Ariel Investments, an investment management company, released its “Ariel Global Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. Global equities rallied in the third quarter, driven by AI enthusiasm, resilient corporate earnings, the first U.S. rate cut of the year, and targeted policy easing across key regions. Against this backdrop, the Ariel Global fund traded +4.99% higher in the quarter, compared to the +7.62% return of the MSCI ACWI Index and +6.13% return of the ...

Centene Corporation Conference Call Summary Company Overview - **Company**: Centene Corporation (NYSE:CNC) - **Date of Conference**: November 11, 2025 - **Speakers**: Sarah London (CEO), Drew Asher (CFO) Key Points Industry Context - Centene operates primarily in the healthcare services sector, focusing on government-sponsored programs such as Medicaid and Medicare. Financial Performance - Q3 results exceeded expectations, leading to an upward revision of the full-year outlook to at least $2 per share [4][7] - The company reported a revenue stream of approximately $5 billion from the Florida Medicaid contract, which is expected to decrease to between $4.5 billion and $9.3 billion next year due to contract changes [8][9] Medicaid Updates - Centene was not awarded the CMS Florida contract after six years, impacting their revenue but allowing for a focus on sustainable margins [5][8] - The company is prioritizing a seamless transition for affected members and is not planning to protest the contract decision [5] - Medicaid margins are expected to remain consistent next year, contrasting with some peers who anticipate declines [15][36] Medicare and Marketplace Insights - Open enrollment for Medicare is ongoing, with a focus on margin improvement rather than membership growth [49][54] - The company is optimistic about its position in the Medicare Advantage market, aiming for break-even by 2027 [49] - There is an uptick in call volume related to Marketplace inquiries, indicating member confusion over premium changes [20][22] Legislative and Subsidy Discussions - Ongoing discussions in Congress regarding enhanced subsidies could significantly impact members and the overall market [24][25] - Centene has prepared for various scenarios regarding subsidy extensions and has built pricing for 2026 accordingly [26][30] Operational Strategies - The company is focused on improving margins through various levers, including rate negotiations and utilization management [15][17] - Centene is actively engaged with state governments to optimize Medicaid programs and address issues like fraud and waste [41][42] Future Outlook - The company sees potential for growth in Medicaid and is exploring disruptive opportunities in employer-sponsored insurance [59] - Centene aims to maintain a flexible capital structure, targeting a debt-to-capital ratio below 40% to seize future opportunities [58] Behavioral Health and Cost Management - Behavioral health accounts for approximately 20% of Medicaid spending, and states are increasingly focused on managing these costs [42][43] - Centene is working with states to implement effective policy changes to control costs while maintaining care quality [41] Conclusion - Centene is navigating a complex healthcare landscape with a focus on sustainable growth, margin improvement, and proactive engagement with legislative changes and state partnerships [59][60]

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Core Insights - UnitedHealthcare, the largest health insurer in the U.S., announced that rate increases exceeding 25% and targeted service area reductions could lead to a reduction of its Obamacare customer base by approximately two-thirds [2][3][4] Group 1: Rate Increases and Customer Impact - The company is facing elevated costs due to a higher-than-expected number of sick patients, prompting it to request double-digit rate increases of 25% or more in 30 states where it offers individual coverage under the Affordable Care Act (Obamacare) [3][4] - If the projections hold true, over 1 million Americans enrolled in UnitedHealthcare's Obamacare plans may need to select different health plans due to these changes [4][5] Group 2: Financial Performance and Future Outlook - UnitedHealthcare's third-quarter net income fell to $2.3 billion as it navigates rising costs associated with providing health insurance [7] - The company aims to improve margins in its employer and individual segments by establishing a sustainable premium base, although it anticipates that enrollment in the ACA will decrease significantly [5][6] Group 3: Broader Industry Context - The rising medical costs faced by UnitedHealthcare reflect a broader industry issue, exacerbated by a federal government shutdown that has stalled the extension of tax credits making Obamacare more affordable [5][6] - The company is also addressing challenges in its Medicaid segment, where funding levels have not kept pace with actual cost trends, impacting the health needs of state enrollees [10]

Core Insights - Molina Healthcare is a low-cost, state-contracted health insurance company focusing on cost-sensitive individuals, operating primarily in Medicaid, Medicare, and Marketplace segments [1] Business Overview - Molina Healthcare has experienced growth from 2018 through 2024, indicating a positive trajectory in its business operations [1] Investment Philosophy - The investment approach emphasizes long-term value, focusing on free cash flow, capital allocation, and downside protection, inspired by the principles of Warren Buffett and Charlie Munger [1]

Core Insights - Molina Healthcare is a low-cost, state-contracted health insurance company focusing on cost-sensitive individuals, operating primarily in Medicaid, Medicare, and Marketplace segments [1] Business Overview - Molina Healthcare has experienced growth from 2018 through 2024, indicating a positive trajectory in its business operations [1] Investment Philosophy - The investment approach emphasizes long-term value, focusing on free cash flow, capital allocation, and downside protection, inspired by the principles of Warren Buffett and Charlie Munger [1]

