Molina Healthcare, Inc. ($MOH)

All right. Good morning, everyone, and welcome to Molina Healthcare's 2026 Investor Day. I'm Jeff Geyer, Vice President of Investor Relations for the company. Before we begin today, I would like to remind everyone that today's event is being recorded. And shortly after the event ends, the replay will be available on the Investor Relations section of our website, www.melinahealthcare.com, where you can also find a copy of the presentation materials that we'll discuss today. Turning to the event. We'll start this morning with Joe Zubretsky, our President and Chief Executive Officer. Then following Joe's presentation, Mark Keim, our Chief Financial Officer, will speak to the company's financial profile. Then after the conclusion of the presentation, we'll have a live Q&A session with Joe and Mark, and they will be joined by Jim Woys, our Chief Operating Officer. Please note that our presentation and remarks today will include numerous forward-looking statements, including, without limitation, the forward-looking statements described on Slides 3 and 4 of the presentation and in the Form 8-K that was filed with the SEC earlier this morning. Please take a few minutes to review the cautionary language. Our forward-looking statements are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially due to numerous known and unknown risks and uncertainties. These risks and uncertainties are discussed under the headings, Forward-Looking Statements and Risk Factors in the company's annual report on Form 10-K for the year ended December 31, 2025, which is on file with the SEC and in the company's other filings with the SEC. Our forward-looking statements represent our judgment as of today, Friday, May 8, 2026, and -- and except as otherwise required by law, the company disclaims any obligation to update any forward-looking statements to conform the statement to actual results or changes in our expectations. I will now turn the presentation over to Joe.

