EX-99.1 2 a51814510ex99_1.htm EXHIBIT 99.1
Exhibit 99.1
Molina Healthcare, Inc.Investor Day 2018 May 31, 2018 SSID: Molina Healthcare Password: #MOH2018

Cautionary Statement Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:This slide presentation and our accompanying oral remarks contain forward-looking statements regarding, without limitation, our business, operations, turnaround, plans, guidance, projections, and longer-term outlook within the meaning of Section 27A of the Securities Act of 1933, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, or Securities Exchange Act. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with such safe harbor provisions. All statements, other than statements of historical facts, included in this presentation may be deemed to be forward-looking statements for purposes of the Securities Act and the Securities Exchange Act. Without limiting the foregoing, we use the words “anticipate(s),” “believe(s),” “estimate(s),” “expect(s),” “guidance,” “intend(s),” “may,” “outlook,” “plan(s),” “project(s) or “projection(s),” “will,” “would,” “could,” “should,” and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guarantee that we will actually achieve the plans, intentions, outlook, or expectations disclosed in our forward-looking statements and, accordingly, you should not place undue reliance on our forward-looking statements. Anyone viewing or listening to this presentation is urged to read the risk factors and cautionary statements found under Item 1A in our Form 10-K annual report, as well as the risk factors and cautionary statements in our quarterly reports and in our other reports and filings with the Securities and Exchange Commission and available for viewing on its website at sec.gov. Except to the extent otherwise required by federal securities laws, we caution you that we do not undertake any obligation to update forward-looking statements made by us. 2

Agenda 9:30 – 9:35 Welcome and Overview Ryan Kubota & Joe Zubretsky 9:35 – 9:50 Company Overview 9:50 – 10:50 The Plan Joe Zubretsky 10:50 – 11:15 Projections 11:15 – 11:30 Break 11:30 – 12:00 Health Plan Operations Pam Sedmak 12:00 – 12:20 Financial Discussion Joe White 12:20 – 1:00 Q&A 1:00 – 2:00 Lunch 3

Welcome and Overview 4

Investment Thesis The growth opportunity in government-sponsored healthcare is enhanced by Molina’s active turnaround Low-Risk Execution Long-Term Growth Potential Compelling Turnaround Opportunity Strong presence in government-sponsored programs aligns with highest-growth profit pools in managed care Turnaround in a strong growth sector yields clear margin expansion opportunity Turnaround builds upon a stabilized earnings base and is off to a solid start as evidenced by first quarter earnings and 2018 guidance 5

Realigned management incentive programs with investor objectives Produced solid first quarter results and raised guidance Formed a new executive leadership team Early Accomplishments Management has taken swift and decisive action in first six months Addressed burdensome SG&A profile Strengthened balance sheet Solved short-term liquidity challenge Revamped contract procurement process and posted early win 6

The Team We have assembled a team of industry-leading senior executives who know how to win, recruit top talent and execute Pam Sedmak Health Plans Jim Woys Health Plan Services Mark Keim Transformation Tom Tran CFO Jeff Barlow General Counsel Sherri Hollingsworth Human Resources Hal Gooch, M.D. CMO Joe Zubretsky President & CEO Ron Kurtz Chief of Staff New management 7

Company Overview Joe ZubretskyPresident & Chief Executive Officer 8

Our Franchise High-quality health care through government programs for disadvantaged people 152 Ranking Began as a single clinic serving Medicaid patients 3-year revenue CAGR of 10% through 2018 revised guidance 3-year membership CAGR of 11% through March 2018 Well-diversified, staggered reprocurements $19B Revenue 4.1M Members 15 Markets Fortune 500 9

Geographic Diversification Revenue base spans 14 states and the Commonwealth of Puerto Rico Premium Revenue by State $2.5B $1.5B $ 0.8B ≤$ 0.4B Puerto Rico Geographically diversified with no state greater than 18% of premium revenue Meaningful in-state market share Staggered reprocurements Strong incumbency status, resilient state relationships and growth opportunities Florida and New Mexico Lost Revenue ($2.7B combined) 10

