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Employees say:"I have a People Leader that does not micromanage but is available to provide assistance when I need it. I love the guidance and training that People Leaders receive from Corporate. I enjoy the people I work most closely with, who are from all over the country. I also love working remotely and, as an introvert, think that I work best that way. I also love Centene's focus on work/life balance. "

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The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

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Employees say:"I appreciate that the company has responded to feedback from employees and implemented/modified areas that truly make a difference to those working here. I believe that this has led to a better morale overall and results in more commitment and dedication from employees."

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Employees say:"I love our mission and each day I see how our team and all the employees from within the organizations strives to achieve the upmost of our mission. I love what I do, what we do for our community and our members. Always going above and beyond, the recognition of each staff member speaks volumes to myself and others."

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The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

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The 300 companies on this list are transforming industries from the inside out.

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Employees say: 
 
"At Centene Corporation, new, innovative ideas are encouraged. We constantly strive to work with community partners and invest in the communities we serve. We are constantly evolving and are flexible to handle change."

GPTW Women 2023-Centene Corporation

Employees say: 
 
"The leadership 'talk the talk and walk the walk.' They say what they want to do, then they do it. Mission and business focused. Support for the 'sandwich' generation mom, like myself, has been great."

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

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The health care company, led by CEO Sarah London, focuses on insurance plans offered through Medicaid and the Affordable Care Act. Revenue was up 15% in 2022 from the previous year. 
<ul> 
 	<li>Centene’s $2.2 billion acquisition of behavioral-health specialist Magellan Health, completed in January 2022, was cited by the company as a major factor in its revenue growth for the year.</li> 
 	<li>Elsewhere, Centene has been divesting itself of “noncore” subsidiaries in an ongoing review of its portfolio. Divisions that it has sold off include Magellan’s pharmacy and specialty-health units. In May 2023, Centene announced it would divest its A.I.-powered health care analytics company Apixio.</li> 
</ul>

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Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

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Employees say: 
 
“Yes, we operate as family. Everyone has the same goals and that is to take care of our members and each other. Executive leadership is very personable and accommodating. This company does its very best to reward their employees and accommodate them the best way that they can. I love my company. Everyone is very friendly, family oriented and considerate of one another. I would recommend Centene/Superior Health Plan to anyone that I feel would be a good fit for the company.”

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A global health crisis continued to drive revenue growth at Centene, a health insurer with considerable exposure to the Medicaid and Affordable Care Act marketplaces. Revenue increased 13.4% in 2021, to $126 billion, and as of early 2022, Centene’s managed care membership had increased by 1.9 million over the previous year. In January 2022, Centene acquired Magellan Health for $2.2 billion, expanding its behavioral-health offerings. The company is also coping with a loss in the corner office: In April 2022, CEO Michael F. Neidorff, who headed Centene for more than 25 years, passed away after a long illness. Sarah London, formerly vice chairwoman, is now chief executive.

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A couple of strategic bets paid off for Centene over the past year. The health insurer dug in to the Affordable Care Act’s marketplaces even when the Obama-era health law’s future was far from certain, and through April 2021 it had added 320,000 new members under the Biden administration’s expanded special enrollment period for those individual insurance exchanges. Centene’s 2020 revenues exceeded $111 billion, after executives accurately predicted that the COVID pandemic would bring about a windfall, with growing demand for coronavirus-related services across the nation. The question is how long that win streak can last. “This a year with unique drivers,” said CEO Michael Neidorff in late April 2021, “which we cannot be certain can continue throughout all of 2022.”

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F500-2021-24-Centene

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Centene has at times been an oddity among its health insurance peers. In the past few years, the company has remained steadfast in serving the Affordable Care Act’s individual insurance markets, despite what would seem like never-ending legal and political uncertainty surrounding the government program. Well, it seems the skeptics lost that bet. Centene's strategy, coupled with acquisitions that focus on government-affiliated health plans like Medicare and Medicaid, propelled the insurer to 24% revenue growth in 2019, compared with the previous year. And it may benefit from another financial tailwind to come: The firm reportedly expects billions of dollars in revenue growth this year, due to the coronavirus crisis.

