COMBINED FINANCIAL STATEMENTS MAGELLAN SPECIALTY HEALTH (A Business of Magellan Health, Inc.)

COMBINED FINANCIAL STATEMENTS

MAGELLAN SPECIALTY HEALTH

(A Business of Magellan Health, Inc.)

MAGELLAN SPECIALTY HEALTH

(A Business of Magellan Health, Inc.)

COMBINED FINANCIAL STATEMENTS

Year Ended December 31, 2022

Report of Independent Auditors 1

Audited Financial Statements

Combined Balance Sheet 3

Combined Statement of Income 4

Combined Statement of Net Parent Investment 5

Combined Statement of Cash Flows 6

Notes to Combined Financial Statements 7

INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of

Magellan Specialty Health (A Business of Magellan Health, Inc.)

We have audited the combined financial statements of Magellan Specialty Health (A Business of Magellan Health, Inc.) which comprise the combined balance sheet as of December 31, 2022, and the related combined statements of income, net parent investment and cash flows for the year then ended, and the related notes to the financial statements.

In our opinion, the accompanying combined financial statements present fairly, in all material respects, the combined financial position of Magellan Specialty Health (A Business of Magellan Health, Inc) as of December 31, 2022, and the combined results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Magellan Specialty Health (A Business of Magellan Health, Inc.) and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Magellan Specialty Health's (A Business of Magellan Health, Inc.) ability to continue as a going concern within one year after the date that the financial statements are available to be issued.

Auditors' Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we

Exercise professional judgment and maintain professional skepticism throughout the audit.

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Magellan Specialty Health's (A Business of Magellan Health, Inc.) internal control. Accordingly, no such opinion is expressed.

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Magellan Specialty Health's (A Business of Magellan Health, Inc.) ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

MAGELLAN SPECIALTY HEALTH

(A Business of Magellan Health, Inc.)

COMBINED BALANCE SHEET AS OF DECEMBER 31, 2022

See accompanying notes to Combined Financial Statements.

MAGELLAN SPECIALTY HEALTH

(A Business of Magellan Health, Inc.)

COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2022

(1) Includes stock compensation expense of $774 for the year ended December 31, 2022. Refer to Note 2 Summary of Significant Accounting Policies for further detail.

See accompanying notes to Combined Financial Statements.

MAGELLAN SPECIALTY HEALTH

(A Business of Magellan Health, Inc.)

COMBINED STATEMENT OF NET PARENT INVESTMENT

See accompanying notes to Combined Financial Statements.

MAGELLAN SPECIALTY HEALTH

(A Business of Magellan Health, Inc.)

COMBINED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2022

See accompanying notes to Combined Financial Statements.

MAGELLAN SPECIALTY HEALTH

(A business of Magellan Health, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS

1. Organization and Nature of Operations

The accompanying combined carve-out financial statements include the historical accounts of Magellan Specialty Health (referred to as Specialty Health or the "Company"), part of the Healthcare segment of Magellan Health, Inc. ( Magellan or the Parent ). Magellan was acquired by, and became a wholly owned subsidiary of, Centene Corporation ("Centene") effective as of January 4, 2022.

On November 17, 2022, Magellan Health, Inc. and Magellan Healthcare, Inc. executed a definitive agreement to sell Magellan's Specialty Health business to Evolent Health, Inc. ("Evolent") (collectively the "Sale"). Given MPT and MLIC no longer have any specialty business, the only legal entities included in the Sale are NIA and its non-dissolved subsidiaries. The Sale closed on January 20, 2023. In addition to the Sale, Evolent and Centene are expanding Centene's relationship with NIA and extending NIA's contracts with Centene through 2027.

The Company is focused on delivering innovative specialty solutions for the fastest growing, most complex areas of healthcare. The Company develops innovative solutions that combine advanced analytics, agile technology and clinical excellence to drive better decision making and positively impact members' health outcomes. The Company provides its management services primarily through (i) risk-based contractual arrangements or (ii) administrative services only ("ASO") contractual arrangements. Additional information regarding the Company's contractual arrangements is provided in "Revenue Recognition" below.