Full Range of Government-Sponsored Product Lines Core Medicaid footprint provides access to valuable high-acuity populations Note: Company estimates for 2018 Premium Revenue Mix 32% TANF & CHIP 17% Expansion 30% ABD 8% MMP 61% TANF & CHIP 16% Expansion 10% ABD 2% MMP 1% D-SNP 10% Marketplace 4% D-SNP 9% Marketplace Product Membership Mix 11

Complementary Business Lines Opportunities for future growth in D-SNP, MMP, and Marketplace 1 Medical Care Ratio excludes impact of prior year CSR of $70M Marketplace Revenue Medical Care Ratio 1 Extension of core Medicaid population Leverage existing Medicaid network Risk pools stabilizing Potential to merge with Medicaid expansion D-SNP and MMP Revenue Medical Care Ratio Complements core Medicaid business High-acuity population Growth product line with opportunity for increased penetration Age-in opportunity 12

Pivoting from Past Performance Turnaround underway as operational reset restores margins 1.5% - 1.6% Total Revenue and Net Income Margin Turnaround Underway New management team Execution on managed care fundamentals Effective operational and financial infrastructure Improved Marketplace performance Effective management of high-acuity populations Stabilize existing footprint $ in Billions 1.0% 2015 2016 2017 2018 Guidance 14.2 17.8 19.9 18.7 0.3% -2.6% 13

Portfolio Performance Strong base of well-performing businesses with significant performance upside across the enterprise 2018 Revenue Mix by Profitability Opportunities for Improvement Leverage success in California, Ohio, Michigan, Texas, and Washington to other health plans Performance manage Illinois, New York, and Puerto Rico Manage effectively the pending run out of New Mexico and Florida Grow subscale plans 2% After-Tax Margin or Greater Below 2% After-Tax Margin but Profitable Not Profitable FL/NM Assumed Lost Revenue 58% 20% 7% 15% 14

Guidance (as of April 30, 2018) Low High Total Revenue $18.7B $18.7B MCR 89% 88% G&A Ratio 7.4% 7.4% Net Profit Margin 1.5% 1.6% Net Income per Diluted Share $4.00 $4.50 2018 Guidance We reaffirm with a high degree of confidence Key Assumptions No benefit from prior period development Excludes any restructuring costs that might be incurred subsequent to March 31, 2018 Excludes impact of future potential capital transactions Includes $0.62 per diluted share of performance improvements not included in original guidance Includes $0.38 per diluted share for certain items not included in original 2018 guidance 15

Secure Existing Business Recent success, process revamp, and incumbency fuel our confidence Company Health Plan Washington Puerto Rico Texas Medicaid Programs All TANF and CHIP ABD TANF and CHIP Annualized Revenue $1.8 $0.7 $1.5 $0.3 Status Awarded Award Pending Submitted In-Flight Award Date May 24, 2018 June 2018 October 2018 January 2019 $ in Billions 16

The Plan Joe Zubretsky President & Chief Executive Officer 17

The Plan: Overview A clear path to attractivemargins by 2019 1 2 3 Margin recovery Restore margins through operating improvements and managed care fundamentals Secure revenue base and position to grow Win in-flight reprocurements and pursue measured growth Capital management Enhance balance sheet and capital management discipline 18

The March to Margin Recovery Turnaround is well underway with path to attractive margins by 2019 2019 2020 2018 Earnings Capital Revenue Base Margin Recovery Organization Rebuild senior leadership team Defend existing revenue in reprocurements Identify and implement profit improvement initiatives De-lever and simplify capital structure GUIDANCE Fill talent gaps in second line Rebuild revenue pipeline Manifest run-rate impact in earnings and achieve margins of at least 1.9% Achieve target capital structure PROJECTION Seasoned management team in place Harvest new revenue opportunities Sustain margins of 2.3% or higher Redeploy free cash flow OUTLOOK 19

Total Revenue and Percentage Growth Three-Year Outlook: Revenue Despite lost contracts, we will maintain scale and resume measured growth in 2020 2018 a year of decisive action, revenue stabilization, and turnaround 2019 revenue declines due to $2.7 billion premium loss in Florida and New Mexico, HIF moratorium Modest top-line growth resumes in 2020f rom rebuilding pipeline in 2019, other short-term opportunities, and resumption of HIF Outlook assumes a reasonable rate environment (11.8%) 7.9% $ in Billions 2018 Guidance 2019 Projection 2020 Outlook $17.4 $15.6 $16.5 $1.3 $0.9 $18.7 $17.8 Non-Premium Revenue Premium Revenue 20

