CNC - Earnings call transcript Q1 2018

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Operator

Good morning, everyone and welcome to the Centene Corporation First Quarter Earnings Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note, today's event is being recorded. At this time, I would like to turn the conference call over to Ed Kroll, Senior Vice President of Finance and Investor Relations. ahead. go please Sir,

Edmund Kroll

various about forward-looking as forward-looking prospects make differ results Safe plans that materially Litigation Private the of Schwaneke, Actual those Centene Form dialing Good call, statements XXXX events Thank filed Conference First and will and today, Neidorff, Operator. these of its purposes Financial and us Provision of Act can U.S. completion and A available anticipates shortly be Canada, be Officer SEC Call. subsequent through Form also Centene XXXX Centene's Centene.com will April for developments other on dialing XX, also indicated at will Chairman Centene, XX, future constitute important statements countries XX-Q accessed under Harbor the our Jeff Officer, most may recently a Executive filings. the discussed from estimates including our dial-ins Quarter this Chief Reform our code Vice morning, result dated you, XXX-XXX-XXXX. President replay website you XXXXXXXX. Securities XXX-XXX-XXXX or may and Chief and in other to dated February or morning's that The XXXX expectations, XXXX. public factors, for by of the everyone. remarks host Any cause joining Michael Executive change. and which for and Thank at call's Earnings Results in is XX-K Centene.com. by after both playback in by those

obligation Centene.com our point measures also these website, specifically Press update Quarter at XXXX The on the in which to elect First can reconciliation Investors comparable found we the statements most is certain to company measures Company's available under section. any measures. with Release, directly be GAAP of the refer non-GAAP to do future, the will A so. some While the call disclaim in forward-looking may these

that XX, like reminder and next York be Friday, will over June that, a I'd Michael? Michael turn CEO, Finally, to Chairman to on call New in With our XXXX the Day Neidorff. Investor City. our

Michael Neidorff

morning, and Centene's First Earnings joining Thank Quarter thank everyone you Ed. you, Good Call. XXXX for

call, During provide and we on results discuss this first quarter morning's and our Centene's of the will updates products. course markets

also will around and provide regulatory legislation commentary landscape. We healthcare the

of Medicaid term managed Centene approximately Fidelis investments to close we acquisitions Upon combination strategic diversified Additionally, markets. position discussing will totaling of Centene's we largest the and begin U.S. environment. leader of XXX on we of just To largest be also I Medicaid-focus XXX,XXX the a solutions in individuals segment. today's healthcare the approximately largest largest a discuss the the longer states. will our company. and long multinational to and of provider product; support international to is ever-changing bring healthcare enterprise. recent in acquisitions the Centene in XX would updates of are like country. We the Fidelis. organization in including is Ambetter four the marketplace provider organic citizens we investments, in care Medicaid-managed the is a no services evolved two a acquisition, Centene states, into have million by XX.X

can we operating performance One evolution positive have of transitory business. in the the enhances maintain despite to our is incur our of benefits scale that This chief ability any gained. scale issues

approval quality the by capabilities. Centene in to the invest for to ability to are systems healthcare encouraged can This future the provide being by that to would highest we positioning and continuing at related sustain our is the are ensure We like and Care; lowest cost. most I progress made to go investments. process. Fidelis regulatory through acquisitions now our recent the we

the and approval from received of Health reported of Services. have Financial we yesterday, Department As New Department New we York the York

We soon. integration approvals; relatively X. ensure final be helps we are the under extremely way this a received to believe actively planning Attorney with is going should the July later York This The than obtain well. and New to closing General working date no

the over across a primary to facilities in be This used ground to adds vertical the Earlier XXX,XXX opportunities consistent running Centene the additional the with York of in approach in also over Medical more new able platform with in It upon Medicaid/Medicare a and a undertakings recipients. the This serves existing Centene's footprint to acquisition our Miami nice individuals is in transaction. acquisition mission represents to MHM vulnerable be conventional other portfolio. of will MHM. will the New $XXX transaction the the correctional hit staffing healthcare provider towards CMG Group, marketplace to the state. Services; Centene We period. in serving than and XX% agencies. agreement, in seven-state states. of of we stint the MHM to states. York County Centurion. a covers focuses Medical integration pursue governmental to Community of Community We correctional also Centene high Services, molding plan acquired million the national one we to larger XX,XXX company between five-year healthcare services individuals This This paid provider Health. government-sponsored this agreed populations It approximately healthcare. a month, for contribution within venture Advantage close U.S. Day Centene's initiatives at-risk programs. New Group; on of and ownership March, the care contribution and is Under providing state completed both Department Florida. to strategic expands XX terms healthcare This of be targeted certain this Centene's the acquisition quality the new MHM leading to services remaining includes April, existing as joint XXX leverage completed in of healthcare State in systems

care model. clinical a has Importantly, unique CMG

March, transportation acquisition provides expansion provides This services. for other primary platform Florida and be investment full-service access in Centene's the complimentary to benefits RX particular is Centene to may focus social internal across pharmacy a other in states equity model Advance Advance; with services, on a care into and limited. [ph]. TVM care, manager. and addition suite Advance, of RX In support access RX potentially an where of specialty CMG areas made a a

in company's relationship expect significantly customer use technology reduce We platform a medical cost RX drug-impacted to affordable both strategic to Advance. the includes cloud-based cost. partnership and a This and investment administrative

of transaction, and in ownership an is to and capabilities we well an Centene's genomic innovative additional as on healthcare. rights and continue technology data, Interpreta investment investments equity ownership expand in for part XX% effect net healthcare a has provider Interpreta; future. well clinical the our IT As summary, XX%. of focused provide government-sponsored pharmacy This health enhances initial opportunities strategy. a on Centene March, acquisitions is we Adding in real-time acquired analytics. the to in In into leader future. the margin to Centene as brings total that certain in diversification enterprise our and growth This these company, its as [ph] the execute and the should position categories Interpreta.

update Next, and healthcare landscape. on I provide legislative an will regulatory

see healthcare-related unlikely is We a that to believe done to XXXX. being continue changes legislation it Congress regulation. pass any We in healthcare will

consistently in navigate notice early for past. rule example, so these we can in we successfully have as For final exchanges. CMS We XXXX done changes April, payment released believe the its

of onto Now, the first financials. XXXX quarter

million top pleased This XXXX. end of Membership flows. beneficiaries are first represents quarter XXXX We another growth solid at strong the begin quarter recipients. marked quarter, to robust XX.X was line with and by increase bottom and XXX,XXX an of operating cash over

