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Centene Corp (NYSE:CNC)
Q2 2019 Earnings Call
Jul 23, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Centene Corporation 2019 Second Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Ed Kroll. Please go ahead.

Edmund E. Kroll -- Senior Vice President, Finance & Investor Relations

Thank you, Alissa, and good morning, everyone. Thank you for joining us on our Second Quarter 2019 Earnings Results Conference Call. Michael Neidorff, Chairman, President and Chief Executive Officer; and Jeff Schwaneke, Executive Vice President and Chief Financial Officer of Centene, will host this morning's call, which can also be accessed through our website at centene.com. A replay will be available shortly after the call's completion, also at centene.com or by dialing (877) 344-7529 in the US and Canada or in other countries by dialing (412) 317-0088. The playback number for both dial-ins is 10132753.

Any remarks that Centene may make about future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in Centene's most recent Form 10-Q filing filed today, July 23rd and the Form 10-K dated February 19th of 2019 and other public SEC filings.

Centene anticipates that subsequent events and developments will 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 2019 press release, which is available on our website at centene.com at the Investors Section.

Finally, a reminder that the Centene third quarter 2019 earnings call will be held on Tuesday, October 22nd, 2019, and our next Investor Day will be held Friday, December 13th, 2019 in New York City.

With that, I'd like to turn the call over to our Chairman and CEO, Michael Neidorff. Michael?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Thank you, Ed. Good morning, everyone, and thank you for joining Centene's second quarter 2019 earnings call. During the course of this morning's call we will discuss our second quarter results and provide update on Centene's markets and products. We will also provide commentary around the healthcare legislative and regulatory environment, as well as an update on the acquisition of WellCare. Then we begin with second quarter 2019 financials.

We are pleased report another solid quarter marked by robust top and bottom-line growth and operating cash flows. Membership at quarter end was 15 million recipients. This represents an increase of 2.2 million beneficiaries was 17% over the second quarter of 2018.

Second quarter revenues increased 29% year-over-year to $18.4 billion. The HBR increased 100 basis points year-over-year to 86.7%. This was primarily attributable to the marketplace business. As expected margins have normalized from the favorable performance in 2018. The increase was also attributable to the health moratorium, as well as the acquisition of Fidelis.

We reported adjusted second quarter diluted earnings per share of $1.34. This compares to $0.90 reported in the same period last year, representing a 49% increase year-over-year growth.

Lastly, operating cash flows came in at $917 million or 1.9 times net earnings. This is the high end of our previously stated range of 1.5 to 2 times net earnings. These solid results reflect the benefit of our ongoing diversification strategy, which has led us to become a $74 billion enterprise. We're no longer simply a Medicaid healthcare Company.

One has to look at the totality of this enterprise, as the scale and diversity allows us to absorb the ups and downs in rate cycles, markets and subsidiary performance. This ensures that no one part of the portfolio can jeopardize our total organization. Jeff will provide further financial details, including updated 2019 guidance in his prepared remarks.

A quick comment on medical costs. They remain stable and in line with our expectations in the low single-digit.

Moving on the markets and product updates. First, we'll discuss Medicaid activity. Our Medicaid book of business continues to perform well in the second quarter. At June 30, we had 8.5 million recipients representing year-over-year growth of 1.3 million or 18%. We continue to win Medicaid RFPs in new and existing states upholding our industry leading RFP win rate of 80%.

Now on to state updates. Oregon: In July, Centene successfully reprocured its Oregon Medicaid Managed Care contract. We expanded our presence under this new contract, adding three additional counties. We will now be operating in six counties, including Metro Portland. Centene currently provides care to 92,000 beneficiaries in the state. The additional three counties will maturely increase our membership in Oregon.

We look forward to continue to work with the state demonstrating the value of integrated care, focusing on social determinants of health and maintaining sustainable cost control. The new contract is expected to commence January 2020 and will run through December 31, 2024.

Iowa: On July 1 we began operating Iowa's Medicaid Managed Care program, a new state for Centene. Operations commenced as expected, and we are now providing healthcare to approximately 254,000 beneficiaries. Iowa is committed to operate a sustainable Medicaid Managed Care program, as evidenced by the recent rate increase, which we did anticipate. We expect to achieve a normal margin within a typical ramp up period for any new Medicaid contract. Iowa marks Centene's 32nd state of operation.

New York: It has been just over one year since we closed the Fidelis acquisition, and we could not be more pleased with the performance. The integration of the Company is running smoothly, and we are realizing our synergy and accretion targets.

North Carolina: As we have previously noted, Centene won two large regions in North Carolina Medicaid RFP and has an active appeal for the balance of the state. We remain cautiously optimistic regarding our appeal.

Texas: Texas recently decided to delay the start of processing reprocurement announcement until the end of August. We remain confident in the value we bring to the state.

Louisiana has also delayed the announcement of its reprocurement. We now expect to hear late July and remain confident in our prospects there.

Next Medicare: At June 30, we served just under 400,000 Medicare and MMP beneficiaries across 20 states. This represents a year-over-year increase and approximately 55,000 recipients. On a sequential basis, membership increased over 4,500 recipients.

As we have previously commented, we expect 2019 MA revenue and memberships to be flat compared to 2018. This is net of the actions taken by Fidelis to reestablish their posts already, which includes exiting 26 counties in 2019. Next year, we plan to expand it to 100 counties in existing states and add one more new state to that.

We will begin our joint venture with Ascension in core geographies in 2020. Further, Centene will return to a 4-star MA parent rating and the addition of WellCare's high performing MA portfolio will bolster our MA platform. Going forward, this should accelerate profitable long-term growth into 2020 and beyond.

