Good day and welcome to the Centene fourth quarter and full year 2023 earnings results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note today’s event is being recorded. I would now like to turn the conference over to Jenn Gilligan, Head of Investor Relations. Please go ahead, ma’am.

Thank you Rocco and good morning everyone. Thank you for joining us on our fourth quarter and full year earnings results conference call. Sarah London, Chief Executive Officer, and Drew Asher, Executive Vice President and Chief Financial Officer of Centene will host this morning’s conference call, which also can be accessed through our website at centene.com. Ken Fasola, Centene’s President will also be available as a participant during Q&A. Any remarks that Centene may make about future expectations, plans and prospects constitute forward-looking statements for the purpose of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. 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-K filed on February 21, 2023 and other public SEC filings. Our Form 10-K for 2023 will be filed in coming weeks. Centene anticipates that subsequent events and developments may cause its estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. This call will also refer to certain non-GAAP measures. A reconciliation of these measures with the most direct comparable GAAP measures can be found in our fourth quarter 2023 press release, which is available on the company’s website under the Investor section. The company is unable to provide a reconciliation of certain 2024 measures to the corresponding GAAP measures without unreasonable effort due to the difficulty of predicting the timing and amounts of various items within a reasonable range. With that, I would like to turn the call over to our CEO, Sarah London. Sarah?

