Good day. And welcome to the Centene Corporation First Quarter 2020 Financial Results. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note today’s event is being recorded. I would now like to turn the conference over to Jen Gilligan. Please go ahead.

Thank you. And good morning, everyone. Thank you for joining us on our first quarter 2020 earnings results conference call. Michael Neidorff, Chairman, President and Chief Executive Officer, and Jeff Schwaneke, Executive Vice President and Chief Financial Officer of Centene will host this morning’s call, which can also be accessed through our website at centene.com. A replay will be available shortly after the call’s completion. Any remarks that Centene may make about future expectations, plans, and prospects constitute forward-looking statements. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in Centene’s most recent Form 10-Q, filed today April 28th, and Form 10-K dated February 18, 2020, and other public SEC filings. The call will also refer to certain non-GAAP measures. A reconciliation of these measures with the most directly comparable GAAP measures can be found in our first quarter 2020 press release. Additionally, I’d like to highlight Centene’s upcoming Investor Day, scheduled for Friday, June 12, 2020. This will use a virtual format, and we will provide more information as we get closer to the date. With that, I would like to turn the call over to our Chairman, President, and CEO, Michael Neidorff. Michael?

Thank you, Jennifer. Good morning, and thank you for joining Centene’s first quarter 2020 earnings call. I’d like to welcome Jennifer to Centene as Senior Vice President of Finance and Investor Relations. She has taken the reins from Ed Kroll, who many of you know so well. We’d like to congratulate Ed on his retirement and thank him for his impactful contribution over the years. We look forward to celebrating him in person when gathering together is considered safe. Let me start by saying, I hope you, your families, and loved ones are all staying safe and healthy. Our hearts go out to all that have been impacted by the crisis, and we are thankful to the essential workers on the front lines and the families supporting them for fighting the pandemic every day. We believe we are in a strong financial position, with a solid balance sheet and abundant liquidity. We have always been effective managers of our balance sheet, which has become more important than ever, as it enables us to fund our priorities as well as respond to the pandemic. With that, let me start with our response to the COVID-19 crisis. Our mission at Centene is clear. We have to provide accessible, high-quality, affordable healthcare to our members, some of whom are among the nation’s most vulnerable populations. As we have seen both the public health and an economic crisis of unprecedented nature and scale unfold, we are acutely aware of the vital role we must play. We have never been more resolute in serving our members, as well as supporting our providers. We will maintain our approach, which focuses on our members' health, with exceptionally local and provider-centric strategies. Looking at these critical challenges ahead of us, our priorities are as follows. First and foremost, is the health and safety of our employees. We have taken significant steps to support our employees and are doing everything we can to protect their health and safety while ensuring continuity of our operations. To this end, we have implemented our business continuity plans and have taken actions to support our workforce. I am proud that we have been able to transition approximately 90% of our workforce to work remotely within just three days. This allowed Centene to continue to operate at close to full capacity without disruption. I’d like to give a special thanks to the remaining 10% whose roles are critical and cannot be performed outside the office. Second, it is critically important that we safeguard people's access to high-quality healthcare, especially the most vulnerable in our society. It is with this in mind that we have taken important steps to support our members during the pandemic, including class waivers for both testing and treatment and increased access to our health services. We also announced a series of investments that build on our long-standing commitment to address broader social determinants of health. We continue to support initiatives that address hunger, connectivity, and increased demand for healthcare and educational supplies. For example, we are donating 1 million meals a month for 12 months to feed our neighbors and communities nationwide and delivering 50,000 gift cards to be used to purchase essential healthcare and educational items. Our third priority is to support the organizations and partners on the frontlines. As you saw from our exceptionally local provider-focused approach, Centene has long-standing deep relationships across our provider network. We have initiated a broad range of initiatives to support those on the front lines. These include the provision of PPE, facilitation of additional medical personnel across virus hotspots, relaxation of administrative burdens for physicians, and access to financial resources. We will continue to be proactive in thinking through how we can best contribute