Molina Healthcare(MOH) - 2025 Q2 - Quarterly Report

PART I - Financial Information Item 1. Financial Statements Presents the unaudited consolidated financial statements and accompanying notes for the periods ended June 30, 2025 Consolidated Statements of Income Three Months Ended June 30, 2025 vs. 2024 (in millions): | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Premium revenue | $10,868 | $9,446 | $1,422 | 15.05% | | Total revenue | $11,427 | $9,880 | $1,547 | 15.66% | | Medical care costs | $9,829 | $8,368 | $1,461 | 17.46% | | Operating income | $373 | $434 | $(61) | -14.06% | | Net income | $255 | $301 | $(46) | -15.28% | | Net income per share - Diluted | $4.75 | $5.17 | $(0.42) | -8.12% | Six Months Ended June 30, 2025 vs. 2024 (in millions): | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Premium revenue | $21,496 | $18,950 | $2,546 | 13.44% | | Total revenue | $22,574 | $19,811 | $2,763 | 13.95% | | Medical care costs | $19,308 | $16,782 | $2,526 | 15.05% | | Operating income | $806 | $860 | $(54) | -6.28% | | Net income | $553 | $602 | $(49) | -8.14% | | Net income per share - Diluted | $10.19 | $10.33 | $(0.14) | -1.36% | Consolidated Statements of Comprehensive Income Comprehensive Income (in millions): | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $273 | $301 | | Six Months Ended June 30 | $600 | $599 | - Other comprehensive gain (loss), net of tax, for the three months ended June 30, 2025, was $18 million, compared to $0 million in 2024. For the six months ended June 30, 2025, it was a gain of $47 million, compared to a loss of $3 million in 2024[8] Consolidated Balance Sheets Balance Sheet Highlights (in millions): | Metric | June 30, 2025 | December 31, 2024 | Change | | :---------------------------------- | :------------ | :---------------- | :----- | | Total assets | $16,209 | $15,630 | $579 | | Total liabilities | $11,606 | $11,134 | $472 | | Total stockholders' equity | $4,603 | $4,496 | $107 | | Cash and cash equivalents | $4,499 | $4,662 | $(163) | | Investments | $4,310 | $4,325 | $(15) | | Medical claims and benefits payable | $4,885 | $4,640 | $245 | | Long-term debt | $3,375 | $2,923 | $452 | Consolidated Statements of Stockholders' Equity Stockholders' Equity Changes (in millions, except shares): | Metric | Dec 31, 2024 | Mar 31, 2025 | Jun 30, 2025 | | :-------------------------- | :----------- | :----------- | :----------- | | Shares Outstanding | 56 | 54 | 54 | | Total Stockholders' Equity | $4,496 | $4,310 | $4,603 | | Net income (Q1 2025) | - | $298 | - | | Net income (Q2 2025) | - | - | $255 | | Common stock purchases | - | $(500) | - | | Other comprehensive income, net (Q1 2025) | - | $29 | - | | Other comprehensive income, net (Q2 2025) | - | - | $18 | - The company repurchased 2 million shares of common stock in Q1 2025, reducing total outstanding shares from 56 million at December 31, 2024, to 54 million at March 31, 2025, and June 30, 2025[12] Consolidated Statements of Cash Flows Cash Flow Summary (Six Months Ended June 30, in millions): | Activity | 2025 | 2024 | Change | | :-------------------------------------------------- | :----- | :----- | :----- | | Net cash used in operating activities | $(112) | $(5) | $(107) | | Net cash provided by (used in) investing activities | $5 | $(435) | $440 | | Net cash used in financing activities | $(42) | $(50) | $8 | | Net decrease in cash, cash equivalents, and restricted cash and cash equivalents | $(149) | $(490) | $341 | | Cash, cash equivalents, and restricted cash and cash equivalents at end of period | $4,592 | $4,418 | $174 | Notes to Consolidated Financial Statements (Unaudited) 1. Organization and Basis of Presentation - Molina Healthcare, Inc. provides managed healthcare services under Medicaid, Medicare, and state insurance marketplaces, serving approximately 5.7 million members across 22 states as of June 30, 2025[15][16] - The company operates with four reportable segments: Medicaid, Medicare, Marketplace, and Other, consistent with its business management and market view[15] 2. Significant Accounting Policies Receivables from Government Agencies (in millions): | Date | Amount | | :---------------- | :----- | | June 30, 2025 | $2,662 | | December 31, 2024 | $2,223 | - The company recognizes premium revenue as earned, subject to adjustments from Minimum MLR, medical cost corridors, and profit-sharing provisions, with