First the better related growth business. quarter XX% year. a year-over-year basis performance HBR first primarily in represents insurance We XX%. to XX.X%. diluted our marketplace to a revenues Medicaid compared last to The year-over-year in in XX.X%. ratio decreased of adjusted period $X.XX share reported of SG&A the per year-over-year growth $X.XX, earnings basis XXX marketplace same quarter growth This of $XX.X billion. earnings of fee. expense health XXX and The points business, to primarily return points to result increased This was This is increased adjusted

We Lastly, operating cost A quick including medical financial his net prepared in at cash further X.Xx guidance flows details billion XXXX came $X.X comment basis points on XX the The and flu quarter first peaked will remarks. of in provide in uptake earnings. was it Jeff HBR an saw or updated impact February. in approximately flu. quarter year-over-year. in flu in including the first

are to As earlier, absorb I able and scale. this diversity mentioned our we to cost

trends flu cost. view as episodic medical overall of our Importantly, We to expense. our indicative flu manage and not ability of one just is component medical

as see overall to as This in continue the trends. well consistent expectations we is cost medical stable anticipate low digits. single with Finally,

and updates. markets product to on Moving

program. awarded Arizona, last activity. First, contract we'll Arizona's discuss month, recent under a the Medicaid was Centene Medicaid

Arizona. state. and Maricopa region Central physical services Southern the this serve and beneficiaries currently Centene providing be in we the region. the number serves awarded is where commence care XXXX care under Texas; cover plans beneficiaries. of contract contract to CHIP was five X.X X, of on and Program. plans, the expected commence year, October last managed be of region will We is healthcare This contract, million in Service of new we X, a one to late September in new This one Under Texas five recipients to XXXX. the counties Centene managed to program Rural Southern Area expanding Central behavioral will was county set

to the announced an these awards. in of the April evaluation was XXXX, in cancellation error However, This due state process. of the

commence Pennsylvania TANF the expectations. beneficiaries zone two this Separately, our included one Southwest was may of As begin forward XX,XXX demonstrate program end, served Program. XXXX, remaining to on upheld. term ahead the All this coverage we opportunity Pennsylvania; RFP of Whichever until of Also At the to is quarter's are zones began beneficiaries in the is continue to X, CHIP enrolled now CHIP and January, released to in RFP. the on new to has care with April, area the will in having of on The an we state to Pennsylvania's contracts Star scheduled be X, XXXX. contracts contract long state. we value Centene look been determining XXXX. steps. to stage set new in has our the January Southeast CHIP program next awarded. Pennsylvania incumbents, process scheduled awarded of in The appeal January Texas RSA the provide in January on the serving The path zone. are commence chooses,

members decent eight in new They At we bonus beneficiaries. of we eligible remain in New rating members. end, operating Upon care plans quarter brand. These onto XX,XXX and than for of over four-star MMP to close successful Medicare will in we represents served Now are business Advantage our all-well under launch Medicare our transaction; brands serving This also a premium the XXXX. states. Medicare; will be in Medicare building more Medicaid and Fidelis Advantage year-over-year We over increase on began York. January, XXX,XXX term. a in the Medicare Centene [ph] brand focused a [ph] the still long

We significant this annual to growth expect business driver of a our be rate.

Ambetter business retained quarter. the health the leader Next, navigated marketplace. in well We insurance is share difficult perform exchange insurance of first marketplace we the We continues marketplace. market successfully national The gain targets. XXXX a enrollment members. XX% the of to environment, exceeded health growth in

At that of XX% It total served is a position the approximately states. the exchange an rates Shifting XXXX. a continue composite key million to be compares products the consistent of Separately, The -- Medicaid put initial for us set enrollees came XX%. expect surpassing our years. in also financial Medicare XXXX beneficiaries made members, important in in December will work, to estimate in of been transaction growth strategic CMS demographics better are whether same notice of a momentum to at our to This rate maintain radar stage over [ph] of investment. X% offer growth or XX Advance ahead March X.X to note to adjustment we exchange recently of our of for we that million. X.X Additionally, issued remain gears million with organic paid and than XX, through through our our acquisition. results strong XXXX. us approximately we period growth Fidelis members last positive these quarter has to company first of conclusion, $X.X the expectations. closing Care Centene representing prior our comments members In it's continues increase year,

of acquisition proven have We effectively acquire to ability our integrate and all sizes.

and expect to line both automation our We as the double growth top by will continue We efficiencies process our digit anticipate percentages. scale. to and focus on increasing our to margins we bottom expand maintain

is turn Day your seeing you call to support We for We continued Investor will now XX reminded New then. and and interest I've forward As I our June to over look you, in Jeff. of Centene York thank City. the you

Jeffrey Schwaneke

and Michael, first guidance and update as quarter Fidelis cover more the our annual strong the morning. This we made you, will Thank the acquisition morning, color announced and I changes good to morning. this provide on results on

we minute. performance and cost in mentioned, led a I business, our in that a first the start first compensated the with than will more the quarter. and quarter had details Michael This in As of strong improvements additional more to results business. growth year-over-year Medicaid by in the on the marketplace provide year performance our flu good we experienced for

of first the increase year. of over XXXX For over total the per first XX% quarter an the XXXX $X.XX, increase XXXX, were XX% adjusted were earnings an diluted for $XX.X and last share quarter billion, revenues

earnings share of by health business and diluted were driven marketplace associated adjusted growth profitability quarter reform. the membership the benefit first per in the insurance The and tax

were for acquisition Additionally, the than due Fidel's previous per share associated on quarter included previous March X. was the with share count interest which to lower first expense the the guidance expectations results diluted our in financing $X.XX approximately and lower in delay the higher