as the situation evolves. To that end, let me touch on how we’re thinking through the trajectory of this pandemic. We are preparing for a range of scenarios relating to the shape, intensity, and duration of the pandemic. We are in close contact with developing health authorities, and we are closely tracking the data provided by organizations such as the Institute for Health Metrics and Evaluation, the CDC, and the World Health Organization on an ongoing basis. While it is difficult to predict precisely what future weeks or months will bring, we are prepared for scenarios that take into account several key considerations, including the potential for multiple peaks as local, federal, and state governments balance the need to reopen economies with the risk of increased viral transmission. A return to normalization may take some time until we have widely available testing, effective medications, or a safe vaccine. Next, let me provide a brief overview of our performance in the first quarter. Overall, we delivered solid results, including adjusted diluted EPS of $0.86. First-quarter revenues were $26 billion, representing a 41% increase from the prior year, primarily driven by the acquisition of WellCare, organic growth from our marketplace business, and the addition of new members through expansion and new programs across our states. Our managed care membership now stands at 23.8 million, including 11.8 million in our Medicaid business, 2.2 million in the marketplace, and 5.4 million across our Medicare products. Our financial position is robust. We remain focused on ensuring we have the right capital structure and capital allocation policies in place that ensure we’ll continue to effectively manage through this crisis. Now on our full-year outlook. Our earnings trajectory remains consistent, and we are maintaining our adjusted EPS guidance range. However, there will be variability in how we get there. We expect our results to be choppy from quarter to quarter, but overall, we continue to view our prior guidance range as the most reliable baseline. Let me offer a few other variables that we continue to monitor. First, membership. We expect economic impact and resulting unemployment to drive increases in members. These increases will be partially reversed as and when the economy reaches the recovery stage. Second, utilization. There have been and are expected to be continued declines in types of deferrable services, for example, dental and optical business, mostly in the second quarter, but large provider groups expect pent-up demand to return early in the third quarter and continue into our fourth quarter. We expect utilization to increase as restrictions are lifted and members return to more normal pre-pandemic behavior. Third, costs related to COVID-19. We expect to see an impact from the cost waivers for COVID-related testing and treatment during the second quarter, which could continue throughout the year. The way this dynamic materializes will be dependent on how the pandemic evolves. Lastly, intensity and duration of the pandemic. Working with leading epidemiologists, we continue to monitor closely the potential for multiple infection rate scenarios. As we prepare for significant levels of seasonality and choppiness, we continue to engage with state partners and other stakeholders, including regulators like CMS, to establish holistic ways to address these varying cost dynamics. We are maintaining an abundance of conservatism in our outlook. We anticipate an increase in membership, but we also acknowledge the fluid nature of the employment landscape. It is prudent to recognize the various unknowns this operating environment creates, and we will continue to update you as the impact from the pandemic takes shape. If we see developments that materially change our guidance assumptions, we commit to updating you immediately outside of our regular calendar. Turning to WellCare. The integration remains a positive and important aspect of our operations. The team continues to focus on education and the execution of a seamless transition and delivery of synergies. While our view of the total run rate opportunity remains unchanged, the current operating environment could generate some variability in the timing of synergy capture. For instance, in Georgia, the timeline to combine the two plans has been delayed from 2020 to 2021 by the state, recognizing the economic environment and the challenges of finding new physicians. We are offering extended benefits to those impacted by the integration during such a daunting time for our nation. In closing, our mission has never been more vital. To date, we have taken significant actions to ensure we serve the most vulnerable during this time of need. We are undergoing rigorous planning processes and will continue to be guided by the facts as we know them while remaining flexible in this dynamic environment. Our organization is united and focused on delivering for our members, providers, state partners, and shareholders as we face this pandemic together. As noted in our press release, we have raised our revenue guidance, we continue to make significant progress on the WellCare integration, and our balance sheet remains very strong. Now, I’d like to turn the call over to Jeff, who will provide the financial details.