Good morning, everybody, and welcome to Molina's Investor Day 2026. Everything we do here at the company has a purpose, including picking the title of today's session. We embarked on this journey, this new management team, 8 years ago, we built durable operational, financial and strategic infrastructure. And that infrastructure created a sustainable, profitable growth model, top line and bottom line. Nothing has happened to that infrastructure. That machine that apparatus is still in place. What's happened is fuel line has been temporarily disrupted rates, rate and trend is out of balance. And when it comes back into balance and that fuel to the business once again, the machine that we've created of sustaining profitable growth will again be an action, as you'll see here today. Second point I'll make is stylistic. We know you have a very important responsibility to your client base and trying to assess the investment thesis we're going to outline here today. But you can only challenge an assumption if you know what they are. And so we're going to unpack everything in painstaking granular and transparent detail. So you know exactly what this management team thinks. You will not leave here wondering what we're going to do. You may challenge it, but you're not going to leave here wondering how we're going to do this. I cover 6 topics today. First, again, our style is we're going to give you the answer upfront, instead of talking to you for 1.5 hours, wondering where this is going. We're telling you where we're going. And then every detail that Mark and I talk about for the next 1.5 hours can be in support of the answer, which we're going to give you right out of the gate. The investment thesis very simply laid out, and we're going to do a franchise retrospective. We don't celebrate success here, and that's not why we're doing this. But when you look at what we're going to accomplish in the next 3 years, the best proof point is what did you accomplish in the past 5. And when you look at the trajectory of the business, top line growth margin sustainability, it puts a point on the art of the possible for the next 3 years. Yes, the current environment is a bit challenging right now. Everything that's happened in this environment we dealt with before. The confluence of exogenous factors is pretty extraordinary, as many of you have recognized, but we'll lay those out in how management intends to deal with them. The next section, we're going to talk about growth. Now we're going to give equal prominence to rate recovery and margin restoration and growth, but we didn't want anybody to forget that with $42 billion of revenue, in mid-single-digit market share in Medicaid, there's plenty of growth still to occur. These are growth businesses and whether it's by M&A or whether it's by winning new contracts, or growing our existing footprint, we want to unpack the growth story for you. And lastly, I'm often asked, how do you do it? There seems to be some differentiating factor between Molina's performance and others. We're going to talk a little bit about that. We think it's just as important to understand the investment thesis on not just what we're going to do, but how we do it. It is a differentiator. Okay, the answer, so you don't have to flip to Page 65. Here it is. Our 3-year outlook, and we're calling it a 3-year outlook for a variety of reasons. One is the longer-term outlook might actually be more attractive. But as we say internally, 5 years, you're dreaming 1 year, you're trading, 3 years you're investing. This is a good time frame over which to look at a valid incredible investment thesis. So this is our 3-year outlook. We're going to go premium revenue from the $42 billion base we have today to $64 billion over the next 3 years. Now you may think that 15% is pretty sporty. But as we unpack that, you'll see that much of that is already in the bank. It's in contract backlog, wait a few minutes and we'll unpack that for you. Our consolidated MCR is going to range from 91% to 92%, 91.5% at the midpoint, which is 100 basis points better than what we're achieving in 2026. That results in margins at the midpoint of 2.5% on a pretax basis, which produces $25 of earnings per share. As we unpack this for you today, you're going to notice that there's many sources of value, including rate recovery and margin restoration, but there are other sources of value many of which we are in total control of. That's everything you'll hear today from Mark and me will support $64 billion in revenue and a 15% CAGR, a 91.5% consolidated MCR a 2.5% pretax margin at the midpoint and $25 of earnings per share. And unpacking that for you, -- you can see the growth as it has been in the past, is balanced. We're not relying on any one thing. We're not making some heroic assumption on rates. We're not projecting a huge number of contract wins. In fact, the contract wins that we're projecting are a fraction of what we have achieved in the last number of years. So if you look here at the $64 billion revenue outlook for 2029, $5 billion of it is just by being there, rates and modest growth, particularly in Medicare, embedded future revenue. It's in contract backlog. Don't forget, Georgia, Florida kids, Texas Star chip. We have huge contract backlog that's creating $6 billion of the revenue growth. It's in the bank. Projected initiatives of 7, you'll see as we lay that out for you that the win rate that supports that is a fraction of what we've achieved over the past number of years. And lastly, our expert M&A team we believe can action enough opportunities to create $4 billion of revenue, $42 million turning to $64 million, balanced across many initiatives, $11 billion, half of it is in footprint and in the bank. That's why the 15% CAGR is realistic, it's credible. It's supportable and entirely achievable. Now how do you get to $25 a share from $5, which is our guide for 2026. Again, very balanced. It's not all banking on the rate recovery that you see on the right side of the page. Only 25% of the $20 increase relies on that, discipline. What do you mean discipline? If we're growing the top line of $64 billion, we're going to get that same fixed cost leverage that we've harvested over the past number of years. And this plan throws off enough cash to fund the M&A, fund organic growth and to repurchase shares, $6 purely from operating discipline. . Future revenue growth? Sure. Embedded as I said, embedded earnings projected initiatives and M&A producing another $6.75. And then, of course, as rates and trend come back into balance, both on revenue that's in backlog and on our current footprint, we're projecting $7.25 of improvement from margin recovery due to rates. Balanced going from 5% to 25%, a 70% CAGR and very balanced on how we get there. None of the assumptions that underlie this are heroic. They're all data-driven, supportable and achievable. Well, that sounds like a very precise analysis, $25 we have, there's variability around this. There are scenarios that produce less. There are scenarios that produce more. In fact, if you want to see models come inside the shop and you'll see models that produce many different ranges of outcomes, faster growth, lower margin recovery, faster margin recovery, lower growth and faster margin recovery and faster growth. They all seem to triangulate around the $25 number. So we came out at bottoms up and top down and this is where we landed. But what have trend moderates, what if trend accelerates, would there be variability around how fast rates respond to that, sure. We think the $25 number is a very solid baseline. It's credible believable and data supported. But if trend moderates and rate catch up faster we could easily be at 3% pretax margins in 2029, which is $30 of earnings per share. And conversely, if trend continued to accelerate or did accelerate, then maybe you come in shorter. So there's variability around it. But we really believe that the midpoint is solid, and we wouldn't put a number on a page that we didn't think was achievable. We unpack some of the segments for you here, so you can see how the segments contribute to this outlook. On the top swim lane is our organic growth assumptions. And we've save you the effort of going back and looking at last Investor Day, we laid it out for you. And on Medicaid, it's all about point in time. It's all about point in time, even with some attrition from the One Big Beautiful Bill, we believe we can grow organically in Medicaid at 12% to 14%. Why? Because a lot of it is in the bank. The comparison to the last time we did this is really how much is in the tank when you're presenting those. But since much of it is in backlog, the 12% to 14% organic growth in Medicaid is entirely achievable. In Medicare, which we're calling our rejuvenation line, deemphasizing MAPD and emphasizing the duals, 10% to 14% CAGR in our 2029 outlook. It's a high-growth business, exclusive line enrollment, really advantages somebody who's in Medicare and Medicaid and the market itself is growing at 12% to 14% a year. And in Marketplace, which we call our rationalization business line, we're going to talk about optionality, rates will grow at 5%, probably more if trend continues to accelerate, but we're not projecting growth until we're sure that the risk pool has stabilized. Once the risk pool has stabilized, it comes out of the optionality category and maybe gets back into the growth category, recalibration in Medicaid rate trend, Medicare rejuvenation, focus on the duals, marketplace rationalization, don't allocate capital until you're sure the risk pool has stabilized. Now down below, we'll give you the MCRs that balance to that 91.5% view for the full company. Medicaid at 92% coming off of 92.9% for 2026, 90 basis point improvement. And with nearly a 90 basis point improvement in Medicaid, we're getting to $25 a share. You can see that Medicare, again, 90 to 91, 90.5% at the midpoint off of where we were before, a realistic view of the profitability of the duals business. And of course, in marketplace, as we've often said, always said that the growth is the variable -- the fixed component is mid-single-digit margin. We'll never put a price out there in the market that does not contemplate hitting a mid- to high single-digit margin. Growth becomes the variable. That's the segment you -- now everybody always knows sort of the elephant in the room for managed care these days is tell me about trend. What is your outlook for trend over the next 3 years? We believe trend will stabilize. Maybe it already has, but we have to wait and see in 2026, whether the second and third quarter data points support that. Why do we think it's moderated? Guys, health care costs are 21% higher today than they were 3 years ago, after 3 years of high single-digit trends. Right now, we're forecasting Medicaid trend to be 5%. Our forecast only relies on that stabilizing, not decreasing to its historical norm, which is 3% to 3.5%, but staying at 4.5% to 5%. The post-pandemic acuity shift is behind us. We have a lower mix of lower acuity members. We're very confident that as you look ahead 3 years by looking at all these different aspects of medical cost trend, including what we consider our best-in-class management of medical costs that a 5% outlook for the next 3 years is entirely reasonable. Okay. The counter to that is, okay, so if that's what you're saying trend is going to do, what are rates going to do? Well, we're not in control of it. But Mark is going to really dive deep into this when he gets up here. Managed Medicaid is underfunded by 300 basis points. Well, how do you know that? Because the data supports it, not macro data, data at the local level, peeling through regulatory reports of every company that's out there in a single geography, looking at reported MCRs. The market is underfunded by 300 basis points. If an actuarial pricing target, rating target is 1.5% can be a little more in some states generally 1.5%. And the market is producing a 1.5% pretax loss. The market is 300 basis points underfunded. Actuarial soundness is fundamental to Medicaid rates. And states continue to recognize the underfunding nature of many components of their program and keep giving the market off-cycle rates, retrospective and prospective. We got a few of them in the first quarter. We've been asked about the cost baseline. When is the baseline going to be taken as true? Well, we can't wait for the 2025 year end up in the baseline. When the 2025 year is fully baked into the cost base line we think that the flexibility that actuaries may have to project trend off a baseline that is a bit, I don't know, unclear that the ability to do that is low, when 2024 and 2025 are in the baseline, the flexibility to misforecast trend is lower. So all of these factors point to a better rate environment versus a stabilized trend over time. That's why we're confident in the outlook we're giving you here this morning. Complicated investment thesis. Some people get really interested in the more complicated it is, the more interesting and smart you sound about something. Our investment thesis is quite simple. We take capitated risk in government-sponsored health care and manage it as well or better than everyone else. That's what we do. It's that simple. Medicaid, Medicare and Marketplace. We're a pure-play government-sponsored health care company. These programs have sustainability. We all know it's a barbelled economy. We all know that these entitlement programs are integral to the social fabric we have in the company, not going anywhere. They'll change from time to time as they are now, but they're not going on. It's a sustainable business model. Given our market share, we can comfortably project double-digit revenue growth organically and through M&A. Now we were at 4.5%, 5% pretax margins in our historical view. And now we're sitting here in Medicaid at 1.2, 1.5 in our Florida Kids, which is a good place to start. But we're going to show you a very credible path to attractive margins, whether they ever get back to 4.5% to 5% time will tell, but the $25 per share number is supported by 2.5% pretax margins in Medicare and Medicaid and a little more in the marketplace. The balance sheet characteristics of this business are stellar. The cash flows, the return on equity of $1 of organic growth on how much the rather meager capital requirements are and the cash flows to the parent to generate the growth, the capital deployment characteristics of managed care. Yes, it's internet insurance model, yes, they're regulatory subs. But the cash flow characteristics, the excess cash flow characteristics of this business are outstanding. And lastly, and I'll brag about my guys toward the end here, the management team that produced the last 7 years as a result the people, the process and technology that produced the last 7 years of results are here today and they're proven. As I mentioned a few minutes ago, we're proud of what we've done. We don't celebrate it, but I present this to you to juxtapose the performance of the past against what I'm suggesting will be the performance of the future. We have a franchise. We built a franchise. We might have 8 years ago, I consider this sort of a collage a collection of contracts. We have converted that collage into a mosaic into this apparatus, this machine that is structured to produce sustainable and profitable growth. You've seen the numbers, we're big enough to be relevant, and we're small enough to be nimble. And this is what our goal is, is to create and to sustain an iconic franchise in government-sponsored health care. You know the numbers. I'm not going to read them to you. but the premium growth rate and at the same time, producing margins at 4.5% to 5% pretax is an incredible feat, an incredible feat. The generation of capital of $8 billion or $6 billion of capital generated internally, I won't read the numbers to you, but the tail of the tape from 2018 to our peak at 2024 is attractive. It was outstanding performance at the time. And we'll talk about where we are now but whether it's the RFP win rate, our ability to acquire companies at 20% of revenue, whatever it has been -- whatever the metric has been over the last 8 years, I think we can all agree that it produced sustainable, profitable growth over that 8-year period. We like the portfolio. We like the diversification in the golden age of managed Medicaid, I remember this back 20 years ago, most managed Medicaid companies had 2 or 3 large contracts and a bunch of hobbies. In every 3 years, you held your breath on the RP. And that's just the way it was. And they were great companies, and they did really well. Look at the diversification we have. Now there's 42 managed care states in Medicaid, we have 20 of them. So there's room to grow. We're in 21 states all together. Many states, even our biggest ones, don't represent more than 10% of revenue. the myth that you have to have $4 billion or $5 billion of revenue state to make money of the bucket right here. It's not true. So we like the portfolio. It doesn't matter whether it's a red state or blue state or a purple state that matters least. It doesn't matter whether it's in the middle of the country or in the East or West Coast. The portfolio is well diversified. And the recent wins have really filled in this map over the last 3 or 4 years. The reason we're showing this again is go back to the chart I showed you earlier, balanced growth. Are you swinging for the fences on any 1 thing? No. Are you relying on a hope and a dream. No. legacy footprint with rates and organic growth, strategic initiatives, 90% win rate on new contracts, that's pretty darn good, and acquisitions, $10 billion of revenue acquired in building this company from $16 billion of revenue at low point to $42 billion today. Keep that in mind and bear that in mind we're trying to evaluate whether we can get from $42 to $64. Now I say we don't celebrate things. I'm going to celebrate this thing a little bit. This is 10 straight years of 100 win seasons. Nobody's ever had a stretch like those. A 90% win rate, $14 billion of retained revenue in our existing states. And I'm telling you right now, these RFPs are fierce. Everybody is competing the new guys that want in and the existing guys want more. It is fiercely competitive, 90% win rate, $14 billion of revenue retained. New RFP wins, very proud of this. Our new business development engine and the team we have built, combined with our operators, not only tell a great story, but have the results to back it up. Anybody can write an innovative RFP, you have the chance to deliver? Do you have the reference ability to deliver 80% win rate, $20 billion of new revenue over the past number of years. Keep that in mind when we get to the growth section in terms of whether we can achieve what we say we're going to achieve. Our M&A history. Mark Menkowski, the Head of our M&A shop is here, string appears right across the board, all shapes and sizes generally either orphaned assets or things that might have been in mild forms of distress. We've purchased these things at just slightly more than 20% of revenue. Bear in mind that half of that is regulatory capital. So very little goodwill deployed and hugely accretive. That's why we developed the embedded earnings concept, embedded earnings in our vocabulary is backlog revenues. It's not future performance, it's backlog revenue, revenue that has yet to hit the top line in our P&L, but it's waiting to manifest itself. Mark will cover embedded earnings in a few moments when he gets up here. But this is the one of the main catalysts for our growth rate has been our expert ability to buy things at reasonable values and to get them from underperforming assets, open up the [indiscernible] playbook and these guys at it. And all of a sudden, you're at target margins, hugely accretive. Well, you know this story, we had a crescendo of $2.65 a share in 2024. And that run was a 14% CAGR, while we're growing the top line at 19% or in the same period of time, 4.5% pretax margins on average over that period of time. Now will the market return to that former glory, I don't know, and we're not forecasting in 3 years, it will, but it could. It could. So what happened? Right side of the page starting in mid-2025. Remember, we said 2025 was a tale of 2 halves. First half, we earned over $11 a share. Second half trend in rate became tremendously imbalanced, which leads us to where we are today with a $5 guide, but line of sight to a $25 picture here by 2029, that leads us to a discussion of the current environment. Yes, it is a challenging environment, okay? Supporting the chart I just showed you where the earnings are today in terms of the margin compression that this company has experienced, here it is by segment. 