XXXX. Total some health was and insurance $X.X our expansion many result the revenues programs primarily details me offset XXXX support This of removal partially services fee the the in health in California, Pennsylvania program Let in and lower including the by the of in expansion revenues growth marketplace new the managed of year-over-year Missouri return XXXX in quarter. provide the business, of more by associated with a the for insurer states as grew in growth billion from contract of the and LTSS in-home the care. program approximately

and business the XXXX in which to the XXXX and lower our is marketplace enrollment year, additional the last seasonally first the in the lower HBR in operates primarily quarter by to quarter ratio the year-over-year expense quarter first recorded in health compared year's quarter, insurer Medicaid flu in the year, the reinstatement XX.X% basis additional flu of the on driven initially in XX.X% of the fourth CSRs. XXXX. this cost point the and by of year-over-year HBR quarter business benefits higher is offset marketplace basis from health Sequentially, insurer was partially quarter fee fourth was of XXXX. reinstatement cost to in the compared and new Moving of of XX.X% HBR; to at This compared XXX of decrease has fourth This partially the effect quarter and fourth XX growth the first in offset approximately prior of with HBR cost increased decrease business the a attributable early XXXX. growth associated points. was the by primarily in business which our health a to the fee in The

was by fourth additional general in during additional increased marketplace Our last year-over-year open periods year the in this expense associated the compared the XXXX. was variable fourth the adjusted first in marketplace XXXX. quarter earnings the quarter service to quarter. both This increase to year is The quarter and sequential partially XX.X% the related cost A XX.X% due and ratio selling, to increased with in administrative decrease the the to businesses membership. offset for first of X.X% quarter expense due the Medicare cost compensation performance enrollment first is in to of incurred ratio

first Additionally, prior on with year. cost we consistent business quarter, $X.XX is diluted share which the the expansion spend per during

in tax effect for rate health by quarter The in return the XXXX. tax by first the effective offset partially XX.X%, compared driven income rate was quarter the the was to tax the of of lowered the fee. insurer XX.X% first Our XXXX, of reform

Now billion to cash subsidiaries. quarter the on investments by million balance and $XXX $XX.X unregulated totaled held including sheet; at end

in on excess was quarter continues to level. borrowings $XXX filers NAIC end facility. authorized credit XXX% for our including the percentage revolving million $X.X at billion of Debt capital risk-based be Our control of of

non-recourse was of to at mortgage debt-to-capital XX.X% XX.X% the last note QX year compared XX% and end ratio XXXX. our at excluding Our

focus on component with acquisitions significant the past first as practice, deleveraging continue and equity to completed We in consistent a our and fund various to used investments we quarter.

first borrowings we revolving increased in with with the a consistent Although we our ended our quarter facility, debt-to-capital credit ratio year-end. the

increase in days operations in and for Our in The and the medical is quarter claims in $X.X DCP payments. or first by the Cash at is the of quarter adjustment XXXX. risk represents benefited earnings. marketplace totaled million liability and first business compared billion to X.Xx flow reserves the end flow end XX at growth quarter days payable in the the the provided business. marketplace growth with $X.X in timing of the claims result of payable XX Cash from the quarter associated net claims the

Before we acquisition. annual you to discuss minutes XXXX guidance, the changes let on me spend few update to the Fidelis a our

we the As XXXX. in Fidelis expected go hit the running. and Michael to the acquisition to planning revised integration to comments, have his ground The X synergy date continues X, well July we expect and April mentioned from closing for

$XX to million result, synergies a of XXXX. we expect of year half As achieve in the one

expect we our previously targets. Additionally, deliver the to communicated accretion to transaction continue

$X.X to expect approximately debt. the billion fund of with We $X.X transaction of and billion equity

May in of have As to we be and financing of subject and the conditions. X. will indicated assumptions are financing market assumptions to These earnings the release equity annual guidance updated in have ultimate timing debt our reflect the guidance our equity today, debt we as

let so me to a Now of give me here, you be let our annual direct guidance; perspective. updates, our on lot are there

after debt $X.XX equity of the quarter good our financing. exceeded a the timing expectations and had accounting per for we share by that diluted First, Fidelis

earnings our and diluted $X.XX. expectations full year share per increased adjusted GAAP have by the We

Second, to we earlier, timing the we the Fidelis and of our transaction, as perform the are of result stated are in-line making with continues the changes guidance to associated expectations the in financing full of and The month diluted overhang undertakings. and Fidelis adjusted additional financing removing on earnings a result change per quarter an is the earnings. of the share the of

you to would to effective earnings transactions financing share and perspective, $X.XX our some been higher. year January full associated XXXX, the Just per $X.XX guidance Fidelis be X, adjusted had the give

diluted intangible is dilutive EPS acquisitions an and summary, basis being have drive billion, Interpreta we guidance between earnings as in due basis, for full-year are NHM and in XXXX. we investments XXXX updated GAAP guidance. on That our In aggregate, updated and an is and investments for closed in $X.XX expansion. transaction and several share accretion cost revenues to share have Total share those amortization. earnings earnings Advance a adjusted margin will CMG in offset by strategic Third, are $XX.X per billion $X.XX. $X.XX to to included RX GAAP $XX our per and In adjusted follows. accretive transactions believe of XXXX that On long-term of revenue transactions growth these $X.XX, per and

With the view we due second the relatively the Medicare. being and equal cost the being earnings lower fourth business, enrollment to quarters third in the perspective, the quarter seasonality marketplace open marketplace of for with an from

the in now quarter Operator, strong That investments and the the growth we my with for the performance margin in you questions. concludes pleased remarks may to expansion. are first and long-term open will drive We continue acquisition addition completed that line the in of

Operator

from Steve go from comes today question Please Goldman first ahead Our Sachs. your Instructions] question. with Tanal [Operator

Stephen Tanal

decoupled that Advantage, like in score. audit A guys. in notice, the you, know an of here, penalties final the about for measures the In related issue one was scores thinking Medicare 'XX. call they it random I seemed BAP just star

'XX processes star any Just understand was rates, trying appeal whether the to your underway? implications scores or for there

Michael Neidorff

process is the Well, the and still XXXX evaluate we minimizing underway we appropriate, we The the so income. and cetera appealed see crosswalk impact alternatives. on continue have to rates et any

Stephen Tanal

Got it.

offset QX us Okay. about frame or year EPS marketplace, the and then seasonality wrap seasonality we really could the our in discreet around heads kind of XQ? So the way the nothing you on of should upside what be relatedly, to call later thinking just there? help is direct the any there out in like And the

Michael Neidorff

go into Jeff let I'll that.