Now Health Insurance Marketplace; the Marketplace business continues to perform well, consistent with our expectations. At June 30, we served approximately 1.9 million exchange members across 20 states. This represents a sequential decline of 58,000 recipients, which is lower than our historic attrition rate. We continue to see higher member retention than in prior years, which we previously noted. Importantly, the key demographics of our membership remain in line with our previous remarks on this subject. Consistent with our previous comments our Marketplace margins continue to be in the 5% to 10% range. We continue anticipate another strong year of operations as a national leader of exchange products and expect to continue to grow this business in 2020.

Next, International; in late June we purchased an additional 40% ownership in Ribera Salud from Banco Sabadell, expanding our stake to 90%. We believe how knowledge and skills, along with our leading edge IT systems has further enhanced an already strong business in Spain. We continue look for opportunities to expand our International business. Please note our growing International business will not distract us or impede our ability to pursue the growth opportunities in the US.

I will now provide an update on the healthcare legislative and regulatory environment. Although there appears to be little desire in Washington to revisit comprehensive healthcare reforms. Congress and the administration continue explore ways to improve healthcare delivery systems. We support the administration's decision to withdraw its rebate proposal to eliminate the existing safe harbor protection within Medicare and Medicaid.

While the Senate still needs to take up the matter, the House recently voted on a very bipartisan basis to eliminate the health insurance fee. Importantly, there are opportunities in which we can work together to bring down not only pharmaceutical costs, but costs across the entire healthcare delivery system. The administration's approach to dealing with the rebate rule is another example demonstrating how Centene does not focus on short-term headline volatility. We focus on the facts as we know today.

We continue advocate for greater price transparency, which includes moving toward net pricing in pharmacy. In this same light, we commend Congress on their bipartisan effort to take steps to reduce the amount of money Americans pay out of pocket for their healthcare costs by ending surprised noise. We continue to see efforts took in Washington state that further stabilize the marketplace.

The administration's final rule allowing employers to offer HRAs as an option to pay for market price coverage provides an opportunity to have a positive impact on premiums. Also, pending waivers in Utah and Georgia aim to stabilize the Marketplace to provide affordable, comprehensive coverage to those between 100% and 250% of the federal poverty level. This has the potential to improve affordability for those with and without subsidies.

As exemplified by Georgia, states are taking the lead with meaningful discussions on how to improve and expand government healthcare programs. They are focusing on seeking private sector solutions to enhance quality and lower cost of healthcare. We're well positioned to be supportive of these efforts. We are encouraged by anything that moves us back from politics to policy. Centene is committed to working with both parties on bipartisan solutions that strengthens the nation's healthcare delivery system.

I would now like to provide an update on the acquisition of WellCare. We were pleased shareholders of both Centene and WellCare voted overwhelmingly to approve the acquisition on June 24th. We appreciate the mandate of our investors as they recognize the value of this transaction. Regulatory discussions are well under way and have been very constructive. Both companies are currently working through the state insurance approval process required for the completion of this transaction. The required Form As and Es have been filed in 27 states. Conditional approvals have been obtained in each state, which is ahead of schedule. Where applicable, the divestiture process is under way and we are pleased to be seeing a great deal of interest in potential acquirers.

Centene and WellCare have each received a request for additional information and documentary materials from the Department of Justice. This was expected given the size of this transaction. Both companies continue to work expeditiously and cooperatively with the DOJ.

Immigration planning is well under way. Our teams are doing extensive work to ensure a smooth and seamless combination of the companies. And both companies are fully engaged and the integration planning is progressing well. We remind you that the combined company will have estimated pro forma 2019 revenues in excess of $100 billion and EBITDA of $5 billion. We are comfortable with our previously communicated synergy and accretion targets. We continue to be comfortable that we will receive all necessary approvals to close the deal in the first half of 2020. Given the progress of activity to date, there may be an opportunity to close earlier in 2020.

Shifting gear to our rate outflows, we expect a composite Medicaid rate increase of approximately 1.5% to 2% for 2019.

In summary, Centene continues to be a growth company, both organically and through M&A. Our targeted pipeline remains robust. We continue to focus on margin expansion and are already realizing benefits from our Centene Forward transformation project. The pending Wellcare acquisition firmly solidifies our 2020 vision of maintaining our industry leading position in the highly competitive, government sponsored healthcare market. We look forward to leveraging the strength each company brings in terms of providing high quality healthcare at lower cost to our recipients and state customers.

We thank you for your continued interest in Centene, and I'll now turn it over to Jeff.

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Thank you, Michael, and good morning. This morning we reported solid second quarter 2019 results. Second quarter revenues were $18.4 billion, an increase of 29% over the second quarter of 2018, and adjusted diluted earnings per share was a $1.34 this quarter, compared to $0.90 last year. Adjusted diluted earnings per share for the second quarter 2019 was driven by solid performance across our business segments. The reconciliation of the 2018 marketplace risk adjustment, which exceeded our expectations by $0.05 per diluted share, and $0.03 per diluted share associated with a gain on the Ribera Salud acquisition.

Let me provide additional details for the quarter. Total revenues grew by approximately $4.2 billion over the second quarter of 2018, primarily as a result of the acquisition of Fidelis Care. Growth in the Health Insurance Marketplace business, expansions and new programs in many of our states in 2018 and 2019, particularly Arkansas, New Mexico and Pennsylvania. This growth was partially offset by the health insurer fee moratorium in 2019.

Moving on to HBR; our health benefits ratio was 86.7% in the second quarter of this year, compared to 85.7% in last year's second quarter and 85.7% in the first quarter of 2019. The HBR increase was primarily driven by the performance in the Marketplace business, the acquisition of Fidelis, which operates at a higher HBR and the health insurer fee moratorium. As we have highlighted previously at our Investor Day, we expected a return to more normalized margins in 2019 for our marketplace business.

Additionally, we continue to experience a higher membership retention rate compared to prior years. As members stay with this longer, it increases medical costs in the HBR. I just want to emphasize that this is a slight increase and we are still well within our 5% to 10% pre-tax margin targets for the product. Sequentially, the 100 basis point increase in HBR from the first quarter of 2019 is primarily due to the performance and seasonality in the health insurance marketplace business.