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Centene has at times been an oddity among its health insurance peers. In the past few years, the company has remained steadfast in serving the Affordable Care Act’s individual insurance markets, despite what would seem like never-ending legal and political uncertainty surrounding the government program. That strategy, coupled with acquisitions that focus on government-affiliated health plans like Medicare and Medicaid, propelled Centene to 24% year-over-year revenue growth in 2019—not to menition a steady, decade-long rise on the Fortune 500. And the insurer may benefit from another financial tailwind to come: The firm reportedly expects billions of dollars in revenue growth this year, due to the coronavirus crisis.

As we face unprecedented collective challenges, cooperation has become a business superpower.

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This insurer’s 24 million members, the vast majority of whom belong to Medicaid, Medicare, and Health Insurance Marketplace plans, are disproportionately vulnerable to harm from the pandemic. Centene has leaned into the challenge of keeping them healthy by plowing money into infrastructure that helps Medicaid members access telehealth, and by removing barriers (like prior authorizations) to COVID-19 testing and care.

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Centene is the largest Medicaid managed-care organization in the U.S. as of 2026. The company works with programs in the public and private sector to provide health care services to the underinsured and uninsured, military veterans, and commercial organizations. Programs it serves include Medicaid and Medicare plans, Medicare prescription drug plans, the Health Insurance Marketplace, and Tricare plans. It also operates its own health care and dental clinics and pharmacies.

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Centene (CNC): Company Profile, Stock Price, News, Rankings

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Centene

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Good morning, and welcome to the Centene Corporation Second Quarter Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. Would now like to turn the conference over to Jennifer Gilligan, Senior Vice President, Finance and Investor Relations. Please go ahead, ma'am.

Thank you, Rocco, and good morning, everyone. Thank you for joining us on our second quarter twenty twenty five 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 call, which also can be accessed through our website at centene.com. 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. Specifically, our discussion today about expectations for the drivers of adjusted EPS for 2025 and any commentary on expected adjusted EPS for 2025 are forward looking statements.

Actual results may differ materially from those indicated by those forward looking statements as a result of various important factors, including those discussed in our second quarter twenty twenty five press release, Centene's most recent Form 10 Q filed this morning and its 10 ks filed on 02/18/2025 and other public SEC filings, which are available on the company's website under the Investors section. 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. The call will also refer to certain non GAAP measures. A reconciliation of these measures with the most directly comparable GAAP measures can be found in our second quarter twenty twenty five press release.

We are unable to reconcile our commentary on adjusted expected adjusted EPS for 2025 to the corresponding GAAP measures due to the difficulty of predicting the timing and amounts of various items within a reasonable range. Finally, following the call, the team's prepared remarks will be posted on the Investors section of our website. With that, I would like to turn the call over to our CEO, Sarah London. Sarah?

Thanks, Jen, and thanks, everyone, for joining us.

We have a lot to cover this morning, so let me start by outlining a few key elements of my prepared remarks. First, I'll provide more detail on the marketplace risk adjustment challenge we previewed earlier this month, including what happened and what actions we're taking to mitigate the financial impact with an eye to restoring the book to profitability in 2026. Second, I will address the elevated medical cost trend that drove our higher Q2 Medicaid HBR result, how we are addressing it, and an updated view on the positive progression of Medicaid rates. Third, I'll review our updated outlook for 2025. And finally, I'll share our perspective on how the policy landscape in the wake of the One Big Beautiful Bill Act, or OB3 and how that informs our view of 2026 and beyond.

Before we jump in, let's level set with what we printed this morning. We reported second quarter results for 2025 inclusive of an adjusted per share loss of $0.16 We are disappointed by this performance and frustrated to have fallen short of the financial goals we set at the start of the year. Our primary focus is restoration of our earnings trajectory, and the entire team is unified behind that goal, operating with a sense of urgency and discipline as we work to improve performance across the portfolio and drive results that will generate tangible shareholder returns. As you will hear, we are aggressively taking actions to put our Marketplace business on a path to recovery and enhance profitability for 2026. In Medicaid, we have clear line of sight into what is driving our trend, and we are actively pulling the levers necessary to correct our trajectory.