Jeffrey Schwaneke

Yes. the would it's first, A on year-over-year things Number couple bit higher a quarter. a in performance it's an of first say basis one, little from membership; HBR two, two better and things. perspective. I

phenomenon so the break into but get in think first I'm I the the and really, really the marketplaces quarter I close going to So quarter, the the decline earnings quarter. starts are the offset commentary in two past the to things the first fourth driving quarter of quarter. it with specifics, made to that by to quarter being fourth not fourth first the from even the majority in

Stephen Tanal

it. Got

July actual statement? it little framing of Just that Is bit X for regulatory one real like more maybe there's a quick. me last sounds out timing one approval a for conservatism given there. fair Fidel, that as you're only than

Michael Neidorff

I say [ph]. don't to be of end abundance want certainly not it's to I that with I fair saying but realistic. certain think something is conservatism, that want up we do everything to

So than represent. I the no to probably is best July think saying X later way

Stephen Tanal

Great. it. Thank Appreciate guys. you,

Operator

Our Please from Sarah Piper ahead go next James comes question. your question from with Jaffray.

Sarah James

Thank you.

maybe so you pieces? pretty changing I through spoke got and guidance can know break me we investments kicks some it about areas out As I still the the but the Fidelis you I payments Thanks. just bridge that for growth, conservative, of and conservative was to [ph] hoping looked the other SG&A us. strong could was the updates, you walk one seem of and some guidance moving maybe any

Jeffrey Schwaneke

lower ratio of Fidelis. stands Yes. it Centene G&A as business metrics to the today. things. just you are the When had quarter, Fidelis before A compared that of about out the move they've we've of changing the couple talked of A reblending a because of lot

because all of for timing, half year. changes you for that the the the when So two of reblending adjust a effectively, companies it metrics

the already investments as as reblending but thing closed. well, made as going that's think -- transactions Obviously on the is ratio little investments and really those this that when the you far we've of investments move Obviously, the bit driver some the effects largest largest company we've I morning on. of quarter. talked out about of have Fidelis the we've the that a

Sarah James

Got IPNs you that on have I you with that just and any guys update share past is Florida? us to I in I'm announced can it. And about talked wondering know there's expected be think Florida today. the your if

Michael Neidorff

tuned. Stay The and of say hear There's they us rest hopefully, we'll to that, more about It's wait -- nothing today. see. Sarah. just do

Sarah James

it. Thank Got you.

Operator

America. Fischbeck Our next from comes question from with Please go ahead question. your Bank Kevin of

Kevin Fischbeck

Great, thanks. I wanted to out-performance. dive into the guidance $X.XX a little bit the from as far as quarter the

basis You guys ensure I of mentioned year-over-year, to guess flu about points basis of were I quarter? assuming Were XX how a out about you want that thinking the thought an or versus little of you from which in out being was you that guidance? up XX something is better and like $X.XX just your offset already EPS. actually performance points bit about how flu, $X.XX

Michael Neidorff

want you that? to take Jeff,

Jeffrey Schwaneke

the X, guidance is update our February we just really obviously Kevin, the internal movement and a last shares what have off that Yes. I would is that on view at do I'd the gave way beat The we little the the of is $X.XX and we've of was mathematics had we look start $X.XX. higher. back mentioned. was then you is forecast it and I'd were we guess, it I ahead $X.XX so flu It with bit way the the $X.XX indications

it's marketplace early driven X QX the the higher be really February on that and and business was by commentary QX enrollment would we that the really made I than mentioned. With

do you if that, that's will think up come number I the you So with.

Michael Neidorff

individual to are we A of We was things, you our the it. one the about ahead have, to which also over on expense. we when scale line the estimate say but combination medical on reach was what the on a is try marketplace, the contributor flu earlier

Jeffrey Schwaneke

Yes.

provided Michael's is commentary think consistent So that X. everything we I with on February the to point

Kevin Fischbeck

Okay.

the year? of you Is was the might the you think the had there beat $X.XX what in something $X.XX year. be, as then you out-performance guess for guidance offset by raise the quarter? by of about actual So thought if an $X.XX rest per well, kind quarter, the I

Michael Neidorff

and it start I'll can up. pick you

the we to with to each we If on it Jeff, also it of and growth add? and exchange of a reduced quarter, deductibles just the that some nature earnings want and nature, explain of it. over be you the should to and things the lot it look of that's had at the -- help said of that said do starts that exchange you that performance the

Jeffrey Schwaneke

Yes. imply Again, to than higher to out similar year on this X not to lay go consensus discreet and back XX% I'll were effectively, to our QX earnings like February make -- We better is that I XXXX is number. 'XX on the here. said $X.XX always commentary the going then the would than half which going of something first of are the QX. was be expectations,

a is Medicaid expectations really kind you Michael's the things and the to right press are is of ahead with and and release. now, of point If and by those line performance in you the that driven in marketplace, listed $X.XX where do that revenue math, the line which gets we think we've all that I HBR to

Kevin Fischbeck

actual Fidelis' far? so there? I updates performance on color any Okay. Any guess

Jeffrey Schwaneke

Yes. my in-line that in made they're expectations. with prepared comments I remarks

So I we're think that this they talking about really really rest the is well all just continue transaction of to and out-performancing timing morning perform really QX the is closing. and

Kevin Fischbeck

you. thank Great,

Michael Neidorff

Thank you.

Operator

ahead your question Evercore. comes with Please next from from question. Newshel Our go Michael

Michael Newshel

Thanks.

you're any expand a at So that claims full And the have quarter, higher some exchange commentary or starting on and change or shrink? rates going initial margins to how sounds on what what also you experiences than like you in first or out any for footprint, going least for since there the year? now a whether thought. consistent it's do It now you you're developing that XXXX, bit you're of you're little make into to rates viewing have the have

Michael Neidorff

talk that do early let and I'll the we we into too Jeff, we in moment much think pick over the get we not marketplace, we I'll talking Jeff December of way of I tend you increasing about remind original until the when marketplace. in first quarter kind we're start expectations and do the But on to guidance our up. that anything? year. had business 'XX about expectations It's an

Jeffrey Schwaneke

I really volume-driven. It's think Michael right. is

You'll do in have full-year that's our to. MLR and a margin some recording some minimal we we're filings notice extent, what payables. we're To projecting

Michael Newshel

what's on on Is did still adjustment? consistent that net you booking what in risk adjustment? And you payer prior with Are your years? on risk

Jeffrey Schwaneke

Yes. We're obviously the but of increase the business. net because has volume of the the size grown payer, in

Michael Newshel

in the of if your policy your take that Anything that. and participate? the Would or you happened it. some all? changes fully at approach thinking Got on loading administration front several changes any that expect you'll on like to try anything on change to might any XXXX restrictions that Or you participate put recently whether can

Michael Neidorff

Kevin?