Three-Year Outlook: Net Income Plan achieves attractive margins by 2019 In 2018, we stabilized the business and achieved a credible baseline In 2019, we currently project to lose $50 million of contribution margin from Florida and New Mexico, but profit improvement initiatives expand margins In 2020, we expect to drive margin recovery and return to growth, while restoring operating leverage More efficient capital management expected to drive additional EPS upside to this earnings outlook Net Income Margin 1.5% - 1.6% 1.9% - 2.2% 2.3% - 2.7% 2018
Guidance 2019 Projection 2020 Outlook 21

The Plan A clear path to attractivemargins by 2019 1 2 3 Margin recovery Restore margins through operating improvements and managed care fundamentals Secure revenue base and position to grow Win in-flight reprocurements and pursue measured growth Capital management Enhance balance sheet and capital management discipline 22

Margin Recovery At the midpoint, profit improvement initiatives represent a $500 million opportunity for 2019 and beyond Margin Recovery Fundamentals Opportunity Estimate ($ in Millions, before tax) Medical Costs Administrative Costs Revenue Utilization Management High-Acuity Care Management Pharmacy Core Facility and Physician Networks Ancillary Services and Network Claims Payment Integrity Corporate SG&A Control Corporate SG&A Transformation At-Risk Revenue $225 - $325 $100 - $150 $75 - $125 $400 - $600 Total 23

Timing of Pre-Tax Earnings Impact 60% of the total opportunity realized in projection period after considering timing and execution risk Opportunity Midpoint 2019 2020 2021 and Beyond Resources allocated Work streams commenced Redundancies harvested Behavioral change Process engineering and redesign Third party negotiation $ in Millions Greater execution complexityT ransformation and innovation TBD 24

Opportunity Estimate ($ in Millions) Margin Recovery: Utilization Management 2017 Challenges 2018 Actions Prior authorization and concurrent review processes Inpatient utilization; $4.8 billion annual expense Emergency room; $1.9 billion annual expense Excess short-term hospital admissions Clinical policy inventory Specialty referrals processes Improving utilization management and concurrent review capabilities Moving short stays to observation status Deepening clinical policies focused on medical necessity Expanding specialty referrals Contracting rent-to-own specialty utilization management $40 $60 Low End High End 25

Opportunity Estimate ($ in Millions) Margin Recovery: High-Acuity Care Management 2017 Challenges 2018 Actions Long-term care and behavioral health benefits under-managed Opioid Use Disorder; 65,000 members Disparate models of care deployed locally, leading to inconsistent interventions High-impact member engagement NICU utilization management; $210 million annual expense Long-term care benefit: 240,000 lives; $1.7 billion annual expense Built new clinical leadership and enhancing care systems and platform Implementing opioid use disorder program Improving integration of behavioral, medical and long-term care services New NICU physician leadership with focus on improved performance Emphasizing targeted care coordination and improved transitions of care $30 $50 Low End High End 26

Opportunity Estimate ($ in Millions) Margin Recovery: Pharmacy 2017 Challenges 2018 Actions Pharmacy benefit under-managed Utilization management (UM) and formulary compliance Specialty drug unit costs and site of service Generic dispensing rate too low Analytical expertise AWP discounts lower than market Average cost per script too high Gross annual spend $3.5 billion Installed new pharmacy leadership Consolidating pharmacy UM under new leadership Implementing specialty drug management initiatives Adjusting formulary to encourage generic dispensing Outsourcing pharmacy advanced analytics Conducting market check and re-contracting PBM $50 $70 Low End High End 27

Opportunity Estimate ($ in Millions) Margin Recovery: Core Facility and Physician Networks 2017 Challenges 2018 Actions Broad and untailored networks Inpatient cases reaching outlier status (% of billed charges) Contract unit costs not competitive in certain geographies Limited financial impact of value based reimbursement Tailoring narrow networks to take advantage of scale Remediating disadvantageous outlier contract terms and leveraging competition among hospitals Partnering to share financial risk and opportunity with high-quality providers Aligning provider incentives through value based reimbursement $35 $55 Low End High End 28

