ST. LOUIS, April 24, 2018
/PRNewswire/ -- Centene Corporation (NYSE: CNC) announced
today its financial results for the first quarter ended
March 31, 2018, reporting diluted earnings per share (EPS) of
$1.91, and Adjusted Diluted EPS of
$2.17.
In summary, the 2018 first quarter results were as follows:
Total revenues (in
millions)
|
$
|
13,194
|
|
Health benefits
ratio
|
84.3
|
%
|
SG&A expense
ratio
|
10.5
|
%
|
GAAP diluted
EPS
|
$
|
1.91
|
|
Adjusted Diluted EPS
(1)
|
$
|
2.17
|
|
Total cash flow
provided by operations (in millions)
|
$
|
1,846
|
|
|
|
(1) A full
reconciliation of Adjusted Diluted EPS is shown on page six of this
release.
|
Michael F. Neidorff, Centene's
Chairman and Chief Executive Officer, stated, "Our strong first
quarter results set the stage for Centene to maintain positive
operating and financial momentum throughout 2018."
First Quarter Highlights
- March 31, 2018 managed care
membership of 12.8 million, an increase of 684,000 members, or 6%
over March 31, 2017.
- Total revenues for the first quarter of 2018 of $13.2 billion, representing 13% growth, compared
to the first quarter of 2017.
- Health benefits ratio (HBR) of 84.3% for the first quarter of
2018, compared to 87.6% in the first quarter of 2017.
- Selling, general and administrative (SG&A) expense ratio of
10.5% for the first quarter of 2018, compared to 9.8% for the first
quarter of 2017.
- Adjusted SG&A expense ratio of 10.3% for the first quarter
of 2018, compared to 9.3% for the first quarter of 2017.
- Operating cash flow of $1.8
billion for the first quarter of 2018, representing 5.5x net
earnings.
- Diluted EPS for the first quarter of 2018 of $1.91, compared to $0.79 for the first quarter of 2017.
- Adjusted Diluted EPS for the first quarter of 2018 of
$2.17, compared to $1.12 for the first quarter of 2017. Adjusted
Diluted EPS for the first quarter of 2018 was higher than our
previous expectations by approximately $0.12 per diluted share due to the delay in the
financing for the acquisition of New York
State Catholic Health Plan, Inc. d/b/a Fidelis Care New York
(Fidelis Care) (Proposed Fidelis
Acquisition).
Other Events
- In April 2018, we received
regulatory approvals from the New York Department of Health and the
New York Department of Financial Services for the Proposed Fidelis
Acquisition. The Proposed Fidelis Acquisition remains subject to
regulatory approval from the New
York Attorney General and certain closing conditions.
- In April 2018, we completed the
acquisition of MHM Services, Inc. (MHM), a national provider of
healthcare and staffing services to correctional systems and other
government agencies. Under the terms of the agreement, Centene also
acquired the remaining 49% ownership of Centurion, the correctional
healthcare services joint venture between Centene and MHM.
- In March 2018, we acquired an
additional 61% ownership in Interpreta Holdings, Inc. (Interpreta),
a clinical and genomics data analytics business, bringing our total
ownership to 80%.
- In March 2018, we completed the
acquisition of Community Medical Holdings Corp., d/b/a Community
Medical Group (CMG), an at-risk primary care provider serving
approximately 70,000 Medicaid, Medicare Advantage, and Health
Insurance Marketplace patients in Miami-Dade County, Florida.
- In March 2018, we made a 25%
equity method investment in RxAdvance, a full-service pharmacy
benefit manager (PBM), and expect to use its platform to improve
health outcomes and reduce avoidable drug-impacted medical and
administrative costs. This partnership includes both a customer
relationship and a strategic investment in RxAdvance. As part of
the initial transaction, Centene has certain rights to expand its
equity investment in the future.
- In March 2018, our Arizona subsidiary, Health Net Access, was
selected to provide physical and behavioral healthcare services through the Arizona
Health Care Cost Containment System Complete Care program in the
Central region and the Southern region. Pending regulatory approval
and successful completion of readiness review, the three-year
agreement, with the possibility of two two-year extensions, is
expected to commence on October 1,
2018.