4.7% pretax margin historically in Medicaid softened, particularly in the second half of '25, and now we sit here, not a negative 1.5%, but a positive 1.2%. And if you factor out Florida Kids, it's 1.5%, in the trough of this Medicaid rate cycle, we're at 1.5% pretax margins. That's a great jumping off point to get to where we need to go. That is a great jumping off point, but it has been a challenging environment. . Medicare. Same story, different reasons. Sure, there's been margin pressure in Medicare generally. We know that, whether it's V-28 risk adjustment, stars the whole thing. But in that period of time, the Medicare book that we inherited with 2 acquisitions was not performing, which is why we decided to retire that product going into 2027. And in Marketplace, follow the line of business year-to-year, sometimes it's volatile within the year. But we're projecting a 1.7% pretax margin this year. Last year was a pretty bad year from a probability perspective. Over time, that business has produced, on average, 3% margins over an 8-year period. The problem is, it can be negative 10% and positive 10%, and that's no way to forecast the business. But right now, we're projecting low single-digit margins for 2020. But that's the margin pressure that we're working our way out of right now. And the story on margin restoration is somewhat different for each line of business, Mark will impact that for you in a few minutes. And this is what I was saying before. If you then drill down on Medicaid pressure, the market is underfunded by 300 basis points. That is almost an irrefutable fact. Public companies have reported where they are in managed Medicaid and the statutory, the regulatory reports are very clear where the market is. Those same reports actually support the fact that we're operating 300 to 400 basis points better than the market. At least in 2025, we were, we posted a 2.8% pretax margin last year when the market was at negative 1.5%, half of which was MCR performance. The other half was G&A. Because how do you have a 5.5% G&A ratio in Medicaid because we do. There's no hocus focus there. There's no magic, there's no alchemy. We are very disciplined on our operating costs, and Medicaid is operating at a 5.5% G&A ratio, which is sort of unheard of in the managed Medicaid industry. Industry is underfunded by 300, we're outperforming by 400. Keep that in mind as we start to paint the picture of margin restoration here over the next number of years. We could spent 2 hours on this page, but you know all this. Most of you have written about this, you have people in your shop to follow the stuff as well as we do in terms of the Washington seeing what happens at the state level. But you can just go across the page. There are many challenges, regulatory challenges to the profitability and growth of these programs. Sure. And we all know what they are. They've been well chronicled and written about by your good selves and we've talked about them on our earnings calls. But there's also some catalysts, particularly the actuarial soundness of Medicaid rates, duals, catalysts, CMS regulatory regime, exclusive online enrollment. I want a dual member who has both Medicare and Medicaid. I want those 2 products connected at the same parent company MCO. Somebody has a deep and wide Medicaid footprint. We'll talk about this in a few minutes. So there's as many catalysts as there are challenges, but we're navigating through all this. There's not 1 topic on this page, that I and that team has not dealt with over the past 20 years, we've been doing this 25, 30, 35 to 40. Not one topic. The fact that many of them are sort of here at the same time, is a bit challenging, but we're working our way through it. And we have good line of sight to the impact of many of these issues. We have ways to work around them. And certainly, the industry is strongly advocating against some of the things that are not well thought out that made great policy headlines legislation that comes out of a committee without any operational content. Many of these things are not operationally well thought out when they're presented as policy alternatives, but we know what they are. We're dealing with all of them. You've heard the story before. The preponderance of them is quite extraordinary at this 1 single point in time. And then, of course, the One Big Beautiful Bill. Now we're going to -- when we get to the growth section, show you a Medicaid membership attrition number that's 2% to 3% annually, decline, 2% to 3% decline annually. And we started descending order, the work requirements and everybody's got their own best number and what's going to happen there with the expansion population, semi-aneverification , same thing. Program integrity, states are just getting more disciplined about ex parte in and procedural out. And then, of course, in just a handful of states, the imrigant enrollment population will add some pressure. But all of these combined, we're looking at a 2% to 3% decline and Medicaid membership over the next 3 years annually but with only a minor acuity shift. Mark will take you through that on why we believe that's true. But yes, this is another -- this is get a lot of headlines these days. What's the One Big Beautiful Bill going to do to manage Medicaid. It is completely contemplated in our outlook. And the headline is 2% to 3% membership decline each year for the next 3. These are growth businesses. They said, "Well, how can a business that was $92 million in members that's going to 70? Well, it's rebaseline. The barbell economy isn't going anywhere. Entitlement programs are still in place. And by the way, with only 5% or 6% national market share, 10% to 12% in service in state. There's plenty of room to grow. And in only 21 states out of 42 that have managed Medicaid, plenty of room to grow. These are growth businesses, which is why we're forecasting growing from $42 billion to $64 billion to 15% CAGR in the next 3 years. As our style has always been, we're not just going to tell you what we're going to do. We're going to show you how we're going to do it. Medicaid. 12% to 14% organic growth. 2% in the footprint. That footprint growth has been about 5%, 6% over the last number of years, but there's 2% to 3% attrition assumption that's going to offset what happens in rates. Rates will grow 4% to 5%. That's in our forecast. Volume will come off by 2% to 3%. So the footprint is going to grow less dramatically and not contribute as much as it has in the past because of that membership attrition. Embedding revenue, it's there. All we have to do is get those contracts out of whatever administrative procedures they're in, get them effectuated and implemented and the 6% embedded revenue growth becomes -- it is real, it becomes top line growth and projected initiatives, winning RFP states $6 billion adds 4% to 6%, and we'll show you how we get to $6 billion on the next page. So by contract inception year, not when the RFP comes out, not when we're working on it, but by revenue inception year or contract inception year. There's $90 billion that has the ability to end up in someone's P&L over the next 3 years. 10 of it in 27, 25 and 55 in 2029, a little back-end loaded. That's okay. $90 billion, and you can see the states right there, we have our eyes on all of these. $90 billion of contract value, and of course, if 4 or 5 players win, your market share is going to be about 20%, maybe 25%, but 20% is a conservative number, which means the revenue opportunity is $18 billion. We're projecting a 1/3 -- a 33% win rate. Look at the note next to it. The historical win rate has been 80%. 33% a batting average. We have free-throw percentage is our win rate. 80% win rate, we're only projecting 33, which is $6 billion of growth. Now nothing is to lay up in this business. It's highly competitive. We look at the track record. When I said, remember the track record, remember the track record and judge for yourself whether this is reasonable, conservative or aggressive. I know what I think. Proofpoint. For some reason, I had to talk a lot about this. I get it, $6 billion of revenue and people wanted to understand it. It's been a lot of chatter in the market about it. But the proof point most recent proof point on our skill in this area is Florida CMS will call it, Florida Kids. The contract right now is in full implementation mode. $6 billion of revenue at full run rate. We were able to tell a story not just a story, but a referenceable story, supported by facts, supported by real infrastructure of what we do nationally. And if you're not good at high acuity and you're not good at BH, you can't service this contract. We're good at both. If you don't want high acuity business, you shouldn't be in Medicaid, we seek high acuity businesses. These are very complex cases, and this is what we do best. So this $6 billion program we're highly confident this gets to target margins. Mark will take you through what's an embedded earnings related to this contract. But the latest proof point on all of this is something that we have only learned in the past, I think, 45 days. And that is how is the business performing today? I mean it's a live contract. How do you know you can get the target margins if you don't know what you're inheriting? Well, we know now. because we have cost and claim information to the state, and we've got the entire rating regime. We got it all laid out. This business is producing mid- to low single-digit pretax margins today, which gives us confidence that we can hold on to that over time. So in our view, this is a winner. Testimony to the RFP team, testimony to the operational team are clinical people who are creating best-in-class infrastructure for handling these very complex medical and behavioral cases. It's all there. We can't wait for this to incept in the fourth quarter of this year. And we look forward to at least breaking even on it in full year 1 and getting it to target margin in year 2. Proofpoint on our ability to win. The Medicare duals organic growth at 10% to 14%, 12% is just by being there. Now first job, first job was converting the MMPs I don't know if you're familiar with these MMP, these demonstrations, but we had 80,000 members and a little over $2 billion of revenue in these demonstrations. Well, the demonstrations were sunset at the end of 2025. Okay. Then you just inherited the new program? No. We had to bid on, those went to RFP in Illinois, Michigan and Ohio. And we ran the table, we sweat them. first job, convert your MMP 80,000 members and $2 billion of revenue to a commercial-based HIDE and FIDE product, highly competitive, we won. That was job number one. Job #2 is now make sure it's competitive. We believe that this is a high-growth business. We believe the footprint can grow at 4% and trended rates might be 7 or 8, give you a 12% head start on the current footprint. The MAPD Exit is fully accounted for in this model and projected initiatives, which is a slight increase to market share all produces a 10% to 14% growth rate. I said, nothing is easy, but when you start to unpack this and look at the detail behind it, it's data supported and we believe, entirely achievable. 10% to 14%, 12% at the midpoint growth rate in our Medicare duals business, even after accounting for the exit of MAPD, which is about $1 billion, $1.2 billion of revenue. And here's the reason. Exclusively aligned enrollment is a catalyst. It's not a panacea. It's not a silver bullet, it's a catalyst. The rules, both the state level and at the CMS level favor a company that's got a D-SNP product from the state, a D-SNP license from the state through a SMAC agreement and a Medicaid footprint for those 2 products to come together in a very integrated way to offer a seamless benefit to a dual eligible. If you look at our market share today, with 16% service area market share, our duals market share is only 6%. We think that can go to 10% to 16% over a period of time and get to that same level now. All boats don't rise to the same level, but that's sort of a model. There's no reason why it shouldn't. But we're only relying on a 1% increase in market share to support our growth thesis, not 10, not 6 stages of 1% going from 6% market share to 7%. You can do the math if you think that's conservative. What happens if it's 8, 9 or 10, easy math matters. Very conservative, 1% increase in market share in our footprint because of how we're going to distribute how we're going to increase our Stars performance, our product design, and the fact that we do this really well, and we are just credentialed by 3 states saying, you're 1 of the best of doing this. Increased tools market share, 1% when the market would suggest that there could be multiples of that. Next, optionality in the marketplace. I got to see the risk pool stabilize. Mark would agree with that. We're aligned on this. The risk pool is still a little unstable with market movements, regulatory changes, subsidies in, subsidies out, SAPN/SCPL. And when members come in and out of this and you don't have a good line of sight over the duration of membership and what risk adjustment will look like, it makes it a little bit of a perilous pace. Other companies have done better than we have in this business, and I applaud them for it. Right now, we're holding this out as an option. In our growth model, it is merely an option. And when we see line of sight, both from a competitive perspective and a regulatory perspective, the risk pool might have stabilized, we can go back into it from a growth perspective. We talked about M&A before. The track record of $10 billion of revenue has been outstanding. We've purchased our properties for a little over 20% of revenue, which means we've deployed very little goodwill value to acquiring these properties and we've got them to target margins. As testimony to the fact that when we buy a property, it goes into embedded earnings and then it comes out of a better earnings actually into the EPS run rate. It's not theory, it's actual. It actually happens. Right now, there's a lot of distressed property in the market. As you can imagine, with the margin compression that's happened in the industry, we believe that valuations have also reset. That's pretty obvious. Whether we're willing to pay 20%, 22% of revenue anymore, I don't know. I'm kind of thinking book value, but there's a lot of distressed property in the market, many of which we've walked away from because there's a difference between distressed and broken. We like distress, we don't like broken. And we can get these things to target margin. So the M&A pipeline, the M&A story and the pipeline is a very important part of the story and want to have a high degree of confidence in. And Mark Menkowski here and his team do a great job sourcing proprietary deals, moving them along through the process and executing with operational and financial excellence. A key part of the story. Now sometimes, I've asked like something differentiates Molina, I would agree something differentiates us. The results in the past have suggested that's true. Everybody brags about their team and their business. But at the end of the day, show me the numbers, and I'll tell you whether I actually believe you're better than the other guys. The competition is fierce in this business. Our competitors are highly respected, but there is something about what we do here at Molina that is differentiating. So I'm going to talk a little bit about how we execute the fundamentals of managed care, our operating platforms, the playbook, the Molina manifesto and most about my team a little bit at the end. In 2018, in January of 2018, 8 weeks into the business, 8 weeks into the company, I was presenting at a big investor conference, and this wheel end up. Real hasn't changed in 8 years, no. The fundamentals of managed care, a blocking and tackling and executing on the fundamentals will never change. There's different ways to come out of it. Using technology more effectively in the future using AI, but the fundamentals are the fundamentals. If you can't do this well, everybody gets the same rate. Everybody's got the same corridors with 25% market share, everybody has got the same cross-section of membership. So how does 1 company outperform in the MCR. There's no other reason. If everything else is at par, this is a differentiator. And you go right around the wheel on how it's done. And whether it's utilization management, care manage the clinical side of it, whether it's just expert payment integrity, making sure you're paying claims exactly and according to the contract, whatever it is, we do it really, really well. And a lot has been written about behavior just as a case study of if you look at the components of trend inflection here over the last couple of years, what are you doing different? Well, we're always doing something different. We're not perfect. You're always diving into areas that are performing hotter than they have in history and drilling down into them sure what's going on. And I'm not going to take you through everything that's going on behavioral, but we have an expert behavioral clinical team an excellent behavioral operational team. One of the reasons why we're so confident in the Florida Kids is because of this. 20% of our Medicaid members have a behavioral condition. That cohort trends at 9% a year. The behavioral side of that cohort trends at 16% a year. You got to be good at this. And whether it's SMI or OUD, whatever it is, we all know that the range of diagnosis and behavioral is a lot wider and more variant than it is in medical and the treatment protocols are very much wider and more flexible and more judgmental. You got to be good at this. And whether it's this or LTSS or high-cost drugs, this is the area of focus. It's that wheel of managed care, knowing where the next point of trend pressure is and getting on it and drilling into it. This is a bigger deal than it may sound. Our operating platforms are uniform. After all your acquisitions, you have 1 operating platform. Yes. We have 1 version of our claim and administrative platform. We have 14 instances of it, but 1 version. What does that mean? It means when you go to plug something into it, you don't have to figure it out 21x. We've had the discipline through our acquisitive period to synergize and integrate everything we've done. One way of doing business. One administrative platform, all acquisitions fully integrated. All our stuff is in the cloud, no other companies may save that, too. Data center is gone, everything is in the cloud. From a security perspective, from a perspective of uptime, all those things that we worry about from an operational perspective, work well at Molina. Now we're good at this. Our G&A ratios not only reflect that we're efficient, but our operational ratios and metrics are proved that were effective. And we still think that, over time, 3 years with $22 billion of revenue coming on board that we can actually drive 50 basis points more of productivity and fixed cost leverage into our G&A ratio. As Mark will show you, that 6.5% coming down to just below 6% without skipping a beat on making sure we keep the trains running, keep our customers happy, a great member experience. This doesn't get talked about a lot, but the way we approach this is with a great deal of discipline, 1 platform across the entire company, which also gives you great insight into your claims and cost data. That shouldn't be under that should be underscored. I mean, we just spent a lot of time doing this. We just put this in here because we know it's top of mind. We know what other companies have talked about it. We don't have the time to drill down on this today. But not only are we not ignoring it, we're fully immersed in an AI model that will first 3 phases. One, do managed care fundamentals more efficiently. Second phase, reimagine the fundamentals of managed care. And the third phase, whether the industry ever gets or not, can you imagine the way managed care is done, period. But first and foremost is can I get marginal cost savings in the next couple of years before I reimagine it and before we throw the whole model up in the air and say, managed care is just different today. That's a few many years out. We believe that in the next number of years, we can get another 100 to 150 basis points in our cost ratios, probably mostly in G&A, but some in our MCR over the next number of years. It's not in our forecast. I want to be very clear. We have 50 basis points in our forecast that comes from mostly fixed cost leverage on G&A. We think there's another $100 million to $150 million out there that is not in the forecast. But we're on this. We have an intense management team and platform that is working this hard, and we know -- we believe and know that this will add value over the next couple of years, that's not contemplated in our forecast. I've been asked about this a lot. Some people have actually asked to see it. It's hermetically sealed that's under glass, under pressure. We don't let it out. Nothing in it is going to surprise you. Nothing in it's going to surprise you at all. You're going to read and say, "Oh, decision rights." That sounds pretty basic Yes. But is it clear? There's nothing about our playbook that's magic. Our religious and our obsession with it is what's different. Many operational models, management processes or designs can work as long as there's religious adherence to an 18,500 people are doing the same thing for the same reason. That's the difference. We tell people to come in here. You come here, you play in Alabama football. You want a fling and bling to LSU. You want to run the Wishbone go to Oklahoma here, you play in Alabama football. This is the way we do it. This is the way information flows. This is the way we make decisions. We run flat and we run hard. We don't have headquarters generals. We have field generals. Spans of control are very flat and very wide. It's a way of doing things individually, none of which will shock you or surprise you or astonish you but the collection of which creates a culture of performance that we believe is unparalleled. And lastly, I'll brag about my team. The statement at the top of the page was a big tongue in cheek, but it actually is a cultural statement. I didn't put an org chart here, I have names. I mean I'm very fond of our team. I spent tons of time with them, not just these guys here, but dozens, not hundreds and hundreds of people. They're really good at what they do. We have subject matter experts, but it's the way they discharge their responsibilities as differentiating. We have a collection of individuals, battle hard and veterans and young up and comers who are innovative and creative. It's an incredible collection of talent. And we've created a culture of performance. Everybody who's in our company, the senior leadership team knows that the name on the front of the Jersey means more than a name on the back. They'll do anything to produce the results as a commitment to our constituents, and that's what's differentiating. They leave, they don't just manage. They put team before self, and they have high integrity character. And I'm very fond to them, and you've gotten to know many of them over the years. That's how we do it. That's our story. I gave you the outlook for the next 3 years. We wound through the growth model. The operational excellence is not what we do but how we do it. And speaking of team, with that, I'm going to turn it over to one of my best teammates here, someone you know and have come to deal with over time. Mark Keim, who's going to take you through our compelling financial profile. Thanks for listening, guys.