And finally, our Medicare Advantage business is achieving significant operational progress, paving our path to breakeven in 2027 and profitability in the years to follow. With that, let's dig in, beginning with Marketplace. We reported second quarter Marketplace membership of 5,900,000 members as the book continued to grow, driving more than $10,000,000,000 of commercial premium and service revenue in the period. Revenue in the quarter was negatively impacted by the previously disclosed shortfall in projected 2025 risk adjustment transfer revenue, generating a drag of approximately $1,200,000,000 in pretax for the segment. In addition to the risk adjustment challenge, the underlying performance of our Marketplace business was impacted by higher levels of utilization.

We've incorporated this elevated utilization into our full year 2025 outlook, which we will address in a few moments. Now let's talk about the risk adjustment challenge in a bit more detail. On July 1, we announced that with information on approximately 72% of our membership, we were tracking to earnings pressure of $1,800,000,000 in 2025 as a result of a change in marketplace risk adjustment transfer assumptions. This was based on data from Weekly, an independent actuarial firm that aggregates market growth and morbidity information on behalf of carriers on the individual marketplace. Since this announcement, we have received our additional files and spent meaningful time reviewing the findings.

Based on the complete data set, we now expect full year 2025 Marketplace earnings to be pressured by $2,400,000,000 which represents 100% of the membership impact. Analysis of the full data confirmed a significant shift marketplace risk pool in 2025, which we now believe is primarily being driven by three things. First, a higher than expected percentage of healthy and or low utilizing members left the marketplace during open enrollment, which was likely the result of program integrity measures that were introduced after 2024 pricing was finalized and implemented for the 2025 open enrollment cycle. Second, new sign ups to the market had higher morbidity, likely reflecting changes in the underlying member mix from redeterminations and those same program integrity guardrails deterring new healthy sign ups in 2025. And third, a step up in marketplace utilization more broadly, combined with more aggressive provider coding, is likely driving higher in year documented morbidity.

Together, these dynamics have shifted the morbidity of the market in some states as much as 16% to 17% year over year. Ultimately, Ambetter was underpriced for this morbidity shift. As a result, we now expect the product to run slightly below breakeven for the remainder of 2025 instead of within our target margin range of 5% to 7.5%. This is obviously a disappointing outcome, but we are not taking it standing still. We immediately turned our focus to mitigating the impact of this pricing miss with the goal of returning the business to profitability in 2026.

As of this morning, we have already filed 2026 pricing in 17 states. We expect to submit adjusted pricing files in up to 12 additional states within the next week and anticipate state certification of rates over the next month. Based on what we know today, we continue to believe that we will be able to reprice the 2026 portfolio to account for a substantial majority of our Marketplace membership, and our goal is to reprice 100% of the book. Importantly, our 2026 pricing adjustments account for the morbidity shifts we observed in the 2025 data, but they also account for shifts we now expect to see in certain markets in 2026, informed by the scale of our data and our unique ability to see correlations across the 29 state footprint. As a reminder, initial 2026 pricing was already set to current law of the land, which means we have accounted for the potential expiration of EAPTCs.

In addition to addressing pricing, we are actively looking at ways to leverage our position in the market to create more transparency around market dynamics earlier in the year. We are also engaged with the administration as they prepare to implement the next wave of program integrity measures to ensure the mechanics for open enrollment 2026 both achieve their goals and ensure that eligible members can readily access high quality affordable health insurance on the Federal Exchange. While the individual marketplace will be absorbing the impact of regulatory changes for at least one more cycle, it does not change the fact that millions of Americans rely on this critical infrastructure to access health care coverage. We remain committed to supporting our almost 6,000,000 members in getting the care they need to keep themselves and their families healthy. And as we do so, we are focused on returning our marketplace portfolio to profitability in the short term and sustainable profitable growth over the long term.