Before I get into SG&A, let me provide an update on the Marketplace business. As expected and highlighted at our Investor Day, the final risk adjustment was lower than our year-end accrual by $238 million. Additionally, after adjusting for other risk sharing programs including minimum MLRs, our estimated RADV adjustment and other programs, the net amount exceeded our expectations by approximately $31 million or $0.05 per diluted share. Recall, we had included approximately $100 million in our annual guidance. This benefit was driven by our Centene Forward program, and as highlighted during our Investor Day in June, we are reinvesting this amount in other Centene Forward initiatives in the back half of the year.

Now onto SG&A our adjusted selling, general and administrative expense ratio was 9% in the second quarter this year, compared to 9.6% last year and 9.5% in the first quarter at 2019. The year-over-year decrease was primarily driven by the acquisition of Fidelis Care, which lowered the ratio by 60 basis points. The sequential decrease is primarily due to the higher selling costs in the first quarter associated with the marketplace and Medicare products. Additionally, we spent $0.04 per diluted share on business expansion cost during the second quarter.

Investment and other income was $120 million during the second quarter, compared to $65 million last year and $99 million last quarter. The increase reflects increased investment balances over 2018 as a result of the Fidelis Care acquisition, higher interest rates and a gain of $16 million associated with this step-up in bases of our previously held equity investment in Ribera Salud upon acquiring a controlling interest. Sequentially, investment income increased due to the previously mentioned gain on the acquisition of Ribera Salud recognized in the second quarter.

Interest expense was $101 million for the second quarter 2019, compared to $80 million last year, and $99 million last quarter. The increase year-over-year was driven by the additional debt to fund the Fidelis acquisition and higher interest rates associated with our interest rate swaps. Our effective tax rate for the second quarter was 25.7%, compared to 36.9% in the second quarter 2018, which reflects the impact of the health insurer fee moratorium.

Now onto the balance sheet: Cash and investments totaled $15.9 billion at quarter end, including $801 million held by unregulated subsidiaries. Our risk based capital percentage for NAIC filers continues to be in excess of 350% of the authorized control level.

Debt at quarter end was $7.1 billion, which includes $513 million of borrowings on our revolving credit facility. Our debt-to-capital ratio was 36.3%, excluding our non-recourse debt compared to 36.7% last year, and 36.5% at the first quarter of 2019. Our medical claims liability totaled $7.4 billion at quarter end and represents 47 days in claims payable, compared to 48 days in the first quarter of 2019. We continue to expect the DCP to be in the mid-40 range on a run rate basis with the inclusion of Fidelis.

Cash flow provided by operations was $917 million in the second quarter or 1.9 times earnings. The cash provided by operating activities in the second quarter of 2019 was due to net earnings, collections as premium and trade receivables and an increase in other long-term liabilities driven by the risk adjustment payable for the Health Insurance Marketplace Business in 2019.

Lastly, I would like to highlight a few of the changes to our 2019 annual guidance. We are increasing the total revenue guidance at the midpoint by $700 million to reflect the second quarter results and higher membership retention in the Marketplace business. Additionally, we are increasing our GAAP and adjusted diluted earnings per share guidance at the midpoints by $0.03 and $0.05 per share respectively associated with the second quarter performance and the gain from the Ribera Salud acquisition. While risk adjustment delivered an additional $0.05 per diluted share of earnings during the quarter, we are reinvesting the additional earnings and other initiatives to accelerate the Centene Forward program.

Overall, the operating metrics for the second quarter were good across all of our business segments. We believe the continued growth in revenue provides opportunity for future earnings growth.

That concludes my remarks. And operator you may now open the line for questions.

Questions and Answers:

Operator

Thank you. We will now begin the question and answer session. [Operator Instructions] Our first question today comes from Scott Fidel with Stephens Inc. Please go ahead.

Scott Fidel -- Stephens Inc -- Analyst

Hi. Thanks, and good morning.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Good morning.

Scott Fidel -- Stephens Inc -- Analyst

Just wanted to start on the exchanges and maybe just update us in terms of on the margin front, I know that you're still within that 5%, 10% range. I'm just interested in terms of are you tracking sort of right to where you had thought previously?

And any sense in terms of within that range you may be sort of tracking for the year? Then just as a follow up, just on the exchanges as well, just interested we think a lot of the rate filings coming out and the proposed rates for 2020 and just interested in your updated views on how the pricing environment appears to be trending for 2020 on the exchanges and just your views on whether competition is increasing in the Marketplace? Thanks.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Okay. I am going to start off with the margins. Made a little comment on competition, and then let Jeff and Kevin and others comment. The margins are well within a 5% to 10% targeted range. I cannot emphasize enough to everybody that in this business, and I've said this historically as best to-date and it has -- you see movement up and down within that range. Now, in this instance, we commented our retention of membership has been longer than typically -- what we have typically seen. That means we're going to get increased revenue, because we retain that membership. They will reach the maximum out of pockets and so some of the costs will go up.

But we'll still have increased revenue and increased earnings from that increased. It's the nature of this insurance business. And it's really what one expects. And the longer we retain a member, the better it is. Because over time, we have demonstrated we're keeping for a long period of time, we bring the cost down for that person. So I -- as I said, it's a little frustrating to see people concerned about our margin, and movement of margin, which is doing so well within the range is normal Health Insurance performance and shows that this business is really growing and performing as we expect it to. And we've commented earlier to expect this.

So from a margin standpoint, it's doing just what we wanted to do and what we expect it to do. And we see that continuing. And the longer you keep the member, the higher the MLR might go, but also you get all that incremental revenue; revenue which gives you actual dollar earnings increases, and the shareholders, everybody benefit from it.