Opportunity Estimate ($ in Millions) Margin Recovery: Ancillary Services 2017 Challenges 2018 Actions No cost center focused leadership Behavioral health, lab, DME, dental, transportation, and vision undermanaged Multiple vendor contracts, inconsistent standards Behavioral health benefit: 330,000 lives, $400 million annual expense Non-behavioral ancillary services; $700 million annual expense Established cost center leadership Coordinating ancillary services with medical services to realize greater value Moving to more efficient preferred vendors for national services Driving lab utilization to preferred vendors and points of service $50 $60 Low End High End 29

Opportunity Estimate ($ in Millions) Margin Recovery: Claims Payment Integrity 2017 Challenges 2018 Actions Sub-optimal provider payment process Claims backlogs, excessive re-work Provider abrasion Grievances and appeals Claims edits not implemented to market standards $135 million in provider settlements in 2017 $30 million in penalties and interest on claims in 2017 Established new claims and payment integrity leadership Increasing automation and standardization Standardizing system, benefit and provider configuration with quality assurance Revamping appeals and grievances process Installing full suite of claims edits and DRG groupers Deploy comprehensive COB capabilities $20 $30 Low End High End 30

Opportunity Estimate ($ in Millions) Margin Recovery: Corporate SG&A Control 2017 Challenges 2018 Actions Health plan operating decisions frequently subordinated to corporate headquarters Staffing, compensation and talent performance not always aligned with business needs Numerous labor pools in high-cost geographies Excess real estate capacity; 40% vacancy Heavy reliance on temporary and costly consultants Transforming culture to emphasize centrality of the heath plans Continuing talent review, delayering and redundancy elimination; introducing salary levels and job families Realigning labor pools to access lower cost markets Consolidating footprint to rationalize office space Reducing dependence on consulting and contract labor $25 $50 Low End High End 31

Opportunity Estimate ($ in Millions) Margin Recovery: Corporate SG&A Transformation 2017 Challenges 2018 Actions Majority of corporate functions performed in-house with low efficiency or efficacy benchmarkingLow utilization of outsourcing opportunities even in commodity functionsLow awareness of best-in-class service or economicsIT operations costly and ineffective Established office of transformation to lead analysis and actionEvaluating all functions for co-sourcing and out-sourcing opportunities Measuring performance against best-in-class service and economics 32

Opportunity Estimate ($ in Millions) Margin Recovery: At-Risk Revenue 2017 Challenges 2018 Actions Risk scores in Medicaid and Medicare are not consistentwith member acuityLow quality scores reduce Medicaid auto-enrollmentSTAR ratings in Medicare range from 2.5 to 3.5; no 4.0 STAR plansMarketplace business pays 30% of gross revenue intothe risk adjustment poolRetaining 70%-80% of Medicaid quality revenue Established new clinical operations leadership; organizing centralized resources more effectivelyIncentivizing providers to submit complete encounter dataImplementing improved HEDIS and other quality platforms that target STAR and at-risk quality measuresIdentifying and engaging more effectively with high-cost membersBetter member targeting and chart chases 33

The Plan A clear path to attractivemargins by 2019 1 2 3 Margin recovery Restore margins through operating improvements and managed care fundamentals Secure revenue base and position to grow Win in-flight reprocurements and pursue measured growth Capital management Enhance balance sheet and capital management discipline 34

Secure Revenue Base and Position to Grow Focus on reprocurements and rebuilding the growth engine Action Realized In Short-Term Opportunities 2019-2020 Long-Term Strategic Value 2020 and Beyond Secure Existing Business 2018 Win reprocurements in Washington, Texas, and Puerto Rico Pursue organic growth and carve-ins in current markets and products Renew focus on procurements to enable opportunities in new markets 35