Turning to Medicaid. Our Medicaid portfolio also fell short of expectations in the second quarter, producing an unanticipated and unacceptable health benefits ratio of 94.9%. Driving this underperformance was a step up in medical cost trend in three areas: behavioral health, home health and high cost drugs. Behavioral health was the most significant driver of the quarter over quarter increase with AVA or Applied Behavioral Analysis as an accelerating pressure point across a number of our markets. In response, we have formed enterprise wide behavioral health and ABA task forces to further support our markets in aggressively managing this trend.

Together, they are focused on aligning members to high quality providers, educating state partners around evidence based clinical guidelines, advocating for behavioral health specific rate adjustments, and rooting out fraud, waste, and abuse in service of better member outcomes. Within the underlying ABA trend, the largest concentration of pressure was isolated to a single program in a single state. As a reminder, earlier this year, we inherited the ABA population in Florida within the Children's Medical Services contract for which we are the sole source provider. That population transitioned with inadequate rates and with a continuity of care provision limiting the use of managed care strategies to effectively manage services and associated costs. This provision lifted as of June 1, and we are already seeing the impact of clinical and administrative interventions.

At the same time, we are also advocating with our state partner to address the underlying rate gap, both retroactively and prospectively. Home health was the next largest contributor to trend across markets in Q2 with home and community based services or HCBS related to complex populations as the top driver. Here too, we are leveraging a cross enterprise approach to select high quality and high integrity providers in this space and ensure states have sufficient data to inform both rate and policy decisions. We saw HCBS pressure manifest in an outsized way in New York in Q2 due to rate insufficiency and state driven program changes. As we saw this emerge, we deployed additional leadership resources to the New York market and are executing against a very clear roadmap to correct the overall trajectory, which is showing good progress as we move into Q3.

ICOS drugs were the final driver of the Q2 step up with cancer drugs and gene therapies among the major categories contributing pressure. In addition to working with our partners to ensure clinical appropriateness for these treatments, we have also been ramping up efforts to educate our states on a sustainable cost containment, including through corridors or carve outs. This is another place where the benefit of a 30 state Medicaid footprint means we can readily source best practices to inform solutions. And we are seeing states moving more quickly to make policy and program changes to better regulate this cost driver. In addition to pulling these more direct levers, we are hyper focused on securing rates that reflect current trends in order to deliver meaningful margin improvement for the Medicaid business.

As a reminder, 88% of our Medicaid franchise gets re rated between sevenonetwenty five and elevenonetwenty six. Over the last eighteen months, we have demonstrated the ability to secure outsized rate increases and engage constructively with our state partners to infuse more real time data into the process. We are activating that same playbook in light of this recent step up in trend to push for faster rate correction. Our sevenone and nineone rates have materialized better than our previous expectation, and we now expect a 2025 composite rate adjustment of 5% compared to 2024. This is stronger than the previous expectation of 4% plus.

We have important rate updates upcoming in our tenone states, including Florida, and we are already feeding current trend data to those states who will update rates oneonetwenty six for 40% of our membership. Despite the current dislocation, we remain confident in our ability to secure rates that are sufficient to address the current acuity and health care demand within the Medicaid population and support sustainable margins over the long term. Turning to Medicare. PDP membership ended the quarter at 7,800,000 members, roughly flat on a sequential basis. Our performance in this product exceeded our expectation in the period, allowing us to improve our outlook for full year results in PDP.

The PDP program absorbed a number of regulatory changes in 2025. And with half the year behind us, we are now more comfortable with the assumptions we made around the impact of some of these changes. While our outlook for the product remains prudent, PDP is providing some earnings upside relative to our previous outlook. Meanwhile, Medicare Advantage is making important progress on its path to margin recovery, thanks to effective 2025 pricing, an optimized footprint and continued operating discipline. To date, the book is running slightly favorable to expectations, and we continue to closely monitor components of costs such as outpatient surgery and pharmacy to ensure that we appropriately manage any evolving pressure.