I'll start off a little bit from the competitive standpoint, but we like competition. And then we think it's important we have it. It just makes us better. And we've also commented that in our segment, which is 40% the federal poverty level and below, that it's fully subsidized, highly subsidized and therefore price in those types of issues do not give somebody trying to come in on price an advantage.

So I think this is a solid business. The actions we took in building it and becoming a leader in it, I think is going to pay a lot of dividends for our shareholders going forward.

Jeffrey, you want to add.

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah. I think Michael addressed the members staying longer comment. I think the only thing I would like to bifurcate is, we did talk about, previously about the margin normalization and that Marketplace margins would be consistent with '17, '16 and '15 and then '18 was a very good year. And so that that piece was completely expected in our forecast.

And then the second piece, I think, that Michael mentioned here was the member staying longer, which just a highlight. We've increased our guidance, our revenue guidance over $1.4 billion for the first and second quarters here really due to the member retention and them staying longer. And I completely agree with the comments he stated about that.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

I want to make one more comment that when we have a $75 billion business, it's definitely we have a $20 billion, $30 billion business and you have more complexity, get more products, you have more states. There's going to be some variability, but it's really a very strong position to be in. And that it really affords us the offsets. And with that sized business and now going International, do we have a market that may have an issue? It's no different than investors that have funds, that have a stock that maybe [Indecipherable] if others had offset it. Marketplace is one of our key strengths and I can emphasize that enough, Scott.

Scott Fidel -- Stephens Inc -- Analyst

Got it. And this sounds like, Michael, so just to clarify on 2020, with what you're seeing the pricing at this point. It sounds like you're still comfortable with the growth rates that you've been targeting in that market for next year?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Yeah. I think I commented in my prepared remarks that I expected to grow next year. So and I think that -- and I still feel that way.

Scott Fidel -- Stephens Inc -- Analyst

Okay. Thanks for the color.

Operator

The next question comes from Kevin Fischbeck with Bank of America Merrill Lynch. Please go ahead.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Good morning, Kevin.

Good Morning, Kevin.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Good morning. Thanks. So I guess, maybe two questions. First question being, when you think about the guidance update, that are few items in there. You had the $0.03 gain and then you had the $0.05 that came in. But I think you're spending $0.05 away. When you think about the components of the guidance raise and could be the raise a little bit less than what the beat was [Phonetic] versus consensus in the quarter. How do you think about that guidance raise? How much of that is going to core operational earnings versus kind of onetime things versus potential offsets as far as reinvestments?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

I will make one comment and Jeff can go in all the detail you want, OK. But then what we try to say is, here we have this Centene Forward, which is really working well. It's going to -- it is freeing us funds to invest in technology and things that would pay big dividends going forward, couldn't be more pleased with it. What happened is, we started to realize results in this quarter and the shovel-ready projects won't be ready until next quarter. So we had to take the earnings, but in effect said, we've taken the earnings this quarter, but next quarter we're going to have the expense. And Jeff, you might just further...

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah, I mean, a couple of things. I would say is that if you're comparing to, I think, the consensus number, I think that was around a $1.24, that's $0.10. So we were at a $1.34, so it is a $0.10 beat. $0.05 is really driven by what Michael mentioned is Centene Forward, which we're reinvesting in the back half of the year. And then you would have another, call it $0.05, $0.03 from the Ribera Salud gain and call it $0.02 from operations if you're comparing to consensus. And so I would say the guidance raise was in line with that. It's the $0.03 from the Ribera Salud gain plus $0.02 from operations, again if you're comparing against consensus that we increased the guidance by.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Okay. That's helpful, and then I guess just a second question being if you could raise the MLR guidance by 10 basis points. Can you talk a bit about what was driving that? I would have thought that the better exchange enrollments and retention might have helped bring that MLR down a little bit?

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah. I think if you're comparing the year-over-year and specifically for this year, I think Michael commented on the higher member retention. So what we did have in the forecast was the margin normalization and we talked about that at our December and probably Q1 earnings calls that we anticipated that exchange margins would be similar to 2017 and prior and then '18 was a very good year. And so Michael commented on the membership retention and that members are staying longer. And so it's -- increased in the HBR, the margins just a little bit. And that's why we did the tenth on the increase in HBR guidance.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

In other words, Jeff, the -- they stay longer so they reach their maximum out of pocket sooner. It doesn't mean that their health conditions have deteriorated if anything. Over time we'll see improvements [Phonetic] the longer we keep them, right. That's really why you see that jump. It's a normalization of the business. And the good news is, I like the fact we're retaining people. When it says longer term, we're going to have a very strong base there.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

I am excited to see why the higher MLR versus the normal exchange person, but I thought normal exchange person had below average MLR. So even if it was higher than an average exchange person, it might be lower than your consolidated MLR. You're saying that if you keep them longer, it's actually higher than your targeted MLR, which holds up the consolidate MLR?

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

No. It's just higher than our previous expectations, Kevin. I mean, we had -- right, we had -- I mean, if you look at the Q1 and Q2, how we raised guidance at the top-line, that's over a, almost a $1.4 billion of additional revenue. And what we're saying is that, that MLR is higher than our expectations that we originally had. So the members are staying longer, which is outside of our expectations, well, and we're adjusting the forecast for that.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

All right. Thanks.

Operator

[Technical Issues] comes from Josh Raskin with Nephron Research. Please go ahead.

Josh Raskin -- Nephron Research -- Analyst

Hi. Thanks. Good morning. I just want to ask on the $0.05 that gets reinvested. I guess, first question is that $0.05, that reinvestment in Centene Forward. Does any of that go into the MLR line or is that all G&A?

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

The bulk of that would have been in the G&A line.

Josh Raskin -- Nephron Research -- Analyst

Okay.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

That is Josh, it's a lot of investments. In other words, we will continue to update our systems. And we said going back when we're going to be investing in that and that's going to deliver longer term real efficiencies. And so this is whole effort on reducing our G&A costs and reinvesting that money without affecting our earnings stream, it's expected. That's what it's all about. It's a -- it's recognizing that growth.