Thank you, Michael. And good morning. Let me just start by echoing Michael’s comments. I hope you and your families are all staying safe and healthy. Today, I’d like to keep our discussion of the quarter’s performance relatively brief, and we’ll spend more time on our outlook in light of the extraordinary circumstances we are facing and provide you with more detail on our expectations for the year. Overall, it was a good start to the year. We reported first-quarter revenues of $26 billion, an increase of $7.6 billion or 41% over the first quarter of 2019. As a reminder, we also closed the WellCare acquisition this quarter and completed several other capital structure items that are included in our first quarterly report as a combined company. The closure of the acquisition and the inclusion of WellCare in the results beginning January 23rd influenced many of the usual metrics. I’d also refer you to the detailed explanations in our press release. We reported adjusted diluted earnings per share of $0.86 compared to $1.39 last year. Both diluted earnings per share and adjusted diluted earnings per share for the first quarter were negatively affected by approximately $0.05 associated with lower investment income and higher interest expense. Our investment income was $167 million during the first quarter compared to $99 million last year and $126 million last quarter. The increase over last year reflects the gain on the divestiture of our Illinois business, as well as higher investment balances, partially offset by the sharp decline in interest rates in March, which negatively affected the fair values of some of our bond portfolios. Interest expense was $180 million for the first quarter of 2020, compared to $99 million last year and $113 million last quarter. The increase reflects a net increase in borrowings related to the issuance of an additional $7 billion in senior notes in December 2019 to finance the cash consideration of the WellCare acquisition and the $2 billion in senior notes issued in February 2020. We decided to defer the redemption of the 2022 senior notes as a result of the COVID pandemic to maintain further flexibility. Operating cash flow used in operations was $240 million in the first quarter. Operating cash flow was negatively affected by a delay in premium payments in New York of approximately $700 million and the growth in the PDP business, which used working capital. Given that the COVID pandemic did not accelerate in the United States until the second half of March, we experienced a minimal impact during the quarter in terms of claims. We did experience a significant drop in dental and vision claims, which was offset by investments in our technology and employee infrastructure to support a work-from-home environment and higher COVID costs in our international operations, primarily in Spain, which was affected much earlier in March. Turning now to our outlook for 2020. Broadly, we are maintaining our guidance for the bottom line, demonstrating our ability to navigate this environment. That said, the pandemic has impacted the various dynamics that affect our business. I want to take a few minutes and highlight the headwinds and tailwinds of the current environment on the top and bottom line to provide as much transparency as possible in terms of how we believe these dynamics could potentially play out throughout the remainder of the year. First, total revenues. Setting aside the effects of the pandemic, we are increasing our total revenue guidance by $2 billion at the midpoint. This is driven by an increase in pass-through payments of $1.3 billion and $700 million due to actual membership and premium changes as we exited the first quarter. Second, as a result of the higher unemployment rate in the U.S., the suspension of eligibility redeterminations, and our product mix, we are increasing our total revenue guidance by an additional $4 billion at the midpoint, bringing our total guidance increase to $6 billion at the midpoint. We are also widening our guidance range, reflecting the lack of visibility regarding the magnitude and duration of the high unemployment rate in the U.S. We have seen early evidence of membership growth in April driven primarily by states suspending eligibility redeterminations and special enrollment periods for Marketplace businesses in some states. However, we are also conscious that some of these trends may lessen significantly as economic conditions improve. We now expect our total revenues for 2020 to be in the range of $110 billion to $112 billion. Next, GAAP and adjusted diluted earnings per share. There are numerous items that affect the bottom line, and I’m going to highlight those that are most material. As I just discussed, the additional membership will be a tailwind to 2020 earnings, particularly in our Medicaid business, although we expect normalization of enrollment during the second half of the year as the economic recovery progresses. Next, utilization. While we saw a minor effect of lower utilization on the first quarter’s results, we expect to see a significant impact of shelter-in-place policies on utilization rates during the second quarter. We also expect a potential reversal of these trends during the second half of the year. While we cannot, at this stage, predict the exact scale and scope of normalization, it will be highly dependent on where we will be in the economic recovery at that time; however, we expect that there will be pent-up demand for medical services in the back half of the year. We also expect that the deferral of medical services may lead to higher costs of treatment once members return to seeking medical care, as their health issues may have become more acute. Regarding the costs impact of COVID-19 and the waivers for tests and treatments, we expect the bulk of those costs to begin in the second quarter and continue through the second half of the year. We also expect lower investment income and higher interest expenses due to lower interest rates and maintaining the 2022 notes. Additionally, we expect our marketplace risk adjustment efforts for 2019 to be lower than our previous expectations as a result of the current environment. Finally, while we continue to expect to achieve our run-rate synergy target of $700 million associated with the WellCare acquisition, the timing of synergy capture will be affected due to shifting regulatory timelines and relaxed provider policies in the current environment. We expect our synergies to be lower than our previous expectations in year one. At this point, it is too early to predict the effect on synergies for 2021, but we continue to drive toward the $500 million net synergy target. Combining all these items, we continue to expect adjusted diluted earnings per share to be in the same range as our previous guidance. We have a strong balance sheet and are well-positioned to meet our operational and strategic needs from a liquidity perspective. We have taken proactive measures to strengthen our liquidity even further in this environment. We had approximately $2 billion of unregulated cash on hand at the end of the first quarter, and approximately $1.4 billion available on our revolving credit facility, creating almost $3.5 billion of immediate liquidity. The increase in leverage at quarter-end was intentional, driven by the decision to defer the redemption of our 2022 senior notes. This increased our cash on hand and our debt by $1 billion each at quarter-end, driving our debt-to-capital ratio to 41.9%, excluding our non-recourse debt. Our debt-to-capital ratio would be 38.9% when netting our unregulated cash with our debt at quarter-end. In addition, we utilized $500 million of the divestiture proceeds to repurchase shares at a weighted average price of $57.66 during the quarter. As we progress through this year, we will continue to revisit our capital structure and adjust as appropriate. Overall, we had a good start to the year and have a strong balance sheet and liquidity position given the environment we are dealing with today. That concludes my remarks. Operator, you may now open the line for questions.