Relative to STARS, we are pleased with our continued performance improvements across multiple categories and particularly with gains we have seen in our clinical measures for members with chronic illnesses. We are still waiting for CAHPS results and final cut points from CMS, but based on the data we have today, we still anticipate year over year progress in STARS. But challenging cut points may make our 85% target difficult to hit. As a reminder, we anticipated cut point headwinds coming into 2025 and have built a path to our 2027 breakeven target that does not rely on further STARS improvement. Based on our performance in 2025 to date, as well as the advancements we have made and expect to to continue to make relative to clinical interventions, SG and A and value based care alignment, we feel good about our path to breakeven in 2027 for Medicare Advantage and are pleased with the consistent progress we are making turning around this business.

As we think about the road ahead, our current forecast calls for full year adjusted diluted EPS of approximately $1.75 The following six items can help you bridge from our previous full year 2025 adjusted EPS guidance of $7.25 representing $4,550,000,000 of pretax to the $1.75 One, as I mentioned earlier, we now estimate that the marketplace morbidity shift relative to our previous 2025 forecast will create a $2,400,000,000 full year headwind to the 2025 pretax earnings. Two, also in Marketplace, we have built in an additional $200,000,000 in pretax margin pressure from expected back half utilization, including the impact of members seeking care in advance of the expiration of EAPTCs. Three, in Medicaid, we've reflected the rate increases we know for sevenone and nineone, but have been balanced about our assumptions for the tenone cohort. Four, we have also assumed that we will continue to have trend pressuring the back half of the year such that the Medicaid HBR in the second half is approximately 93.5. The overall change in full year Medicaid HBR represents an approximate $2,100,000,000 headwind on pretax earnings compared to our prior forecast.

Five, we expect the Medicare segment to deliver approximately $700,000,000 in pretax favorability in our compared to our prior forecast, largely driven by PDP, but supported by better Medicare Advantage results as well. Embedded in this $700,000,000 is the expectation of continued specialty trend in PDP and slight outpatient pressure in MA. And finally, through continued aggressive SG and A management and natural leverage on growth, we expect to deliver an approximate net $500,000,000 in pretax earnings in the buildup to $1.75 compared to our prior forecast. As we think about variations of that forecast, we believe the largest swing factor that could pressure the $1.75 would be a further acceleration of Medicaid trend in the back half of the year. To frame the downside for you, if we made no progress on HBR in the back half of the year compared to the first half, that could push the $1.75 as low as $1.25 With respect to upside to the $1.75 we have tangible momentum in Medicaid on rate updates and policy changes, progress on clinical interventions and network design, and increasingly effective initiatives to stamp out fraud, waste and abuse.

The impact of that work could lead us to a better result than 93.5% in the back half of the year. And as a reminder, every 10 basis points of back half HBR improvement is $45,000,000 in pretax. In Marketplace, we will get updated market morbidity data at the September and December, which could indicate we don't need the full $2,400,000,000 change in the marketplace forecast. As the next few months progress, we will also have a better view on whether the additional $200,000,000 provision for marketplace trends was necessary. And finally, we will continue to pursue strategic SG and A opportunities as we look to right size the business for 2026.

All of these factors could drive results higher than $1.75 There are a number of very near term milestones that will better inform our view of the full year outlook, including July and August results, tenone rate updates and the next tranche of weekly data, all of which are expected by the September. We look forward to providing updates on our outlook as we gain additional visibility into these key inputs. With that, let me take a moment to talk about 2026. We fully expect to deliver margin improvement in our three core lines of business in 2026 relative to the current forecast. Let's dig into that in more detail.

We believe we are on track to reprice our Marketplace business for meaningful margin improvement in 2026. While the last month has been incredibly challenging for this business, the team has far more clarity on the trend and market morbidity dynamics of 2025 as well as the insights embedded in that data that foreshadow 2026 dynamics. We have integrated this view into our 2026 refiling decisions and are making excellent progress against our goal to reprice 100% of the marketplace book. In Medicaid, we now have far more transparency about the drivers of cost and trend across our portfolio and are in command of the levers to correct our HBR trajectory as we head into 2026 and beyond. With 88% of the book rerating over the next six months, momentum around policy changes and enterprise aligned execution on key initiatives, we are confident we can meaningfully move the Medicaid HBR in the right direction over the next twelve to eighteen months.