Great. Good morning, and it's good to see so many familiar faces out here. Let's get to the numbers. We're going to go through 6 topics, just like Joe did this morning. First and foremost, what's top of mind for all of you is margin recovery. We'll spend a lot of time on that. That's going to lead neatly into 2026 guidance, 2027 outlook. We'll double click a little bit more on 2029, the numbers that Joe laid out. And then lastly, capital foundation. How does the whole thing come together? So let's get into it. Margin recovery, we're coming off 2 years of really high trend. It's not news. The chart shows it well. historically 3% to 4% average, 6.5% in 2024, 7.5% in 2025. We've broken those high trends into 2 components. One component is the acuity shift that we've talked a lot about. The other 1 is core. Think of core as the underlying sustaining run rate of trend whereas the acuity mix shift is just that, it's a mix shift of members. I'll talk more about the acuity mix shift in a moment. But let's talk about the core. What's driving core. We're at 5%. Is that the new normal? Maybe. What's in there? High-cost drugs that are a big part of it, anti-inflammatories, HIV, diabetes, GLP-1s and on it goes. Behavioral health services, Joe talked about this. What's in BH? We think of it in 2 categories: substance use disorder, SUD, and SMI or mental health conditions. Definitely utilization running high, rates running high. Prevalence of chronic and high-cost conditions, yes, more complex visits and procedures, yes. Now suddenly, is something we're starting to see a little bit more of to take note of is on professional office visits. The mix of Level 1 through Level 5 visits. We're seeing a few more 4s and 5s than we used to. Now it's subtle, but something to keep our eyes on provider upcoding, Joe mentioned across 3 years, medical cost trend is up 20%. The baseline is up 20% from where it used to be. That's an inflection. So a few words about the acuity shift. I think this is a constructive way to think about it. April 2023 is when redetermination started. That's 3 years ago now, time flies, right? April of 2023, there were 95 million people in Medicaid, 95 million people in Medicaid. 3 years later now, there are $77 million, Medicaid has come down 20% across 3 years. Now within that, at Molina, we track a metric we call low acuity users. That mix since redetermination is down 5%. So the people with really low costs are down as a mix, 5% within our book. What's interesting is, yes, 5% since redetermination, but look, since we've been tracking it, it's down meaningfully. This is the lowest we've ever seen it today. So that sets you up well then for the medical cost at the bottom of the page. We're up 20%. But lay that out against the mix of low acuity members as the total population came down, you can see that sure, there's core costs driving trend, but that acuity shift drove a meaningful part of it. Those low users came out. So we're up 20%. About 5% of that trend is that mix shift. So it's an interesting way to see it. It gives Joe and I a lot of comfort that, one, you're not going to see another decline in membership like this. But even if you saw a subtle one, the bolus of low users, the low-acuity folks, the bolus of them are out of the system. So you might lose some value on volume. I don't expect you'll lose it on margin. It's an important point for where we are. So without a doubt, trend has been underfunded. We all know that. Rates are not where they need to be. Rate advocacy is a big deal here at Molina. We kind of take 3 approaches on advocacy. Our planned presidents are kind of the local face of the market with the local regulator. Our government affairs team is really more on the national policy side and the real engine of its are actuaries. The state health plan associations are a really important tool. Why? Underfunding of rates is a market problem, not a Molina problem. So working with the other health plans in a given state, the association, we can attack that as a team. Finally, increased use of managed care initiatives, there have been states that, for 1 reason or another, have turned off with Joe called the Wheel of managed care, certain parts of the wheel of managed care. When they start to see the trend in the data that we give them, they're quite anxious to let us turn back things like utilization management for behavioral health or high-cost drugs, whatever it might be. That's an important part of advocacy as well. So on the actuarial review, sharing data is the ultimate tool with the actuaries. We do that really well, sharing general trends, but also discrete items, what's called rate cells. Certain things are discretely rated for pharmacy, BH, sharing rate cells for discrete items to make sure that discrete items are properly funded. I wanted to take a moment just to talk about how the actuarial process works because I think this is helpful as you all think about what might be the trough year and why rates are probably going to recover here. The way the actuarial process works, is, for example, 2026, the rates that we get for 2026 were set on baseline 2024 data. Why is it a 2-year lag. Well, the concept from the actuaries is they want to see fully developed baseline data. So they don't want to see any more estimation, full run out, so there's no question about what the baseline data is. Okay, so they want to go back to 2024. How the '26 rates come about is they take that fully developed 2024, they estimate what trend might have been in '25 and they project what might trend be in 2026? That gets us to the rates. The problem with that is you're using rock solid, indisputable baseline but you got a lot of room for the estimate of those 2 years of trend. Now when we look at 2027, we're optimistic that things are going to be a little bit better. In 2024, when they looked at the baseline 2024 for '26 rates, the 2024 calendar year, but what a lot of folks don't realize is that 2024 calendar year actually straddled a bunch of fiscal years, many states run on fiscal years that are different than calendar years. That 2024 base was for almost half of our revenue straddling into '23 and '24. We remember '24 and '25 with a big inflection. If the '24 base rate really included a lot of '23, you're not capturing a lot of the inflection. When we go to '27, we'll be using '25 jump-off point. Even if it's straddling into 2024 a little bit, that's a very powerful place to be because that now represents so much of those 2 years of big inflection we saw. So we're optimistic that '26 is the trough year for a variety of reasons, but that's an important one on the actuarial side. So here's just a quick word about how the actuaries actually rate and put rates into the market. As you can see here's an example of market. The market runs at 94%. Molina runs at a 92%. It's an example, but it's indicative of typically, we're about 200 basis points better on the MCR line. That 94% is where rates are set, not Molina's 92%. That 94% is made up of Molina's 92% but it's also the average of plans 2, 3 and 4. Rates are set at the market average. So the question I get all the time is, sure, Molina is best-in-class on the MCR 200 basis points better. But is that sustainable? As long as Molina can continue to outperform the market average, of course, it's sustainable. Rates are set at the average, we outperform the average. It's sustainable. And you've seen that. For the last 2, 3, 4 years, a very sustainable advantage to the market. It's an important point. Now pushback is, well, wait a minute, can't you cut corners to do that. Maybe you're doing something you shouldn't be doing. And that's really why you're outperforming. The last bullet on the page talks a little bit about quality requirements. Every state publishes a set of metrics, quality standards that you have to perform against. At the extreme, if you fall short, you'll lose your contract. But more suddenly, there's either penalties or what's called quality withholds. That if you don't hit your metrics, you'll lose revenue. Many states have roughly 2% of quality withholds. If you don't hit your metrics, you don't get 2% of your revenue. Well, in a business that has whispered thin margins like Medicaid does. If you're not booking 2% of your revenue, you have a problem. Molina has been really good about getting the vast majority of our quality withholds, put it another way, we couldn't put up these numbers if we didn't. So we're delivering on our quality metrics, and we're performing at the MCRs. Rates are set at the total market, not Molina specific, important points. So Joe showed a version of this slide this morning. The punchline is we believe the markets Molina footprint markets are underfunded by about 300 basis points. Our analysis through stat filings, discussions and reported GAAP numbers show us the markets in our markets are running about 1.5% pretax loss, actuarial targets 1.5, they're 300 basis points underfunded. Molina, on the other hand, our guidance for 2026 is 1.2%. Joe laid out a target of 2.5% for the whole company as well as Medicaid. How does Medicaid get to 2.5? Well, we're jumping off 1.2, really 1.5 without Florida CMS, but put that aside, we're jumping off 1.2. We're going to improve our G&A ratio by 50 bps over the coming 3 years. I'm going to talk more about that. So there's 50 bps of recovery right there. If we want to get to 2.5, we just need 90 basis points across 3 years. Market needs 300. We need 90. We need 1/3 of what the market needs. So I like our odds in that situation. It's something I think that bodes really well for the company. If Molina gets the 90 bps, we hit our target margin. The market gets the same 90 bps. Well, wait a minute, the market's losing $1.5 billion, they get 90, they're still at 40, 50 basis points pretax loss. So we're hitting our numbers. 3 years from now, the market is still sustaining losses. Tough to see how that plays out. So it bodes well for this set of numbers, should the market get the full 300, of course, they should. Will they tough to say? Are the odds good, we'll get our 90? I think so on that logic. So roll up the whole company segment margins. Joe gave you a taste of this this morning. Medicaid, I just walked you through it. 92.9% goes down to 92%. That's the 90 bps we just talked about. In addition to the 90 bps, you get the $50 million of G&A. So look at the pretax margin, 1.2% goes to 2.5%, pretty straightforward math. Medicare, it's about 15% of the portfolio. Look at the pretax margin, a loss of $1.7 billion goes to 2.5 across 3 years. Well, don't forget, SMAC in the middle of that is the MAPD program. MAPD, we're losing $1 a share this year. We're going to exit that program at the end of the year. Once that comes out, that 1.7% loss goes to breakeven. So you're almost halfway there just on exiting that program. Now the duals which is the remainder of Medicare, $5 billion of revenue today. There are breakeven. We're very confident with our Stars profile and a number of our initiatives, we can get that up to 2.5. 2.5 would be a fraction of how these things have historically run. So we feel good about that. Marketplace, 5% of our book. We target mid-single-digit pretax margins on that. On the consolidated line, 92.6 drops 110 basis points. You can see the whole company is going from 0.8 to 2.5 target. Hopefully, that's a pretty good walk of how we're thinking about margins. Ient itself really well to jump into '26, '27 and '29. All right, '26 guidance, middle column was what we reported in the first quarter. Right-hand column is guidance. Now when we gave guidance back in February, we said expect about 2/3 of the full year earnings in the first half. We're on track to do that. $2.35 in the first quarter. Full year guidance unchanged at 5%, very front-end loaded. Won the rate cycle, two, Florida CMS. There's a bunch of reasons for that, but we're right on track. Look at the MCR, it's 91.1% on a consolidated basis in the first quarter, we've left ourselves a lot of room for the back half of the year. 91.1% for the first quarter, 92.6% across the full year, a lot of room for the back half of the year. Adjusted G&A, we ran a little bit higher in 6.9% in the first quarter, full year guidance unchanged, just timing. We've got a number of expenditures and projects that make that a little bit lumpy. We're right on track. Some of the other highlights from the quarter. All of our segments did better than we thought a little bit. We reaffirm $5 for the full year. We said that before we revisit guidance, we want to see first and second quarters to really have a firm handle on the jumping off point. A lot of volatility would trend transitioning Medicare products; and finally, marketplace always volatile. So we want to see 2 quarters before we revisit $5, but certainly a good setup for the first quarter. In Medicaid, same-store attrition, we took from 2% up to 6% for the full year. 2 quarters in a row, we saw a little more attrition than we were expecting about 1.5% per quarter, more to the point, 3 states, in particular, drove most of the decline, California, Illinois and New York. So we thought it was prudent to recognize that's probably going to play out through the rest of the year. Full year rates at 4 unchanged full year trend at 5, unchanged. Medicare Marketplace, we talked about transitioning MMPs, year-end Marketplace membership. In the first quarter, we were at 305,000 members. That's half of what we ended last year with a meaningful and purposeful decline in membership on marketplace given the volatility. I expect that will shift to about 250 by the end of the year. That's normal seasonality. We've got about 70% renewal in the book today. Embedded earnings. Well, if you're going to take down target margins for the company, you're going to take down embedded earnings. Target margin used to be 4% to 5%, 4.5% at the midpoint. We're now 2.5%. So commensurately, embedded earnings. We're going to go rebaseline those as well. When we talk about embedded earnings, 2 categories. There's what's in our current revenue. The revenue is there, the earnings aren't and future revenue, the revenue is not in our P&L