Kevin Counihan

obviously it's the to payment be think us could may number of a so notice one, There's made that to things. of that couple a lower flexibility number positive. I We a the a because payment are changes us going think regulation to things by. regard are that help we're exist be that state regular Michael in flexibility be payer, encouraged MOR. that two number been said; as via think just going in actually that stay we've there's actually There notice we in a is the positive

Michael Neidorff

decentralized, I add, that might that on structured see a as really to and a so were very we mind plus. basis also work you we're state-by-state

Michael Newshel

guys. Got it. Thanks,

Operator

Windley question. from comes ahead go question with Dave from Jefferies. Please your next Our

Dave Windley

question. of here Fidelis' in just pennies I wanted the my movement the Thanks All of understand for timing. to right. taking some

you're two push to then of and you months last anticipated and change, pushed a I the out March, timing when is the from second the $X.XX updated and then $X.XX quarter. that think the you in when was close or February from ahead loss funding of the to quarter change a March us

the what's be and difference then first, much $X.XX So will $X.XX in drag we then how the not for and between much secondly, present caring the XXXX about XXXX? Thanks. the just XXXX? How year, is that should think full

Jeffrey Schwaneke

mentioning $X.XX of is you're Right? things. couple A $X.XX? QX. The The

Dave Windley

your you remarks $X.XX of from think result the the said was the delay Well, in I upside X? prepared March quarter in that

Jeffrey Schwaneke

first full quarter the full it year count. for share be the quarter the Yes. versus the the one-third case the diluted That's the shares would total it $X.XX QX. be year, full for on gets count, because for by That not would year of share

packaged is line number different the What it's we've QX the a is Fidelis number. bit we've not full for $X.XX year, all done the up of the the there. movement into really one of little So That's item.

We March, EPS the to in all offerings the moving adjusted have in encapsulated the $X.XX transaction That moving is assumed we're May, that closing in the April, diluted range. those we're to that's July.

Dave Windley

what funding -- two Yes. give Is funding of advanced months advanced it possible the is? to me the

Jeffrey Schwaneke

Sure. overhang? The Yes.

Dave Windley

Definitely.

Jeffrey Schwaneke

between is for $X.XX overhang The to sure. $X.XX Yes.

Dave Windley

you Thank that. Okay. for

your influences On pick and as your annual It The like about Michael, looks you us in was membership your curious across scattered second guess would I'm period of growth question. what describe learnings how your entry Advantage, I year various your going new for your be positioning? that up states substantial competitive that to Medicare and to enrollment positioning this forward. from the desire a driver

Michael Neidorff

-- enrollment we've will open but these pick period. we the be up as at of go anything, as we marketing think our with me I one much how adjusted approach --

direct that more improved results to consumer to fine-tune and continued the the we'll see we it's So approach from. expect

Dave Windley

Okay, thank you.

Michael Neidorff

Thank you.

Operator

with go comes from question. question next ahead your Borsch Capital BMO from Please Markets. Our Matt

Matthew Borsch

Yes. Thank about ask If I a different you. topic. could

you I update or majority your Thanks. to realized market the that the into California, on lot us hear is of assessment is price trends? vast give a competition group but of like in Just cost in this commercial as come what just your medical year.

Michael Neidorff

Sure.

very the we're have to Personally, good continue acquire a and us, and I some very commercial they think work to it. I stated for business that's believe grow renewal out when frame doing was involved product perform we we well-received we've there. they to were going committed well it's intel

California about think may be you and about it model is state be I'm time alternatives I might talking governments coming and statement As it consider of and the as additional as kind is expanded. as commercial how it working opportunities of We're good energy just giving not to just I government-related. work, things assessment with We that pure that and there time can, thing. we'll permits, out over believe of learning candid

Matthew Borsch

this the year? on reason that on the year Can retention for last any you. of anything you thank just less could different or the on there's talk that is individual did seen retention as have just awareness indicate ACA to about might If that real opposed Whether I business you ask or individual. area just numbers rate a going mandate it's away? Okay,

Michael Neidorff

I think I'll that. Kevin we're let not seeing give more you details.

Kevin Counihan

experienced Good morning. not that. have actually We

than way. particularly by actually critical about effectuation by What by is which we're above is you encouraged it encouraged higher the predicting we're our is something, We're ago. at persistency retention. year future also by a which Our rate. that. remaining national encouraged very of It's at XX% rate That's We're is is which know terms was XX% in seeing. the average, is XX%, what

the to to for that Now dollar you at of the and interesting significant many respect I value was people premium; really mandate, thought it's for mandate there question number religious why. when powerful others. I particularly Because for individual Whether I'll was for because education, was one, appeal. the all purposes penalty never college for that tell were to so kind an and individual compared the not with is opportunities was and affordability, it two number CMS,

cost. in So actually higher way, is think new a the mandate I healthcare

insurance want want with people And to to they think and enrollment think the XXXX families. products I I these protect seen to are. have themselves going their attractive we've coverage, how

Michael Neidorff

Kevin. you, Thank

Matthew Borsch

all Thank that. you for

Operator

go your ahead A. J. with Please Suisse. Our Credit next from question Rice from question. comes

A. J. Rice

and the just is First what Advance. health you thinking any you is pharmacy made benefit legacy light you question. really you and at doing give you RX have CBS. updated us industry PBM know thoughts have you're backdrop on and an up the I relationship your around and net doing? that evolving have what Obviously benefit industry around own with Can pharmacy investment

Michael Neidorff

I'll really go. to the just let -- pharmacy work I'll needs direction point this comment most see benefits give to and you of modernization you But either we open been the from perspective. M&A the this and that as an up. Jeff's doing comment he's pick it