liabilities recorded under 'Amounts due government agencies'[26] Liabilities for Premium Adjustments (in millions): | Program | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Medicaid (MLR/Corridors/Profit Sharing) | $771 | $1,006 | | Medicare (Minimum MLR) | $40 | $32 | | Marketplace (Minimum MLR) | $35 | $30 | | Medicare (Risk Adjustment/Part D) | $117 | $115 | | Marketplace (Net Risk Adjustment Payable) | $293 | $98 | 3. Net Income Per Share Net Income Per Share (Diluted): | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $4.75 | $5.17 | | Six Months Ended June 30 | $10.19 | $10.33 | Diluted Weighted Average Shares Outstanding (in millions): | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | 53.7 | 58.2 | | Six Months Ended June 30 | 54.3 | 58.3 | 4. Business Combinations - Effective February 1, 2025, Molina Healthcare acquired 100% of ConnectiCare Holding Company, Inc. for $350 million in cash. The acquisition costs were $3 million for the six months ended June 30, 2025[38] Provisional Fair Values of ConnectiCare Acquisition (in millions): | Category | Amount | | :------------------------------------------ | :----- | | Current assets | $461 | | Goodwill | $222 | | Intangible assets | $61 | | Other long-term assets | $40 | | Medical claims and benefits payable | $(295) | | Amounts due government agencies | $(28) | | Accounts payable, accrued and other long-term liabilities | $(111) | | Fair value of net assets acquired | $350 | - Goodwill of $222 million was assigned to the Marketplace segment and is not deductible for income tax purposes. Acquired intangible assets, totaling $61 million, include contract rights (member list), trade name, and provider network, with a weighted-average amortization period of 9.8 years[41][43] 5. Fair Value Measurements - The company's financial instruments measured at fair value on a recurring basis primarily consist of corporate debt securities, mortgage-backed securities, and asset-backed securities, all classified as Level 2 (directly or indirectly observable inputs)[44][45] Fair Value of Investments (in millions): | Type of Security | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Corporate debt securities | $2,643 | $2,744 | | Mortgage-backed securities | $980 | $914 | | Asset-backed securities | $424 | $431 | | Municipal securities | $196 | $183 | | U.S. Treasury notes | $20 | $5 | | Other | $47 | $48 | | Total assets | $4,310 | $4,325 | Carrying Amount vs. Fair Value of Notes Payable (in millions): | Notes | June 30, 2025 (Carrying) | June 30, 2025 (Fair Value) | Dec 31, 2024 (Carrying) | Dec 31, 2024 (Fair Value) | | :------------------ | :----------------------- | :------------------------- | :---------------------- | :------------------------ | | 4.375% Notes due 2028 | $796 | $782 | $795 | $759 | | 3.875% Notes due 2030 | $645 | $603 | $645 | $578 | | 3.875% Notes due 2032 | $743 | $683 | $743 | $648 | | 6.250% Notes due 2033 | $741 | $763 | $740 | $741 | | Term Loan | $450 | $450 | — | — | | Total | $3,375 | $3,281 | $2,923 | $2,726 | 6. Investments Available-for-Sale Investments (June 30, 2025, in millions): | Type of Security | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | | :---------------------- | :------------- | :--------------------- | :---------------------- | :------------------- | | Corporate debt securities | $2,630 | $28 | $15 | $2,643 | | Mortgage-backed securities | $1,003 | $6 | $29 | $980 | | Asset-backed securities | $425 | $2 | $3 | $424 | | Municipal securities | $197 | $2 | $3 | $196 | | U.S. Treasury notes | $20 | — | — | $20 | | Other | $48 | — | $1 | $47 | | Total | $4,323 | $38 | $51 | $4,310 | - Total gross unrealized losses on available-for-sale investments decreased from $89 million at December 31, 2024, to $51 million at June 30, 2025. These losses are primarily due to fluctuating interest rates, not credit deterioration, and the company does not intend to sell these investments before recovery of amortized cost[49][50] Contractual Maturities of Current Investments (June 30, 2025, in millions): | Maturity Period | Amortized Cost | Estimated Fair Value | | :-------------------------- | :------------- | :------------------- | | Due in one year or less | $602 | $600 | | Due after one year through five years | $1,958 | $1,966 | | Due after five years through ten years | $578 | $583 | | Due after ten years | $1,185 | $1,161 | | Total | $4,323 | $4,310 | - Restricted investments held-to-maturity amounted to $291 million at June 30, 2025, with $261 million maturing in one year or less. These are carried at amortized cost, approximating fair value[53][54] 7. Medical Claims and Benefits Payable Medical Claims and Benefits Payable (Six Months Ended June 30, 2025, in millions): | Segment | Beginning Balance | Total Medical Care Costs | Total Paid | Acquired Balances, net | Change in non-risk | Ending Balance | | :---------------- | :---------------- | :----------------------- | :--------- | :--------------------- | :----------------- | :------------- | | Medicaid | $3,667 | $14,671 | $14,959 | — | $260 | $3,639 | | Medicare | $722 | $2,743 | $2,844 | $128 | — | $749 | | Marketplace | $251 | $1,846 | $1,749 | $125 | — | $473 | | Other | — | $48 | $66 | $42 | — | $24 | | Consolidated | $4,640 | $19,308 | $19,618 | $295 | $260 | $4,885 | - The company experienced a favorable prior year development of approximately $201 million for medical claims and benefits payable as of June 30, 2025, primarily due to reserving under moderately adverse conditions, lower than expected utilization, and improved operating performance in the Medicaid segment[57][58] 8. Debt Outstanding Debt Obligations (in millions): | Debt Type | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | 4.375% Notes due 2028 | $800 | $800 | | 3.875% Notes due 2030 | $650 | $650 | | 3.875% Notes due 2032 | $750 | $750 | | 6.250% Notes due 2033 | $750 | $750 | | Term Loan | $450 | — | | Deferred debt issuance costs | $(25) | $(27) | | Total | $3,375 | $2,923 | - On February 19, 2025, the company entered into an Amended Credit Agreement, establishing a $500 million Term Loan (maturing Feb 2027) and a $1.25 billion revolving credit facility (maturing Sep 2029)[61] - As of June 30, 2025, $450 million was outstanding under the Term Loan, and no amount was outstanding under the Credit Facility. The company was in compliance with all financial and non-financial covenants[62][63][64] 9. Stockholders' Equity - In Q1 2025, the company purchased approximately 1.679 million shares for $500 million under a $1 billion stock repurchase program authorized in October 2024, exhausting the funds[70] - In April 2025, the board authorized an additional $1 billion common stock repurchase program, extending through December 31, 2026. No shares have been repurchased under this new program as of June 30, 2025[72] 10. Segments - Molina Healthcare operates four reportable segments: Medicaid, Medicare, Marketplace, and Other. The 'Other' segment includes long-term services and supports consultative services and the commercial portion of the ConnectiCare acquisition[73][74] - Key metrics for assessing segment performance are revenue, medical margin (revenue minus medical care costs), and Medical Care Ratio (MCR)[75] Segment Revenue and Margin (Three Months Ended June 30, 2025, in millions): | Segment | Premium Revenue | Medical Care Costs | Medical Margin | | :---------- | :-------------- | :----------------- | :------------- | | Medicaid | $8,029 | $7,332 | $697 | | Medicare | $1,608 | $1,447 | $161 | | Marketplace | $1,200 | $1,025 | $175 | | Other | $31 | $25 | $6 | | Total | $10,868 | $9,829 | $1,039 | Segment Revenue and Margin (Six Months Ended June 30, 2025, in millions): | Segment | Premium Revenue | Medical Care Costs | Medical Margin | | :---------- | :-------------- | :----------------- | :------------- | | Medicaid | $16,159 | $14,671 | $1,488 | | Medicare | $3,076 | $2,743 | $333 | | Marketplace | $2,204 | $1,846 | $358 | | Other | $57 | $48 | $9 | | Total | $21,496 | $19,308 | $2,188 | 11. Commitments and Contingencies - The healthcare industry is subject to extensive laws and regulations, with potential penalties including fines, exclusion from public programs, and repayment of revenues. The company is involved in various legal actions in the ordinary course of business and accrues liabilities for probable and estimable losses[81][82] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's analysis of financial condition, operational results, liquidity, and key business trends Forward-Looking Statements - The report contains forward-looking statements covered under safe harbor provisions, providing expectations of future events based on assumptions. Readers are cautioned against undue reliance due to numerous known and