The Company's customers include health plans for whom Magellan provides carve-out management services for areas of specialty healthcare including diagnostic imaging, musculoskeletal management, cardiac and physical medicine. These management services can be applied broadly across commercial, Medicaid and Medicare populations, or on a more targeted basis for our health plan customers.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Combined Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States ( U.S. GAAP ) from the consolidated financial statements and accounting records of Magellan using the historical results of operations and historical cost basis of the assets and liabilities of Magellan that comprise Specialty Health. The Company has historically operated as part of Magellan and not as a stand-alone company and has no separate legal status or existence. Consequently, stand-alone financial statements have not historically been prepared by Specialty Health. The accompanying Combined Financial Statements have been prepared from Magellan's historical consolidated financial statements and accounting records and are presented on a stand-alone basis as if the Company's operations had been conducted independently from Magellan. All intercompany accounts within Specialty Health have been eliminated within these statements.

The operations comprising Specialty Health are in various legal entities, owned 100% by the Parent, in which Specialty Health has no direct ownership relationship. References in these Combined Financial Statements to subsidiaries of Magellan Specialty Health refers to legal entities that are primarily engaged in operating activities that are dedicated to the business of Specialty Health. The Company's business is primarily composed of all of the business of National Imaging Associates, Inc. ("NIA"), as well as the specialty risk business written by Magellan Providers of Texas, Inc. ("MPT") and Magellan Life Insurance Company ("MLIC"). Effective January 1, 2022, the risk business written by MPT and MLIC converted to non-risk contracts. This non-risk business is written by NIA as of January 1, 2022. The financial statements have been derived from Magellan's historical accounting records and are presented on a carve-out basis.

The Combined Statement of Income include revenues and costs directly attributable to Specialty Health as well as an allocation of expenses related to functions and services provided by our Parent. The allocation methodologies have been described within the notes to the Combined Financial Statements where appropriate. These allocated costs are primarily related to corporate administrative expenses, and other corporate support services. The allocated costs are deemed to be settled by Specialty Health to the Parent in the period in which the expense was recorded in the Combined Statement of Income. The Combined Statement of Cash Flows present these allocated Parent functional costs as cash flows from operating activities. Due to the inherent limitation of allocations, there can be no assurance that allocated costs represent arm's length transactions.

Current and deferred income taxes and related tax expense have been determined based on the stand-alone results of the Company by applying Accounting Standards Codification No. 740, Income Taxes ("ASC 740"), to Specialty Health's operations as if it was a separate taxpayer (i.e. following the Separate Return Methodology).

The Combined Balance Sheets include all assets and liabilities that are attributable to the Specialty Health business. Assets and liabilities in shared entities were included in the stand-alone financial statements to the extent the asset is primarily used by Specialty Health. If Specialty Health is not the primary user of the asset, it was excluded entirely from the Combined Financial Statements. Any such items which exist in other entities, whether shared or otherwise, are outside of the control of Specialty Health and have been excluded from the Combined Financial Statements. Our Parent's third-party debt and the related interest have not been allocated to us for any of the periods presented because our Parent's borrowings are primarily for corporate cash purposes and are not directly attributable to the Company. In addition, the Company did not guarantee the debt nor is the Company jointly and severally liable for Parent's debt.

The Company utilizes the Parent's centralized processes and systems for cash management, payroll, purchasing, and distribution. Accordingly, cash, related party debt and related party interest have been attributed to Specialty Health in the Combined Financial Statement only to the extent such items have been legally entitled to the Company. The net results of these cash transactions between the Company and the Parent are reflected within net Parent investment in the accompanying combined balance sheets. In addition, net Parent investment represents the Parent's interest in the recorded net assets of Specialty Health and represents the cumulative net investment by the Parent in Specialty Health through the dates presented, inclusive of cumulative operating results.

