the conclusion of the live webcast. A link to this webcast can be found on the Company’s website at molinahealthcare.com.

Overview of 2015 Financial Results, Continuing Operations

Earnings per diluted share nearly doubled in 2015 when compared with 2014, while net income more than doubled. Substantial increases in revenue, along with improved operating efficiency, were responsible for

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the Company’s improved performance. The Company’s after-tax margin increased to 1.0% in 2015 from 0.6% in 2014.

Strong enrollment growth combined with a 4% increase in premium revenue per member generated over $4 billion, or 46% more premium revenue in 2015 compared with 2014.

Enrollment growth was primarily due to increased Medicaid Expansion, Marketplace and integrated Medicare-Medicaid Plan (MMP) enrollment, and the start-up of the Puerto Rico health plan in April 2015.

Medical care costs as a percent of premium revenue (the “medical care ratio”) decreased to 89.0% in 2015, from 89.5% in 2014.

General and administrative expenses as a percentage of total revenue (the “general and administrative expense ratio”) increased slightly to 8.2% in 2015, from 7.9% in 2014, primarily as a result of dramatic growth in the Company’s Marketplace membership. Excluding Marketplace broker and exchange fees from both years, the general and administrative expense ratio decreased to 7.5% in 2015 from 7.8% in 2014.

Other items affecting premium revenue in 2015 included the Affordable Care Act health insurer fee (HIF). During 2015, the Company secured full reimbursement for its expenses under the HIF. Additionally, as the Company has previously disclosed, it has been unable to recognize certain quality related revenue at its Texas health plan because it does not have historical information, clear definitions, and clarity around minimum standards. The Company recognized no such revenue in either the fourth quarter of 2015, or the year as a whole.

Fourth Quarter Developments

Fourth quarter results were favorable for the reasons explained above. The following items are included in results for the fourth quarter of 2015:

• During the quarter, the Company recorded a contract settlement charge of approximately $15 million ($0.16 per diluted share) as a result of its termination of a hospital management agreement.

• During the fourth quarter of 2015, the Company recognized approximately $6 million ($0.07 per diluted share) of interest expense related to $700 million of senior notes due 2022 issued in November.

• General and administrative expense for the fourth quarter 2015 includes approximately $3 million ($0.03 per diluted share) in transaction costs for business acquisitions.

Conference Call

The Company’s management will host a conference call and webcast to discuss its fourth quarter and year-end results at 5:00 p.m. Eastern time on Monday, February 8, 2016. The number to call for the interactive teleconference is (212) 271-4657. A telephonic replay of the conference call will be available from 7:00 p.m. Eastern time on Monday, February 8, 2016, through 6:00 p.m. on Tuesday, February 9, 2016, by dialing (800) 633-8284 and entering confirmation number 21802135. A live audio broadcast of Molina Healthcare’s conference call will be available on the Company’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 our locally operated health plans in 11 states across the nation and in the Commonwealth of Puerto Rico, Molina currently serves approximately 3.5 million members. Dr. C. David Molina founded our company in 1980 as a provider organization serving low-income families in Southern California. Today, we continue his mission of providing high quality and cost-effective health care to those who need it most. For more information about Molina Healthcare, please visit our website at molinahealthcare.com.

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Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This earnings release contains “forward-looking statements” regarding the Company’s plans, expectations, and anticipated future events. Actual results could differ materially due to numerous known and unknown risks and uncertainties. Those known risks and uncertainties include, but are not limited, to the following:

• uncertainties and evolving market and provider economics associated with the implementation of the Affordable Care Act, the Medicaid expansion, the insurance marketplaces, the effect of various implementing regulations, and uncertainties regarding the Medicare-Medicaid dual eligible demonstration programs in California, Illinois, Michigan, Ohio, South Carolina, and Texas;

• management of our medical costs, including seasonal flu patterns and rates of utilization that are consistent with our expectations, and our ability to reduce over time the high medical costs commonly associated with new patient populations;

• federal or state medical cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit sharing arrangements, and conflicting interpretations thereof;

• the interpretation and implementation of at-risk premium rules regarding the achievement of certain quality measures;

• cyber-attacks or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;

• the success of our new health plan in Puerto Rico, including the successful resolution of the Puerto Rico debt crisis and the payment of all amounts due under our Medicaid contract;