Thanks Jenn, and good morning everyone. Today, we reported a strong finish to a very productive 2023. Fourth quarter results include adjusted earnings per share of $0.45, generating full year 2023 adjusted EPS of $6.68. The quarterly and full year EPS results were slightly ahead of internal expectations and provide the organization with positive momentum as we head into 2024. We’ve been planning for and talking about 2024 for a while, and now that we’re here, we’re focused on positioning each of our lines of business for long-term growth while continuing the important work to fortify our platform as we prepare for 2025 and beyond. Specifically, we are working through the tail of the redeterminations process, positioning Centene to resume organic enrollment growth in Medicaid and to pursue new program opportunities from a position of strength. We are solidifying our Medicare Advantage footprint thanks to an annual enrollment period that largely hit the mark with respect to our target membership, including sales, retention and dis-enrollments, and we are capturing a powerful growth opportunity in the marketplace, demonstrated by the increased revenue guidance we issued this morning. We recognize that amid these opportunities, we still have valuable bottom-line work to do, and we are approaching that work with the same focus and disciplined execution that has defined the first two years of this management team’s tenure. In fact, Centene wasted no time setting the tone for 2024 by successfully delivering what we believe to be the largest ever PBM platform migration and improving our pharmacy cost structure on behalf of our customers and members. We have processed more than 40 million scripts so far through ESI and are pleased with the way this massive undertaking has rolled out. There is always a period of issue management after a change of this magnitude, and the teams have worked tirelessly and collaboratively to prioritize member access to care during this transition. We will continue to closely monitor end-to-end processing and customer service as we move through the year. Additionally in January, Centene closed the divestiture of Circle Health, the last of our international assets, and the company can now focus solely on our domestic core businesses. Circle marks the tenth divestiture since we began the portfolio review process in late 2021, and we are pleased to have purposefully streamlined our enterprise while keeping the portfolio of divestitures net accretive to earnings and generating cash for deployment. In the broader context of value creation, our SG&A initiatives remain on track to exceed our original savings goals, and we continue to identify opportunities to drive operating efficiency through modernization and process improvement. Annual enrollment periods for both marketplace and Medicare also contribute to our confidence in Centene’s 2024 positioning. Continued pricing discipline in the marketplace and the deliberate actions we took to align our 2024 Medicare bids with our strategic focus on lower income and complex members yielded the intended results on both fronts. Marketplace growth was more robust than anticipated, fueled by better than anticipated overall market growth as individual commercial offerings continued to gain traction with an expanding consumer set. As such, we expect to deliver both growth and our planned margin expansion in the marketplace in 2024. Together, these dynamics position us well to achieve our 2024 adjusted earnings per share guidance of greater than $6.70. With that, let’s dig deeper into each of our core business lines. Within Medicaid, we have delivered important proof points around the power of incumbency while navigating the unprecedented dynamics of redeterminations. In December, we were awarded the Arizona LTSS contract that will expand our footprint in serving complex populations in that state. That same month, we added approximately 90,000 members to our care and coverage through the successful go-live of Medicaid expansion in North Carolina, and in early January we successfully re-procured our New Hampshire contract, earning the top score in the Granite State among competitors. Our uniquely local footprint fosters important and trusted relationships with the communities and state partners we serve, and continues to differentiate us as we retain and grow our largest business. Turning to redeterminations, the process continues to track largely in line with our expectations. As of year-end, we were approximately 80% of the way through the projected member transitions and, consistent with our modeling, we ended 2023 right around 14.4 million Medicaid members. Our health plan presidents along with our Medicaid actuarial teams continue to work in concert with our state partners to monitor the impactful effects of membership changes and calibrate rates to match acuity in the near term. To that end, we received some but not all of the outstanding 2023 retrospective rate adjustments we mentioned during our December investor day before year-end, and we still feel good about our 2024 Medicaid guidance as we sit here in early February. While Medicare has been a hot topic for the industry of late, we are pleased that the annual enrollment period played out largely as expected for Centene, and our 2024 financial projections for Medicare remain unchanged from investor day. Duals, or DSNP members have grown as a percentage of our Medicare enrollment as thoughtful benefit design changes allowed us to invest in and effectively refocus our book on members to whom we have the strongest ability to provide long-term value. We expect DSNP members to represent more than 35% of our Medicare Advantage membership by year-end, an important step relative to our strategic plan. As an organization, we remain laser-focused on advancing our Medicare quality agenda. We made progress on a number of initiatives in 2023 that create positive momentum as we continue to execute in 2024. This includes expanding our member outreach capacity, which ultimately allows us to conduct over 1.1 million preventive service outreach calls, reach 80% more members, and schedule 62 more appointments year-over-year. At the same time, we invested in digital data and provider connectivity, successfully deploying direct EMR connectivity to over 640,000 provider practices; and finally, we continue to drive core administrative and customer experience performance with service levels remaining in the high 90s through Q4. All of these efforts are important contributors to our long-term stars performance goals. In 2024, as planned, we will continue to invest in this space with an obvious focus on Medicare Advantage star ratings, but with an approach that will drive benefit across lines of business. With respect to Medicare utilization, as you heard from us in December, our 2024 bids incorporate a level of elevated medical trend related to non-inpatient services. To date, based on our full year and fourth quarter claims experience, we continue to view our pricing posture as adequate to support our 2024 Medicare outlook. Preliminary Medicare Advantage rates for 2025 were released last week. Bearing in mind the continued expectation for the multi-year phase-in of the risk adjustment model changes finalized in 2023, we view the preliminary rates as insufficient concerning general medical cost trend expectations. Drew will provide some additional thoughts on the preliminary rate in a moment. As this audience is well aware, we will receive final Medicare Advantage rates for 2025 in early April, and at the time of our first quarter call, we will have a better directional sense for bid strategy related to next year. Finally, marketplace. As you’ve heard from us with increasing enthusiasm in recent months, marketplace presents Centene with a unique opportunity for simultaneous revenue growth and margin expansion in 2024. Overall, market growth was stronger than expected during this open enrollment period, and we successfully captured our target market share of the expanded pie, netting to stronger than expected OEP results for the company. Within our 4.3 million member footprint as of January, our market share increased to roughly 26%, up from 23% previously, serving as another proof point of our leadership in the space. This strong enrollment result is driving the $2.5 billion increase to our full year 2024 premium and service revenue guidance. Membership mix continues to skew slightly younger, consistent with the year-over-year trend we saw last year, and distribution across middle tiers is consistent with our expectations with silver plans representing the majority of our enrollment. One driver of overall marketplace growth has been members impacted by Medicaid redeterminations. On that front, we continue to trend towards the top half of our previously provided guidance range of 200,000 to 300,000 re-determined lives captured by Ambetter. Ultimately, the individual commercial market represents a strategic opportunity for Centene, and we are excited to enable the expanding reach of these offerings as the demands of the market evolve. While the dynamic businesses Centene operates in continue to ebb and flow, the strength and diversification of our government-sponsored healthcare platform creates resiliency. We see tremendous opportunity for our core products, both near and long term. We will continue to execute against these opportunities to improve health outcomes for our members, generate profitable growth, and drive shareholder return. Before I turn it over to Drew, I want to take just a moment to thank the entire Centene team for how you showed up in 2023 on behalf of our members and our partners. I am honored to work alongside you in 2024 as we make this company stronger every day and transform the health of the communities we serve one person at a time. With that, I will hand the call over to Drew for more details around our financial performance and 2024 outlook.