Secure Existing Business Recent success, process revamp, and incumbency fuel our confidence Company Health Plan Washington Puerto Rico Texas Medicaid Programs All TANF and CHIP ABD TANF and CHIP Annualized Revenue $1.8 $0.7 $1.5 $0.3 Status Awarded Award Pending Submitted In-Flight Award Date May 24, 2018 June 2018 October 2018 January 2019 $ in Billions 36

Short-Term Opportunities Building on 2018 momentum, revenue opportunities in our core markets are achievable in 2019 and 2020 2020 Improve auto-assignment Increase voluntary selectionExpand geographically in existing markets Benefit carve-ins Targeted Marketplace growthD-SNP penetration and expansion $600 Realized In Total EstimatedRevenue Sources of Growth 2019 $600 $1.5 - $3.0 Identified Pipeline $1.0 - $1.5 ($ in Billions) ($ in Millions) 37

Long-Term Strategic Value Renew focus on procurements to enable opportunities in new markets Potential New Markets Kentucky W. Virginia Delaware Indiana Minnesota Georgia Tennessee Nevada 2016 Medicaid Spend $9.5 $3.5 $2.0 $10.5 $11.0 $9.5 $9.5 $3.5 2016 Managed Care Spend $7.0 $1.5 $1.5 $4.5 $5.0 $4.0 $6.0 $1.5 $ in Billions Sources of Growth Realized In Total Estimated Revenue 2020 andBeyond TBD Identified Pipeline $5.0 - $8.0 Improve auto-assignment Increase voluntary selectionExpand geographically in existing markets Benefit carve-ins Targeted Marketplace growthD-SNP penetration and expansionExpand to new states 38

The Plan A clear path to attractivemargins by 2019 1 2 3 Margin recovery Restore margins through operating improvements and managed care fundamentals Secure revenue base and position to grow Win in-flight reprocurements and pursue measured growth Capital management Enhance balance sheet and capital management discipline 39

Capital Management: Debt Overview Suboptimal capital structure creates an opportunity to drive shareholder value Note: Balance sheet as of March 31, 2018, market value as of May 25, 2018 Debt currently $2.0 billion of book valueConvertible notes create share count volatilityRevolver partially drawn and bridge facility in placeQ1 Debt/Cap 56%Recent Moody’s downgrade to B3 Fully Diluted Shares Convertible Bonds Drive Debt to Higher Values Summary 40

Capital Management: Parent Company Cash Resources Turnaround will generate substantial cash at the parent company Sources of Cash ($ in Millions) Robust dividend flow No new equity issuance neededSubstantial parent-level cash balancesSubsidiaries now adequately capitalizedParent company cash flow more predictableNo reliance on revolver2019 dividend includes expected release of Florida and New Mexico capital 41

Capital Management: $0.40 To $0.50 Per Share Opportunity Significant and immediate redeployment opportunity on excess cash can drive shareholder value Potential Impact Repay Revolver 1 2 Terminate Bridge Facility 3 Repurchase or Redeem Convertibles 4 Repurchase High-Yields 5 Stock Buyback Cash Redeployment Strategies Estimated Range Net Income Impact Share Count Impact EPS Annualized Debt to Cap From 56% To 50% 42

Capital Management: Longer-Term Outlook With optimal capital structure, attractive underlying cash flow profile enables multiple redeployment strategies to drive incremental shareholder value Faster Organic Growth 1 2 Inorganic Growth 3 Share Repurchase 4 Shareholder Dividends Capital Redeployment Strategies Excess Capital Generation >30% 2.3%-2.7% 10% >20% 43

Projections Joe Zubretsky President & Chief Executive Officer 44

Total Revenue and Percentage Growth Three-Year Outlook: Revenue Despite lost contracts, we will maintain scale and resume measured growth in 2020 2018 a year of decisive action, revenue stabilization, and turnaround 2019 revenue declines due to expected $2.7 billion premium loss in Florida and New Mexico, HIF moratorium Modest top-line growth resumes in 2020from rebuilding pipeline in 2019, other short-term opportunities, and resumption of HIF Outlook assumes a reasonable rate environment (11.8%) 7.9% $ in Billions 45