• specialty drugs or generic drugs that are exorbitantly priced but not factored into the calculation of our capitated rates;

• significant budget pressures on state governments and their potential inability to maintain current rates, to implement expected rate increases, or to maintain existing benefit packages or membership eligibility thresholds or criteria, including the resolution of the Illinois budget impasse and continued payment of our Illinois health plan;

• the accurate estimation of incurred but not reported or paid medical costs across our health plans;

• retroactive adjustments to premium revenue or accounting estimates which require adjustment based upon subsequent developments;

• efforts by states to recoup previously paid amounts;

• the success of our efforts to retain existing government contracts and to obtain new government contracts in connection with state requests for proposals (RFPs) in both existing and new states;

• the continuation and renewal of the government contracts of both our health plans and Molina Medicaid Solutions and the terms under which such contracts are renewed;

• complications, member confusion, or enrollment backlogs related to the annual renewal of Medicaid coverage;

• government audits and reviews, and any fine, enrollment freeze, or monitoring program that may result therefrom;

• changes with respect to our provider contracts and the loss of providers;

• approval by state regulators of dividends and distributions by our health plan subsidiaries;

• changes in funding under our contracts as a result of regulatory changes, programmatic adjustments, or other reforms;

• high dollar claims related to catastrophic illness;

• the favorable resolution of litigation, arbitration, or administrative proceedings;

• the relatively small number of states in which we operate health plans;

• the effect on our Los Angeles County subcontract of Centene’s acquisition of Health Net;

• the availability of adequate financing on acceptable terms to fund and capitalize our expansion and growth, repay our outstanding indebtedness at maturity and meet our liquidity needs, including the interest expense and other costs associated with such financing;

• the failure of a state in which we operate to renew its federal Medicaid waiver;

• changes generally affecting the managed care or Medicaid management information systems industries;

• increases in government surcharges, taxes, and assessments;

• newly emergent viruses or widespread epidemics, including the Zika virus, and associated public alarm;

• changes in general economic conditions, including unemployment rates;

• the sufficiency of our funds, on hand to pay the amounts due upon conversion of our outstanding notes;

• increasing competition and consolidation in the Medicaid industry;

and numerous other risk factors, including those discussed in the Company’s periodic reports and filings with the Securities and Exchange Commission. 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, we can give no assurances that the Company’s forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by the Company’s forward-looking statements will in fact occur, and we caution investors not to place undue reliance on these statements. All forward-looking statements in this release represent the Company’s judgment as of February 8, 2016, and we disclaim any obligation to update any forward-looking statements to conform the statement to actual results or changes in the Company’s expectations.

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MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended						Year Ended
	December 31,						December 31,
	2015			2014			2015			2014
	(Dollar amounts in millions, except net income per share)
Revenue:
Premium revenue	$	3,488		$	2,599		$	13,140		$	9,023
Service revenue	106			54			252			210
Premium tax revenue	104			91			393			294
Health insurer fee revenue	61			52			264			120
Investment income	6			2			18			8
Other revenue	—			4			5			12
Total revenue	3,765			2,802			14,072			9,667
Operating expenses:
Medical care costs	3,110			2,322			11,691			8,076
Cost of service revenue	90			39			193			157
General and administrative expenses	317			205			1,147			765
Premium tax expenses	104			91			393			294
Health insurer fee expenses	40			23			157			89
Depreciation and amortization	28			25			104			93
Total operating expenses	3,689			2,705			13,685			9,474
Operating income	76			97			387			193
Other expenses, net:
Interest expense	22			15			67			57
Other (income) expense, net	(2		)	—			(2		)	1
Total other expenses, net	20			15			65			58
Income from continuing operations before income tax expense	56			82			322			135
Income tax expense	26			48			179			73
Income from continuing operations	30			34			143			62
Net income	$	30		$	34		$	143		$	62
Diluted net income per share: (1)
Income from continuing operations	$	0.51		$	0.69		$	2.57		$	1.30
Loss from discontinued operations	—			—			—			(0.01		)
Diluted net income per share	$	0.51		$	0.69		$	2.57		$	1.29
Diluted weighted average shares outstanding	57.7			48.9			55.6			48.3
Operating Statistics, Continuing Operations: (1)
Medical care ratio (2)	89.2		%	89.4		%	89.0		%	89.5		%
Service revenue ratio (3)	84.7		%	72.6		%	76.4		%	74.6		%
General and administrative expense ratio (4)	8.4		%	7.3		%	8.2		%	7.9		%
Premium tax ratio (2)	2.9		%	3.4		%	2.9		%	3.2		%
Effective tax rate	47.0		%	58.6		%	55.5		%	53.8		%
Net profit margin, continuing operations (4)	0.8		%	1.2		%	1.0		%	0.6		%

____________

(1) Source data for calculations in thousands.

