Molina Healthcare Inc (MOH) Q4 2024 Earnings Call Highlights: Strong Full-Year Growth Amidst Q4 ...

GuruFocus.com
02-07
  • Adjusted Earnings Per Share (EPS) for Q4 2024: $5.05
  • Adjusted Earnings Per Share (EPS) for Full Year 2024: $22.65, representing 8.5% year-over-year growth
  • Premium Revenue for Q4 2024: $10 billion
  • Premium Revenue for Full Year 2024: $38.6 billion, representing 19% year-over-year growth
  • Consolidated Medical Care Ratio (MCR) for Q4 2024: 90.2%
  • Consolidated Medical Care Ratio (MCR) for Full Year 2024: 89.1%
  • Medicaid MCR for Full Year 2024: 90.3%
  • Medicare MCR for Full Year 2024: 89.1%
  • Marketplace MCR for Full Year 2024: 75.4%
  • Adjusted G&A Ratio for Full Year 2024: 6.7%
  • 2025 Premium Revenue Guidance: Approximately $42 billion
  • 2025 Adjusted EPS Guidance: At least $24.50, approximately 8% year-over-year growth
  • 2025 Projected Consolidated MCR: 88.7%
  • 2025 Projected Medicaid MCR: 89.9%
  • 2025 Projected Medicare MCR: 89%
  • 2025 Projected Marketplace MCR: 79%
  • 2025 Projected Adjusted G&A Ratio: 7%
  • 2025 Projected Pretax Margin: 4.1%
  • Warning! GuruFocus has detected 3 Warning Signs with MOH.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Molina Healthcare Inc (NYSE:MOH) reported a full-year premium revenue growth of 19% year-over-year, reaching $38.6 billion.
  • The Marketplace segment significantly outperformed its long-term target margins with a full-year MCR of 75.4%, allowing for reinvestment into pricing for 2025.
  • Molina Healthcare Inc (NYSE:MOH) secured significant new contract wins, including a Medicaid managed care services contract in Georgia, expected to generate $2 billion in annual premium revenue.
  • The company successfully defended key RFPs, retaining traditional Medicaid contracts in Michigan, Florida, and Wisconsin, representing over $2 billion in renewed premium revenues.
  • Molina Healthcare Inc (NYSE:MOH) projects 2025 premium revenue of approximately $42 billion, with an expected adjusted earnings per share growth of at least 8% year-over-year.

Negative Points

  • The fourth quarter results did not meet expectations, with a consolidated MCR of 90.2% due to higher-than-expected medical cost pressure in Medicaid and Medicare segments.
  • Medicaid experienced higher utilization, particularly for LTSS, pharmacy, and behavioral health services, leading to a higher-than-anticipated medical cost trend.
  • The Medicare segment's full-year MCR was 89.1%, above the long-term range, due to continued higher utilization and revenue recognition adjustments.
  • The company faced a contract loss in Virginia, which is under protest, potentially impacting future revenue.
  • Molina Healthcare Inc (NYSE:MOH) anticipates continued elevated medical cost trends in 2025, with projected Medicaid MCR slightly above the target range.

Q & A Highlights

Q: Can you provide more details on the components affecting the Medicaid MLR for 2025, given that it is 90 basis points above the target? A: The Medicaid MLR for 2025 is projected to be flat compared to 2024. We anticipate a 4.5% rate increase and a 4.5% trend based on the 2024 baseline. About 75% of the rate increase is known at 5%, and 25% is estimated at 2.5%. The trend considers the pressures from the second half of 2024, and we are only 90 basis points above our long-term range, indicating we are close to achieving our target with potential rate actions.

Q: How did the geographic pressure affect the risk corridors, resulting in no material benefit in the fourth quarter? A: The benefit of risk corridors depends on where the underperformance occurs geographically. In the fourth quarter, despite forecasting a 50 basis point trend pressure absorbed by corridors, it did not materialize due to the geographic distribution of the trend pressure versus where corridor protection was available.

Q: Can you explain the fourth quarter Medicaid MLR breakdown and any impacts from new stores or retros? A: The fourth quarter Medicaid MLR was primarily affected by a 1.2% trend versus a forecast of 50 basis points. There were no one-time items or retros impacting the results. The trend pressure was consistent with the third quarter, driven by higher utilization in LTSS, pharmacy, and behavioral health services.

Q: What are your assumptions for Marketplace membership attrition if APTCs are not extended, and how might this affect new members? A: We anticipate a 4% reduction in Marketplace membership throughout the year, considering factors like SEP membership, natural attrition, and FTR. The quality of our membership has improved, with a 70% retention rate, and we expect minimal impact from FTR changes due to enhanced integrity around agent of record.

Q: How are you addressing the Medicare Advantage pressures, especially with the acquired Bright book, and what changes were made for 2025? A: The Medicare MLR was impacted by industry-wide trends, including LTSS, pharmaceuticals, and inpatient/outpatient utilization. We adjusted our risk adjustment revenue, which is a one-time item. For 2025, we have been conservative in our trend assumptions and expect to be slightly above our target range, but we are confident in our pricing strategy and medical cost management.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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