Three-Year Outlook: Net Income Plan achieves attractive margins by 2019 In 2018, we stabilized the business and achieved a credible baseline In 2019, we currently project to lose $50 million of contribution margin from Florida and New Mexico, but profit improvement initiatives expand margins In 2020, we expect to return to growth and accelerate margin recovery More efficient capital management expected to drive additional EPS upside to this earnings outlook Net Income Margin 46

2019 Projections: Lost Medicaid Contracts Lost revenue in New Mexico and Florida, currently under protest, is expected to be a modest headwind due to lost contribution margin 2018 Guidance Metrics New Mexico Florida Total Membership 220,000 355,000 575,000 Premium Revenue $1.2B $1.5B $2.7B Administrative Expense $140M $160M $300M Contribution to Fixed Overhead $20M $30M $50M 47

2019 Projections: Premium Revenue Contract losses are expected to lead to a decline in revenue in 2019 $ in Millions ($2,700) 48

2019 Projections: Pre-Tax Income Profit improvement initiatives are expected to offset impact of contract losses 1. 2018 Guidance Adjusted is 2018 income before taxes per 2018 Guidance, reduced by: 1) the net benefit of $35 million for items that were not included in the Company’s preliminary 2018 Guidance; and 2) the impact of the ACA Health Insurer Fee. More efficient capital management is expected to drive additional EPS impact of $0.40-$0.50 $60 $60 1 $ in Millions 1.5% 1.9%-2.2% Net Income Margin $35 ($50) 49

2020 Outlook: Premium Revenue Organic growth and yield are expected to drive a 6% increase in 2020 and accelerate positive operating leverage $ in Millions 50

2020 Outlook: Pre-Tax Income Modest growth, operating leverage, and accelerating profit improvement initiatives are expected to sustain a 2.3% margin or higher by 2020 More efficient capital management is expected to drive additional EPS impact of $0.40-$0.50 $90 $90 $ in Millions 1.9%-2.2% 2.3%-2.7% Net Income Margin $715 51

The Plan A clear path to attractivemargins by 2019 Our Plan is Achievable Profit opportunities are identified; merely executing on fundamentalswill achieve our goals Assumes only 60% of identified profit improvement initiativesharvested through 2020 In 2020, only $600 million of revenue growth from a short term pool of $1.5 to $3.0 billion is needed to accelerate operating leverage Includes appropriate contingencies for inherentoperating uncertainties 52

Break 53

Health Plan Operations Pam SedmakExecutive Vice President, Health Plan Operations 54

Strong relationships with state partners, providers and communities reinforced by new leadership Years of combined incumbency experience with significant local relationships Organic opportunities for long-term growth in all geographies Core Competencies and Growing Strengths A solid foundation for building optimal performance Experienced plan presidents Deep experience managing government programs across multiple products Effective mid-level leaders identified and promoted Performing plans lead the way with proven best practices that we scale 55

Portfolio Performance Strong base of well-performing businesses with significant performance upside across the enterprise 2018 Revenue Mix by Profitability Opportunities for Improvement Leverage success in California, Ohio, Michigan, Texas, and Washington to other health plansPerformance manage Illinois, New York, and Puerto RicoManage effectively the pending run out of New Mexico and FloridaGrow subscale plans 56

Operating Discipline, Rigor, and Accountability Essential for plan performance, margin recovery, and sustainability Operating Discipline Multi-Disciplinary Approach Weekly performance dashboardsRegular forecast updatesMonthly/quarterly operating reviewsPerformance improvement initiativesSWAT teams Full organizational involvementPlan President – ultimate accountabilityFinance/actuary – stewardship, transparencyShared services – service level agreementsExecutive leadership team engagement Early Indicators–Daily/Weekly Unpack Trends and Take Action Rigorous Bid and Rate Reviews Performance Incentive Alignment 57

Health Plan Performance Turnaround: Illinois Impact of new leadership and operating discipline 2017 Challenges 2018 Actions $593M 107.6% 2017 Premium Revenue 2017 MCR $141M 86.4% 1Q 2018 Premium Revenue 1Q 2018 MCR Inexperienced senior leadership with high leadership turnoverPervasive provider claim payment issuesKey provider facility contracts not competitiveHealth care services team allocated limited and ineffective resources Installed completely new, seasoned leadership teamConfirmed accuracy and completeness of all major provider contracts and reviewing payment accuracy of every large claim >$50,000Terminated a high-cost provider and renegotiated four facility contractsHired new clinical leadership, retrained staff on proper clinical determinations, focused care managers on highest-risk cases, and integrated behavioral health into all clinical teams 58