(2) Medical care ratio represents medical care costs as a percentage of premium revenue; premium tax ratio represents premium tax expenses as a percentage of premium revenue plus premium tax revenue. Medical care costs include costs incurred for providing long term services and supports (LTSS).

(3) Service revenue ratio represents cost of service revenue as a percentage of service revenue.

(4) Computed as a percentage of total revenue.

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MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

	December 31,
	2015			2014
	(Amounts in millions, except per-share data)
ASSETS
Current assets:
Cash and cash equivalents	$	2,329		$	1,539
Investments	1,801			1,019
Receivables	597			596
Income taxes refundable	13			—
Prepaid expenses and other current assets	192			49
Derivative asset	374			—
Total current assets	5,306			3,203
Property, equipment, and capitalized software, net	393			341
Deferred contract costs	81			54
Intangible assets, net	122			89
Goodwill	519			272
Restricted investments	109			102
Derivative asset	—			329
Deferred income taxes	18			15
Other assets	28			30
	$	6,576		$	4,435
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable	$	1,582		$	1,201
Amounts due government agencies	834			527
Accounts payable and accrued liabilities	360			242
Deferred revenue	223			196
Income taxes payable	—			9
Current portion of long-term debt	449			—
Derivative liability	374			—
Total current liabilities	3,822			2,175
Senior notes	962			690
Lease financing obligations	198			157
Lease financing obligations - related party	—			40
Derivative liability	—			329
Other long-term liabilities	37			34
Total liabilities	5,019			3,425
Stockholders’ equity:
Common stock, $0.001 par value; 150 shares authorized; outstanding: 56 shares at December 31, 2015 and 50 shares at December 31, 2014	—			—
Preferred stock, $0.001 par value; 20 shares authorized, no shares issued and outstanding	—			—
Additional paid-in capital	803			396
Accumulated other comprehensive loss	(4		)	(1		)
Retained earnings	758			615
Total stockholders’ equity	1,557			1,010
	$	6,576		$	4,435

____________

Note: Certain 2014 amounts have been reclassified to conform to the 2015 presentation. Specifically, current and non-current deferred issuance costs are now reported as direct deductions from “Current portion of long-term debt,” and “Senior notes,” respectively. Additionally, the aggregate amount of deferred income taxes are now reported as non-current. Both reclassifications are a result of recently adopted accounting pronouncements.

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MOLINA HEALTHCARE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS,

CONTINUING AND DISCONTINUED OPERATIONS

	Three Months Ended						Year Ended
	December 31,						December 31,
	2015			2014			2015			2014
	(Amounts in millions)
Operating activities:
Net income	$	30		$	34		$	143		$	62
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	33			35			126			134
Deferred income taxes	5			9			(7		)	(2		)
Share-based compensation	7			6			23			22
Amortization of convertible senior notes and lease financing obligations	8			7			30			27
Other, net	6			3			19			7
Changes in operating assets and liabilities:
Receivables	79			(171		)	56			(298		)
Prepaid expenses and other current assets	28			32			(35		)	(20		)
Medical claims and benefits payable	20			77			379			531
Amounts due government agencies	(146		)	129			307			470
Accounts payable and accrued liabilities	48			37			82			11
Deferred revenue	153			5			24			74
Income taxes	(52		)	17			(22		)	42
Net cash provided by operating activities	219			220			1,125			1,060
Investing activities:
Purchases of investments	(612		)	(337		)	(1,923		)	(953		)
Proceeds from sales and maturities of investments	263			159			1,126			633
Purchases of property, equipment, and capitalized software	(31		)	(43		)	(132		)	(115		)
Increase in restricted investments	(1		)	(10		)	(6		)	(34		)
Net cash paid in business combinations	(373		)	(36		)	(450		)	(44		)
Other, net	(1		)	(8		)	(35		)	(23		)
Net cash used in investing activities	(755		)	(275		)	(1,420		)	(536		)
Financing activities:
Proceeds from senior notes offerings, net of issuance costs	689			—			689			123
Proceeds from common stock offering, net of issuance costs	—			—			373			—
Contingent consideration liabilities settled	—			—			—			(50		)
Proceeds from employee stock plans	10			6			18			14
Principal payments on convertible senior notes	—			(10		)	—			(10		)
Other, net	2			—			5			2
Net cash provided by (used in) financing activities	701			(4		)	1,085			79
Net increase (decrease) in cash and cash equivalents	165			(59		)	790			603
Cash and cash equivalents at beginning of period	2,164			1,598			1,539			936
Cash and cash equivalents at end of period	$	2,329		$	1,539		$	2,329		$	1,539