unknown risks and uncertainties[84] - Key risks include Medicaid rate adjustments, federal/state regulatory changes, budget pressures, Marketplace dynamics, contract retention, acquisition integration, medical cost management, cyber-attacks, and the impact of AI investments[85] Overview - Molina Healthcare, Inc. is a FORTUNE 500 company providing managed healthcare services under Medicaid, Medicare, and state insurance marketplaces, serving approximately 5.7 million members across 22 states as of June 30, 2025[89] Second Quarter 2025 Highlights Q2 2025 Financial Highlights: | Metric | Value | | :-------------------------- | :---------- | | Net income | $255 million | | Diluted EPS | $4.75 | | Membership (June 30, 2025) | 5.7 million (3.0% YoY increase) | | Premium revenue | $10.9 billion (15% YoY increase) | | Consolidated MCR | 90.4% (vs. 88.6% in Q2 2024) | | G&A ratio | 6.2% (vs. 7.0% in Q2 2024) | | Pre-tax margin | 2.8% | - Membership growth was primarily driven by the Marketplace segment, including the ConnectiCare acquisition, partially offset by a modest contraction in Medicaid[90] - The increase in MCR reflects a challenging medical cost trend environment across all segments, while the improved G&A ratio is due to reduced incentive compensation, operating discipline, and fixed cost leverage[90] Consolidated Financial Summary Consolidated Results Summary (in millions, except per-share amounts): | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Premium revenue | $10,868 | $9,446 | $21,496 | $18,950 | | Medical margin | $1,039 | $1,078 | $2,188 | $2,168 | | MCR | 90.4% | 88.6% | 89.8% | 88.6% | | General and administrative expenses | $711 | $691 | $1,485 | $1,402 | | G&A ratio | 6.2% | 7.0% | 6.6% | 7.1% | | Operating income | $373 | $434 | $806 | $860 | | Net income | $255 | $301 | $553 | $602 | | Net income per share – Diluted | $4.75 | $5.17 | $10.19 | $10.33 | | Ending Membership (millions) | 5.7 | 5.6 | 5.7 | 5.6 | | Effective income tax rate | 21.5% | 25.8% | 22.7% | 25.2% | | Pre-tax margin | 2.8% | 4.1% | 3.2% | 4.1% | Consolidated Results Net Income and Operating Income - Net income decreased to $255 million ($4.75 diluted EPS) in Q2 2025 from $301 million ($5.17 diluted EPS) in Q2 2024, and to $553 million ($10.19 diluted EPS) for the six months ended June 30, 2025, from $602 million ($10.33 diluted EPS) in the prior year period[93] - The decline in net income and operating income was primarily due to an increased Medical Care Ratio (MCR), higher interest costs, and lower investment income, partially offset by higher membership and G&A expense efficiencies[95] Premium Revenue - Premium revenue increased by $1.4 billion (15%) in Q2 2025 and $2.5 billion (13%) for the six months ended June 30, 2025, driven by new contract wins, acquisitions, growth in existing footprint, and rate increases, partially offset by Medicaid redeterminations[96] Medical Care Ratio - The consolidated MCR increased to 90.4% in Q2 2025 (up 180 basis points YoY) and 89.8% for the six months ended June 30, 2025 (up 120 basis points YoY), reflecting a challenging medical cost trend environment across all segments[97] - The MCR for the six months ended June 30, 2025, is above the company's long-term target range[97] Premium Tax Revenue and Expenses - The premium tax ratio increased to 3.8% in Q2 2025 (from 3.1% in Q2 2024) and 3.7% for the six months ended June 30, 2025 (from 3.0% in 2024), mainly due to state mix changes in the Medicaid segment[99] Investment Income - Investment income decreased to $106 million in Q2 2025 (from $115 million in Q2 2024) and $214 million for the six months ended June 30, 2025 (from $223 million in 2024), primarily due to a decline in interest rates, partially offset by increased average invested balances[100] Other Revenue - Other revenue remained stable at $22 million in Q2 2025 (vs. $21 million in Q2 2024) and $45 million for the six months ended June 30, 2025 (vs. $43 million in 2024), mainly from long-term services and supports consultative services in Wisconsin[101] G&A Expenses - The G&A expense ratio improved to 6.2% in Q2 2025 (from 7.0% in Q2 2024) and 6.6% for the six months ended June 30, 2025 (from 7.1% in 2024), reflecting reduced incentive compensation, operating discipline, and operating leverage from business growth[102] Depreciation and Amortization - Depreciation and amortization increased