Health Plan Performance Turnaround: Ohio Building momentum 2017 Challenges 2018 Actions $2.2B 89.1% 2017 Premium Revenue 2017 MCR $577M 82.6% 1Q 2018 Premium Revenue 1Q 2018 MCR New plan leadership with variable performanceClinical management inconsistent with a lack of focus on high-priority issues Marketplace underperforming – MCR 93.7% and low capture of at-risk revenueSignificant gaps in provider network Recruited seasoned CMO and head of health care servicesReduced readmissions, inpatient short stays and ER visits, while significantly improving transitions of care Implemented comprehensive post-acute care program and materially improved at-risk revenue captureSuccessfully contracted with major provider and recontracted with other key providers in central and southeast regions 59

Product Performance: D-SNP and MMP Focusing on the basics and sharing best practices 2017 Challenges 2018 Actions $2.0B 88.4% 2017 Premium Revenue 2017 MCR $514M 84.8% 1Q 2018 Premium Revenue 1Q 2018 MCR Product leadership internally focused and lacking breadth of expertiseTactical, not strategic, approach to MedicareCostly distribution and sales channelRisk adjustment accuracy and completeness not aligned with relative risk assumedSTARS performance decline impacting margin and ability to offer enhanced benefits Restructuring organization – installing new leadership,flattening structure, reorienting focus, reducing costsStrategically targeting where and how best to playReducing cost per sale and more efficiently supporting brokersImproved member identification for assessments/provider visits,more effective chart chases, and enhanced reportingFocusing on targeted STARS intervention plans (hybrid and administrative measures) improving medication therapy management, and member/provider experience 60

Product Performance: Marketplace Stabilizing and building sustainability 1.Medical Care Ratio excludes impact of prior year CSR of $70M 2017 Challenges 2018 Actions $3.0B 88.1% 2017 Premium Revenue 2017 MCR $430M ~67% 1Q 2018 Premium Revenue 1Q 2018 MCR1 Expanded footprint faster than capacity to manageInsufficient rates given level of risk transferNon-competitive contracts with key providers in some geographiesRisk adjustment accuracy and completeness not alignedwith relative risk assumedSuboptimal operating processes Reduced footprint by half, exiting non-competitive marketsIncreased rates to better account for level of risk transferRetained select footprints where able to negotiate more competitive network termsImproved member identification for assessments/provider visits,more effective chart chases, and enhanced reportingImproved enrollment, claims, premium, deductible, and accumulator processes 61

Rebuilt Procurement Process Procurements are given the highest priority; 2018 win in Washington 2017 Challenges 2018 Actions Inadequate procurement resourcesProcurement team drove/controlled processat parent company levelProcurement process entirely internalNo executive leadership involvement in procurement process Full leadership restructuring and retrainingPlan President drives RFP with support and co-locationof RFP team, win themes/strategies clearly definedImplemented outside, unbiased expert reviews of RFP responses to ensure concise and impactful answers Executive leadership fully engaged and applying all enterprise resources to procurement needs 62

Financial Discussion Joe WhiteChief Financial Officer 63

Guidance (as of April 30, 2018) Low High Total Revenue $18.7B $18.7B MCR 89% 88% G&A Ratio 7.4% 7.4% Net Profit Margin 1.5% 1.6% Net Income per Diluted Share $4.00 $4.50 2018 Guidance We reaffirm with a high degree of confidence Key Assumptions No benefit from prior period developmentExcludes any restructuring costs that might be incurred subsequent to March 31, 2018Excludes impact of future potential capital transactionsIncludes $0.62 per diluted share of performance improvements not included in original guidanceIncludes $0.38 per diluted share for certain items not included in original 2018 guidance 64