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MOLINA HEALTHCARE, INC.

UNAUDITED NON-GAAP FINANCIAL MEASURES

The Company uses two non-GAAP financial measures as supplemental metrics in evaluating its 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.

The first of these non-GAAP measures is earnings before interest, taxes, depreciation and amortization (EBITDA). The following table reconciles net income, which the Company believes to be the most comparable GAAP measure, to EBITDA.

	Three Months Ended				Year Ended
	December 31,				December 31,
	2015		2014		2015		2014
	(Amounts in millions)
Net income	$	30	$	34	$	143	$	62
Adjustments:
Depreciation, and amortization of intangible assets and capitalized software	33		30		120		114
Interest expense	22		15		67		57
Income tax expense	26		48		179		72
EBITDA	$	111	$	127	$	509	$	305

The second of these non-GAAP measures is adjusted net income, continuing operations (including adjusted net income per diluted share). The following table reconciles net income from continuing operations, which the Company believes to be the most comparable GAAP measure, to adjusted net income, continuing operations. The source data for per diluted share calculations below is in thousands.

	Three Months Ended December 31,								Year Ended December 31,
	2015				2014				2015				2014
	(In millions, except per diluted share amounts)
	Amount		Per share		Amount		Per share		Amount		Per share		Amount		Per share
Net income, continuing operations	$	30	$	0.51	$	34	$	0.69	$	143	$	2.57	$	62	$	1.30
Adjustments, net of tax:
Amortization of convertible senior notes and lease financing obligations	5		0.08		4		0.09		19		0.34		17		0.36
Amortization of intangible assets	3		0.06		3		0.06		11		0.20		13		0.27
Adjusted net income, continuing operations (1)	$	38	$	0.65	$	41	$	0.84	$	173	$	3.11	$	92	$	1.93

________________________

(1) Beginning in the first quarter of 2015, the Company revised its calculation of adjusted net income, continuing operations. The Company no longer subtracts “depreciation, and amortization of capitalized software” and “share-based compensation” from net income, continuing operations to arrive at adjusted net income, continuing operations. The Company made this change to better reflect the way in which it evaluates its financial performance, makes financing and business decisions, and forecasts and plans for future periods. All periods presented conform to this presentation.

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MOLINA HEALTHCARE, INC.

UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP, CONTINUING OPERATIONS

	As of December 31,
	2015	2014	2013
Ending Membership by Health Plan:
California	620,000	531,000	368,000
Florida	440,000	164,000	89,000
Illinois	98,000	100,000	4,000
Michigan	328,000	242,000	213,000
New Mexico	231,000	212,000	168,000
Ohio	327,000	347,000	255,000
Puerto Rico (1)	348,000	—	—
South Carolina	99,000	118,000	—
Texas	260,000	245,000	252,000
Utah	102,000	83,000	86,000
Washington	582,000	497,000	403,000
Wisconsin	98,000	84,000	93,000
	3,533,000	2,623,000	1,931,000
Ending Membership by Program:
Temporary Assistance for Needy Families (TANF), CHIP(2)	2,312,000	1,809,000	1,603,000
Medicaid Expansion(3)	557,000	385,000	—
Aged, Blind or Disabled (ABD)	366,000	347,000	289,000
Marketplace(3)	205,000	15,000	—
Medicare-Medicaid Plan (MMP) - Integrated(4)	51,000	18,000	—
Medicare Special Needs Plans	42,000	49,000	39,000
	3,533,000	2,623,000	1,931,000

_______________________

(1) The Puerto Rico health plan began serving members effective April 1, 2015.