Josh Raskin -- Nephron Research -- Analyst

Now, that makes sense. And then my real question is just from a strategic standpoint, Michael, you alluded to the potential to close WellCare slightly earlier than it sounded like by the end of the first half of next year. It sounds like you're seeing some progress on the regulatory front. That gives you some comfort there. So my question on that is, does that do anything strategically, you know, as you think about the Medicare Advantage line or any other investments or branding or your M&A strategy or anything along those lines that change based on your ability to potentially close the transaction faster?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Well, I think that. Okay. One, I mean, your first take was right. We're seeing a lot of success with the states. They understand it. We've had good discussions with justice. We understand their role and what they have to do and providing them all the material on expeditious basis. So and I want to just consciously let people know it's going well enough that it could close earlier. Now, that sooner it closes and we get the company integrated, the sooner we're prepared to move ahead with some accelerated activity we have in mind. But we're going to be patient and manage it through carefully after we've demonstrated this is fully integrated. We're not going to bite off more than we can chew. And we know how to integrate companies. We've demonstrated that. And so anything that picks up that speech just puts us in a position to do something soon.

Josh Raskin -- Nephron Research -- Analyst

Okay. Perfect. Thank you, Michael.

Operator

The next question comes from Sarah James with Piper Jaffray. Please go ahead.

Sarah James -- Piper Jaffray -- Analyst

Thank you. The DoDs talked about TRICARE moving to risk on the next RFP, can you help size what that would mean for Centene if you retain the same region? And are there any quality metrics for that contract you can share with us that give us insight onto how Centene is performing from the DoD's viewpoint?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Kevin, you want to take that?

Kevin J. Counihan -- Senior Vice Presidents of Products

Sure. Hi. Good morning. We've been working very closely with with DoD for a while about this potential new arrangement and also with House and Senate Armed Services Committees. There is a -- to your point, there's a variety of different thinking going on within DHA as well as in House and Senate Armed Services Committees about what that final new benefit plan might look like. The risk arrangement that you're talking about is one of the things that they're considering, but there's a lot of different things they're considering too with respect to care management, with respect to value based contracting, with respect to network design. We're very pleased to be at the table and providing a lot of different recommendations and ideas to them.

Sarah James -- Piper Jaffray -- Analyst

And when do you think that you'll know how the contract will evolve and potential difference in size of the new contract versus what it's contributing to Centene now?

Kevin J. Counihan -- Senior Vice Presidents of Products

Well, as you're probably aware, there's a leadership change that's going to be taking place over the next couple of months. And so our thinking is probably after that takes place, which is probably in the late summer or early fall. We'll probably know more. So I would imagine with the next three to six months.

Sarah James -- Piper Jaffray -- Analyst

Thank you.

Operator

The next question comes from Lance Wilkes with Bernstein. Please go ahead.

Lance Wilkes -- Bernstein -- Analyst

Yeah. Good morning. Could you talk a little bit about Medicaid, medical cost trend and the components of that and was interested in what the implications are for Iowa in the latter part of the year and maybe as a contributor to MLR guidance just given the withdrawal of one of the competitors in that market?

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah. This is Jeff, Lance. I think what Michael said, we continue to see stable cost trends in the Medicaid business. And as far as Iowa, it's nothing has changed. I would say, our commentary around Iowa has been that we don't have that forecasted or projected to be a contributor to earnings in the first six months of operation for this year. And I think Michael had reiterated in his commentary, his prepared remarks, that we do see kind of a normal, what I would call, Medicaid margin profile on a going forward basis.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Yeah. We typically have said that we will always book at a higher level for the first three quarters and so, sometimes four. But it doesn't mean it's losing. It is maybe break even, but though a new business. We work with our providers on evolution, not revolution. And so it is an educational process as we work through the [Indecipherable] systems and things. So we see it performing normally as all new markets do.

Lance Wilkes -- Bernstein -- Analyst

And is the membership you're getting there kind of above where your original expectations were or is it in line with those original expectations in your [Speech Overlap]

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Chris, you want to comment on that?

Christopher Bowers -- Executive Vice President, Marketing

Sure. Thanks, Michael. We as -- I think Michael mentioned in his remarks, we're at about 254,000. We do expect to come in close to our anticipated membership at 300,000 by the end of the year.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

So we can see it growing and being a very effective market force.

Lance Wilkes -- Bernstein -- Analyst

Great. Thanks.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Thank you.

Operator

The next question comes from Matt Borsch with BMO. Please go ahead.

Matt Borsch -- BMO Capital Markets -- Analyst

Yeah. If I could just ask a first question on the Texas RFP, the Texas contract awards, is that any disability on the timing at this point?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

We've indicated at the end of August. But, I have said historically, I think my quote is that I don't put my hand in fire for any state and their timings, because, you just -- and they do what they want. We're still confident that it's going to continue to be a good opportunity for us.

Matt Borsch -- BMO Capital Markets -- Analyst

Okay. And if I could also ask and you talked about supporting price transparency. Do you -- should I -- should we take that to mean that you would support the initiative to have hospitals and insurers essentially open up their books in terms of their negotiated rates? And if so, do you think that would be something good for pricing and good for Centene?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

I think -- I don't think that everything I've read about it, historically where they've tried those kinds of things. It tends to have a negative impact on pricing. All prices seem to rise to the highest level, not drop to the lowest level. I don't think that would be good. What I'm talking about is particularly in pharmacy. I think there's been an absence because of rebates and things on transparency there. And we are working aggressively to move to net pricing on the pharmacy products.