Thank you Sarah. Today, we reported fourth quarter 2023 results, including $35.3 billion in premium and service revenue and adjusted diluted earnings per share of $0.45 in the quarter. For the full year, we reported $6.68 of adjusted EPS, growth of over 15% compared to 2022, including a 5.5% beat to our original 2023 guidance, and that’s on the heels of growing adjusted EPS 12% in 2022 compared to 2021. Our Q4 consolidated HBR was 89.5% while our full year consolidated HBR was 87.7%, both in the range of our expectations. Medicaid at 90.0% for the full year was slightly higher than our expectations. As of Q3, we were 89.9% year-to-date and we posted 90.6% in the fourth quarter. As we mentioned at our investor day in December, there were some open Medicaid retro rate adjustments. At year end, had we received those adjustments, our full year 2023 Medicaid HBR would have been about 10 basis points better. All things considered, over nine months into redeterminations, our original forecasts for membership, acuity and rates were very close. As you can see in the membership tables, we were at 14.47 million Medicaid members at year end, consistent with the 14.4 million we were forecasting, as shared in the investor day appendix. That reflects an approximate 1.9 million Medicaid member reduction since 3/31/23 due to redeterminations, as expected. To reiterate what we laid out at investor day, our 2024 guidance reflects a low point of 13.2 million Medicaid members at 3/31/24 and year-end 2024 membership of approximately 13.6 million. That all ties to our 2024 midpoint of $80.5 billion of Medicaid premium revenue, so no changes to our 2024 view of Medicaid revenue, membership or HBR. Medicare full year HBR was 87.1%, which includes the $250 million premium deficiency reserve recorded in the fourth quarter that we first discussed with you back in April of 2023. On Medicare trend, we continue to see steady but elevated levels of outpatient trend consistent with what we began to see in Q2 and consistent with our forecasts. We also saw a pick-up of COVID costs in December, as we mentioned in early January, though not alarming compared to prior COVID cycles. We thought about the current level of trend when we booked the 2024 PDR and continue to believe our forecasts are consistent with delivering our 2024 Medicare segment guidance elements outlined at investor day. To help you with some math, the $250 million premium deficiency reserve lifted the fourth quarter Medicare segment HBR by approximately 475 basis points, and the full year Medicare HBR by approximately 110 basis points. The commercial HBR at 79.8% for the full year continues to be strong. Simultaneously in Q4, we were also capturing growth from both redeterminations and the special enrollment period, and we were up to 3.9 million marketplace members as of year end - that is the source of the strong premium growth in the fourth quarter. As you heard from Sarah, we couldn’t be more pleased with the growth that continued into January 2024, up to approximately 4.3 million members. This continued growth and HBR performance in 2023 sets us up very well to achieve our 2024 marketplace goals. Moving to other P&L and balance sheet items, our adjusted SG&A expense ratio was 9.7% in the fourth quarter compared to 9.3% last year, consistent with our updated mix of business along with Medicare distribution costs. Cash flow provided by operations was $8.1 billion for the full year, representing 2.2 times adjusted net earnings. This was primarily driven by net earnings, an increase in risk adjustment payable for the marketplace, and the timing of pass-through payments. Our unregulated and unrestricted cash on hand at year end was approximately $200 million. During the fourth quarter, we repurchased 397,000 shares of our common stock for $27 million. For the full year 2023, we repurchased 22.9 million shares for $1.58 billion, a little over our goal of $1.5 billion. Our debt to adjusted EBITDA was 2.9 times at year end. Our medical claims liability totaled $18.0 billion at year end and represents 54 days in claims payable compared to 53 in Q3 of 2023, and 54 in Q4 of 2022. Looking back at 2023, it was a very good year of execution. We beat original adjusted EPS by 5.5%. We bought back 4% of the company’s shares for a cumulative total of over 10% since Q1 of 2022. We continue to execute on divestitures. We completed five divestitures in 2023, closed the divestiture of Circle in January of 2024, and received approximately $850 million in net proceeds in January. In total, we have completed 10 divestitures and are close to wrapping up that successful phase of value creation. On January 1, 2024, as Sarah mentioned, we successfully executed on our PBM conversion. RFPing and moving PBMs has become one of our core competencies, and as a result of that, we have improved our pharmacy cost structure on behalf of our members and customers, and we’ve doubled marketplace membership since year-end 2022 and fortified Ambetter’s number one position. 2023 was a pretty good year! We had provided detailed 2024 financial guidance elements at our December investor day. Since then, we’ve gained some additional clarity around the AEP and OEP results in Medicare and marketplace. Medicare enrollment is tracking right in line with our expectations relative to both volume and product mix. I give the Medicare team credit for precision in sales, disenrollment and membership product mix forecasts, as well as execution in a challenging year. While Medicare Advantage is only a $16 billion revenue stream for us, it represents a meaningful margin expansion opportunity as we improve stars over the next few years and begin to have that reflected in revenue in 2026 and beyond. To reinforce Sarah’s comments on the 2025 advance notice, we are in the process of preparing our feedback with questions so far around the adequacy of fee-for-service trend and a new method for normalization that further reduced the rate. For us, the rate change as it sits today is approximately minus-1.3% before risk coding trend, and the new risk model introduced last year and that’s being phased in still has a disproportionate negative effect on partial and full duals, the most vulnerable populations in Medicare. Our marketplace chassis continues to be well positioned for both growth and margin. Marketplace growth is running ahead of our previous expectations, allowing us to raise our full year 2024 consolidated premium and service revenue guidance by $2.5 billion, which takes our guidance to a midpoint of $136 billion. Appetite for marketplace products continues to be strong as these offerings successfully provide both healthcare access and affordability for millions of beneficiaries. At this very early point in the year, we are reiterating our 2024 adjusted EPS guidance of greater than $6.70. As we turn the page from 2023, we can quickly reflect back on our second strong year of execution from this management team and positive progression of the company. I couldn’t be more excited to drive success with this team and provide affordable access to healthcare for our members in 2024 and beyond. Thank you for your interest in Centene. Rocco, you can open the line up, please.