(2) CHIP stands for Children’s Health Insurance Program.

(3) Medicaid Expansion membership phased in, and Marketplace became available for consumers to access coverage, beginning January 1, 2014.

(4) MMP members who receive both Medicaid and Medicare coverage from the Company. The Company began serving members under this program in the second quarter of 2014.

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MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA,

CONTINUING OPERATIONS

(In millions, except percentages and per-member per-month amounts)

	Three Months Ended December 31, 2015
	Member Months(1)	Premium Revenue				Medical Care Costs				MCR(2)		Medical Margin
		Total		PMPM		Total		PMPM
California	1.8	$	563	$	309.31	$	474	$	260.44	84.2	%	$	89
Florida	1.2	329		277.71		318		268.98		96.9		11
Illinois	0.3	85		287.88		79		266.91		92.7		6
Michigan	1.0	329		334.44		282		287.00		85.8		47
New Mexico	0.7	304		438.82		263		379.10		86.4		41
Ohio	1.0	500		501.11		437		436.77		87.2		63
Puerto Rico	1.1	192		184.79		159		153.04		82.8		33
South Carolina	0.3	78		261.07		69		229.48		87.9		9
Texas	0.7	543		693.06		496		633.77		91.4		47
Utah	0.4	89		290.05		77		251.55		86.7		12
Washington	1.7	416		241.28		376		217.77		90.3		40
Wisconsin	0.3	55		186.57		53		182.41		97.8		2
Other(3)	—	5		—		27		—		—		(22		)
	10.5	$	3,488	$	334.62	$	3,110	$	298.43	89.2	%	$	378
	Three Months Ended December 31, 2014
	Member Months(1)	Premium Revenue				Medical Care Costs				MCR(2)		Medical Margin
		Total		PMPM		Total		PMPM
California	1.6	$	463	$	291.27	$	379	$	238.49	81.9	%	$	84
Florida	0.4	126		348.60		129		356.76		102.3		(3		)
Illinois	0.2	84		353.71		78		323.76		91.5		6
Michigan	0.7	213		294.14		185		254.41		86.5		28
New Mexico	0.7	299		456.40		294		448.99		98.4		5
Ohio	1.1	492		475.15		426		412.02		86.7		66
Puerto Rico	—	—		—		—		—		—		—
South Carolina	0.4	93		263.97		73		208.10		78.8		20
Texas	0.8	339		458.42		299		404.88		88.3		40
Utah	0.2	76		300.28		69		277.44		92.4		7
Washington	1.4	364		246.91		342		232.08		94.0		22
Wisconsin	0.2	38		148.99		36		139.75		93.8		2
Other(3)	—	12		—		12		—		—		—
	7.7	$	2,599	$	338.52	$	2,322	$	302.60	89.4	%	$	277

____________

(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. Source data in thousands.

(3) “Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.

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MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA,

CONTINUING OPERATIONS

(In millions, except percentages and per-member per-month amounts)