Thank you. We will now begin the question-and-answer session. And our first question today will come from Kevin Fischbeck with Bank of America. Please go ahead, sir.

Great. Thanks. I want to appreciate the EPS bridge that you guys walked through. I would love to get a little more color, though, about how much of what you are seeing as kind of an impact is going to flow through into next year? I guess, the expectation, if we assume that COVID – you think the rate will be back to normal next year, would you assume, how much of that interest headwind is going to persist into next year versus paying it down the synergy capture? Do you get back to normal a year or two achievement, or has everything kind of got pushed back six to 12 months? I just love to go through those items and kind of see which ones are more this year versus maybe have an impact beyond 2020?

Kevin, I’ll start off. I think the biggest issue we have is, we’ve never seen it like this before. We have seen all the models. It’s difficult to model when you have no prior experience. The biggest issue I see is, for example, unemployment; it could reach as high as 20%. It’s right now around 15%. That’s depression-level. The forecast I see suggests that in the first quarter, first half of next year, you’re not going to see a normalized return, even if they have the vaccine because you’re going to have probably 7%, 9% unemployment. Our planning assumptions have to be to take it quarter-by-quarter. That’s why we thought it's very important to maintain guidance because we really believe that’s achievable. But that’s a baseline from which we can judge when you have nothing out there what’s the baseline for comparison. So, I wish I could say what I think 2021 will be. I’m hoping it to be improved. We don’t even know how many peaks we’re going to have this year. We’re trying to return to work. I’m giving a long-winded answer, but it’s the things we talk about. I work with epidemiologists, and they keep telling me that the return to work before we have the vaccine on a massive scale is unpredictable. I think the earliest we hear, hopefully a vaccine sooner, but first half of next year is probably the earliest we’ll see an effective well-tested vaccine. As we plan through this, we’re going to do rolling quarters and try and get a sense as we look at the models of what unemployment is going to be and what’s that mean to our business, what support the states will be able to provide. I wish I could be more definitive.

No, that’s fair. And then maybe you mentioned the $4 billion of extra revenue. I guess, how do you think about the MLR on that business? I guess, the last time, if I remember correctly, there was some pent-up demand on the new Medicaid enrollment for the first six to nine months. And obviously, on exchanges, you might get some of that COBRA membership that was high MLR dripping onto the exchanges. How do you think about the MLR of that new $4 billion?