The financial information included herein may not necessarily reflect the combined financial position, results of operations, changes in net Parent investment and cash flows of Specialty Health in the future or what they would have been had the Company been a separate, stand-alone entity during the periods presented.

Basis of Combination

The Combined Financial Statements are presented on a stand-alone basis and include the financial position, statements of income and cash flows of Specialty Health. All significant intercompany accounts and transactions within Specialty Health have been eliminated in the accompanying Combined Financial Statements. All intercompany balance receivables and payables between our Parent and Specialty Health are considered settled through net transfers to Parent.

Net Parent Investment

Specialty Health 's equity on the Combined Balance Sheets represents our Parent's historical net investment in the Company, and is presented as net Parent investment in lieu of stockholders' equity given Specialty Health has no direct ownership relationship in the various entities comprising its operations. The Combined Statement of net Parent investment include corporate allocations, net cash transfers and other property transfers between our Parent and the Company. All transactions reflected in net Parent investment in the accompanying Combined Balance Sheet have been considered cash receipts and payments for purposes of the Combined Statement of Cash Flows and are reflected as financing activities in the accompanying Combined Statement of Cash Flows.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net revenue during the reporting period. Significant estimates of the Company can include, among other things, valuation of intangible assets, valuation of goodwill, stock compensation assumptions, tax contingencies and legal liabilities. In addition, the Company also makes estimates in relation to revenue recognition under Accounting Standard Codification 606 ("ASC 606") which are explained in more detail in "Revenue Recognition" below. Actual results could differ from those estimates.

All of the Company's revenues are derived from business in North America. The following tables disaggregate our revenue for the year ended December 31, 2022 by major service line, type of customer and timing of revenue recognition (in thousands)

Per Member Per Month ("PMPM") Revenue. The Company provides its management services primarily through (i) risk-based contractual arrangements, where the Company assumes all or a substantial portion of the responsibility for the cost of providing treatment services in exchange for a fixed PMPM capitation payment, or (ii) ASO contractual arrangements, where the Company provides services such as utilization review, but does not assume full responsibility for the cost of the treatment services, in exchange for an administrative fee and, in some instances, shared savings.

The risk-based contracts have provision that include "profit share." Under a contract with profit share provisions, if the cost to provide the care is below certain specified levels, the Company will "share" the cost savings with the customer at the percentages set forth in the contract. In addition, certain contracts include provisions to provide the Company additional funding if the cost of care is above the specified levels. Based on right to offset terms in certain contracts, the Company reflected accounts receivable net of the accrued liabilities related to the cost of the treatment services and profit share liability by customer. If the customer was in a payable position the net liability was included within accrued liabilities.

For such risk-based contracts, the Company estimates cost of care using actuarial principles and assumptions that are consistently applied each reporting period and that recognizes the actuarial best estimate of the ultimate cost of care to be incurred, inclusive of a margin for adverse deviation. This approach is consistent with actuarial standards of practice that cost of care be adequate under moderately adverse conditions. For each reporting period, the Company compares key assumptions used to establish the reserves for claims and

performance-based arrangements to actual experience. When actual experience differs from these assumptions, reserves for claims and performance-based arrangements are adjusted through current period net income.

The Company operated under a risk-based contract with Centene that converted to an ASO contract (with fixed contractual terms not requiring actuarial estimates) as of January 1, 2022. The development of estimated cost of care for this contract in 2022, along with the reversal of the margin for adverse deviation, resulted in favorable changes in estimates to revenue of approximately $4.8 million that were recorded to the Company's combined financial results in calendar 2022.