Thank you. Today's first question comes from Stephen Baxter at Wells Fargo. Please go ahead.

Yes, hi. Thanks for the question. I was hoping you could expand a little bit on the Medicare outlook embedded in your guidance. It’s certainly a concern that costs in the fourth quarter could be coming in higher than expected, and you certainly reported in MLR that it was a bit above consensus, even excluding the PDR. That would seem to suggest, too, I think most that your Medicare assumptions for 2024 would be under pressure, but you’re saying that’s not the case, so hoping you can expand on why that wouldn’t be, and maybe some of the underlying trend assumptions that you factored into your guidance here. Thank you.

Sure, Stephen. Good morning, and thanks for the question. Yes, we still feel comfortable with how we’ve accounted for trend in the 2024 bids, and as you heard earlier, no change to 2024 Medicare guidance elements; but let me talk a little bit about what we saw throughout 2023 and underlying trends. Let’s talk macro first and then we can talk Q4. From an inpatient utilization standpoint, that was pretty consistent throughout 2023 - very little variation quarter over quarter. Where we did see a step up, as we pointed to multiple times throughout the back half of the year, was in Q2 in outpatient, and underneath that, the drivers were fairly consistent through the last three quarters of the year, so orthopedics with DME on either side of that, cardiac and cardiovascular as a subclinical category, so those were pretty consistent full year. What was incremental in Q4, obviously the biggest item was taking a $250 million PDR. We also saw a COVID step-up between Q3 and Q4 and then sequentially month-over-month in the quarter. We also saw in Medicare only, ILI step up late in Q4. Both of those have come back down, as we’re seeing in January run-out data. We saw some RSV vaccine utilization in Q4, partly a function of our continued efforts to get seniors in for their preventive service visits - you heard me talk about that in my prepared remarks. That was also part of intentional investments we made in quality in Q4 as we prepared and positioned for 2024, which as you know is that critical third year in our cycle and our effort to get to 85% of members and 3.5 stars by October of 2025, so those are really the elements of both full year ’23 and then in Q4, and again still feel comfortable with how we’ve accounted for overall trend in the ’24 bids and no change to ’24 guidance for Medicare.

Thank you. Our next question today comes from Josh Raskin with Nephron Research. Please go ahead.

Yes, hi. Thanks. I was wondering if you could give us some color on the Medicare Advantage membership losses coming into the year. I’m looking specifically at geographic mix relative to expectations, meaning did you lose the members where you expected, and then also were the balance of new sales and sort of gross losses consistent with expectations, retention, was that in line? Just any color there would be helpful.

Yes, thanks Josh. We were, as Drew said, very pleased with the way the Medicare team executed in AEP and precision across all of the dimensions that you talked about, again largely in line with expectations. We took an intentional refocus in the ’24 bid strategy to try to align to those lower income, more complex members, as well as the duals and the DSNP population, and we were successful in terms of what we’re seeing relative to the concentration of duals coming out of AEP, so pretty pleased with where we intentionally focused, what the impact looked like, and again that was really a function of the team going PBP by PBP and building up a strategy where we could invest in those members that we wanted to retain, and in those members that we feel like we’re going to provide the greatest long-term value to. Ken, I don’t know if you want to talk a little bit about some of the calibration we did on distribution as part of that effort overall?

Yes, it’s a really important add to Sarah and Drew’s comments. If you recall, in prior quarters we talked about the prior penetration with tele-digital brokers, and we made a conscious effort both in terms of owned assets and discipline with preferred partners that moved the mix to a balance that we’re really, really comfortable with, and our owned assets performed historically far better with respect both to retention and overall quality, and we’re seeing that now in preferred partners. I think the distribution system has responded to obvious opportunities to improve quality, persistency, and product mix, as Sarah said, is directly in line with what we were targeting, so the level of precision is both impressive, important and directionally where we’re going to go.

Thank you. Our next question today comes from Kevin Fischbeck with BofA. Please go ahead.

Thank you. I noticed you increased the revenue guidance by $2.5 billion but kept the EPS guidance the same. Is there anything specific impacting the EPS, or is this simply a cautious approach? Also, I want to clarify the PDR. Are you indicating that the current rate isn’t enough to cover the trend? Does your PDR take into account the latest rate update, or does it expect an improvement? If the rate update is confirmed, could that lead to changes in the PDR? Thank you.