Matt Borsch -- BMO Capital Markets -- Analyst

Okay. And I'm sorry, just last -- one last one, which is, do you think that you'll see a substantial impact from the -- you touched on the HRA, the ability of employers to use HRA for employees to pay ACA premiums. Do you think that's going to have significant follow through?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

I think that there's an opportunity there, but I have not quantified it yet, but the team hasn't. But I think we see it as potential upside, having no downside risk to us. It's only good. But we have to -- we have to see how it will react then hopefully in future calls, there will be more more guidance on it.

Matt Borsch -- BMO Capital Markets -- Analyst

All right. Thank you.

Operator

The next question comes from Steve Tanal with Goldman Sachs. Please go ahead.

Stephen Tanal -- Goldman Sachs -- Analyst

Good morning, guys. Thanks for the question.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Good morning.

Stephen Tanal -- Goldman Sachs -- Analyst

I just wanted to dig into some of the specifics as much as you're willing to share on risk adjustments. So in the Q it sounds like, you know, $238 million favorable reduction in payables, but then a net pre-tax benefit of 131 million. And so two questions. First, the offsets sound like minimum MLR is in RADV. So I'd love if you could quantify those. But then getting back to the $0.05, it sounds like that number could have been a lot higher. And I want to understand if there's any -- if there's been a change that's sort of permanent in nature in the way they'll accrue for this going forward. Does that mean that the Marketplace business is more profitable essentially now that then you had been occurring for it? Does that -- how should we think about all that? Thanks.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

I'm going to turn that over to our resident expert on risk adjustment. Jeff?

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah. Thanks. Yeah, thanks. So we previewed this obviously at the Investor Day, said -- you know, as we thought at the time that we're going to be more than $200 million, so $238 million is the number. And I would say, I would size the minimum MLR and the RADV as the two largest components of the offsets and primarily of equal magnitude. One thing to highlight just about RADV specifically is, it gets finalized in August of this year and this is the first year that they're doing the RADV adjustment for the Marketplace and they've decided not to collect the funds with the RADV adjustment until 2021.

And as a result, there's really -- there was no ability for us to offset the RADV adjustment in our minimum MLR calculation, meaning, usually the MLR calculations to last, right. So you would have a RADV adjustment that would then be calculated into the minimum MLR. But as this was the first year for the RADV adjustment, we were unable to do that. So some of the RADV adjustment would have been mitigated in our minimum MLR calculations. But it wasn't for this quarter because of the unique circumstance. But I guess what I would say is, the Centene Forward program delivered good value and it continues to do that on the risk adjustment side. And I think that's a good thing long term.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

And I just want to add, this -- I want to remind everybody that there's two elements to risk adjustment. One that we control. That's how well we do our medical expenses I will tell [Phonetic]. But if somebody else has a negative, has a different than expected result, that impacts us and that's outside our control. So when you look at this, it's not just how we're doing, but what the total market in a particular product is doing. I think I am telling you what you already know.

Stephen Tanal -- Goldman Sachs -- Analyst

Yeah, absolutely. And I guess just the $238 million, that's a pretty sizable on a percentage basis, just over the last follow up pieces. Do you guys expect to make any changes to the way it occur or is it going to be consistent going forward?

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Again, I mean, we were following GAAP, right. So our job is to make the best estimate at the end of each quarter and at the end of each year. And that's what we'll continue to do. So, yes, if we have historical information that indicates that we're performing better than we would absolutely include that information into our estimates.

Stephen Tanal -- Goldman Sachs -- Analyst

Okay. Thanks a lot, guys.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Thank you.

Operator

The next question comes from Dave Windley with Jefferies. Please go ahead.

Dave Windley -- Jefferies -- Analyst

Hi. Good morning. Thanks for taking my question. Wanted to follow up on MLR just with a cadence question. I think the first half MLR is up about 120 basis points year-over-year. The guidance implies us the second half would be up a little less than that. Your update on exchange sounds like that drags the back half of the year up a little bit. So I wondered, what's the offset that makes that year-over-year change smaller in the second half? Is it Fidelis? Is that exclusively or are there other factors? Thanks.

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Well, I think if you're comparing year-over-year, first half to second half, obviously Fidelis is a change, meaning we did not have that in the first half of last year, right. And we do have Fidelis in the first half of this year. And as we've commented, they were running higher HBR than the Centene-based business when we did the acquisition. So that is definitely a driver.

Dave Windley -- Jefferies -- Analyst

And then just a quick follow up on a separate topic. There are, Michael, some enrollment moving parts sequentially in both your TANF and CHIP and ABD, LTSS categories. Could you describe what some of the moving parts are there and then is the International line now just this the change in the ownership base in Ribera Salud, is that what drives that addition? Thanks.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

I am going to -- I'll start and let Jeff pick up. But obviously our TANF, our [Indecipherable] business long-term care etc. Now we've got a new business in the east side of Pennsylvania and other things. So there are moving parts affected by new businesses coming-in in all these categories. And so that's going to move it -- to move it up, down, around. But as [Indecipherable] over time will smooth out.

Jeff, do you want to pick up on the second point of that?

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah. On the second piece, you are spot on. When we took control of the Ribera Salud, we've included those members now in our membership reporting table. So that's the change there.

Dave Windley -- Jefferies -- Analyst

Okay. Thank you.

Operator

Next question comes from Peter Costa with Wells Fargo. Please go ahead.

Peter Costa -- Wells Fargo -- Analyst

Thanks for taking my question. Most of my questions are asked and answered, but I like to ask you [phonetic] a couple of details. First off, what are the incremental start-up costs in the fourth quarter from Oregon? And second, what are the changes to your reported earnings, revenues, MLR and minority interest line for Ribera Salud and the change in ownership there?

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah. So first question that there were -- there are costs obviously associated with Oregon start-up. And we had a place holder in our original start-up cost guidance. So it fits well with them what we had already previously communicated. And then the second thing, when you're talking about the consolidation now, obviously we would -- the net earnings impact is, in theory, the same other than we have more share of those earnings. But now we will include the revenue and we'd had that in the guidance, because we had a -- we knew this was -- acquisition was coming. So we had already had that the previous guidance.