Kevin Counihan

just number moving investment industry think you've and and the an think will and is improves also from perspective topic, point that automation, of overall I it and landscape. case complicated ability you if are in A I but is that think important, both need starting there's to some the things our both thing a the -- health for number having AJ. as interoperability but that respect the quality I the that a understands couple to is to think parts the know, brings one, the lot everybody of model capability efficiencies benefit physical But across ties RX from connect are the management, other is important with with administrative that I respect behavioral experience see systems tied cloud, change an know, on I cost been like, we've all think of Advance. in that which opportunity that you because the from of as One you Yes, PBM technology to payer how the increasingly pharmacy to et and underlying internalized to into our dimension cetera very and beginning. the focused the

that the existed is and care total I in benefits also towards not exists, operating the implement the marry but models. in relationship to particular what new In that see pharmacy arrangement now of technology, moving cost for the marry past. think scale the has a some value-based ability we

the has the long I transparency that think will been embedded a industry time. address n that concerns some for of

A. J. Rice

up. Okay, great. Maybe one other follow

have largest your than the marketplace the the at XX% health of marketplace, player guys now done enrollment more I nationwide with market. and think great in expanding you're You

gotten out. are you maybe earlier ahead provider to now you've to additional year the your go As these make members you're in adjustments I if forth. a networks network because is this But that measure to traditional thinking might figure one on you Any around update people up picking are issues? that and so those claims geographies, of know out metric outside of that those

Michael Neidorff

and I'll a support i.e. strategic recipient's the just was of comment. network about change deserve leave that's not to that it But expand that's increasing wish. thinking traditional a had our We've membership. course and with there. I the do we network,

A. J. Rice

to network Okay. thought other you're of early in not or -- network know a the you so that claims, seeing year whether will? Any the expansion, about is it too lot

Michael Neidorff

the to I old all put markets. our all and energy speak, we time that XXX% that's and pretty there's being the level federal would expand see network below historic experience. in to trying below property that say going property of getting we're We the network that level some consistent it's Any the had things including use XXX% to a to if market, is federal not to stick total lot we increase We're of our 'knitting', deficiency, majority the need just and a be is to so with expanded. the stick we of cliché to and up to our people. to of

A. J. Rice

Okay, all right. Thanks lot. a

Operator

ahead your Costa question. Peter Wells from comes question next Our Fargo. with Please from go

Peter Costa

Good morning.

Looking back sort of of and understand to just trying couple different of numbers the a aspects to I'm the annual are, different again where it. guidance

be $X.XX. quarter if $X.XX earnings of potentially your delay to by you whole said else would the the had you earnings your you for a year First, that $X.XX filled for higher. adjusted Yet,

XX% deal. when for about more Then you quarter. is took out price You the share than the higher your announced

attractive? understand some considered performing was not being that had Fidelis in from by the out-performance the performance full more And flu the that or the not what year the are So before numbers more you makes Care theory, conservative? had it the just that of but is deal I'm raised changes that being conversion quarter you despite you before. Fidelis than the the in there is to cost something in why trying so it in $X.XX, mentioned didn't QX accretive that anything than some your actually Is guidance was then you less for overcome. with

Jeffrey Schwaneke

There is a lot start beginning here. in at but the that question I'll

to guidance another month remember last to of debt of and another have that both month on overhang, overhang. you includes that includes $X.XX, compared the the So -- right, shares

point just probably we overhang. number accretion is is prepared the I'd there. So would think My of remarks, I than month so that expecting the you're Fidelis what because performing larger additional be; second I reiterated exactly targets and my what -- expected, go to of

two share have compared we I announced interest updated we a year, would of price, when in and -- price share say September expense. to the as transaction far last As this things, both both

you rates here we have moved we price against our capital raised in believe what today. the favor. tell has would but relatively haven't sitting the So this, are I have moved expectations bond share conservative we

Michael Neidorff

out. chapter that think done done, see how conservative not very it's so to numbers want important is what's -- in, I Until come to be it's point. those a it you

Peter Costa

you're number of Fidelis [ph] multiple $XXX that that terms synergies in still the about improved that talked the million, you And business? is is thinking Care, having from about or

Jeffrey Schwaneke

million half that million level target to always targeted we in said of comment million XXXX. We say We that's on did that are today in year. the a $XXX year two, today. with of first we've get comfortable in and the we're made $XXX but $XX I higher synergies where we felt a

Michael Neidorff

we we'll the is every very in York, has and in very find aspect changes at important Fidelis good the very through just of really we they just work is the has MOL in of consistent all assumptions so they approach and [ph], as are is with being so a believe that have team. very believe engaged made, well, us. delay the are what's management we the strong very think -- The today, any managed We deal been deal strong incredibly positive New one. seeing their as I it professional it's see they -- the they things we're a we every aspect were original regulatory to not do,

Operator

Joshua Our with go Research. your from comes Nephron next ahead question Raskin question. Please from

Joshua Raskin

at horse I'm just no just just in for on from trying XXXX. impact with Good to going quarter, point it's time. morning, operations. sounds the $X.XX one it's the deal obviously second the Fidelis this financing Fidelis impact second the accretive overhang like first I'm beat figure an the more half? dilutive just No What's to quarter

Jeffrey Schwaneke

conversation before. Yes, this we've had

go for the you $X.XX. we to $X.XX be if full to back you today said think had Fidelis numbers that I right, where would increasing a if we year,

deal and that I So assume for said, single up an accretive math, just as the it then do or digit accretion if to we've is think year. -- you mid

So, XXXX. and we're picking up half of in accretion that

Joshua Raskin

better question, lot you of there it. specific some were And obviously and better? second got Medicaid any did there quarter curious improvement; say guys drivers the a were states of specific just much that in or you then Medicaid any was a any but the just MLR I'm Okay, was marketplace geographies, mentioned the that MLR -- segments, MLR that

Jeffrey Schwaneke

for in improvement usually came based performance really that think driven quality our favorable at by did about. some cost metrics, network those initiatives risk which we had favorable contracts to on I unit pay states have saw some are meeting and percentages Yes, in We management. addition certain of and of performance pleased we're medical and part metrics

So I board, a overall the it was -- would it crossed say Medicaid business. performance generally the good in

Joshua Raskin

Okay.

this first that's of recur the performance paid in that so the reason not that to part get maybe you're some those of are the XXXX year? expecting rest the the So idea of metrics quarter,

Jeffrey Schwaneke

the things. in some meet XXXX future meet year metric in right. metrics XXXX year those as opinions confidence is Meaning, more Number then changes that actually metric previous if there your as have one, you are the -- it well, the well. on a but of it's you also you'll two Yes,