	Year Ended December 31, 2015
	Member Months(1)	Premium Revenue				Medical Care Costs				MCR(2)		Medical Margin
		Total		PMPM		Total		PMPM
California	7.1	$	2,101	$	296.93	$	1,823	$	257.67	86.8	%	$	278
Florida	4.1	1,197		289.38		1,081		261.49		90.4		116
Illinois	1.2	397		328.93		367		303.72		92.3		30
Michigan	3.4	1,067		317.15		903		268.27		84.6		164
New Mexico	2.8	1,237		446.27		1,106		398.98		89.4		131
Ohio	4.1	2,034		499.34		1,718		421.61		84.4		316
Puerto Rico	3.2	567		178.31		505		158.80		89.1		62
South Carolina	1.3	348		267.25		278		213.30		79.8		70
Texas	3.1	1,961		621.25		1,809		573.32		92.3		152
Utah	1.2	331		286.22		300		259.32		90.6		31
Washington	6.6	1,602		242.36		1,470		222.36		91.7		132
Wisconsin	1.2	261		213.48		215		176.01		82.4		46
Other(3)	—	37		—		116		—		—		(79		)
	39.3	$	13,140	$	334.71	$	11,691	$	297.81	89.0	%	$	1,449
	Year Ended December 31, 2014
	Member Months(1)	Premium Revenue				Medical Care Costs				MCR(2)		Medical Margin
		Total		PMPM		Total		PMPM
California	5.6	$	1,523	$	270.51	$	1,269	$	225.37	83.3	%	$	254
Florida	1.1	439		397.79		419		379.95		95.5		20
Illinois	0.3	153		498.48		141		456.88		91.7		12
Michigan	2.8	781		278.68		661		235.81		84.6		120
New Mexico	2.5	1,076		435.17		996		402.92		92.6		80
Ohio	3.7	1,553		425.47		1,335		365.87		86.0		218
Puerto Rico	—	—		—		—		—		—		—
South Carolina	1.5	381		260.72		323		220.89		84.7		58
Texas	3.0	1,318		442.32		1,197		401.81		90.8		121
Utah	1.0	310		310.64		285		286.43		92.2		25
Washington	5.5	1,305		236.27		1,219		220.75		93.4		86
Wisconsin	1.0	156		150.87		136		130.91		86.8		20
Other(3)	—	28		—		95		—		—		(67		)
	28.0	$	9,023	$	322.68	$	8,076	$	288.84	89.5	%	$	947

____________

(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. Source data in thousands.

(3) “Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.

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MOH Reports Fourth Quarter and Year-End 2015 Results

Page 11

February 8, 2016

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA,

CONTINUING OPERATIONS

(In millions, except percentages and per-member per-month amounts)

	Three Months Ended December 31, 2015 (1)
	Member Months(2)	Premium Revenue				Medical Care Costs				MCR(3)		Medical Margin
		Total		PMPM		Total		PMPM
TANF and CHIP	6.9	$	1,203	$	175.96	$	1,092	$	159.83	90.8	%	$	111
Medicaid Expansion	1.7	637		386.27		503		305.28		79.0		134
ABD	1.1	1,059		967.72		995		910.11		94.0		64
Marketplace	0.6	126		223.57		111		194.80		87.1		15
MMP	0.1	330		2,160.91		290		1,905.00		88.2		40
Medicare	0.1	133		1,076.00		119		954.40		88.7		14
	10.5	$	3,488	$	334.62	$	3,110	$	298.43	89.2	%	$	378

	Year Ended December 31, 2015 (1)
	Member Months(2)	Premium Revenue				Medical Care Costs				MCR(3)		Medical Margin
		Total		PMPM		Total		PMPM
TANF and CHIP	25.5	$	4,483	$	175.64	$	4,122	$	161.50	92.0	%	$	361
Medicaid Expansion	5.9	2,291		391.62		1,828		312.58		79.8		463
ABD	4.3	4,122		966.37		3,784		887.27		91.8		338
Marketplace	2.6	651		251.96		481		185.85		73.8		170
MMP	0.5	1,063		2,033.76		974		1,863.93		91.6		89
Medicare	0.5	530		1,038.15		502		982.50		94.6		28
	39.3	$	13,140	$	334.71	$	11,691	$	297.81	89.0	%	$	1,449

_______________________

(1) Three and twelve months ended December 31, 2014 data not presented due to lack of comparability.

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

(3) The MCR represents medical costs as a percentage of premium revenue. Source data in thousands.

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MOH Reports Fourth Quarter and Year-End 2015 Results

Page 12

February 8, 2016

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA,

CONTINUING OPERATIONS

(In millions, except percentages and per-member per-month amounts)

The following tables provide the details of the Company’s medical care costs from continuing operations for the periods indicated:

	Three Months Ended December 31,
	2015						2014
	Amount		PMPM		% of Total		Amount		PMPM		% of Total
Fee for service	$	2,297	$	220.34	73.9	%	$	1,644	$	214.14	70.8	%
Pharmacy	449		43.08		14.4		354		46.12		15.3
Capitation	257		24.69		8.3		211		27.60		9.1
Direct delivery	43		4.14		1.4		26		3.42		1.1
Other	64		6.18		2.0		87		11.32		3.7
	$	3,110	$	298.43	100.0	%	$	2,322	$	302.60	100.0	%