Peter Costa -- Wells Fargo -- Analyst

Okay. Thank you.

Operator

The next question comes from A.J. Rice with Credit Suisse. Please go ahead.

A.J. Rice -- Credit Suisse -- Analyst

Hi, everybody. First off, just to ask about an update on the PBM side of the business. I think Mississippi and Nebraska are rolling out RxAdvance. Any learnings from that? Maybe you talk about the cadence of further roll-outs there. And I know RxAdvance is talking about additional capabilities that they have, care management help, operating efficiency help. Are you exploring any of that? And what kind of opportunity might that be?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

I will ask Brent and Kevin to pick up on that. Brandy?

Brandy Burkhalter -- Executive Vice President-Operations

Hi, Nei, Dave, Brandy Burkhalter. So we are currently live in six states with just over one million lives on RxAdvance platform and very pleased with our progress and what we're seeing today. And we look forward to, I guess, exploring the new things that RxAdvance platform allows us to do. And so we'll have more to come in the future calls, but very pleased with the progress today.

Kevin J. Counihan -- Senior Vice Presidents of Products

If I could just come -- just amplify a little bit what Brandy had said. This is Kevin. I think one of the core learnings that we've had is the importance of engaging independent pharmacies very early on in the process. So we get out to the IPA, the Independent Pharmacy Association early. We talk about what we're doing, why we're doing and what the new website is going to look like, get in their newsletter, things of that sort. So that's been a core learning.

A.J. Rice -- Credit Suisse -- Analyst

Okay. Great. Now you're coming up on a year with Fidelis. I know when that deal was originally struck, there was an expectation of improving the medical loss ratio trend, but also maybe given a little bit back in the G&A area, but net positive. Can you talk maybe as you look back over the last year, has it developed as you expected or you had a plan, but little bit behind? And how much -- is there still further things to do once you anniversary this?

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah. This is Jeff, and it's, I think, Michael has mentioned this previously, but it's been a very good deal for the Company. It's performing in line with expectations, were capturing the synergies that we thought we would. And I would say the initiatives and what we expected at the beginning, where we were going to invest more G&A dollars to lower the medical costs have -- actually have occurred. And so we're pleased with the performance. And I think there's still more opportunity for continued improvement and we're working on those actions as we speak.

A.J. Rice -- Credit Suisse -- Analyst

Okay.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

We guys has -- had commented before that if we could find more Fidelis as you -- one in the morning and one in the afternoon.

A.J. Rice -- Credit Suisse -- Analyst

Okay.

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Absolutely.

A.J. Rice -- Credit Suisse -- Analyst

And just the last question, this guy has [Phonetic] raised by one of your larger competitor say they already reported the question of prior period development. You don't specifically put that in the press release as [Indecipherable]. Any comment about relative to a normal quarter prior period development and that you realize this quarter relative to last year or first quarter?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

So, now over [Phonetic], Jeff, you can...

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah. It's been normal. I mean, A.J., We've talked about this before. I mean, what we really focus on is the consistency, rate of development, meaning we have a consistent process. We used -- we use claims received, we use an impatient validation methodology. So our methodology is a little unique compared to others in the industry. But we look for consistency, and I think ours has been consistent for a long time.

A.J. Rice -- Credit Suisse -- Analyst

Okay. Great. Thanks a lot.

Operator

The next question comes from Gary Taylor with J.P. Morgan. Please go ahead.

Gary Taylor -- J.P. Morgan -- Analyst

Hi. Good morning. Most my questions answered, so just two quick follow ups. It sounds like from the commentary this is correct, but I just wanted to confirm it so. And In Spain, it was 50% ownership before it, but it was not consolidated in the financials and now it's in a review or it will be, is that correct?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Yes. That is correct.

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

That is correct, yes.

Gary Taylor -- J.P. Morgan -- Analyst

Okay. And then just my other one, just going back to the exchanges and certainly acknowledging your commentary that you thought margins would normalize to some degree after 2018. We saw in the first quarter when we look at the stat filings that that the loss ratios and exchange is up about 300 basis points. So when we get a chance to see that again for the 2Q is that going to be a pretty consistent trajectory or should we anticipate based on some of your retention comments that maybe that's up a little more?

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

No. I guess what I would say is I think it will be up. The other thing you have to realize is when you're looking at there's a difference between the statutory and the GAAP HBRs that we talk about. So that's all I would highlight. But yes, it will be up on a year-over-year basis.

Gary Taylor -- J.P. Morgan -- Analyst

Okay. Thank you.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

As expect -- go ahead.

Operator

Go ahead, sorry.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

No. I say, that's it. Fine.

Operator

The next question comes from Justin Lake with Wolfe Research. Please go ahead.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Good morning.

Justin Lake -- Wolfe Research -- Analyst

Thanks. Good morning. First, just a question on exchanges. I appreciate the comment on the 2020 membership growth. Wanted to ask you about margins. Should we expect margins to normalize lower again in 2020 or do you see the current margin is sustainable into next year?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

I think, when you look at margins, it's going to be a function of this as you continue to attract, how long you retain your existing membership. There's multiple variables there. And what's important to me, and I said this, though we talk about a 5% to 10% range. We see nothing that's going to change there. It's going to move up and down within that range based on retention, on the membership you attract and series of things. And that's to be expected in any insurance business. As it grows and as you keep people longer, you'll see some leveling off of it. Because as they're being managed are under control, but in the law of larger numbers, larger price. So I guess going in there as we look at 2020, we'll give more guidance in December, which is our standard practice versus trying-in into too much at this stage. And we'll have more history at that point to understand what our retention is, what the membership is. I remind you, every year we've retained 80% of the previous year's membership. So all those factors come into play, Justin.