yet, that will be next year or the year after and then you get the earnings as well. So in current revenue, a few things are in there already. The Medicare duals wins, remember, they're breakeven, I got the revenue. I don't have the earnings. ConnectiCare Marketplace got the revenue, don't have the earnings yet breakeven and then the Florida CMS, we've got about $1.50 drag from all the implementation we're doing to get ready for revenue that incepts fourth quarter of this year and the rest next year. You roll those 3 together, that's $275 million, at 2.5% target margin. Future revenue, about $6 billion. We talked about this this morning, a bunch of things in there. Joe mentioned Florida CMS, Georgia, Texas, going the other way, a loss of revenue exiting MAPD, that's about $1.2 billion loss, roll all that up into the $6 billion of future revenue. The EPS equivalent on all of that is 4.25. Now the last component, the $2 is at the bottom of the page, we're going to drive 14% revenue growth next year. We've had really good discipline about keeping fixed costs fixed. So in the presence of 14% revenue growth, if I can keep fixed costs fixed, we drive a lot of value on the G&A line. That 14% revenue growth gives me 20 to 30 bps advantage on the G&A ratio. That 20 to 30 bps is worth $2 a share EPS. So embedded earnings down $9, down a little from where we were before. Really important point for all of you within the $9, 450 is known to come out next year. The items in blue help you to see that. Florida CMS implementation costs. That's the drag we have this year, by definition, goes away next year. MAPD exit, we're losing $1 on the MAPD this year. Next year, the revenue goes away, but so is the dollar loss. You get that. And then finally, -- the rest is math, $2 as long as we keep fixed costs fixed, which we do $2 of EPS. So you roll that through, $450 of the $9 is known to come out next year. Maybe some of the rest does too, not ready to speculate on that yet, but a really important point on the embedded earnings. Sets us well for '27. Premium outlook. We're not going to give you guidance for 2027, how would I do that in May, but the building blocks are pretty clear and apparent. Let's lay them out, and I think it will help you with your models. If we're jumping off $42 billion, we get $1.5 billion just on rates and membership. Embedded Future revenue total is $6 million you get 4.5% next year. Joe rattled through these this morning. We're working on a few other things, not really ready to make any announcements, but I think it's important to have a placeholder for other initiatives. You roll that up, you've got visibility to 14% growth. On the EPS side, once again, this is not guidance. These are building blocks in search your own assumptions on top of these. Jumping off $5. We talked about 450 of the embedded earnings coming out known to be harvested next year Florida CMS, the MAPD the operating leverage. There's a placeholder in here for other embedded earnings, not ready to populate that yet, but there's got to be something there. And that lastly, legacy Medicaid MCR. If we believe and we do that the rates are underfunded, and rates need to catch up with trend. How much is that going to be next year? I can't give you a view yet. Academically, we would think it's something. You have to put your own assumption in there, but that's a very helpful mechanic to drive your models on how you might think of next year. 2029, I'll repeat a lot of what Joe said here just because hearing it a second time may be helpful, but I'll also double-click on a few things. The revenue target, Joe went through this. We grew 50% in 3 years, 15% CAGR. We jump off 42, current footprint, rates membership, embedded future revenue, the 4 things Joe talked about this morning. The projected initiatives of 7 that Joe walked you through; and finally, the M&A of $4 billion. What I like about this, 50% of this, Joe said in the bank, 50% of this is known. Sure. 15% is a lot of growth. By the way, I think it's the same growth we exhibited for the last 7 years. Half of it's in the bank, half of its known. Now we got to go execute the rest, but our track record is pretty good on that. We'll talk more about that in a minute. So you know most of the numbers. The projected initiatives, let me remind you just in the $7 billion what Joe said this morning. There's the $7 billion, where does it come from? Seven is 6 of RFP wins and 1 of duals market share. The 6 RFP wins comes out of an $18 billion opportunity that Joe mentioned, at the 33% win rate, you know the story. Our track record is 80%. I like our odds. In the 7, the other $1 billion is Medicare market share. Joe identified a $6 billion opportunity that will be a little bit ambitious to put the whole 6 in. We took 1, I like our odds. Lastly, Marketplace. We're someplace between $2.5 billion and $3 billion, call it, $2.7 billion this year on premium revenue. If we were to double that next year, call it $3 billion of opportunity. That's not in our model at the moment, but it's certainly an opportunity. We'll see how the year progresses. So to believe $7 billion of projected initiatives over the next 3 years, you have to assume we can execute on 25% of this opportunity and we've done it before. Let me roll up the segment targets. Medicaid, 13% growth at the midpoint. Most of it is what Joe called money in the bank, stuff we've already announced as well as rates and membership trends. At the midpoint, 92%, that's only on the MCR, that's only 90 bps better than we are today. For the whole company, 12% growth rate organically. You stack the M&A assumption on that. That's how you get to the 15%. For the company 91.2%, 91.5% at the midpoint on MCR. G&A ratio goes below 6%, you're at 2% to 3%, 2.5% at the midpoint. So gosh, we've been talking a lot about these G&A efficiencies today. I really do need to expose that a little bit more. Here's our G&A ratio, 6.4% today. We'll grow 50% over the next 3 years, 15% CAGR, half of it's known. How do I get such a meaningful contribution 6. 4% goes down below 6%. So 50 bps, by the way, that's $5 a share. A really simple way to think about it we have complicated models, but simple way to think about it, that 6.4% G&A ratio implies $2.8 billion of operating expense, G&A, take the $2.8 billion, half and half fixed and variable, grow the fixed debt inflation, grow the variable at 50%. That's the top line growth, you'll get a G&A ratio meaningfully below 6. It's just math. So if you believe the math, and I do, do you believe we can hold the operating discipline to hold our fixed cost fixed? Because otherwise, it's just spreading the same cost across more revenue, of course, you're going to drive value. So we like that a lot, 6.4 falls below 6, 50 basis points of value. Now what's not here, in many ways, I'm more excited about some of this is we left the placeholder without numbers on artificial intelligence. Joe said 100 to 150 basis points. We are so excited about a number of use cases, not in our numbers. It's all upside. But this is happening fast and there's real value there. So 100 to 150 basis points on top of all this, not in our model, but that sure gets my attention. We're very focused on these things. All right. This chart's busy. Joe showed a simple version of this chart upfront. And if I didn't break out the components, I know you'd ask me, so here they are. Joe mentioned operating discipline $6, -- there it is, $5 of the G&A ratio, that's the 50 bps. We circled the $2 because that's the part that's in the bag. 14% growth next year is known. We'll harvest $2 out of that. That's already done. The other 3 is the rest of the growth. $1 a share repurchases, that's not a heroic assumption. We use the term maintenance repurchase sometimes, which is from time to time, we'll buy small amounts if nothing else just to make sure that share count is suddenly going down, not going up, not a big assumption. The projected initiatives, that's the $7 billion we talked about. M&A, that's the $4 billion of revenue we talked about. Remember, the embedded earnings, future revenue was $4.5 in a quarter, current revenue was $2.75. The last section, current revenue MCR recovery, that's essentially today's company, moving back up to the MCRs we've targeted. That's 110 bps of MCR recovery across the whole company or as it says here, 40 bps a year. So you can see 3 distinct drivers. Current revenue, the current company recovering to 2.5% is a big driver of it, future revenue growth and then, of course, the operating discipline that you've come to expect from us. A bit of an eye chart, but I bet if I didn't put it up there. Happy you would have asked me. So it's good that we have it. Last thing that's been on some of your minds is, do we have the capital to drive this plan? The quick answer is yes. Upper left, where are we today? Net debt to cap 48%, revolver is undrawn at $1.250 billion. I put the RBC ratio up here just because a few of you have been asking me about this lately. We run at RBC 300 or more. State minimum is $200 million. Our policy is to run 50% higher than state minimum. We're at 3.11 today. Will continue going forward to run at 300 or more. I think the reason I've gotten the question a couple of times is, gosh, will you maybe drop your RBC levels to fund your company? Well, no. Our policy is $300 million. And we will continue to run it that way. We have ample cash and capital to drive our agenda. So sources and uses to drive the plan, the outlook that we just talked through we need $3 billion of additional capital. Most of it goes to organic growth. Remember the required capital on revenue, you've got to capitalize revenue. That growth is going to take, call it, $1.5 million range around that. M&A, we said we'd buy $4 billion of revenue at the kind of multiples Molina pays, it's someplace in this 0.8 to 1.2 range. Share repurchases, that's the maintenance concept I talked about, not a big number, call it $0.5 billion. Rolled together, that's $3 billion of capital we need. Where does it come from? Most of it's internal. Internal capital generated $1.7 billion, we'll borrow the rest. Now what do I mean by internally generated? That's net income. No, it's not net income. We love net income at our subsidiaries because that's what rolls up in consolidation and becomes EPS. Love it. But that net income at the subsidiary isn't money I can use at the parent today. Subsidiaries generally require dividends to go through state approval, which means the net income is booked 1 period, you dividended a subsequent period. This is the amount of capital I think I can move up to the parent through dividends. Our simplifying modeling assumption is we usually this year dividend of last year's net income. $1.7 million falls out of this model. We borrow $1.3 billion, you're at $3 billion of sources. So if you're borrowing 1.3, what happens across the years with your debt to cap. We'll hover in the mid-40s which is a very comfortable place for us to be. If you were looking for additional debt to cap up to 50, maybe temporarily, what would it give you, an extra $1 billion along the way if you needed it. But we think we're adequately capitalized here. I'll remind you of how we think about capital deployment. Joe touched on ROEs in some of the earlier statements this morning. I call this the pecking order of capital allocation. Highest and best use is organic. The ROE on organic is 60%, even at these lower target margins. 2.5% target margin, ROE of 60%. Organic returns are phenomenal in this business. Accretive acquisitions, even at target margins at 2.5%, roughly 25% ROEs, and again, whatever is left, we'll return to shareholders, love doing it. But with 60% and 25% ROEs, our money is best put in the first 2 categories. We're in the home stretch now. I'll leave you with 2 slides. What should you take away from today's presentation, the big things our message is today? What drives the story? Joe laid this out, our markets are underfunded by 300 bps. Most of our competitors are losing money on a pretax basis. Molina outperforms by 400. The data shows it. The outperformance is split between the MCR. And remember, these are direct MCRs that fall right out of the stat filings and 200 bps on the operating costs. We need 90 bps across 3 years to hit our target margins. The market needs 300. So we're in a good spot. Will the market get the full thing? I don't know, I like our odds on getting the 90. I'll remind you the point I made earlier. If the market and Molina are only getting 90, the market is still losing money. Is that sustainable 3 years from now. So I feel good, does it Joe mentioned potential acuity shift from One Big Beautiful Bill. We've got Medicaid attrition of 2% to 3% a year for the next 3 years, one, that's not a very big movement, but two, the bolus of low acuity members is at the lowest we've seen it. So would there be an impact? If there is one, I think it's modest for 2 reasons. Point four, our operating costs improved 50 bps on the ratio, just math, 50% growth, hold your fixed fixed. Number five, $11 billion of new growth. We talked about RFPs, 33% win rate. We talked about M&A. Lastly, Medicare duals. Our $5 billion Medicare duals business today is running breakeven. Part of that is they just converted FIDE and HIDE's to the new program. Second is we're growing into some new stars ratios. I feel very good about our outlook here. Historically, 2.5% would be lower than duals programs nationally have run and definitely lower than Molina's duals programs have run. So feel really good about that. I'm going to leave you with the same page that Joe opened with this morning. 15% revenue growth, 50% in total, half of it in the bank. MCR across the entire company better by 100, pretax margin better by 150 bps. That's the MCR in the G&A. Adjusted EPS ratio 2.5% pretax margin, $25 a share. Now we tried to lay things out in about as much detail as we can. It's kind of what we do around here. Something tells me you're still going to have a few questions. So if that's the case, Joe, why don't I ask you to come up. Jim Woys, our Chief Operating Officer; Jim come on up, and we'll take your questions.