to $58 million in Q2 2025 (from $46 million in Q2 2024) and $106 million for the six months ended June 30, 2025 (from $91 million in 2024), primarily due to the ConnectiCare acquisition[103] Other Operating Expenses - Other operating expenses decreased by $18 million in Q2 2025 and $31 million for the six months ended June 30, 2025, compared to prior year periods. This reduction is attributed to lower non-recurring acquisition costs and litigation expenses incurred in 2024[104][105] Interest Expense - Interest expense increased to $48 million in Q2 2025 (from $28 million in Q2 2024) and $91 million for the six months ended June 30, 2025 (from $55 million in 2024), driven by new borrowings under the Credit Facility and Term Loan in Q1 2025, and the issuance of $750 million 6.250% Notes in November 2024[106] Income Taxes - The effective income tax rate decreased to 21.5% in Q2 2025 (from 25.8% in Q2 2024) and 22.7% for the six months ended June 30, 2025 (from 25.2% in 2024). This is due to increased tax benefits from transferable federal tax credits, lower nondeductible expenses, reduced state and local income taxes, and differences in discrete tax benefits[107] Trends and Uncertainties Regulatory Developments and Related Trends - The 'One Big Beautiful Bill Act' (OBBBA), signed in July 2025, introduces Medicaid changes (work requirements, frequent redeterminations, cost sharing for Expansion program) expected to reduce enrollment by 15-20% for 1.3 million expansion members, phased from 2027-2029[108] - OBBBA also limits state provider taxes and caps Medicaid provider payments, with uncertain long-term impacts starting in 2028. Additionally, it restricts Marketplace premium tax credits for certain legal aliens and requires pre-enrollment verification, expected to reduce national Marketplace enrollment from 2026-2028[108] - The Marketplace Program Integrity and Affordability Rule, finalized in June 2025, shortens the open enrollment period, eliminates a special enrollment period for low-income individuals, and tightens eligibility verification, expected to reduce Marketplace enrollment in 2026[109] Other Recent Developments (RFPs and Acquisitions) - Molina secured new Medicaid contracts in Mississippi (commenced July 1, 2025) and Nevada (expected Jan 1, 2026)[110][111] - The company was awarded a contract in Illinois to provide a Fully Integrated Dual Eligible Special Needs Plan, replacing an existing program, effective January 1, 2026[112] - The acquisition of ConnectiCare Holding Company, Inc., a health plan in Connecticut serving approximately 140,000 members, closed on February 1, 2025, for $350 million[113] - Molina's Virginia Medicaid contract terminated effective June 30, 2025, after the company withdrew its legal action protesting the non-award of a new contract[116] Reportable Segments How We Assess Performance - The company's primary revenue source is health insurance premiums from state Medicaid agencies and the federal government. Performance is assessed using revenue, medical margin, and Medical Care Ratio (MCR)[119][120] Segment Membership Membership by Segment (in thousands): | Segment | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :---------- | :------------ | :---------------- | :------------ | | Medicaid | 4,774 | 4,890 | 4,942 | | Medicare | 267 | 242 | 251 | | Marketplace | 690 | 403 | 386 | | Other | 15 | — | — | | Total | 5,746 | 5,535 | 5,579 | - Total membership increased by 167,000 (3.0%) from June 30, 2024, to June 30, 2025, primarily driven by growth in the Marketplace segment, including the ConnectiCare acquisition, partially offset by a modest contraction in Medicaid[90][122] Segment Financial Performance Segment MCR (Three Months Ended June 30): | Segment | 2025 | 2024 | Change (bps) | | :---------- | :--- | :--- | :----------- | | Medicaid | 91.3% | 90.8% | +50 | | Medicare | 90.0% | 84.9% | +510 | | Marketplace | 85.4% | 71.6% | +1380 | | Other | 82.7% | — | — | | Total | 90.4% | 88.6% | +180 | Segment MCR (Six Months Ended June 30): | Segment | 2025 | 2024 | Change (bps) | | :---------- | :--- | :--- | :----------- | | Medicaid | 90.8% | 90.2% | +60 | | Medicare | 89.2% | 86.8% | +240 | | Marketplace | 83.7% | 72.4% | +1130 | | Other | 85.0% | — | — | | Total | 89.8% | 88.6% | +120 | - Medicaid: Premium revenue increased 9% for both Q2 and 6M 2025, driven by new contracts (New Mexico, Texas