And finally, armed with strong rates and operating discipline, our Medicare Advantage business will continue to make solid progress in 2026 on its path to breakeven in 2027. Our industry is always evolving, and it is our job as a business to evolve with it. We have spent the last three years fortifying our platform. And over the coming months, we will pressure test each of our markets for the future conditions necessary to support sustainable profitable growth. We will harvest additional synergies across the platform, lean harder into places we can leverage our unique size and scale and work to ensure we have the strongest and most resilient platform to support the new normal that lies ahead.

That end, a comment on the policy and legislative landscape. We view O B3 as having established a new and stable policy floor for our programs, and we are actively developing a multiyear implementation strategy. Many of the Medicaid provisions include runway for implementation, allowing us to leverage the strong partnerships we have at the state level to help maximize the impact of taxpayer dollars and maximize coverage for vulnerable members. On the marketplace side, as you heard, we have the benefit of an early look at program integrity impacts and are baking that into our revised 2026 pricing. While we expect to see a contraction of the individual market heading into 2026, regardless of what happens with EAPTCs, Just on the other side of that is a more stable market for individual and family coverage.

Medicare likely has another wave of policy changes coming from CMS aimed at maximizing efficiency and integrity across the program. And we are tracking those closely as we build back that business. This clarity allows us to firmly plan for the future, and our confidence in the staying power of Medicaid, Medicare and the individual marketplace is as strong as it has ever been. By staying focused and delivering on our mission of transforming the health of the communities we serve one person at a time, we believe we can command a durable, differentiated position in a key market and deliver meaningful value to our members, our stakeholders and our shareholders. With that, let me turn it over to Drew for some additional detail on the financial results.

Thank you, Sarah. Today, we reported second quarter twenty twenty five results, including $42,500,000,000 in premium and service revenue and a disappointing adjusted diluted loss per share of 16¢. Let me build on what Sarah covered regarding what happened and more importantly, what actions we are taking. Let's start with marketplace where Sarah covered a lot of ground. So let me give you a click deeper into one of the primary drivers observed in the data we received in late June, and then tie that to the relevance for refiling 2026 rates.

We have found a high correlation between increasing 2025 morbidity in a given geography and the degree to which there is disruption in the two low cost silver plans from 2024 to 2025, and whether or not that geography was in a state based exchange or federal exchange for those two years. In other words, where there was a change in the two low cost silver plans in a federally facilitated exchange, which would require the member to take an action in order to maintain a $0 premium, we believe the 2025 program integrity provisions such as a three way call with CMS or Social Security verification negatively shifted the risk pool and disproportionately reduced zero or low utilizers from the market in 2025. This same phenomenon appears to have also reduced the entry of similar new members across all federally facilitated exchange or FFE markets compared to 2024. As Sarah mentioned, the morbidity increase was up as much as 17% in states with significant low cost silver disruption. Conversely, in an FFE geography with no disruption in the two low cost silver plans, the members could auto renew with their carrier for 2025 without much of a hassle.

Why is this important? Because based on what we can see across our 29 state footprint, we can form an expectation of what degree of morbidity lift may be coming in 2026 when all members will have to go through the new program integrity steps and validations to ensure eligibility for 2026 marketplace. This has meaningfully influenced our 2026 pricing approach that Sarah described. As of this morning, we have submitted 17 refilings and expect to wrap up the remaining states in the next week or so with the approval process expected in August. As we sit here today, we expect to make meaningful upward twenty twenty six rate adjustments reflecting this data across our marketplace footprint.

In Medicaid, Sarah covered the trend drivers, including the acceleration of behavioral health, especially ABA and other related counseling therapies in q two. We are working with state partners to get rates corrected for this and in some cases push for retro premium adjustments for program changes such as Florida Children's Medical Service, we where we are the sole source carrier, and where there are inadequate risk adjustment mechanisms such as in New York. In addition to the seven one and nine one positive rate updates Sarah provided, we are working with our state partners to drive policy improvements across a number of states. One example being pharmacy management responsibility returning to the Medicaid plans in one of our states in the fourth quarter, which will allow us to directly manage the cost. We're also executing on initiatives designed to keep health care affordable, including clinical interventions, payment integrity, and choosing the right network partners.