John Stansel, JPMorgan. Just a quick one. A topic we talked about in 2024 that didn't really come up today was risk corridors in Medicaid. As we think about the 90 basis points of MCR improvement that's kind of embedded in the 2029 targets, -- is there something about reestablishing those risk orders? I think you're running about 200 basis points below the risk corridors for Medicaid. How do we think about reestablishing those as it interplays with the amount that the states need or the other managed care companies need and what flows through to your MCR?

I'll frame it and kick it to Mark. The corridor regime has not changed. The quarters that have been in place during the pandemic are still in place. Now if you recall, when the inflection started to happen in late 2024, we had 200 basis points of cushion. People said, you didn't see the inflection No, we saw it. We had 200 basis points of cushion [indiscernible] 2024. We were basically without protection in 2025. Now right now, with the MCRs where they are, we're not near the quarters. We are actually are in a couple of places, but there's plenty of room. If we -- if the market gets what it needs to get back to actuarial soundness, we'll be into the corridors again in various places. I want to be there. I want to always be the chart that Mark showed where we're operating better than the market. If we're paying into the quarters, it gives me intra-year protection, and it means I'm operating better than everybody in the market. Mark, anything to add?

Yes. That's exactly right, Joe. We used to be at an 89% on the MLR. We're at 92% now. We're a long way from those attachment points. The thing about the averages, which is what you see here is there's always 1 state that's a little better, 1 that's a little bit worse. So sure, are we in a corridor in 1 particular place, Maybe. But as a company, we're nowhere near the corridor positions we were and they're not a deterrent on this plan.

Thanks. Good morning. Quickly on the MLR or I should say, the margin target of 2.5%. Can you give us a little color in terms of -- I think you're expecting about 100 basis points of improvement over the next 3 years. How do you think about the slope of that line given the work requirements out there? Do you still expect to be 200 basis points ahead of the industry in 2029, such that the industry is breakeven still in 2029? And if that's the case, walk us through why you think that 3 years from now, the industry is going to be breakeven in Medicaid, how that's sustainable?

We're not giving you the 3-year trajectory yet. You noticed that Mark left that sort of blank in 2027. In Medicaid, we need 30 basis points a year for 3 years. Is that going to come ratably? Nothing ever comes ratably in this business. But getting 90%, meaning rates are ahead of trend by 90 basis points over the next 3 years when the market is at a 1.5% pretax loss to me, is a great place to be. When we're starting at 1.5% pretax. So we're not going to give you a 2027, '28 and '29, but we love our odds of getting 90 basis points of rate trend rebalancing over the next number of years given the market needs $300.

And I'll just echo what I said before, if we're getting that 90, the market is still not getting what it needs. Justin, I think part of your question is, can we also maintain our advantage to the market of 200 on the MCR line, every bit of evidence shows that we can on the operating cost, we're actually going to grow it.

And if I could just squeeze in 1 more on the -- on trend. You're talking about 5%. I think that's logical. When you look at -- when the states look back in '24 and '25 and they build in that 5% trend that's going to help -- but what are they building in for forward trend? Are they -- are you starting to hear some willingness to build in something that's 2x history, right? Trends historically has been are they willing to build in that 5% trend going forward? Because that's what you're going to need, right, to get your margins back. So what are you hearing from them on that forward trend beyond the actualized.

Yes. So if they were really looking to make up the historical difference, they'd have to onetime put in 300 bps. And then I think your question was, are they going to put in the full trend on a go-forward basis that they need to? Well, they're going to have to estimate what the current year is, and they'll have to project what the next year is every bit of data with the actuaries are showing will support the numbers we're talking about. Now if part of the question is if they just don't want to go there, they drag their feet to go there. I think a really compelling data point is that so many folks are losing money that if you don't honor both the historical catch-up and an appropriate go-forward trend, you're going to keep a lot of these folks under water and especially the local not-for-profits they're doing even worse than the numbers we put up today, rates need to come back either for actuarial standard or just for the practicality of solvency on many of these players.

They got to catch up to the 21% cost increase over the last 3 years. And when the 25 seasons into that baseline, then I think there's less flexibility to jam the market on trend. 5% seems to be a great place to do. We've got 2 straight years of core trend being 5%. We're going to argue hard. And nothing is happening on behavioral to soften that trend. Nothing's happened on high-cost drugs to soften that trend. If we can get them to the 21% baseline increase and then convince them that 5% is the new normal, no longer 3.5%, we're in good shape.

It's A.J. Rice from UBS. You guys have been talking for a while about the 200 basis point differential on MCR you have versus the rest of the industry. I think 1 thing that would make it more helpful for us to understand how sustainable that really is is where do you -- when you drill down, where do you see that differential coming from? How come you -- you think you'll be consistently 200 basis points better than everybody else?

What gives us the advantage in actually being pretty clear and assertive on that point is 1 of the points I made earlier. How can anybody MCR be better or worse than some elses. All right, pull it apart. Rates. We're not rate makers, we're rate takers. We all have the same rate. Corridors. Well, we can be deep into it and somebody else is them, but we have the same corridors. And if there are 4 players in the market with 25% market share, it's hard to get selected against, you all have the same membership. I got the same membership, the same level of acuity. We are at the same corridors in the same rates. The only differentiating factor is how you're managing medical costs. And so the way we saw them for it is by holding at par the 3 other criteria that can drive an MCR, the only 1 that can be -- that can flex up and down by competitor is medical cost management. Everything else is atpar..

Is there -- I know you're not going to give up your secret sauce, but what is it about what you're doing with medical management that is a sustainable thing that others don't figure out and see a copy or whatever.

Hard to say, but I'm going to kick it to Jim to talk about how we approach the clinical activities. And Mark, you can talk about some of the payment integrity and other financial things we do, Jim.

Yes. I think Joe talked about it earlier, a multitude of sort of reasons. And the operating model and how we operate and the discipline in which we operate in operating model, I think, has like a big part of what we do very strong teams from a centralized point of view from an enterprise perspective of how we manage clinical network, behavioral health costs, using what we call center of excellence category, the enterprise who develop policies, procedures and they deliver them to the markets for their execution great opportunity for us to continue to do well in that area. I think we have best-in-class payment integrity, operations, best-in-class pharmacy management operations, but it really is the operating model and the discipline that we work. It even goes back to the point that Joe and Mark said that we operate of with 1 single platform. So very much consistency in what we do. Our operating metrics are as good as they ever have been. So there's no big claim lag that we worry about actuarial issues, claims are paid accurately and timely all of our operational metrics are at or better than anybody else in the industry. And I think that drives to a lot of operational performance that drives them to better execution that we do in the medical management arena. But at the end of the day, it's discipline. It's discipline that we have in the company more than they think that I would put.

Mark, medical e-com?

I would just echo what Jim said, we're doing the same things everybody else does. But culturally, we're a little bit different. We're big enough to be relevant in all the big company ways, but we run the place like a small company and so much of what we do is personal to us. I think we just execute at a very different level. Joe mentioned Medical Economics. We've got just a fantastic medical economics team that continues to pull apart medical costs. We call it the cube. You can look at a cube. It's got 6 sides. There are 6 perspectives on Metiecon. Geography, condition, member, provider, so many different ways to look at medical econ by constantly ripping it apart, you're constantly exposing different perspectives on it, which gives you insight on how to manage -- but at the end of the day, it's cultural. We just have an intense focus here.

