Molina Healthcare Inc (MOH)

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Molina Healthcare (MOH)

Q4 2012 Earnings Call

February 07, 2013 5:00 pm ET

Executives

Juan Jose Orellana - Vice President of Investor Relations

Joseph Mario Molina - Chairman, Chief Executive Officer and President

John C. Molina - Chief Financial Officer, Executive Vice President of Financial Affairs, Treasurer, Director and Member of Compliance Committee

Joseph W. White - Chief Accounting Officer

Terry P. Bayer - Chief Operating Officer

Analysts

Sarah James - Wedbush Securities Inc., Research Division

Justin Lake - JP Morgan Chase & Co, Research Division

Joshua R. Raskin - Barclays Capital, Research Division

Christian Rigg - Susquehanna Financial Group, LLLP, Research Division

Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division

Ralph Giacobbe - Crédit Suisse AG, Research Division

Michael J. Baker - Raymond James & Associates, Inc., Research Division

Carl R. McDonald - Citigroup Inc, Research Division

Scott J. Green - BofA Merrill Lynch, Research Division

Peter Heinz Costa - Wells Fargo Securities, LLC, Research Division

Sam Wass - Goldman Sachs Group Inc., Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Molina Healthcare Fourth Quarter and Year-end '2012 Earnings Conference Call. [Operator Instructions] A quick reminder, this conference is being recorded, Thursday, February 7, 2013. It is now my pleasure to turn the conference over to Juan Jose Orellana, Vice President of Investor Relations. Please go ahead, sir.

Juan Jose Orellana

Thank you, David. Hello, everyone, and thank you for joining us.

The purpose of this call is to discuss Molina Healthcare's financial results for the fourth quarter and fiscal year ended December 31, 2012. The company's earnings release reporting its results was issued today after the market closed, and is now posted for viewing on our company website.

On the call with me today are Mario Molina, our CEO; John Molina, our CFO; Terry Bayer, our COO; and Joseph White, our Chief Accounting Officer.

After the completion of our prepared remarks, we will open the call and take your questions. [Operator Instructions]

Our comments today will contain forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act including without limitations statements regarding our ABD and duals membership in Illinois, growth and enrollment associated with the Medicaid expansion, our projected revenue growth over the next several years, our accreditations and quality ratings, our medical care costs and our financial guidance for fiscal year 2013. All of our forward-looking statements are based on our current expectations and assumptions, which are subject to numerous risk factors that could cause our actual results to differ materially.

A description of such risk factors can be found in our earnings release and in our reports filed with the Securities and Exchange Commission, including our Form 10-K annual report, our Form 10-Q quarterly reports and our Form 8-K current reports. These reports can be accessed under the Investor Relations tab of our company website or on the SEC's website.

All forward-looking statements made during today's call represent our judgment as of February 7, 2013, and we disclaim any obligation to update such statements except as required by securities laws.

This call is being recorded, and a 30-day replay of the conference call will be available at our company's website, molinahealthcare.com.

I would now like to turn the call over to Dr. Mario Molina.

Joseph Mario Molina

Thank you, Juan Jose. Hello, everyone, and thanks for joining our discussion today. Let me start by saying that we are proud of our strong fourth quarter operational results, which reflect solid growth in our revenue and considerable improvement in our margins. Our performance in the fourth quarter is a strong finish to 2012, a year in which we successfully managed through a difficult operating environment resulting from margin pressure at our Texas, Wisconsin and California health plans.

We are especially encouraged by the traction we are gaining with our operational and strategic initiatives that we have outlined in the past. The overall result was a record year for our company, with revenue totaling $6 billion. In 2012, our company revenue grew by nearly $1.3 billion, while our enrollment grew by an additional 100,000 members.

To put this in perspective, our annual revenues have increased by over 50% in the last 3 years, and nearly all of this increase has come from organic growth. As we've talked about during previous presentations, our strategy calls for us to double our annual revenues in the next 3 years.

As we begin looking forward at 2013, I thought it would be worthwhile to think back on some of our accomplishments in 2012 and consider the solid foundation on which we can build in 2013. Our health plans in Washington and Ohio had successful Medicaid contract bids. Our Ohio health plan will expand to serve the entire state and was selected to participate in the new contract for the dual eligibles. We helped to transition thousands of aged, blind and disabled or ABD members from fee-for-service into managed care in Texas, Washington and California. We experienced considerable growth in Texas as we implemented new contracts for ABD members in the Hidalgo and El Paso service areas.

Our Utah health plan celebrated its 15th anniversary of serving that state's Medicaid program. It was in Utah that we first demonstrated that our business model could be replicated in states other than California. In Wisconsin, we made great progress in lowering health care cost by entering into new contracts with the major hospitals in our network, and we received a premium rate increase.

Performance of the Florida health plan has improved as medical cost decreased, resulting from reductions in unit costs and utilization. Illinois is a new market for Molina Healthcare. We're excited to have been selected to serve members in the Central Illinois region. Starting in the second quarter of 2013, we will begin serving seniors and persons with disabilities in the Medicaid program, as the state expands its integrated care program. There are approximately 20,000 ABD patients in the central region. In the fall of 2013, our Illinois health plan will also begin serving duals in central Illinois under the state's Medicare-Medicaid Alignment Initiative. There are approximately 18,000 dual eligible beneficiaries in this region, and Molina Healthcare will compete against only 1 other plan. Our participation in Medicare is now entering its eighth year, and we are now the sixth largest Medicare Special Needs plan in the country. All of our eligible plans have achieved 3 Star ratings.

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