Let me go a little bit deeper on PDP as a follow-up from the q one call. Now that we have two quarters of PDP data, we can better forecast the trends for the remainder of the year. Even though we still see very high specialty pharmacy trends in our non low income cohort, we are into the 90% CMS, 10% payer part of the risk corridor. This should provide us with earnings protection and reasonable predictability, though we will continue to build a receivable from CMS, which will be increasingly visible in our cash flows in the back half of the year. And as Sarah mentioned, our Medicare Advantage business is ahead for 2025 and on track for our goal to breakeven in 2027.

Moving to consolidated enterprise topics. Cash flow provided by operations was $1,800,000,000 for Q2, primarily driven by improved timing on pharmacy rebate remittances. Unregulated cash on hand at quarter end was $234,000,000 We do not have any further 2025 share buyback in our current forecast, but we'll remain open to opportunistic buybacks as we continually assess market conditions and changes in our cash positions. Our medical claims liability at quarter end represents forty seven days in claims payable, a decrease of two days as compared to the first quarter of twenty twenty five, driven by the timing and types of claims, as well as the impact of state directed payments. And as a reminder, 2025 DCP is structurally lower than 2024 DCP due to our PDP revenue increase resulting from the inflation reduction act and the speed at which pharmacy claims complete compared to medical claims.

Moving to our outlook for 2025, with the visibility we gained in Q2, we pressure tested each business, operational measures, trend drivers and SG and A. The result is a forecast that equals $1.75 per diluted share of adjusted earnings with swing factors on both sides as Sarah laid out. A few more miscellaneous items that might answer a couple of questions in advance. One, we expect our full year adjusted tax rate in our forecast to be around 19%, which could vary depending on the actual level of pretax earnings. Two, given our market cap change coupled with the passing of the OB3 in July, we will be going through a goodwill evaluation and test in the third quarter, which prevents us from being able to reconcile prospective adjusted EPS elements to a GAAP equivalent.

And three, our premium and service revenue outlook for 2025 has increased to approximately $172,000,000,000 including approximately $89,000,000,000 in our Medicaid segment, 41,000,000,000 in our commercial segment, 37,000,000,000 in the Medicare segment and 5,000,000,000 in other. There is substantial future earnings power in this revenue base. Coming back to the big picture, there's a real opportunity to make meaningful margin improvements, and these are good long term businesses. Yes, we have to navigate a major unanticipated shift in the marketplace risk pool in 2025, as well as the dislocation between Medicaid rates and underlying medical costs, plus regulatory changes in 2026 and beyond. But these are important and relevant long term businesses critical to serve and provide value to economically challenged and medically complex members and our government partners.

This is fixable. We look forward to demonstrating improvements ahead. Thank you for your interest in Centene. And Rocco, please open it up for questions.

Today's first question comes from Josh Raskin at Nephron.

I'm sure there'll be a lot on the operation. So I'm going to ask if you could walk us through your capital position, sort of the amount of capital that you think you'll be adding to your subsidiaries in the second half and maybe how you're thinking about any potential needs for additional capital, whether that's debt or equity for the rest of the year?

Yes. Thanks, Josh. We have a very thoughtful plan on that. So I will let Drew walk through a couple of those items.

Yes. You'll see this in the queue, Josh. We think we'll need to put in net $300,000,000 into our subs in the back half of the year. That's net of dividends that we still expect. Obviously, those dividends will be at a lower level than previous expected.

But stepping back to the big picture, you may recall that in the first quarter, we renewed our credit facility and we doubled the size of that. So it's a $4,000,000,000 credit facility. We had zero drawn at June 30. And there's only one covenant in there, which is a 60% debt to cap, and we're currently about 39%. So we've got quite a bit of runway for capital and look forward to improving the operation and generating a higher level of earnings in 2026.

Thank you. And our next question today comes from AJ Wright at UBS. Please go ahead.

Centene (CNC) Q2 2025 Earnings Call Transcript

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