Justin Lake -- Wolfe Research -- Analyst

Sure. That makes sense. Maybe another way to ask it is just if you're saying 5% to 10% is a reasonable range on margins. And obviously we could pick the midpoint at 7.5%. Is this year, If we think about 7.5% is the kind of midpoint of normal, would this year be lower or above that midpoint?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Well, we know -- I'm not going to get into that level of detail, because once again, it's a very large business and it's a growing business. And if we start getting that finite, we're losing sight of what this total $75 billion dollars, soon to be $100 billion plus company is. So you have to look at it in totality. And we don't look at and say, is it going to be 8%, 8.2%, 8.1%? Well, that's the totality of all our businesses? And we beat from operations by $0.02. And that's kind of the way we look at it, Justin.

Justin Lake -- Wolfe Research -- Analyst

Totally reasonable, OK. And if I could just ask a quick follow up on the MLR, you took up the guidance, as you mentioned by 10 basis points. Just trying to figure out where that is coming from. The consensus was 86.3% this quarter. But I know you don't guide quarterly, so we could have clearly got that wrong. Just curious how the quarter that MLR looked versus your internal expectations, was it -- was the 86.7% in line or was it a little bit higher? Or are you taking up the back half of the year because of the higher retention rate? And really the second quarter was fine, relative to your expectation.

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

No. I was -- yeah, I mean, versus our expectations it was in line. I mean the Marketplace business was in line. I mean, that's our view.

Justin Lake -- Wolfe Research -- Analyst

So 86.7% is pretty much where you would expected it and a 10 basis point guide up for the year is really just taken up the back half of the year for higher retention. Is that the way we should think about this?

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Yes. That's correct.

Justin Lake -- Wolfe Research -- Analyst

Okay.

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Because remember, I mean, Michael explained this at the beginning, remember, there's deductibles and maximum out-of-pockets, right? So the longer -- you can do the math there.

Justin Lake -- Wolfe Research -- Analyst

Sure. Maybe you could just tell us what is like the member that drops off in the middle of the year that you typically see. What's the MLR on that member versus the MLR of someone else this year?

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Justin, let's say we have -- Justin we have 1.9 million members. You want to tell me which one you're thinking about. I mean, seriously, and then other than [Indecipherable] rest my eyes here. But how [Indecipherable]. But I mean, you think about, when you have 1.9 million members, fair enough, one could have an MLR of 72%, one could have a MLR of 85%. I mean it is the way of doing it.

Justin Lake -- Wolfe Research -- Analyst

All right. I'll leave it there. Thanks guys.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Thank you.

Operator

The next question comes from Ralph Giacobbe with Citi. Please go ahead.

Ralph Giacobbe -- Citi -- Analyst

Thanks. Good morning. Just wanted to clarify quickly the incremental benefit from risk adjustment comes through the MLR, right, so it benefit the ratio about 20 basis points this quarter. Is that fair?

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

You're correct. It does come through the MLR as a component of revenue, right. It's a revenue adjustment.

Ralph Giacobbe -- Citi -- Analyst

Right. Okay. Right [Indecipherable]. And then second question, maybe just back to the exchanges here, but a little bit of a different angle. Can you talk about the provider networks on the exchange at this point? How it's kind of evolved over time and you sort of adding or narrowing offerings? And then I guess, more importantly, can you help us on in terms of the annual rate bump to providers, is that similar to kind of a composite Medicaid rate that you typically see in that low single digit range, or is it more like a pure commercial rate bump that maybe more in the CPI plus level and maybe more importantly, how that trended over time? Can you give us a sense for that as you've obviously entered into new markets? Thanks.

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Yeah. That's a lot there. So, first, we're not going to get into the provider specific rate increases for providers, right. But the other thing is, I would say as we continue to manage our provider network to offer a competitive product and be successful and grow the business. And so that's what we continue to focus on. That's what we continue to do and make sure that our members have access to the highest quality care.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

And I just might add that as a comment, we're moving more and more to these risk based contracts and providers that manage the business. And it goes back to old fashioned managing your patient can do incredibly well with that. It puts them in control of how they're practicing medicine. So we think there's real opportunities with providers who do very well on this.

Ralph Giacobbe -- Citi -- Analyst

Okay. Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Michael Neidorff for any closing remarks.

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Thank you. I want to -- I just want to emphasize that as we sit here as a Group today, we feel very good about the business and where it is. It is performing well. It's firing on all 12 cylinders. And I'm balancing as you can see, there's a growth. There's a people [Phonetic] operations. We're dealing with all the issues. And so we look forward to continuing to report what we consider to be very successful quarters. Thank you for your time and look forward to seeing you.

Operator

[Operator Closing Remarks]

Duration: 64 minutes

Call participants:

Edmund E. Kroll -- Senior Vice President, Finance & Investor Relations

Michael F. Neidorff -- Chairman, President, and Chief Executive Officer

Jeffrey A. Schwaneke -- Executive Vice President, Chief Financial Officer & Treasurer

Kevin J. Counihan -- Senior Vice Presidents of Products

Christopher Bowers -- Executive Vice President, Marketing

Brandy Burkhalter -- Executive Vice President-Operations

Scott Fidel -- Stephens Inc -- Analyst

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Josh Raskin -- Nephron Research -- Analyst

Sarah James -- Piper Jaffray -- Analyst

Lance Wilkes -- Bernstein -- Analyst

Matt Borsch -- BMO Capital Markets -- Analyst

Stephen Tanal -- Goldman Sachs -- Analyst

Dave Windley -- Jefferies -- Analyst

Peter Costa -- Wells Fargo -- Analyst

A.J. Rice -- Credit Suisse -- Analyst

Gary Taylor -- J.P. Morgan -- Analyst

Justin Lake -- Wolfe Research -- Analyst

Ralph Giacobbe -- Citi -- Analyst

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