Revenue and Net Income Outlook Despite the 2019 revenue setback, we expect to achieve sequential margin growth 2019 margin percentages expand despite expected $2.7 billion premium loss in Florida and New Mexico Projection and Outlook include appropriate contingencies for inherent operating uncertainties In 2020, we expect to return to growth and accelerate margin recovery More efficient capital management expected to drive additional EPS upside to this earning outlook $ in Billions 1.5%-1.6% 1.9%-2.2% 2.3%-2.7% Total Revenue and Net Income Margin 65

Capital Management: $0.40 To $0.50 Per Share Opportunity Significant and immediate redeployment opportunity on excess cash can drive shareholder value Potential Impact Repay Revolver 1 2 Terminate Bridge Facility 3 Repurchase or Redeem Convertibles 4 Repurchase High-Yields 5 Stock Buyback Cash Redeployment Strategies Estimated Range Net Income Impact Share Count Impact EPS Annualized Debt to Cap From 56% To 50% 68

Financial Dimensions of Margin Recovery Financial actions expected to increase earnings and reduce volatility Action Impact Medical claimsand benefits payable Less downward volatility to earnings Introduce more conservativism into estimates and improve processes Marketplace risk adjustment liability Less downward volatility to earnings Introduce more conservativism into estimates and improve processes Taxes Reduced effective tax rate Increase pre-tax income Share count Reduced diluted shares outstanding Deploy cash 67

Medical Claims and Benefit Payable Prior period development returned to historical levels in the first quarter 2018 2017 Issues Unfavorable 2016 claims run-out exacerbatedpoor 2017 performanceInaccurate and inconsistent claims processingHigh volume of provider settlementsLimited input from health plan teams Actions Improved accuracy and consistency of claims processingMore rigorous assessment of potential provider settlementsCollaborative engagement of health plan, claims, finance and actuarial teams Excess (Deficit) of ReservesHeld Over Amount Ultimately Paid 2015 2016 2017 2018 Target Range 8% - 10% 68

Marketplace Risk Adjustment Liabilities More rigorous estimates expected to reduce negative earnings volatility 2015 and 2016 year end estimates were inadequate, so starting in 2017 we added an incremental risk margin to our estimates. Margin/(Deficit) on Marketplace Risk Adjustment Liability $ in Millions Historical Issues Large prior year expenses recorded in 2016 and 2017 Competitor risk scores underestimatedNo margin for adverse development of estimates Actions More rigorous base estimatesGreater reliance on third party estimates ofcompetitor risk scores Margin added to estimates to account for unknown variability in competitor performance 2015 2016 2017 69

Effective Tax Rate (ETR) and Pre-Tax Income The Health Insurer Fee has a noticeable impact on ETR ETR and Pre-Tax Income ($ in millions) Nondeductible expenses (ACA health insurer fee and a portion of executive compensation) result in an effective tax rate that exceedsour statutory tax rate Impact of nondeductible expenses onthe effective tax rate is diluted as incomebefore tax increases Incremental changes to income before taxare tax-effected at a 22% statutory tax ratein most cases 70 2018 ETR 2019 ETR ETR and Pre-Tax Income ($ in millions)
42.5% 32.3% 25.8% 24.0% 400 425 450 475 500 525 550 575 600 625 650 675 700 725 750 775 800 Pre-Tax Income

Share Count Dilution and Stock Price Convertible notes increase total fully-diluted share count as stock price rises Share Count Dilution and Stock Price Convertible notes increase total fully-diluted share count as stock price rises 63.6M 64.5M 65.3M 66.0M 66.6M 67.1M
67.6M 68.0M 68.4M 68.8M 69.1M 69.4M 60M 61M 62M 63M 64M 65M 66M 67M 68M 69M 70M $65 $70 $75 $80 $95 $90 $95 $100 $105 $110 $115 $120 Share Count Share Price 71

Q&A 72

Investment Thesis The growth opportunity in government-sponsored healthcare is enhanced by Molina’s active turnaround Low-Risk Execution Long-Term Growth Potential Compelling Turnaround Opportunity Strong presence in government-sponsored programs aligns with highest-growth profit pools in managed care Turnaround in a strong growth sector yields clear margin expansion opportunity Turnaround builds upon a stabilized earnings base and is off to a solid start as evidenced by first quarter earnings and 2018 guidance 73