expansions) and rate increases, partially offset by redeterminations. MCR increased due to higher medical costs from acuity shifts, product mix changes, and increased utilization (high-cost drugs, behavioral health, inpatient/outpatient)[124][125][126][127] - Medicare: Premium revenue increased 12% in Q2 and 7% in 6M 2025, mainly from the ConnectiCare acquisition, partially offset by exiting MAPD in thirteen states. MCR increased significantly due to higher-than-expected utilization among high-acuity members, particularly for LTSS benefits and high-cost pharmacy drugs[128][129][130] - Marketplace: Premium revenue increased significantly ($573M in Q2, $1.0B in 6M 2025) due to membership growth (304,000 members YoY to 690,000), including the ConnectiCare acquisition and redeterminations. MCR increased substantially due to higher utilization relative to risk adjustment revenue, prior year member reconciliations, and higher initial MCRs from the ConnectiCare acquisition, alongside an elevated overall risk pool[131][132][133] Liquidity, Financial Condition and Capital Resources Liquidity - Molina Healthcare manages liquidity at both regulated health plan subsidiaries and the parent company level. Subsidiaries meet needs through operating cash flows (premium revenue), investment income, and parent company capital contributions[135][137] - The parent company's cash, cash equivalents, and investments decreased from $445 million at December 31, 2024, to $100 million at June 30, 2025, primarily due to $500 million in stock repurchases, $350 million for the ConnectiCare acquisition, and capital contributions to subsidiaries, partially offset by dividends from subsidiaries and net borrowing activity[139] - In the three and six months ended June 30, 2025, the parent company received $260 million and $370 million, respectively, in dividends and return of capital from regulated health plan subsidiaries[138] Investments - The company invests excess cash from regulated subsidiaries in longer-term, investment-grade, and marketable debt securities, adhering to board-approved policies and state regulations. The overall portfolio rating is AA-[140][141][142] - Restricted investments are held-to-maturity, primarily in cash, cash equivalents, U.S. Treasury securities, and corporate debt securities, and are carried at amortized cost[143] Cash Flow Activities Cash Flow Activities (Six Months Ended June 30, in millions): | Activity | 2025 | 2024 | Change | | :-------------------------------------------------- | :----- | :----- | :----- | | Net cash used in operating activities | $(112) | $(5) | $(107) | | Net cash provided by (used in) investing activities | $5 | $(435) | $440 | | Net cash used in financing activities | $(42) | $(50) | $8 | | Net decrease in cash, cash equivalents, and restricted cash and cash equivalents | $(149) | $(490) | $341 | - The increase in cash flow from investing activities by $440 million was primarily due to net proceeds from investments of $296 million in 2025 (vs. net purchases of $88 million in 2024) and lower net cash used in business combinations ($245 million in 2025 vs. $295 million in 2024)[147] - Financing activities in 2025 included $500 million in common stock purchases and $650 million in combined borrowings under the Credit Facility and Term Loan, partially offset by $200 million in repayments[148] Financial Condition - Working capital increased to $5.2 billion at June 30, 2025, from $4.9 billion at December 31, 2024. Cash and investments totaled $9.1 billion at June 30, 2025, down from $9.3 billion at December 31, 2024[150] - Net unrealized losses on available-for-sale investments decreased to $13 million at June 30, 2025, from $75 million at December 31, 2024, primarily due to fluctuating interest rates[150] Regulatory Capital and Dividend Restrictions - Regulated subsidiaries must maintain minimum statutory capital, estimated at $3.0 billion at June 30, 2025. Aggregate capital and surplus exceeded these requirements[152] - Dividends payable by subsidiaries without prior regulatory approval were approximately $430 million in aggregate as of June 30, 2025[153] Debt Ratings - The company's senior notes are rated 'BB' by Standard & Poor's and 'Ba2' by Moody's Investor Service, Inc. A downgrade could negatively impact borrowing capacity and costs[155] Financial Covenants - The Amended Credit Agreement includes