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 [6][17] - The consolidated MCR for the quarter was 92.6%, reflecting a challenging medical cost environment [6][17] - Year-to-date, the consolidated MCR stands at 90.8% with an adjusted pre-tax margin of 2.7% [6] 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% [7][17] - The Medicare segment reported a third quarter MCR of 93.6%, with higher utilization in high-acuity populations [7][17] - The Marketplace segment had a significantly higher MCR of 95.6%, driven by elevated utilization [7][17] Market Data and Key Metrics Changes - The company anticipates full-year premium revenue to increase to approximately $42.5 billion [8][22] - The adjusted EPS guidance for 2025 has been revised down to approximately $14 per share, reflecting a consolidated MCR of 91.3% [8][22] - The Medicaid MCR is expected to be 91.5% for the full year, which is above the high end of the long-term target range [9][22] 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 [14][72] - The 2026 outlook anticipates growth in existing markets and new Medicaid contracts, despite potential revenue headwinds from Marketplace pricing strategies [12][25] - The company is strategically focused on the dual-eligible segment in Medicare, which is expected to drive profitable growth [15][66] Management Comments on Operating Environment and Future Outlook - Management acknowledged the challenging medical cost environment and the impact on earnings, particularly in the Marketplace segment [6][10] - The company remains optimistic about future Medicaid rates keeping pace with medical cost trends, citing responsiveness from state partners [40][42] - Management believes that the current high medical cost trends will eventually stabilize, allowing for a return to target margins [59][62] Other Important Information - The company has a strong capital foundation, with RBC ratios at 340% and total subsidiary capital 70% above state minimums [20] - The company repurchased approximately 2.8 million shares at a cost of $500 million, indicating confidence in long-term value [21] - The embedded earnings are estimated at $8.65 per share, with expectations for realization over time [60][62] 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 [32][33] 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 responsiveness from states and a solid baseline for rate projections [39][41] Question: How does the expiration of subsidies affect your pricing assumptions for Marketplace? - Management stated that pricing is based on the expiration of subsidies, with a focus on achieving break-even or better margins [44][45] Question: What is the outlook for Medicare performance next year? - Management noted that the Medicare business is rejuvenating, particularly with the transition of MMPs to FIDEs and HIDEs, and expects slight margin erosion but overall stability [66][67] Question: How is the M&A pipeline developing? - Management highlighted a full pipeline of actionable opportunities, particularly among smaller health plans facing operational difficulties, and emphasized disciplined capital allocation [71][72]

Core Insights - The Biden-era plan to expand access to Medicare assistance has been delayed to 2034 due to President Trump's legislation, impacting enrollment in state-run Medicaid programs for older Americans [1][2] - Nearly 5.8 million low-income older adults are eligible for Medicare cost assistance programs but remain unenrolled, which could significantly affect their access to necessary healthcare [2][3] - The rising costs of Medicare, including an increase in the standard Part B premium to $185 in 2025 from $174.70 in 2024, are placing additional financial strain on older Americans [4][5] Group 1 - The Biden administration's plan aimed to automate the application process for Medicare's Part D Low-Income Subsidy and facilitate automatic enrollment for eligible beneficiaries [1][2] - The delay in the plan is seen as a setback, increasing the bureaucratic burden on eligible individuals to find existing federal assistance [3] - The financial strain on Medicare households is significant, with an average expenditure of approximately $7,000 on healthcare in 2022, nearly double that of non-Medicare households [4][5] Group 2 - Many older Americans are delaying or forgoing medical care due to the inability to afford prescriptions, doctor visits, or dental work, exacerbated by rising costs of essential goods [4] - Inflation has diminished the purchasing power of retirees on fixed incomes over the past five years, further complicating their financial situations [4]

Core Insights - Elevance Health anticipates elevated medical costs in its Medicaid business to continue into next year, with potential subsidence only by 2027 [1][2] - The company's third-quarter profit exceeded expectations, but concerns over Medicaid costs led to a 4% drop in shares [1] Medicaid Business - The Medicaid segment is under pressure due to a churn in enrollment, with healthier members dropping off and those requiring more medical services taking their place [2][3] - Chief Financial Officer Mark Kaye indicated that 2026 will be the low point for Medicaid profitability, with improvements expected through 2027 [2] - Elevated demand for behavioral health services and weight-loss drugs is contributing to increased costs in government-backed plans [3] Financial Performance - Elevance's third-quarter medical loss ratio was reported at 91.3%, slightly better than analysts' expectations of 91.73% [6] - The adjusted profit per share for the third quarter was $6.03, surpassing estimates of $4.93 [6] Future Outlook - The company expects higher costs in the fourth quarter as members utilize benefits ahead of changes in individual plans under the Affordable Care Act [4] - The expiration of additional premium tax credits in 2026 adds uncertainty to patient enrollments [4] - Elevance plans to provide a formal forecast for 2026 in January, while reaffirming its 2025 adjusted profit forecast of approximately $30 per share and a medical loss ratio of 90% [5]

Core Insights - Elevance Health reported a third quarter net income of nearly $1.2 billion, reflecting a 17.8% increase from $1 billion in the same period last year [4][3] - Total revenues for the third quarter rose by 12.4% to $50.7 billion, driven by higher premium yields and growth in Medicare Advantage membership [4][7] Financial Performance - The benefit expense ratio increased to 91.3%, up 180 basis points year over year, primarily due to elevated costs in the Medicare business [5] - Operating revenue for the third quarter was up 12% to $50.1 billion, influenced by recent acquisitions and growth in health benefits segments [7] Membership and Services - Elevance ended the third quarter with 45.4 million health plan members, a slight decrease of less than 1% compared to the previous year, attributed to lower BlueCard and Medicaid membership [7] - The Carelon health services business experienced significant growth, with operating revenue increasing by 33% to $18.3 billion, supported by acquisitions and scaling of risk-based solutions [7] Strategic Focus - The company emphasized disciplined execution and a focus on affordability and member experience through value-based care partnerships and AI-enabled digital solutions [6]