Yes, thanks Kevin. Great question. On the marketplace front, it’s really just acknowledging that we’re very early in the year, and then I think you point out a really important point relative to the mechanics of the PDR and how that positioned us with the ability to look at full year trend in ’23. I’ll let Drew talk a little bit more about those mechanics.

The PDR we recorded in the fourth quarter is for the 2024 calendar year. In Medicare, evaluations are done annually, so 2025 is not relevant at this stage as we still have the chance to adjust our bids. We have yet to receive a final rate notice, only an advance notice indicating we have work to do. Regarding the PDR, as mentioned in Stephen's question, we have another opportunity to assess the forward trend when we set the PDR. The accounting rules require us to establish the PDR based on our expectation of how 2024 will unfold, so any trends we considered were included in the PDR booked in the fourth quarter.

Thank you. Our next question today comes from Justin Lake of Wolfe Research. Please go ahead.

Thanks, good morning. Drew, appreciate all the color on Medicare Advantage rates. You mentioned that your rate is minus-1.3%. Given trends in the mid-2s, and you didn’t really have much star impact year-over-year, it sounds like the combination of the V28 model and the fee-for-service normalization is somewhere in the negative 3.5% range, so first, is that math right; and then second, if so, could you compare the negative 3.5% that you’re seeing for 2025, at least in the advance notice, versus how big a negative that was in 2024, so we can understand the year-over-year impact? Then if you can, break up the impact between V28 and the fee-for-service normalization on both the 2025 and a year-over-year basis, it’d be incredibly helpful to understand what’s going on there. Appreciate it.

Yes, let me break that down. The changes in the HCC model, which include the risk score normalization you mentioned, showed about a one-point decline in our evaluation of the advance notice compared to last year. This drop is partly due to the normalization change and the shift to a regression model instead of omitting a base period. That’s likely as detailed as we want to get on this call. However, if you add up all the factors, it currently translates to about a 1.3% impact on rates. This figure does not include the risk score trend, which could shift it into a positive range. We intend to focus on the mechanics of our approach. We’re not looking to expand Medicare Advantage; rather, our goal is to recoup margins over the latter half of the decade, so we'll adjust the bids accordingly. As a result, the offerings may appear somewhat less appealing to seniors from the industry's perspective if we don't achieve significant progress on the final rates.

Thank you. Our next question today comes from AJ Rice at UBS. Please go ahead.

Thanks. Hi, everyone. Just want to pivot over to Medicaid for a minute. Obviously, you mentioned the retro adjustments, you didn’t get the marginal headwind, I guess. You’ve also talked about some states being proactive and giving you acuity adjustments ahead of time, and then you’ve got your normal rate cycle with the state. I wonder if there are any updated thoughts on where you land for ’24 in terms of your Medicaid margin, and I think you had talked about the fact that coming out of redeterminations, you saw potential for improvement in Medicaid margins going into ’25. Just wondered if there was any updated thoughts on any of that.

Yes, thanks AJ. Let me talk a little bit about the dynamic we saw in Q4 and then how we feel as we sit here in early February. Full year HBR for Medicaid in ’23 was really a function of Q4, and what we saw in Q4 was some of that timing dynamic that we’ve called out since the beginning of redeterminations is a dynamic that we were fully expecting to be managing through, the timing of matching rates with acuity as the risk pool shifts. Q4 was a heavy member roll-off quarter, as we talked about, and later in the quarter, we saw some acuity pressure in the portfolio ahead of those 1/1 rates that had been designed to address that acuity kicking in. We also had some of those retro rates designed to address the acuity coming in late in the year, and like we said, we got some of those before year-end but not all, so continue to work on those. That’s really what drove that lingering pressure in Q4. Then as we sit here today, we’ve got really solid visibility into the rate for our 2024 member months - it’s 63% of the book we’ve got visibility for. We’ve got those 1/1 rates now in place and they are in general coming in toward the higher end of that composite range that Drew mentioned at investor day of 2% to 2.5%, and then we’re still working on that handful of 2023 retro rates that would then come in, in ’24. If you take that all together, acknowledge it’s still early in the year, but that’s what makes us feel good about our 90.1 midpoint for the ’24 Medicaid HBR. Then to your point, as any of those timing dislocations shake out in ’24 and we continue to calibrate and match those up, then as we move into the roll-off of redeterminations in ’25 and beyond, that becomes a tailwind for the book overall.

Thank you. Our next question today comes from Scott Fidel with Stephens. Please go ahead.