Well, I think the MLR from the new membership is fairly normalized. But these are people who have just lost their jobs and may not have a lot of pent-up demand, although there may be some. That’s part of the variable we’re dealing with. The biggest issue is when are people returning to work? Yesterday, I was talking to major hospitals; they are doing everything they can to get back to normal today. They don’t want people to lose confidence. While I thought we may not see any return until July, we may now see it well in May and June, which means it will be a more normalized MLR. So we are typically booking from historical levels, expecting that. I think we’ll be able to give more color as we go through the quarters, but we have to recognize that this is variable.

I think we highlighted in the press release, obviously, the Q1 MLR and exchange normalization. The addition of WellCare runs a higher MLR in the first quarter because they don’t have a significant marketplace business. WellCare had a lot of growth in the PDP business this year and that’s the highest MLR. We had new markets with the start-up of the LTSS in Pennsylvania and Iowa carrying over from last year, and we had leap year; we had the effect of New York rates. A lot of things drove the MLR on a year-over-year basis higher, partially offset by the health insurer fee.

I think we’ve talked about our systems, allowing us to be on top of it to the maximum extent possible. As we go through the quarters, we’ll provide more clarity. We value openness and keeping investors informed of trends. You can count on us to keep you updated.

Thank you. Our next question will come from Matthew Borsch of BMO Capital Markets. Please go ahead with your question.

I just want to better understand how the patterns of behavior and care changed. Is there anything you can spike out about the care patterns you’re seeing between Medicaid, commercial, marketplace, and Medicaid?

I’m not sure that there are a lot of differences right now. Everyone is focused on safety and avoiding hospitals. The biggest issue we see currently is delayed services. There are patients that are reportedly waiting for necessary treatments that are being postponed. The pandemic seems to override any specific differences among populations.

And maybe just one more on pent-up demand. Some experiences suggest that the delayed care doesn’t always flow through—that maybe more than half of it goes away. I realize we don’t have prior experience to draw from, but I’m wondering if you could comment on that?

While ER utilization is down, it doesn’t mean that those cases won’t return. If someone needs surgery, they may have delayed it for a while, but it will come back. There may be cases where people live with conditions longer than necessary, but the intensity of care will likely increase over time where necessary. The problem is, we are walking a unique path without prior experience to establish our assumptions.

Our next question will come from Josh Raskin of Nephron Research. Please go ahead with your question.

Hi, thanks. Good morning. My first question is just on the headwinds that you spoke about. I’m curious if we could get a little more color on the sizing? I know it’s imperfect, and there’s no experience, but what’s the relative magnitude of the headwinds versus the WellCare synergies?

Okay. Well, the state of Georgia delayed the combination of the two plans for a year. We have to be nimble and ready as we manage through these uncertainties. There are plenty of variables, for example, the unemployment rate, and we are offering support to our impacted employees. Jeff can provide more insight.

Yes, Josh, really, we sized the revenue impact in our guidance. Regarding risk adjustment initiatives, there’s significant chart chase effort that usually occurs in the first half of every year and will now be affected due to the pandemic. What’s difficult to size right now is the effect of the delay on 2019 risk adjustment efforts.

No, I think what we chose to do was to give investors some insight into what we’re feeling and thinking about in the leg of the recovery. Order of magnitude is yet to be determined. Both challenges and opportunities are out there.

Our next question will come from Sarah James of Piper Sandler. Please proceed with your question.

Thank you. Can you provide us some color on your conversations with states around budget pressure and whether that could impact rates or program changes?

States have budget pressures; municipalities are seeing reduced tax revenues. However, with the enhanced FMAP, the federal government will absorb a larger portion of the costs. We have to work together as the landscape evolves. Most states recognize that reducing programs will quickly come back to haunt them.

Our next question comes from Charles Rhyee of Cowen. Please proceed with your question.

Yes, thanks for taking the question. I’m curious if, as you think about your guidance for the end of the year, are you anticipating any second-wave developments and how that would affect your rear expectations given COVID costs and delays?