	Year Ended December 31,
	2015						2014
	Amount		PMPM		% of Total		Amount		PMPM		% of Total
Fee for service	$	8,572	$	218.35	73.3	%	$	5,673	$	202.87	70.2	%
Pharmacy	1,610		41.01		13.8		1,273		45.54		15.8
Capitation	982		25.02		8.4		748		26.77		9.3
Direct delivery	128		3.26		1.1		96		3.44		1.2
Other	399		10.17		3.4		286		10.22		3.5
	$	11,691	$	297.81	100.0	%	$	8,076	$	288.84	100.0	%

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

	December 31,
	2015		2014
Fee-for-service claims incurred but not paid (IBNP)	$	1,191	$	871
Pharmacy payable	88		71
Capitation payable	37		28
Other (1)	266		231
	$	1,582	$	1,201

______________________

(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 December 31, 2015 and 2014, the Company had recorded non-risk provider payables of approximately $167 million and $119 million, respectively.

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MOH Reports Fourth Quarter and Year-End 2015 Results

Page 13

February 8, 2016

MOLINA HEALTHCARE, INC.

UNAUDITED CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE

(Dollars in millions, except per-member amounts)

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 Company’s original estimate of claims and benefits payable at the beginning of the period were 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 from continuing and discontinued operations combined for the periods indicated:

	Year Ended
	December 31,
	2015			2014
Medical claims and benefits payable, beginning balance	$	1,201		$	670
Components of medical care costs related to:
Current period	11,832			8,123
Prior period	(141		)	(46		)
Total medical care costs	11,691			8,077
Change in non-risk provider payables	48			(32		)
Payments for medical care costs related to:
Current period	10,448			7,064
Prior period	910			450
Total paid	11,358			7,514
Medical claims and benefits payable, ending balance	$	1,582		$	1,201
Benefit from prior period as a percentage of:
Balance at beginning of period	11.8		%	6.9		%
Premium revenue, trailing twelve months	1.1		%	0.5		%
Medical care costs, trailing twelve months	1.2		%	0.6		%
Fee-For-Service Claims Data:
Days in claims payable, fee for service	48			49
Number of members at end of year	3,533,000			2,623,000
Number of claims in inventory at end of year	380,800			307,700
Billed charges of claims in inventory at end of year	$	816		$	719
Claims in inventory per member at end of year	0.11			0.12
Billed charges of claims in inventory per member at end of year	$	230.91		$	273.92
Number of claims received during the year	40,173,300			27,597,000
Billed charges of claims received during the year	$	46,211		$	30,316

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MOH Reports Fourth Quarter and Year-End 2015 Results

Page 14

February 8, 2016

MOLINA HEALTHCARE, INC.

HEALTH INSURER FEE DETAILS BY HEALTH PLAN

(In millions)

	HIF Reimbursement Revenue, Gross(1)
	Year Ended December 31, 2015
	Recognized										Necessary for Full Reimbursement
	Q1 2015		Q2 2015		Q3 2015		Q4 2015		Total
2015 HIF:
California	$	—	$	17	$	6	$	8	$	31	$	31
Florida	2		2		2		2		8		8
Illinois	1		1		1		1		4		4
Michigan	—		—		21		7		28		28
New Mexico	7		8		8		7		30		30
Ohio	12		12		12		12		48		48
South Carolina	3		3		3		3		12		12
Texas	6		6		6		5		23		23
Utah	—		—		4		2		6		6
Washington	11		11		6		9		37		37
Wisconsin	1		1		1		2		5		5
Subtotal, Medicaid	43		61		70		58		232		232
Marketplace	—		—		1		1		2		2
Medicare	6		4		4		5		19		19
	49		65		75		64		253		$	253
2014 HIF:
California	—		12		—		—		12
Michigan	—		—		7		—		7
Utah	—		—		1		—		1
	$	49	$	77	$	83	$	64	$	273
Recognized in:
Health insurer fee revenue	$	48	$	74	$	81	$	61	$	264
Premium tax revenue	1		3		2		3		9
	$	49	$	77	$	83	$	64	$	273

_____________

(1) Amounts in the table include the Company’s estimate of the full economic impact of the excise tax including premium tax and the income tax effect.

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