Hi, thanks. Good morning. Just wanted to pivot back to Medicare. Interested if you could sort of talk through for us just on the inpatient side, it doesn’t seem like you saw anything unusual in the fourth quarter, but do want to confirm whether or not you did see any type of mix shift towards more short stay inpatient visits, a reduction in observation visits as mentioned by a large peer in Medicare. Then just sort of sticking on this potential theme, would love just your feedback and thoughts around the implementation of the two midnight rule for MA and how you’re factoring that into your 2024 outlook. Thanks.

Yes, thanks Scott. As Sarah said, at a high level, inpatient was pretty steady throughout 2023, and you go a couple of clicks below that, we looked at case mix, admits per thousand, obs per thousand, we didn’t see a Q4 uptick in inpatient. If you look at observation days, we saw no meaningful shift in observation days. We all know the two midnight rule doesn’t start until 1/1/24, but we’ve been on top of that, preparing for that, thinking through that as we formulated our forecasts for 2024, and we think we’ve got that captured. Obviously the industry, we can still do medical necessity on that, but yes, we’ll be observing that two midnight rule beginning in January.

Thank you. Our next question today comes from Lance Wilkes with Bernstein. Please go ahead.

Great. Could you talk a little bit about the pipeline and the upcoming bids with respect to Medicaid, some of the upcoming RFP awards? Then more broadly, Sarah, if you could talk a little bit to as you’ve gone through some of the recent wins and as you’re looking at satisfaction scores within states, what are areas of strength that are helping you with either retention or new wins, and are there particular areas of opportunity and what are some of the plans to address some of those areas? Thanks.

Yes, thanks Lance for the question. As you pointed out, we’ve had some great positive momentum of late with New Hampshire, Arizona, North Carolina expansion, as well as Oklahoma, and that makes us feel good as we roll into what’s an active RFP season. We obviously have Florida in flight, and really proud of the sunshine team and the work they’re doing, as well as Georgia, and then Texas for later this year and 2025 go-live, so we continue to track that. We continue to have, I believe, the best BD team in the business, incredibly strong local teams that are being really thoughtful and incrementally forward-looking in terms of, as we said at the investor day, making sure that we’re competing on promises kept, not just promises made. That, I think goes to the second part of your question, which is really what are we seeing in the market in terms of the investments we’ve made over the last two years around customer satisfaction and that local community partnership, and we’re really starting to see improvement in terms of partner satisfaction, provider relationships, as well as quality. If you look at our Medicaid quality scores year-over-year, you’re seeing really nice improvement there. Those have been things at the top of our list in terms of focus over the last two years, and I think we are starting to see those bear fruit, those are really important drivers as states think about who they want as partners relative to the managed Medicaid business. I would say the other major theme that we continue to hear and we continue to be focused on pretty organically, frankly, is health equity, and so the emergence of the 11/15 waivers and thinking about how to put dollars into things like housing, food, jobs, childcare that ultimately drive pretty significant healthcare outcomes, and that's something that states are increasingly interested in partnering over. Again, it’s something that Centene has been naturally focused on as a by-product of being local in our approach and having the strengths of those longstanding incumbent relationships. I think there’s really good improvement in the places that we’ve focused and really good core strength in the areas that are going to matter going forward.

Thank you. Our next question today comes from Cal Sternick with JP Morgan. Please go ahead.

Yes, thanks for the question. I wanted to ask two on the marketplace. First, could you talk about the demographic trends of the incremental membership you got, so any insight on the acuity and metal mix of the extra members you added compared to what you initially anticipated? Then on ICRA and the Indiana pilot, how many members did you enroll in that product and what are some of the key milestones you’re looking to evaluate the pilot as you move through this year? Thanks.

Thanks Cal for the question. As you’ve heard, the demographics for the population that came in during OEP for us were pretty consistent with our expectations, and the distribution of tiers between silver, gold and bronze, also pretty consistent. We still have the majority of our members in that silver tier, so the demographics have not shifted materially. One of the things that I think is interesting - this may just be the data geek in me - but if you look at what we’re seeing, not just in our book but overall in the market, there are some interesting small shifts in the demographics overall that I think tell us a lot about what’s actually driving the underlying growth, above and beyond just what we know in terms of affordability and awareness from the enhanced subsidies and the additional marketing dollars going into navigators and the broker channel. We’re seeing year-over-year, age coming down slightly, which I think supports our view that we’re seeing a younger pool, we’re seeing a healthier pool, and we’re seeing some of those gig workers coming in. We’re seeing the distribution in gender between male and female shift a little bit, so more men coming into the marketplace, which we see as a signal of digging deeper into that uninsured population, because women tend to move sooner out of that population. Then we’re also seeing the gold tier as an industry pick up a little bit, which we see as supporting our view that there’s small group migration coming into the market - obviously we’ve got anecdotal evidence around that, but that’s true in our book, that’s true in the overall industry, and again I think very consistent with what we think is driving 31% overall market growth, but pleased as well with the fact that within that growth, we were able to grow our market share within footprint. Relative to ICRA, obviously that’s still very much a nascent market. The Indiana pilot is very new. I’m happy to say that we sold our first customer in January, so good early proof point; but the goal there for us is really to test and learn and gather data, and we’re pretty confident that we’re going to be incrementally smarter about how that market is evolving as we go throughout the year.