Okay. All right. Maybe just 1 follow-up. We're talking about the recovery sort of as if the whole portfolio was 1 state, but it's 21 different states. Is there a lot of divergence? Or are you sort of thinking everyone's going to -- every state is going to sort of come back and be in line or you weigh off in some states and closer in others, and you need those handful of really key states to improve.

Every state is different, and we're not going to peel down into individual states, but I will tell you, your question is a good one. Because if you had 2.5% margins and half of your properties are 0 and the other half at 5%, that's a bad portfolio outcome. You don't want that. You want everything operating toward the me. We talk about performance SKUs. Is everybody operating close to the mean. And the answer is yes. Now some properties are performing better than others. So not everybody is contributing equally to the recovery to 2.5. But I would say on balance, all of our properties are performing very tight around the mean, and most of them are contributing to the outcome. There are no wild SKUs in the portfolio. To your prior question on medical costs, we have many isms in the company as one, pay attention to a dime before it becomes $1 to pay attention to 10 basis points before it comes 100, because we know in this business, that's what happen.

Andrew Mok from Barclays. I understand you frame some of your G&A leverage against 2026 guidance. But relative to your previous targets, I think Medicaid G&A is down about 150 basis points. which is a pretty significant reduction. So can you remind us, one, how much of your Medicaid cost structure is fixed versus variable and how you're able to achieve that much operating leverage over the next 3 years.

You want to talk about fixed and variable and...

Yes, absolutely. So I'm not going to parse our products or segments or states on a fixed versus variable. What's important is the whole company. But if we were to go into the segments, it's not much different by segment. Again, it's 50-50 and we've demonstrated that. I made some very simple and high-level comments about splitting $2.8 billion of G&A today into 2 components. That's a very simplistic way to think about it, but our practical and sophisticated models sort of get to the same conclusion. The fixed components are a lot of leverage and corporate functions that we keep constant. And then variable so much of that on membership, on utilization management on medical cost management, enrollment. There are a lot of things that move with revenue and membership. But step back, look at the whole company, the cost base is pretty evenly split 50-50.

Great. And maybe just a follow-up. The Florida Kids contract, I think, is a meaningful portion of the embedded earnings figure. Can you help us understand the assumptions embedded into the outlook for that piece of business, specifically, including the time line to breakeven and target margins?

As you saw in our analysis, there's a 2026 drag. You're hiring people before the revenue shows up. You always project a new contract to start out high in the MCR. New people getting used to new technology, so on and so forth. We believe we get that to breakeven in full year 1, and then we hit target margins sometime in full year too. Now that's a significant contributor to the fixed cost leverage. Everything we do in embedded earnings is on a fully allocated basis. And when you bring $6 billion of revenue in 1 year, and you have the discipline of holding fixed cost fixed. We're going to get the operating leverage off that. So we're pretty excited about it. And 1 of the reasons we're actually even more confident of that today than we maybe were 2 months ago is we've seen the numbers. We've got the climate cost data, and we have the rates. And the program is on pretty sound footing, and we're inheriting a program on very sound footing. Anything to add, Mark? .

No, I think that's well said. In the embedded earnings, just to be clear, it's $1.50 of current losses with the contract and $2 of forward profitability at 2.5% pretax margin. So a 350 swing, you get to $1.50 next year. And as Joe mentioned, it will take us a year or 2 to get to target margin.

We'll go to Kevin, and then we'll go to Lance next. Kevin.

Great. You guys talk a lot about embedded earnings. And just going back to that previous guide, last Investor Day, you guys had a margin that was basically almost twice what you're talking about now if you think about 50 basis points more G&A leverage today than what you were talking about back then, -- like should we be thinking about that number being off the table? Is that number still an aspirational number we should be thinking about where 25% relative to $50 of earnings power? Or is it in a new world we should be thinking about something in between what you're doing in that prior number?

We gave you a 3-year outlook. I said any investment thesis in our view, ought to have a 3-year outlook to it. And we got models. We have higher growth models and lower margin recovery and vice versa. It all seemed to triangulate toward a 3-year outlook around $25. So we presented what we think is the most realistic case of margin recovery. The reason we showed you the sensitivity is tell me what happens to trend. If rates are going to catch up to the baseline, the 21% increase -- if trends softens, they catch up faster and to a greater degree. If trend accelerates, maybe they catch up slower. We think we've presented a very rational data supported and conservative case of what we can accomplish by 2029. Is there a reason to believe that managed Medicaid comes back to its former glory of where we were 4.5% pretax margins, it could -- but giving you our best outlook for 2029, we settled in a 2.5% number and $25 a share. But is there upside to that? Tell me where -- how fast rates of recovery will recover? And the answer is yes.

Yes. I think that is 1 of the concerns people have. When you think about '28, '29 that's when a lot of the Medicaid rate cuts start to kick in from OBBB. And so what are the -- so it sounds like you're kind of assuming that the rates are still at the lower end of what's maybe actuarially sound by then. But if that were to happen, is there you mean you said a few times ago, I don't know how that will play out. Like do you guys have to exit some states to prove to the states that they have to pay correctly? Or do -- is it you're going to wait for the competitors to do that, and that's going to cause the states to do that? And if rates are at the low end of actuarial sound, and a lot of people losing money, does that mean they're going to go out of business and you're going to get more share? Like should we think about that as maybe the margins don't get back, but now you've got more revenue upside? Or how does that play out? How do you get the states to get you to actuarial soundness even if they're seeing some pressure.

We laid out what we thought the reasons were. Number one, just to be clear, No, there were no states -- first of all, if there was, I wouldn't be announcing it at our Investor Day that we're going to exit. But no, there are states that have stronger rates than others. States where we have stronger advocacy efforts to get back to actuarial soundness. But no, the every state in the portfolio right now, we have a forward outlook on where we need to be. As others exit states, there's more market share for us. And we do think that rates come back to actual soundness. I don't know how to answer your question any more directly than that. The market is significantly underfunded, not-for-profits and for profits. And rates are based on the market average. And where we're operating, we continue to operate 200 basis points on the MCR better than the market and the market gets the rates it needs just to get back breakeven, the 90 basis points is in the bank. That's what makes us feel good about this. Actuarial sound is a concept. CMS does have oversight responsibility on rates. The programs have to be adequately funded. Mark, anything to add? You're right in the middle of all this with me.

So the principle of actuarial selling is harder to implement in a period of inflection, and that's what we just saw. When things normalize, the concept of actuarial appropriate rates does come back. We believe we're through the period of inflection. So I have high hopes that acturial selling this prevails once again, even if that's slightly delayed for whatever reason, as I pointed out before, the practical reality of so many players losing money is a real concern to states at the moment. So to me, I take comfort in those 2 items.

I wanted to dig into medical management a little more. And could you just talk a little bit about the lower trend environment that existed historically? Maybe what the impact that you are creating into trend from medical management initiatives, UM, et cetera, i.e., gross trend was 5%, but you were achieving 3. And then now that we've hit a much higher trend level -- is it a larger amount of trend impact that you're achieving? Or do you project you can achieve through medical management? And are there particular areas where you see that happening?

I'll kick in my colleagues here. Let me frame the answer. We're not going to start giving numbers on what our cost management initiatives aggregate to. But every single year, they are a significant component of our operating plan, okay? This is inflecting what are the 5 or 6 things we're going to do at the provider level, the member level to arrest the rate of growth of this particular trend. It's meaningful. Now what's happened here people said, "Well, how do you know your cost management techniques are still operating? Well, ER diversion, unnecessary ER visits. How do you know you're diverting the right number. The percentage that we're diverting and avoiding is the same percentage as it always was, except the ER visits are up. So if end is up, but your percentage of diversion is the same, then you know you're operating effectively. So we're not going to start giving numbers, but every single year at the point you're making, there is growth trend, what the unmanaged market would produce, and then there's net trend, what do we think we can get it to. It's a meaningful number. Anything to add, guys?

Yes. I would just say that the process that we go through around medical management and around initiatives around medicos is a dynamic process. It's not a 1 time during the year. We define all the projects -- it is a constant sort of process to look at the data that's presented to us by medical economics, strong analytical presence. We target sort of where those variances are, and we create initiatives to go after them. But it's a very dynamic process, not only just on medical management, but we do around unit cost management as well as we see where we need to take better unit cost approaches and use that data to renegotiate our contracts going forward. It may mean that we have to do more intensive payment integrity initiatives around where we see a cost variance that might occur. It might be even some place like fraud, waste and abuse, so all of those activities combined sort of puts us in that process around how do we get a better medical management outcome in line with where our forecast is. But it's a dynamic process. Every single day, we're working the initiatives.

Got you. And as you've had concentration in some of the areas that have been driving aggregate trend, -- have you seen an increased revenue in driving an increase in value-based care, especially value-based care initiatives? Or how do you see value based care plan out for kind of your approaches?

Do you want to comment on that, Mark?

Yes, absolutely. I think it's well known that value-based care in the Medicaid area is probably at least penetrated of anywhere, right Medicare enjoys the best penetration just because of the dollars and the continuity of the members. But in Medicaid, not only do we see business upside to it, many of our states are looking for us from a compliance perspective to drive more VBC as well as value-based care. We're certainly on that. We're more than meeting our compliance objectives. And in many cases, we're exceeding our own expectations. So again, you don't hear a lot about it in Medicaid just because among all products, it's probably the least penetrated of all forms of health insurance.

We're moving it up to scale. I mean, bonus payments are pretty common. And then, of course, gain share, everybody loves gain share. Then you try to get to the symmetric gain in last year, it gets a little more the debate is a little more intense with a provider. Getting at the full capitation, obviously, in California is a whole separate animal. But getting this to symmetrical gain and loss share in Medicaid is the journey we're taking.

Jason Cassorla, Guggenheim. Maybe shifting gears a little bit. On the dual side, curious, going from 6% share to 10% to 16% over time. Maybe can you help a bit more in terms of the building blocks there? I guess what's different today for you to go after that versus where you're at a 6% currently?

We're excited about it. The market itself is growing at 12% to 14%, exclusive line enrollment, highly incentivized as states encourages them over a period of time up to 20 and 30 to combine a dual member in a Medicare and Medicaid product that's connected at the same parent company MCL. So we're well positioned with Medicaid contracts in 20 states and having snacks. The contract that you need to do this business, we're well positioned. We were running 80,000 members in the MMPs. We're already running integrated products. The reason we ran the table on the RFPs is where our experts in doing this. The difference is now it's highly competitive with the rest of the market, right? We know the big guys are going to be in there. But we're highly confident, as Mark said, 2.5% pretax margin seems pretty bigger. Our star ratings are improving our risk adjustment processes, our market average, and we're well positioned with that Medicaid footprint to take advantage of the growth in that market. And we only put in a 1% market share increase into the model. That's it. We didn't need any more to justify $64 billion in revenue. There's probably some revenue upside there. Mark, Jim, anything to add, Jim, you're close to it?

Yes. I would only add that I think when we think about running the table on the MMP contract, we realized early on that these were state programs not run by CMS, right? And so we focused on our customer in the state who is doing the procurement. Even though Medicare was probably the largest piece of the activity, the -- it became a state program and recognizing that the decisions are made locally in the state and us attributing our business to that, I think, has really created a different operating model for us than some of our competitors.

