Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2020

Condensed Financial Information Disclosure [Abstract]

Condensed Financial Information of Registrant

The condensed balance sheets as of December 31, 2020 and 2019, and the related condensed statements of income, comprehensive income and cash flows for each of the three years in the period ended December 31, 2020 for our parent company Molina Healthcare, Inc. (the “Registrant”), are presented below.

Condensed Balance Sheets


	December 31,
	2020		2019
	(In millions, except per-share data)
ASSETS
Current assets:
Cash and cash equivalents	$	575	$	836
Investments	69		161
Receivables	2		2
Due from affiliates	114		49
Prepaid expenses and other current assets	65		75
Total current assets	825		1,123
Property, equipment, and capitalized software, net	339		327
Goodwill and intangible assets, net	369		13
Investments in subsidiaries	3,228		2,225
Deferred income taxes	5		10
Advances to related parties and other assets	83		76
Total assets	$	4,849	$	3,774
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Accounts payable, accrued liabilities and other	$	338	$	307
Total current liabilities	338		307
Long-term debt	2,127		1,237
Finance lease liabilities	225		231
Other long-term liabilities	63		39
Total liabilities	2,753		1,814
Stockholders’ equity:
Common stock, $0.001 par value; 150 million shares authorized; outstanding: 59 million shares at December 31, 2020, and 62 million at December 31, 2019	—		—
Preferred stock, $0.001 par value; 20 million shares authorized, no shares issued and outstanding	—		—
Additional paid-in capital	199		175
Accumulated other comprehensive income	37		4
Retained earnings	1,860		1,781
Total stockholders’ equity	2,096		1,960
Total liabilities and stockholders’ equity	$	4,849	$	3,774

See accompanying notes.

Condensed Statements of Income


	Year Ended December 31,
	2020		2019		2018
	(In millions)
Revenue:
Administrative services fees	$	1,208	$	1,038	$	1,138
Investment income and other revenue	13		18		17
Total revenue	1,221		1,056		1,155
Expenses:
General and administrative expenses	1,089		937		1,007
Depreciation and amortization	67		63		69
Other operating expenses, net	24		4		6
Total operating expenses	1,180		1,004		1,082
Operating income	41		52		73
Interest expense	102		87		114
Other expenses (income), net	15		(15)		17
Total other expenses, net	117		72		131
Loss before income tax (benefit) expense and equity in net earnings of subsidiaries	(76)		(20)		(58)
Income tax (benefit) expense	(5)		9		(14)
Net loss before equity in net earnings of subsidiaries	(71)		(29)		(44)
Equity in net earnings of subsidiaries	744		766		751
Net income	$	673	$	737	$	707

Condensed Statements of Comprehensive Income


	Year Ended December 31,
	2020		2019		2018
	(In millions)
Net income	$	673	$	737	$	707
Other comprehensive income (loss):
Unrealized investment income (loss)	44		16		(3)
Less: effect of income taxes	11		4		(1)
Other comprehensive income (loss), net of tax	33		12		(2)
Comprehensive income	$	706	$	749	$	705

See accompanying notes.

Condensed Statements of Cash Flows


	Year Ended December 31,
	2020		2019		2018
	(In millions)
Operating activities:
Net cash provided by operating activities	$	59	$	64	$	118
Investing activities:
Capital contributions to subsidiaries	(107)		(43)		(145)
Dividends received from subsidiaries	635		1,373		298
Purchases of investments	(188)		(152)		(136)
Proceeds from sales and maturities of investments	282		93		388
Purchases of property, equipment and capitalized software	(74)		(56)		(22)
Net cash paid in business combinations	(1,028)		—		—
Net cash received from sale of subsidiaries	—		—		242
Change in amounts due to/from affiliates	(68)		38		6
Other, net	3		1		—
Net cash (used in) provided by investing activities	(545)		1,254		631
Financing activities:
Proceeds from senior notes offering, net of issuance costs	1,429		—		—
Common stock purchases	(606)		(47)		—
Repayment of term loan facility	(600)		—		—
Proceeds from borrowings under term loan facility	380		220		—
Repayment of senior notes	(338)		—		—
Cash paid for partial termination of warrants	(30)		(514)		(549)
Cash paid for partial settlement of conversion option	(27)		(578)		(623)
Cash received for partial settlement of call option	27		578		623
Repayment of principal amount of convertible notes	(12)		(240)		(362)
Repayment of credit facility	—		—		(300)
Other, net	2		29		19
Net cash provided by (used in) financing activities	225		(552)		(1,192)
Net (decrease) increase in cash and cash equivalents	(261)		766		(443)
Cash and cash equivalents at beginning of period	836		70		513
Cash and cash equivalents at end of period	$	575	$	836	$	70

Notes to Condensed Financial Information of Registrant

Note A - Basis of Presentation

The Registrant was incorporated in 2002. Prior to that date, Molina Healthcare of California (formerly known as Molina Medical Centers) operated as a California health plan and as the parent company for three other state health plans. In June 2003, the employees and operations of the corporate entity were transferred from Molina Healthcare of California to the Registrant.

The Registrant’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. The accompanying condensed financial information of the Registrant should be read in conjunction with the consolidated financial statements and accompanying notes.

Note B - Transactions with Subsidiaries

The Registrant provides certain centralized medical and administrative services to our subsidiaries pursuant to administrative services agreements that include, but are not limited to, information technology, product development and administration, underwriting, claims processing, customer service, certain care management services, human

resources, marketing, purchasing, risk management, actuarial, finance, accounting, compliance, legal and public relations. Fees are based on the fair market value of services rendered and are recorded as operating revenue. Payment is subordinated to the subsidiaries’ ability to comply with minimum capital and other restrictive financial requirements of the states in which they operate. Charges in 2020, 2019, and 2018 for these services amounted to $1,208 million, $1,038 million, and $1,137 million, respectively, and are included in operating revenue.

The Registrant and its subsidiaries are included in the consolidated federal and state income tax returns filed by the Registrant. Income taxes are allocated to each subsidiary in accordance with an intercompany tax allocation agreement. The agreement allocates income taxes in an amount generally equivalent to the amount which would be expensed by the subsidiary if it filed a separate tax return. Net operating loss benefits are paid to the subsidiary by the Registrant to the extent such losses are utilized in the consolidated tax returns.

Note C - Dividends and Capital Contributions

When the Registrant receives dividends from its subsidiaries, such amounts are recorded as a reduction to the investments in the respective subsidiaries.

For all periods presented, the Registrant made capital contributions to certain subsidiaries primarily to comply with minimum net worth requirements and to fund business combinations. Such amounts have been recorded as an increase in investment in the respective subsidiaries.