Thank you. Our next question today comes from Gary Taylor at TD Cowen. Please go ahead.

Hey, good morning. One clarification and one question. I just want to clarify, Drew, on the negative 1.3% ’25 advance notice for Centene, does that exclude stars or basically for Centene no different stars impact than the negative 15 basis points that CMS sized for the industry? Then my question is, I just wanted to see if you could just balance these very diverse views on MA. Your MA MLR first nine months was down 110 basis points year-over-year, fourth quarter was up 310 excluding the entire PDR, and you only boosted the PDR by $50 million or 30 basis points on ’24. You said your MA outlook looks unchanged, so there’s two camps this quarter: there’s Centene and United saying the sharp fourth quarter MA MLR spike means nothing for ’24, and then there’s Humana, who said the sharp spike in the quarter is the new baseline heading into ’24. It’s been a while since I’ve seen such divergent views across the industry, that all had sort of the same cost acceleration, so can you just explain again why you’re landing where you’re landing on 2024 MA?

All right, so let me take the first one first. Of the 1.3% that we mentioned, our star rating change is minus-0.5, so absent that we’d be at minus-0.8, so it’s a little bit heavier than the industry as a whole, which I believe CMS was at minus-0.2, so hopefully that helps with the math there. On Medicare, Sarah said look, we’re looking hard at our outpatient trend, which we’re not happy with but it’s steady at that elevated level relative to May-June timeframe, and that’s sort of what we’d built into the forecast, so that would be a change year-over-year. Inpatient, we talked about that - I mean, no uptick, as we said earlier. Maybe one of the elements that may be a little bit unique with us is that as we see the year developing, and there’s a dial we have on quality spending initiatives, and there’s a lot of quality initiatives that we’re going to do regardless of what our aggregate EPS result is, but we really stepped that up in Q4 and that triggered a heavier level of office visits, which is a good thing, getting our members in to see their physicians. It triggered RSV vaccines, which is a good thing, and we saw that coming through in December. As Sarah mentioned, we did have ILI. The only area of the business where ILI, an influenza-like illness, was heavier year-over-year was in Medicare, and obviously that’s transitory, it’s already come down in January, so those are the other elements that you should think about when evaluating Q4. But we feel good about our forecasts. We had another bite at the apple on the PDR, Gary. If we thought trend was going to be $50 million higher than the $250 million next year, the PDR would have been $300 million and we would have reported $6.61, or something like that, so feel good about our forecasts. We’ve got work to do in Medicare to improve the macro, but we’re ready to tackle 2024.

Thank you. Our next question comes from George Hill with Deutsche Bank. Please go ahead.

Good morning, everyone. I’d like to rephrase Gary’s question slightly, focusing on what appears to be two different narratives regarding the utilization trend. Broadly speaking, there’s the seasonal utilization we’ve observed, which we now refer to as a normal baseline trend that excludes seasonality or any spikes, and then there’s another narrative indicating that the trend is currently below this baseline, perhaps due to the ongoing effects of COVID. We also have a heightened utilization trend over the past three years that leads us back to baseline. Sarah, do you have a preferred narrative regarding utilization that you’re observing? Are we addressing a short-term backlog in utilization that should stabilize, or are we operating below a longer-term trend that we need to return to, possibly adjusted for your baseline?

I definitely prefer our perspective, particularly regarding Centene. While I recognize the need to align with what other companies are experiencing, our focus remains on our own population. We noticed some trends in Q2 and have incorporated that into our 2024 bids. We have the advantage of having a clearer view of utilization for the full year. Our assumptions for 2024 are built on our ability to implement clinical initiatives, utilize our value-based relationships, and manage the trends we are observing. That is our main concern, rather than being influenced by what others are saying.

Thank you. Our next question today comes from Dave Windley with Jefferies. Please go ahead.

Hi, thank you for taking my question. I wanted to clarify something and then ask another question. Drew, you both mentioned a second opportunity several times. I wanted to confirm whether this is a chance until the end of the year, or if it means that if circumstances change your outlook for 2024, you could adjust your estimate for PDR. I also wanted to ask about SG&A. Where do you currently stand regarding headcount reduction, real estate optimization, and other cost-cutting measures for SG&A as part of your value creation plan? Thank you.