Operator

Lake comes your Research. next from Please question. with Justin Our from question Wolfe go ahead

Justin Lake

the of Couple first, things; side. on pricing

RO did just can results, well exchanges, some and look it made doing positively the of a you Going some been all that in keep feel going that even better they lower they perspective competitive individual, come public comments mean view pretty got to they is from have that margins? even expected. They share back come you pricing into your is get percentage share like chatter of exchange market just price in just pricing the doing if curious tax to differentiated [ph], more market. do they you're a going been need consider or XXXX little price the well. that in you XXXX so your the to just maybe I'm indicates the has they than obviously are bit something if on a of and to benefits from larger There and even how some probably that the do and have you're not-for-profits you terms specifically of your or today were I are and at like of for you competitive still

Jeffrey Schwaneke

objectives the not mean, and when our as the I and at XXXX. are would we're we to XXXX that account for of get into think all factors of details we think mentioned into pricing take the looking what business marketplace before I are competitive we're those goals dynamics of I going but factors

Michael Neidorff

we in some I help -- it's 'XX the it's and helps of think forward. said, direction systems we right you to it and going in -- drive also, when the have, as [indiscernible] the cost

think be our to we'll I continue forward. competitive So all in products very going

Justin Lake

think it's I sounds exchanges update on you're had came is Investor an above with better. at thinking people last us give now your away X% you that for Day Can I margin; you us help And could mean I XXXX, think X% you or that? said, X%. there -- it like

Michael Neidorff

we of I and end the it's high consistent think say just at be our to want range.

Jeffrey Schwaneke

to year first quarter Justin, remember consistent previously in February any different but be we a we're what would we what X. was communicated ultimately the on full have what I little bit We the for expectations performance than year communicated. said with the we saw aren't here going better full that think really

Justin Lake

deal comments, equity prepared guidance next close just by debt your assumes pretty a Got you're this new week. during July and the and will the are then Michael, by basically And that Fidelis, on your X it. the time done follow-up definitive

close, increase on the deal your just here the equity issuance we should of terms given on So what on certainty apparent assume timing?

Michael Neidorff

said I can deal. the on conditions strong equity it. be we will lot with be think a to the dependant forward to market move add to We market -- if Jeff conditions continue and going it's

pre-suppose because environment it's not only in. we vulnerable we lot us, whole have So very something not pre-save and let's just with know a we're the once market, total again, the

if -- a advise because it's of bit we well, can us, and not we'll we've uncertainty go you global about know do decision the and something, out; and take you a time you [ph] patient right so if it. how have some or we If condition be -- that, but that. it we'll about we talked how time not little on how So it's always well time if then that say Justin. fast to based it's market, you do, We're your talked do probably strong when more make it's --

pre-state as to I going -- like not I'm do to reasonable. as it So soon

Jeffrey Schwaneke

to to a guidance so reflects. date Obviously for that's we in that revise order pick the had guidance, right; date what

As Michael I conditions. be indicated, market think on going it's to based

Operator

Bernstein. go comes Please ahead your Our Lance next from from question question. Wilkes with

Lance Wilkes

I've provider? care just uses business obviously clinic primary of -- interest more about is your deal care in question did. access or urgent care vertical on percent of value kind a understanding owning interested or also and integration is that certain you of or approach proposition what what based kind strategy your clinic value in a then centers and the was I alignment markets got the And it's there? of Medicaid retail as today an clinics

Michael Neidorff

specific say to where some do to use I think We we so and have that that dispatch the -- more We of into very in important. I'm gives markets limited, our very scalability we think hammer to approach. opportunity go is was this of we urgent necessary; capability encourage capability us door is where not like reasonable with having try we limited they access primary individuals some so have a what and one somewhat that's is more to expand in that's a an this of a it tip or those adding limited. and important. access markets The and see care care, going push as see that;

you public in we will there here out just We in episodic be and with own when if deans one. and with former care have at for a that come committee quality our you consistent it's urgent you work are employees medical have that type. have without that, primary physician, and and a facility to one care -- deans go of schools clinics an for And urgent health we they are intended

the So approach that's much in we pretty follow that. that

Lance Wilkes

that well transforming retail things beyond and that you. transaction see thinking as being or as episodic you you that the And going as potential one do do about pharmacies strategy or that Got retailers partnerships or clinics see into could into that, thinking primary you're are replace with getting potentially like of you're something as more forward care?

Michael Neidorff

I primary replacing don't care. see it

and so them, very have do with confidence as have relationship, of lot qualified clinic work, a it setup to staff some I something that the of so centers. in see immediately think -- have it's work nurses, they we one we the St. with refer needs it if We this physician to close they very in a we've access group. Louis, physician, that we to health

you very a in that support our place than if So care once more [indiscernible] call. treated someone way we your you we're physicians and it a minor, is doctor children helping advice. pediatrician your more if a assistance emphasis his be to more great, them trying but it on the is putting to support or take successful and more you want there strong something and there and primary in been have transitory has recipients have cold operations; should belief use these -- know, have [ph] and can We capabilities treated; for the our that's you call with own

Lance Wilkes

you're product growth in-market enrollment seeing kind type if but just there? would economy Medicaid are geography as follow-up one -- market-by-market or at by impacting of that be, and question shrink? improving of it in of the varies, you by interested And not the contract-by-contract; Just just kind and looking kind how

Michael Neidorff

healthcare, individuals start be allow an that and encouraging that become what economic or continue their need either for when to environment that increase strong coverage to just think insurance use individuals situation. marketplace we is to with Congress fairly that a expanded have so States have budgets and I how found they working Yes, we're stable are other to system. working consider in if that will learn with we the we're

So public to I allow some there mean is there play fairly that us that be policy issues consistent.

Operator

from with question. Stephen ahead next Please [ph] comes go your from Our question Barclays.