Almost all of the Specialty Health revenue is paid on a PMPM basis and is inclusive of revenue from the Company's risk-based contracts and ASO contracts for services provided to its customers. PMPM contracts generally have a term of one year or longer. All managed care contracts have a single performance obligation that constitutes a series for the provision of managed healthcare services for a population of enrolled members for the duration of the contract. The transaction price for risk-based contracts or ASO contracts is entirely variable as it primarily includes PMPM fees associated with unspecified membership that fluctuates throughout the contract. In certain contracts, PMPM fees also include adjustments for things such as performance incentives, performance guarantees and risk shares.

The Company generally estimates the transaction price using an expected value methodology and amounts are only included in the net transaction price to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. The majority of the Company's net PMPM transaction price relates specifically to its efforts to transfer the service for a distinct increment of the series (e.g. day or month) and is recognized as revenue in the month in which members are entitled to service. The remaining transaction price is recognized over the contract period (or portion of the series to which it specifically relates) based upon estimated membership as a measure of progress.

The performance obligation on an activity-based contract is to stand ready to provide the activity or services purchased by the customer. The performance obligation represents a series for the duration of the arrangement. The reimbursement rate is fixed per the contract however, the level of activity is variable. A majority of the Company's transaction price relates specifically to its efforts to transfer the service for a distinct increment of the series (e.g. day or month) and is recognized as revenue when the portion of the series for which it relates has been provided.

In accordance with ASC 606-10-50-13, the Company is required to include disclosure on its remaining performance obligations as of the end of the current reporting period. The majority of the Company's contracts meet certain exemptions as defined in ASC 606-10-50-14 through 606-10-50-14A, including (i) performance obligation is part of a contract that has an original expected duration of one year or less (ii) the right to invoice practical expedient and (iii) variable consideration related to unsatisfied performance obligations that is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation, and the terms of that variable consideration relate specifically to our efforts to transfer the distinct service, or to a specific outcome from transferring the distinct service. For the Company's contracts that pertain to these exemptions (i) the remaining performance obligations primarily relate to the provision of managed healthcare services to the customers' membership (ii) the estimated remaining duration of these performance obligations ranges from the remainder of the current calendar year to three years and (iii) variable consideration for these contracts as determined in accordance with the methodology above associated with unspecified membership that fluctuates throughout the contract.

Accounts Receivable and Contract Assets

Accounts receivable and contract assets consisted of the following (in thousands)

Based on the right to offset contractual provisions, the Company reflected accounts receivable net of accrued medical costs for treatment, customer settlements, and profit share as these are all included in the annual settlements with the respective customers. Accounts receivable, net for December 31, 2022, includes

gross accounts receivable of $83.9 million, which was offset by accrued medical costs for treatment of $41.6 million, profit share of $3.5 million and deferred revenue and other of $1.3 million.

The Company's accounts receivable consists of amounts due from customers throughout the United States. Collateral is generally not required. A majority of the Company's contracts have payment terms in the month of service, or within a few months thereafter. The timing of payments from customers from time to time generates contract assets or contract liabilities, however these amounts are immaterial.

The Company's accounts receivable is net of an allowance for credit losses. The estimate of current expected credit losses on trade receivables considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management elected to disaggregate trade receivables into business segments due to risk characteristics unique to each platform given the individual lines of business and market. Pooling was further disaggregated based on either geography or product type.

The Company leveraged historical write offs over a defined lookback period in deriving a historical loss rate. The expected credit loss model further considers current conditions and reasonable and supportable forecasts through the use of an adjustment for current and projected macroeconomic factors. Management identified appropriate macroeconomic indicators based on tangible correlation to historical losses, giving consideration to the location and risks associated with the Company's customers.

Concentration of Credit Risk

Accounts receivable subjects the Company to a concentration of credit risk with third party payors that include health insurance companies, managed healthcare organizations and healthcare providers.

Significant Customers

Customers exceeding ten percent of the combined Company's net revenues

The only customer that generated in excess of ten percent of net revenues for the year ended December 31, 2022 was the Centene. The Centene contract generated net revenue of $142.5 million and the current termination date for this contract is December 31, 2024.