I’ll tell you the factors we’re considering. Our modeling is difficult under these conditions. All we can do is prepare for situations and enhance employee safety protocols. As we expect a second peak, we want to be ready for contingencies. I’m proud of our workforce. Our IS team transitioned almost everyone to remote work in just three days, allowing us to maintain productivity.

Our next question will come from Scott Fidel of Stephens. Please proceed with your question.

Hi, thanks. Good morning, everyone. I’m interested in the dynamics you’re seeing in the New York market, given the disruptions there. Specifically, how do you see compensation and visibility improving on getting paid?

The delayed payments to us were due to the New York fiscal year-end. It’s not uncommon for states to delay declines for a few days. We’ve been paid subsequently. Rates still aren’t final, so we don’t have an update there. What was the last part?

Just on the Medicaid costs and impacts from COVID?

We have seen some costs from New York compared to other states, but the dollar amount associated with COVID has not been substantial at this point. There is always a delay in submitting claims, but we are closely monitoring.

Thank you. Our next question will come from Steve Valiquette of Barclays. Please proceed with your question.

Okay, great. Thanks and good morning. I guess curious how you approached the medical reserve process for 2020 regarding COVID-19 medical cost? Was there a bias to over-reserve for caution? Did reserves for COVID impact the Q1 MLR?

Our reserve approach begins with a normal reserve based on historical patterns. We are planning with an abundance of conservatism to mitigate potential impacts. We would prefer to revisit our model later than to present negative surprises. Even as this is unprecedented, we have to carefully manage through it.

To clarify, the actuarial standards require reserving under moderately adverse conditions. You accrue for claims that you believe have occurred before the quarter, month or year-end. We did not see a meaningful shift in the claims submission patterns for Q1. We recorded a normal level of reserves, which is why COVID did not significantly impact Q1 results.

Our next question will come from Dave Windley of Jefferies. Please proceed with your question.

Hi, there. Good morning. Just to follow up on the first quarter MLR, you indicated it would be up year-over-year, but it was up over 200 basis points. I want to ensure there weren’t any major differences during the quarter affecting that...

We didn’t give an MLR Q1 forecast. What we indicated was, at the beginning of March, we were guiding to high 80s to low $0.90 range from an adjusted earnings perspective. If you look at the $0.86, we had $0.05 purely driven by events in the second half of March with interest rates, which was unknown to us in our prior guidance.

We previously said our exchange normalization and the addition of WellCare contributed to nurturing a higher MLR, with WellCare increasing its PDP growth, having the highest MLR. There were several drivers of MLR increases on a year-over-year basis. We will continue to monitor.

Our next question will come from A.J. Rice of Credit Suisse. Please proceed with your question.

Hi, everybody. Just real quick, how are pricing prices evolving with MA bids due soon in June? Have you been considering the uncertainty?

We’re continuing to work through the normal processes. The government’s role is well-established and likely to remain steady.

Okay, thanks.

Thank you. Our next question will come from Ricky Goldwasser with Morgan Stanley. Please proceed with your question.

Hi, good morning and thank you. First question, just some clarity on the MLR guidance moving forward, particularly, should we be thinking MLR as higher or lower than prior guidance of 85.9 and 86.3?

Judging by the uncertainty with pandemic-related costs, I would say our range holds; the variables depend on costs.

That’s about as specific as I’m going to get; we acknowledge the variability we’re living through.

Our next question will come from George Hill of Deutsche Bank. Please proceed with your question.

Hey, good morning. Just thinking about the conversations around state program changes, can you see any changes that could become permanent after this crisis?

We’re not seeing a shift there. We’re focused on providing support to essential workers, and states recognize the quick need for solid healthcare that we provide. The current priority is ensuring we work together effectively. In closing, I want to emphasize that this business remains as vital as ever. We are equipped to manage the uncertainties. Our guidance is in place, and we expect some choppiness quarter to quarter. We will continue to communicate openly as we navigate through these challenging times. Thank you for your interest, and we look forward to speaking again soon.

Today's conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.