customary non-financial and financial covenants (net leverage ratio, interest coverage ratio). As of June 30, 2025, the company was in compliance with all covenants[156][157] Future Sources and Uses of Liquidity - Primary liquidity sources include premium revenue from regulated subsidiaries and dividends from subsidiaries. The Amended Credit Agreement provides a $1.25 billion revolving credit facility, with $1.25 billion available as of June 30, 2025[158][159][160] - Future uses of liquidity include common stock purchases, with an additional $1 billion authorization through December 31, 2026, and targeted acquisitions that offer strategic fit and operational synergies[161][162][163] Contractual Obligations - There were no significant changes to contractual obligations and commitments not otherwise disclosed or outside the ordinary course of business during the six months ended June 30, 2025[165] Critical Accounting Estimates - Critical accounting estimates include medical costs, claims and benefits payable, premium revenue recognition and amounts due government agencies (especially risk adjustment), and business combinations (goodwill and intangible assets)[166][169] Item 3. Quantitative and Qualitative Disclosures About Market Risk Discusses exposure to interest rate risk affecting investment income and the fair value of fixed income investments - The company is exposed to interest rate risk, which could decrease the fair value of fixed income investments if market interest rates rise. A hypothetical 1% increase in rates at June 30, 2025, would decrease the fair value of investments by approximately $118 million[167] - Declines in interest rates over time would reduce investment income. Borrowings under the Amended Credit Agreement bear variable interest, while senior notes have specified fixed rates[167][168] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and reports no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[170] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, these controls[171] PART II - Other Information Item 1. Legal Proceedings Refers to Note 11, 'Commitments and Contingencies,' for detailed information on legal proceedings - For information regarding legal proceedings, refer to Notes to Consolidated Financial Statements, Note 11, 'Commitments and Contingencies'[172] Item 1A. Risk Factors Directs readers to the comprehensive risk factors detailed in the company's 2024 Annual Report on Form 10-K - Readers should carefully consider the risk factors discussed under the caption 'Risk Factors' in the 2024 Annual Report on Form 10-K, as they may have a material adverse effect on the company's business, financial condition, cash flows, results of operations, or stock price[172] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details common stock purchases during Q2 2025 and references information on stock repurchase programs Issuer Purchases of Equity Securities (Q2 2025): | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining Under Plans | | :---------------- | :----------------------------- | :--------------------------- | :--------------------------------------------- | | April 1 - April 30 | 1,000 | $327.71 | $1,000,000,000 | | May 1 - May 31 | — | — | $1,000,000,000 | | June 1 - June 30 | — | — | $1,000,000,000 | | Total | 1,000 | $327.71 | | - During Q2 2025, approximately 1,000 shares of common stock were withheld to settle employee income tax obligations. An additional $1 billion stock repurchase program was authorized in April 2025, extending through December 31, 2026[173] Item 5. Other Information States no Rule 10b5-1(c) or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers - No director or officer adopted or terminated any Rule 10b5-1(c) trading plan or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[176] Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including certifications and Inline XBRL Taxonomy documents - Exhibits include the Molina Healthcare, Inc. 2025 Equity Incentive Plan, Section 302 Certifications of the CEO and CFO, Section 906 Certifications of the CEO and CFO, and various Inline XBRL Taxonomy documents[177] Signatures Contains the certifying signatures of the Chief Executive Officer and Chief Financial Officer - The report is signed by Joseph M. Zubretsky, Chief Executive Officer, and Mark L. Keim, Chief Financial Officer and Treasurer, on July 24, 2025[178]