Unidentified Analyst

from smaller just four acquisitions you think two recent March/April; two that closed that are So in are mentioned accretive, dilutive. the I

or your prior that perhaps there always was those curious, anything was Just of did any any closing expectation? change after trends deals within different if any expectation around -- your than those,

Michael Neidorff

close future. very when in in 'XX sent the that mid-year, don't impact that in do the you we [ph]. the would is bank. but But some navigated surprises, I say, recognized other the and have on now they the surprise payout the dodge clear opportunities we everything benefits that they a in persons money of wire things precise we near in is system and very receive saying point we're see the upto that is We the we a --

Unidentified Analyst

you medical other -- ones, two the quick 'XX? any ratio chance you'd you're quantify this of the of not the sure much in benefits or if able not; I'm to fee quantify return XQ One or are how improved health insurer

Jeffrey Schwaneke

between like that. basis revenue; in roughly premium I so the component I XX XX it's something it's to points, only think think that's

Unidentified Analyst

Okay. inflation color still is of expect provide in cost Maybe or you just any pharmacy categories just level within out-patient you mentioned can trends digits, or you a cost the bigger final single level on and high high whether lower physician, one; XQ remain quick just it's to there medical some that, any in-patient, trends?

Michael Neidorff

said, we've As it's stable. been very

Unidentified Analyst

fair enough. Okay,

thanks. Okay,

Operator

ahead Our Stanley. from Zack Sopcak go with Please comes next Morgan question. your question from

Zack Sopcak

lower saw along those end you normally Eli quarter in their seen morning first on this their of sorry, increased the lines? if utilization Lily this your wondering expected Have based you -- anything I'm utilization? for pharmacy lowered guidance quarter Medicaid year. unusual anything

Jeffrey Schwaneke

thing did we the No, only was the obviously mean flu. see I

so average, side. higher let's were costs say on flu drug spent than see the did flu So we higher

Michael Neidorff

some remind you we're in trend. place systems the I'll would that putting in that then, of upward new now And mitigate these

Zack Sopcak

Got it, understood.

think One the period question enrollment of given more year? next and you of marketing the marketplace, back that learnings the instead will of help into you came from next the -- you major period and go for Any government. your on the success into from as in shorter the enrollment investment

Michael Neidorff

that system. the to to the directly the anticipate to we would did; pick bigger enrollment think due we to were we is, have we in I frac and that able includes response the overwhelmed up enroll benefit, a total and it things it what had in Yes, -- right that wise and people was we were fact,

So XX% we if mean, more for retention anything our be learned this talked high expected at kind we've as for pretty from prepared rate year-over-year; that's what is good far these, product of a upside that's out than going Kevin as forward. I any there. commercial about, satisfaction

things some So it done says that right. being were

Operator

Our Taylor with go Gary question. JPMorgan. next question ahead from comes Please from your

Gary Taylor

quick ones. of couple Just a

talk non-deductibility, there change, the that rate you sort a up was to tax the why that rate EPS; that that On is up reconciling is [ph] about tax and hits that why churning went or little guidance bit? impact just of didn't an

Jeffrey Schwaneke

No. Again, of guidance of reblending went the the tax because Fidelis. up rate

so they So in rate much post-tax New the take York, pay a reform, lower they tax; a average. than the would the you need Centene state if income versus premium tax

when moving goes the up. a the rate Fidelis after reblend So year you quarter,

Gary Taylor

it. Got

of full high in On the exchange Is as that XX%? estimate as good a load G&A what's that year business, business?

Jeffrey Schwaneke

Yes, close. number, that's that's good a pretty

Gary Taylor

on lower the question think case? I don't Fidelis last is remind Okay. And given the why your just corporate materially that's And can you than synergy… which average, us G&A then

Michael Neidorff

little start there. a will I bit

plans structures, benefit by. can -- the different things competition, nature be of of benefit, are Some impacted that

Jeffrey Schwaneke

is actually the more mentioned transaction other as etcetera. abuse; here capabilities to medical planned the with at really G&A acquisition, we've like expense etcetera, them and of fraud that we dollars there I ways we've G&A. the that management thing the in is we analytic think integrity, more management versus things think case medical that that investing think have support I get payment beginning We looked system, and can opportunity that all the of the we've at savings

Operator

ahead from And with Gupte our Partners. go final Leerink question. your question today Please comes Ana from

Ana Gupte

growing beyond The sense and future quite outside you're that up get to actively first the question But acquisitions was is more Fidelis? as services the marketing also that a on how inside? targeted involve, you're in wanted for obviously helpnet are much Fide I rolling then remarkably

Kevin Counihan

planning going our -- present. process actually uninvolved through at we're strategic So a

the things are the in marketplace. reflect of do want is sure those to One refreshed of make we that that way products the opportunities a that

way in they give to shelter be whether just one example; have things kinds looking a access an to at night able or of a for me can a they be in one the food if to or members our call social other Let reconfigured need in support they need housing of directed and way of be you food bank things. if to shelter to is that actually Program could determinants get our software a so that EAP we're

suite now focus meeting of that So is the making is needs current our right involved market. sure real the the

Ana Gupte

your in other market, Off words? internal current

Kevin Counihan

Correct.

Ana Gupte

Okay, all right.

as York, others are involve in business all Secondly, growth the space well more to degrees you there on you is like coming in that's base wide there as are as on know, New both on profit elsewhere? the what Fidelis roll saw for the ups; conversions

Michael Neidorff

going going think and reasons. to where for out not whether how too we're talk are going I'm obvious competitive I they and there we're much about and

Ana Gupte

or Okay, then thoughts the of Medicaid on hearing finally, any your And is Virginia all What worker about other… on you Florida expansion. the of the right. around looks requirements, are it like brink

Michael Neidorff

policy, and supportive who back work will it. way. it's we how was a to to don't helping of and have to very physical were was adults public And to you [indiscernible] governor good -- very who requirements do I the we childless that's the [ph] diligently installed disabilities when responsible remind very supportive Indiana it implement think there We're very do in we work it with seats want of

Operator

like I'd And Neidorff conference question-and-answer closing ladies at Mr. any today's to conclude call time this turn over back session. remarks. we'll the for gentlemen, to and

Michael Neidorff

everybody. thank want I just to

that. had We're pleased going to very it's with is quarter said, it use but looking eventually forward, stronger year. had the forward a we're and this strong we we a another solid pleased issues As and -- different quarter, was with it because planned was quarter, how safety parts anticipated, we of Fidelis a lot what unfold to moving of

in day. So, calls. to good subsequent we you Thanks. thank to you forward and Have a talk look

Operator

for Ladies presentation. We and today's concluded. you has today's conference gentlemen, thank attending now do

your You disconnect may lines. now

Centene (CNC) 24 Apr 182018 Q1 Earnings call transcript