And maybe if I could follow up on the $80 billion or so revenue opportunity through the new RFPs in '28 and '29, I guess with all changes in Medicaid over the past few years, the active policy environment -- do you anticipate any material changes to the way these RFPs could develop, whether it's a set of downside risk to the revenue opportunity within RFPs, ways to win on the margin side or anything along those lines as it relates to the RFPs that are coming down the line. Any changes or anything you're looking out for?

No, there's a couple of imminent ones. Missouri and Indiana will come out really soon. and we're not -- we're going after a new RFP. We're in that state, 2 years in advance of the RFP, you have to be. You're developing relationships, provider relationships, regulatory relationships, et cetera. So we have good visibility into how the RFP will unfold every once in a while, we're surprised by something. But for the most time, for most of the time when the RFPs come out, there are no surprises. And they're pretty traditional. They are pretty traditional you -- there's a hundreds, if not thousands of questions and capabilities you have to showcase. So I would say that there's subtle changes in the RFP processes. But for the most part, it's the traditional process, submit your bid, go into orals down select and we move on. Nothing has really changed in that process. Yes, sir? .

Steve Baxter from Wells Fargo. I just wanted to come back to AI and you guys think about the durable 200 basis points of outperformance you generated versus your Medicaid peers. I guess how do you think about the durability of that? I would think, if anything, like AI might enable some of the other larger for-profit companies potentially try to study what you do and maybe catch up in some of the areas that are deficient, -- maybe the not-for-profits never get there, but you think about kind of future proof in that margin premium that you're generating versus peers?

That wheel of progression, we showed you is exactly the way we think about it. There are 10 core processes that in a combined way go to the management of managed care. How can you make those more efficient? That's job one. And we think there's 50, 100 -- maybe even more, 150 basis points of improvement we can generate just on making the existing managed care processes more efficient. Second, -- could you reimagine that entire process? Take whatever process it is, payment integrity, UM, whatever it is, and reimagine it, that's Phase II we're not even contemplating that. And third is there are a complete reimagination of the way managed care is done, who knows? But right now, the number we put on the page is only taking existing managed care processes and making them more efficient and we think that's a 1- to 2.5-year journey. We already have -- we do things without talking about them a lot sometimes. We already have use cases that are being used. We have 1 operation in the company, I will mention where it is with the volume in that operation has doubled over the last 3 years and headcount's down by 20%. And it's all -- it was early adoption of -- we're taking that model that we used in this particular operation and replicating it across the wheel of managed care. So we're confident it's there, why didn't model it. It's I wouldn't say speculative, but it's at least a nascent form. As we move forward here and have more Investor Days and more communications with you, it will end up in the numbers.

And then just thinking about the -- it's obviously helpful to hear about the actuarial processes. And I think on the medical side, we're starting to maybe understand those better. Do you think about the admin side and how states approach kind of the admin component of setting rates and operating costs, like, obviously, some of the scenarios you pointed to that by the end of the decade, Medicaid enrollment is going to be lower than where it started, but rates might be 40% or 50% higher in a 1 incorporate lower admin loads going forward? And have you kind of factored that into your long-term outlook?

Mark, do you want to take that?

Yes, absolutely. Most states do everything around the MLR line, some states have begun thinking about the admin side. But honestly, it's not something that we're seeing very much of even in the few instances we see it for Molina with a best-in-class structure, it's not necessarily prohibitive. I think when you see something like that, it's really aimed at the very extreme players that have the least attractive G&A ratios. It hasn't been a limiter for us. Not seeing much penetration and where you do, it's not a limiter.

George Hill from Deutsche Bank. I've got a quick 1 for Joe and a quick 1 for Mark. Do you have a top-down kind of perspective on what state Medicaid spend looks like from now through 2029. Like is that number up? Or is that number down? And I'd love to know how you think about the interplay between the decline in membership and the growth in rate like from a state perspective because they tend to be solving for a budget line item. And then, Mark, if you could just sort of rank order or unpack the 150 basis points in MLR improvement as we look out over the next couple of years, like how much of it is rate ahead of trend, how much of it is medical management? How much of it is benefit cuts at the state level. Would love to hear kind of like the building blocks as we think about the expansion there.

We have a very intense effort internally. Health care is all local, and it's -- there's no national trend really it's state by state. So we track very carefully is the state in surplus or deficit. Do they still have rainy day funds from all the COVID stimulus money that went out. How do they think they're going to handle what we call the indirect impacts. The OB3 has direct impacts, right, work requirements semi and reterminations. How about on the indirect impacts in terms of provider taxes and MCO taxes. So we're tracking that. And we have a very, very cable, if not intense, government affairs engine that stays wired into how states are thinking about managing your spend. Every day, you'll see a report come out from 1 of the 1 of the industry publications that talks about some state taking $200 million out of the program for this or putting $200 million in for that. We track all that. Right now, I would say the big watch out? Or unknown would be how are they going to react to when the FMAP match on the indirect taxes begins to hit their budget, what will they do? Where it follow political lines red versus blue in terms of membership and benefits. But there still are incidental benefits, value-added benefits that could be cut if they wanted to. So we're tracking it state by state. Those types of issues were fully contemplated in our revenue outlook. And as states make their decisions, we'll be reporting what happens to our revenue base. accordingly. Mark, do you want to take the second question?

I think the question was how do I think about the MLR recovery? Yes. So we're not going to get into the specific components because that would essentially be laying out trend in rate for the next 3 years, which I don't have a crystal ball to do. Here's the better way I would think about it though. If the industry is underfunded by 300 bps, it has to get back at some point. But maybe a different version of the question is how long does it take? Joe alluded to this, if trend settles down and normalizes, rates can catch up a lot quicker. If trend bounces around and stays higher, it will be harder for rates to catch up. And if trend goes down, my gosh, rates probably catch up even quicker. So on the 300 basis points, I don't have the crystal ball to say how quickly does that come back? But what gives me great comfort is I'm only looking for 90% of it. And more to the point, we're not assuming anything in the 90% on our ability to manage medical costs better than we do today. So that's just market exposure.

Michael [indiscernible] from Baird. So with the incoming D-SNP integration role, are you seeing any fierce competition for acquiring these lower-performing Medicaid assets from MA plans that are under index in Medicaid heading into next year and that ramping up in the '29.

I want to make sure I understood the question. The question was on -- can you hear me, on M&A? .

Yes, M&A, the incoming D-SNP integration role. Medicaid, Medicare Advantage? Are you seeing fiercer competition in M&A for Medicaid assets across the country?

No, I wouldn't say we're seeing any increased competition on Medicaid properties at all. They're still out there. Most of the ones that have come to market are what I'll call underperforming, I would even say maybe distressed. Distressed is a little worse than underperforming. And the question is, when we look at an M&A opportunity, whether it's because they can't compete in D-SNP or not or they're just running out of capital. What we look at is perpetuity of revenue stream. Give me a long-dated revenue stream, and these guys are going to manage it to target margins, absolutely convinced a bit. Now whether those target margins are 2.5%, 3.5% to 4.5%, remains to be seen. But right now, our target is 2.5%, but look for long-dated revenue streams, the reprocurement is out there. The membership is stable. And if it's distressed but not broken, then we trust our operators to open up the milling playbook and get it to target margins. But no, I wouldn't say that the opportunities are getting any more competitive than they were and [indiscernible] is here somewhere is done with his team a brilliant job of creating proprietary opportunity, opportunities that don't come to market. We just have a great story to tell about being part of the Molina family of companies, particularly not for profits. They like the story. They're running out of capital. I need a capital base. I need a big brother. I need a brand. We really like our local presence. Let me become part of the Molina family. 4 out of our 9 deals were nonprofit maybe more. They like the story. But no, we're not seeing that much more increased competition that makes us less confident in the $4 billion of revenue we projected.

Great. And 1 more. On the incoming Medicaid interim final rule by June 1, is what I guess what key details are you looking for that you would consider like your base case, like a good scenario? Are there key definitions around medical frailty that you're looking for?

It's a great question because it's unanswered at this point in time. I'll kick it to these guys because we've -- the 3 of us have been totally immersed in this, is that we have a slight advantage over many of the market because we're in Nebraska. And they're they go May 1 or June 1st, May 1, they already went. So we're using that as kind of our laboratory. Medical frailty undefined. These are going to social security definition or come up with their own who knows. -- what types of information do you actually have to submit to prove the work requirement or the 80-hour requirement? Don't know. How aggressive are they going to be on ex parte, how aggressive they're going to be on on procedural. None of that is known. Nebraska has taken its own position on this and doing what they think is right, and we're following it along. But we have our tentacles as you can imagine, in every single state we're certainly following the final rule. The 3 issues you mentioned are the big ones. What's medical frailty and what types of information do I need to support someone being eligible or ineligible. It's pretty clear what managed care can and can't do. For the most part, we can't participate in the process. We can educate and inform and provide clinical information that proves frailty, but we can't actually participate in the process. That's a general statement. It's pretty true across the states.

Yes, sir. Ryan Langston from TD Cowen. On the initiatives growth, you're assuming 33% wins track record 80%. It sounds like you have some visibility maybe near term and some opportunities. Why assume only 33%, I think, to get to that $80 is another $8 billion of opportunity pretty substantial.

The truth is we like the 15% CAGR at $64 billion. And when you look at $90 billion of opportunity and 20% market share, it's a little too sporty. And look, 80% win rate that's hard to reproduce. But I'm telling you, I can go and call that slide up and go state by state. And Mark and myself and Jim are neck deep in the business development process with our business development team and our operators. We're very close to what goes on there. I like our chances to beat -- but trying to be conservative, put a realistic view out there, something that is eminently achievable. We kind of just reduced the win rate $6 billion of revenue or whatever came to seemed to be enough, and it supports a 15% growth rate. As I said, 33%. We're not going to be happy with that. We have to make sure that people don't take that as an internal target.

50% growth rate, 15% CAG I think we made our point -- we're a growth business. To Joe's point, sure, I said more, but I don't know that we need to put more on the table here.

And then just on M&A, is that likely more a couple of smaller transactions? Are there assets available that you could hit that maybe 1 or 2 transactions .

Yes. If you look over time, we've done a little bit of both. We've done some large ones. We did 1 as large as $3 billion revenue, and we've done some in the $0.5 billion of revenue. We've got a pipeline at any given time, we're in advanced discussions with a couple of targets. Over the last 6 months, we've been in deep discussions with 2 very large ones, another large 1 just came up. And there's always a couple of small ones out there, closer to the $0.5 billion size. So I'm not going to comment more than that, they arrange the gamut.

All right. It looks like we are done. Yes, Jeff, we're done?

No, you're good.

Thank you for attending our 2026 investor conference, and thank you for your interest in our company. we aim to deliver. This is an interesting environment right now. We're not happy with our recent performance. We're proud of our 8-year track record. The industry went into a downturn. the rate trend imbalance, and I assure you that the apparatus, the engine, the machinery we built to create durable and sustainable, profitable growth is intact. And when that fuel line becomes unclogged rates will get back to the normal trajectory you expect from us, and we're going to deliver these numbers. Thanks for attending today. Take care. Have a great weekend.