We appreciate the questions regarding the PDR. While we are not pleased to be in that position, it has allowed us to reassess our 2024 forecast as we finalized our December results. Throughout 2024, we expect to release a significant portion of the PDR in the fourth quarter, considering the seasonal nature of earnings in Medicare. Each quarter, we will review whether the PDR is sufficient in relation to the 2024 policy and calendar year, and make adjustments if necessary, but these changes will remain within the scope of 2024. Regarding SG&A, there are still many opportunities to explore. I mentioned at investor day that there are opportunities in Medicare where we can improve by a couple of hundred basis points over the coming years. As for real estate, we are mostly through the major changes, with only minor adjustments likely remaining. We continue to work on our initiatives and have ample opportunities to improve efficiency.

Yes, I would echo that and just say that a lot of great execution in the first two years, we’re going to realize that in 2024, but we haven’t stopped. You’ve heard us talk about building the pipeline for 2025 and beyond in terms of additional opportunities. Obviously, our long-term algorithm has 1% to 2% of margin expansion built in, and we do see additional opportunities to drive efficiency in the business as we standardize our workflows, allowing us to then automate that with technology, so really pleased not just with the execution thus far and the discipline to get us here. We’re really thinking about how we do work going forward. We do see opportunity for continued efficiency in the future.

Thank you. Our next question today comes from Sarah James at Cantor. Please go ahead.

Thank you. Could you remind us what the margin progression looks like on exchanges, like how many quarters it takes for you to get to run rate? Then just a mechanics clarification on the PDR - are you guys booking that as the delta between where you view costs and target margin, where it would roll over kind of flat at target margin from ’24 to ’25, or is that you’re booking it as the view of costs to break even? Just if you can give us the context of that, thanks.

Yes, in response to your second question, it's not exactly what you've suggested. It relates to the accounting principle concerning marginal loss, excluding elements like marketing expenses and certain investments. Essentially, it reflects the marginal loss allocated to the year when we set the bids. It certainly isn't recorded and falls far short of our target margins. We have considerable work ahead to elevate from an expected minus-3.5% in 2024 to the desired 4% to 5% pre-tax range as we progress through the decade. Stars will likely contribute to about two-thirds of that improvement, and as I mentioned, we still face SG&A and clinical initiative challenges. It’s intriguing that we're focusing so much on just 12% of our revenue, which amounts to $16 billion and remains a key lever, yet we also have several other promising businesses, such as the marketplace that you inquired about. Regarding margin evolution, we anticipate that this year will benefit from the special enrollment period, as members typically utilize a variety of services upon joining and then normalize in the subsequent year. The risk adjustment mechanics can be somewhat harsh if we're only enrolling members partway through the year, but with a full calendar year, both the numerator and denominator align better. Hence, we expect to see positive effects for our members if we manage to grow our SEP, although that expectation isn't included in our guidance yet, as we're currently at 4.3 million members. Should we continue to expand through 2024, it will serve as a favorable drive for 2025.

On that point, I would just note that we’re seeing an increase year-over-year in retention of SEP members, which means that we’re poised to capture the benefit of that sophomore effect from that heavy growth we had in SEP last year, so that’s a really nice trend that we’ve been watching and seeing that retention grow year-over-year.

Thank you. Our next question today comes from Nathan Rich at Goldman Sachs. Please go ahead.

I have a question about the Medicaid business. It seems that the HBR redeterminations have aligned with expectations. The guidance for 2024 includes a 50 basis point headwind, which I believe accounts for any timing mismatches related to acuity. I wanted to confirm whether you are currently observing this situation and if your projections for 2024 still include that 50 basis point adjustment, or if the timing of the rate updates and the costs in the underlying book have actually aligned better than you initially anticipated.

I would say at a high level, we’re pretty pleased, just given the complexity of the portfolio and all of the state-by-state dynamics with the degree to which acuity and rate has matched up relative to timing. Obviously not perfect - we talk about what we saw in Q4, but across the entire portfolio, we’re feeling pretty good about that, which is again part of why we’re still confident in that 90.1 midpoint. But maybe Drew, you can talk a little bit about risk corridors and other dynamics that we’re tracking relative to that 50 basis point buffer?

Yes, we need to consider the savings from our PBM, which we've targeted at 20 basis points, as this has helped us reach the 90.1 figure. Looking ahead to 2025 and 2026, we expect to return to the high 89s on a consistent mix basis. Regarding our risk corridors, while they don't provide a perfect buffer depending on the trends and rate pressures, we anticipate around $1.8 billion in payback for 2023. This places us in a significant payback situation for our Medicaid risk corridors and minimum medical loss ratios. Although this isn't uniform across every state, it does cover several states, and it’s an important factor to consider as we plan future rate actions and align acuity with rates.

Thank you. Ladies and gentlemen, this concludes our question and answer session. I’d like to turn the conference back over to the management team for any closing remarks.

Great, thanks Rocco, and thanks everyone for your time and interest this morning. We look forward to providing updates as we move deeper into 2024.

Thank you. This concludes today’s conference call. We thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.