Financial Data and Key Metrics Changes - The company reported adjusted EPS of $1.84 on $10.8 billion of premium revenue, which was below expectations [7][19] - The consolidated MCR for the quarter was 92.6%, reflecting a challenging medical cost environment [7][19] - Year-to-date, the consolidated MCR stands at 90.8% with an adjusted pre-tax margin of 2.7% [7] Business Line Data and Key Metrics Changes - In Medicaid, which represents 75% of total premium revenue, the MCR was reported at 92% with an adjusted pre-tax margin of 2.6% [8][19] - The Medicare segment reported a third quarter MCR of 93.6%, with higher utilization in high-acuity populations [8][20] - The Marketplace segment had a significantly higher-than-expected MCR of 95.6%, driven by elevated utilization [8][21] Market Data and Key Metrics Changes - The company anticipates full-year premium revenue to increase to approximately $42.5 billion [9][24] - The adjusted EPS guidance for 2025 has been revised down to approximately $14 per share, reflecting a consolidated MCR of 91.3% [9][24] - The medical cost trend for Medicaid is now expected to be 7%, which is 100 basis points higher than previous guidance [10][25] Company Strategy and Development Direction - The company aims to surpass the $50 billion premium revenue mark in the coming years, with a focus on winning RFPs and pursuing M&A opportunities [16] - The strategy includes reducing exposure in the Marketplace while stabilizing the risk pool [17] - The company is optimistic about Medicaid rates keeping pace with medical cost trends, with expectations for slight improvements [42][44] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging medical cost environment but expressed confidence in the long-term growth potential of the business [17][18] - The company views the current operating environment as temporary and expects rates to eventually align with medical cost trends [17][60] - Management highlighted the importance of state responsiveness to rate adjustments in light of increased medical costs [42][44] Other Important Information - The company has a strong capital foundation, with RBC ratios at 340% and total subsidiary capital 70% above state minimums [22] - Share repurchases totaled approximately 2.8 million shares at a cost of $500 million, reflecting confidence in the company's long-term value [23] - The company has an active pipeline of $54 billion in new opportunities over the next few years [16] Q&A Session Summary Question: Can you elaborate on the drivers of ACA MCR pressure in the quarter? - Management indicated that the pressure was due to increased medical cost trends across all categories, with a higher percentage of special enrollment membership contributing to the trend [34][35] Question: Are you expecting Medicaid rates to be in excess of the 7% cost trend? - Management expressed optimism that rates will at least keep pace with the trend, citing state responsiveness and a solid baseline for rate projections [41][42] Question: How does the expiration of subsidies affect your pricing assumptions? - Management stated that pricing was conservatively set to account for the expiration of subsidies, with an aim to break even or better in the Marketplace segment [46][47] Question: What is the outlook for embedded earnings? - Management indicated that embedded earnings are expected to be realized over time, with some components contributing positively in the upcoming year [62][65] Question: Can you discuss the M&A pipeline and capital allocation priorities? - Management confirmed that capital priorities remain focused on organic growth, inorganic growth, and returning capital to shareholders, with a full pipeline of actionable M&A opportunities [71][74]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $1.84 on premium revenue of $10.8 billion, which was below expectations [5][20] - The consolidated Medical Care Ratio (MCR) was 92.6%, reflecting a challenging medical cost environment [5][20] - Year-to-date, the consolidated MCR stands at 90.8% with an adjusted pretax margin of 2.7% [5][20] - The full-year 2025 adjusted earnings per share guidance has been revised down to approximately $14, which is $5 below prior guidance of $19 per share [7][27] Business Line Data and Key Metrics Changes - In Medicaid, which represents 75% of total premium revenue, the MCR was reported at 92% with an adjusted pretax margin of 2.6% [5][21] - The Medicare segment reported a third-quarter MCR of 93.6%, with higher utilization in high-acuity populations [6][21] - The marketplace segment had a significantly higher MCR of 95.6%, indicating elevated utilization compared to risk adjustment revenue [7][21] Market Data and Key Metrics Changes - The company anticipates premium revenue growth in its current footprint and new Medicaid contracts in Georgia and Texas, targeting $46 billion in revenue for 2026 [12][31] - The marketplace business is expected to face revenue headwinds due to pricing strategies aimed at reducing exposure [13][31] Company Strategy and Development Direction - The company aims to surpass $50 billion in premium revenue in the coming years, with a strong pipeline of $54 billion in new opportunities [17][91] - The acquisition pipeline is robust, focusing on smaller health plans that may consider strategic options due to current operating challenges [18][91] - The company is strategically reducing its footprint in the marketplace to stabilize risk pools and improve margins [32][91] Management's Comments on Operating Environment and Future Outlook - Management noted that the medical cost trend is higher than expected, driven by increased utilization across various categories [6][21] - The company remains optimistic about Medicaid rates keeping pace with cost trends, citing responsiveness from state partners [49][51] - The outlook for 2026 suggests a potential return to target margins as rates are expected to improve [60][62] Other Important Information - The effective tax rate in the third quarter dropped significantly due to federal tax credits and lower non-deductible expenses [22] - The company repurchased approximately 2.8 million shares at a cost of $500 million, indicating confidence in the value of its shares [25][91] Q&A Session Summary Question: Can you elaborate on the drivers of ACA MLR pressure in the quarter? - The pressure was strictly related to increased medical cost trends across all categories, with a higher percentage of special enrollment membership contributing to the trend [40][41] Question: Are you expecting Medicaid rates to be in excess of the 7% cost trend? - Management expressed optimism that rates will at least keep pace with the trend, citing responsive state actions and visibility into cost categories [48][49] Question: How does the expiration of subsidies affect your pricing assumptions? - The company has priced for the expiration of subsidies, targeting breakeven or better margins, with significant price increases planned [54][56] Question: What is the outlook for embedded earnings? - The company has $8.65 in embedded earnings, with expectations for a portion to emerge in 2026, although the timing may be affected by current margin levels [77][80] Question: Can you break down the performance of the Medicare business? - The Medicare business is undergoing rejuvenation, with expectations for slight margin erosion in MMPs transitioning to Phydes and Hydes, but overall starting at margin neutral for next year [82][87] Question: How is the M&A pipeline developing? - The M&A pipeline is full of actionable opportunities, with a focus on acquiring revenue streams from struggling local health plans at or near book value [89][91]