Membership
The following table sets forth our membership by line of
business:
|
March
31,
|
|
2018
|
|
2017
|
Medicaid:
|
|
|
|
TANF, CHIP &
Foster Care
|
5,776,600
|
|
|
5,714,100
|
|
ABD &
LTSS
|
866,000
|
|
|
825,600
|
|
Behavioral
Health
|
454,500
|
|
|
466,900
|
|
Total
Medicaid
|
7,097,100
|
|
|
7,006,600
|
|
Commercial
|
2,161,200
|
|
|
1,864,700
|
|
Medicare & MMP
(1)
|
343,400
|
|
|
328,100
|
|
Correctional
|
157,300
|
|
|
141,900
|
|
Total
at-risk membership
|
9,759,000
|
|
|
9,341,300
|
|
TRICARE
eligibles
|
2,851,500
|
|
|
2,804,100
|
|
Non-risk
membership
|
218,900
|
|
|
—
|
|
Total
|
12,829,400
|
|
|
12,145,400
|
|
|
|
|
|
(1) Membership
includes Medicare Advantage, Medicare Supplement, Special Needs
Plans, and Medicare-Medicaid Plans (MMP).
|
The following table sets forth additional membership statistics,
which are included in the membership information above:
|
March
31,
|
|
2018
|
|
2017
|
Dual-eligible
(2)
|
438,200
|
|
|
458,700
|
|
Health Insurance
Marketplace
|
1,603,800
|
|
|
1,188,700
|
|
Medicaid
Expansion
|
1,057,400
|
|
|
1,091,300
|
|
|
|
|
|
(2) Membership
includes dual-eligible ABD & LTSS and dual-eligible Medicare
membership in the table above.
|
Statement of Operations: Three Months Ended March 31,
2018
- For the first quarter of 2018, total revenues increased 13% to
$13.2 billion, from $11.7 billion in the comparable period in 2017.
The increase over prior year was due to growth in the Health
Insurance Marketplace business in 2018, expansions and new programs
in many of our states in 2017 and 2018, and the reinstatement of
the health insurer fee in 2018. These increases were partially
offset by lower revenues in California, which is a result of the removal
of the in-home support services (IHSS) program from its Medicaid
contract.
- Sequentially, total revenues increased 3% over the fourth
quarter of 2017 mainly due to growth in the Health Insurance
Marketplace business and the reinstatement of the health insurer
fee. These increases were partially offset by approximately
$700 million of revenue received in
the fourth quarter of 2017 associated with pass through payments
from the State of California,
which were recorded in premium tax revenue and premium tax
expense.
- HBR of 84.3% for the first quarter of 2018 represents a
decrease from 87.6% in the comparable period in 2017. The
year-over-year decrease was primarily a result of membership growth
in the Health Insurance Marketplace business, lower medical costs
in our Medicaid business, and the reinstatement of the health
insurer fee in 2018. These decreases were partially offset by new
or expanded health plans, which initially operate at a higher HBR,
and increased flu-related costs.
- HBR decreased sequentially from 87.3% in the fourth quarter of
2017. The decrease was primarily attributable to performance and
seasonality in the Health Insurance Marketplace business and the
reinstatement of the health insurer fee in 2018. These HBR
improvements were partially offset by the increase in flu-related
costs over the fourth quarter of 2017.
- The SG&A expense ratio was 10.5% for the first quarter of
2018, compared to 9.8% for the first quarter of 2017. The
year-over-year increase was primarily a result of growth in the
Health Insurance Marketplace business, as well as increased
acquisition related expenses over the first quarter of 2017. These
increases were partially offset by the impact of Penn Treaty
assessment expense recognized in the first quarter of 2017.
- Sequentially, the SG&A expense ratio decreased from 10.9%
in the fourth quarter of 2017, primarily due to increased selling
costs associated with open enrollment in the fourth quarter of 2017
and the $40 million contribution to
our charitable foundation in the fourth quarter of 2017. These
decreases were partially offset by increased acquisition related
expenses over the fourth quarter of 2017 and increased variable
compensation expenses related to earnings performance in the first
quarter of 2018.
- The Adjusted SG&A expense ratio was 10.3% for the first
quarter of 2018, compared to 9.3% for the first quarter of 2017.
The year-over-year increase is primarily a result of growth in the
Health Insurance Marketplace business, which operates at a higher
SG&A expense ratio.
- Sequentially, the Adjusted SG&A expense ratio decreased
from 10.5% in the fourth quarter of 2017, primarily due to
increased selling costs associated with open enrollment in the
fourth quarter of 2017, partially offset by increased variable
compensation expenses related to earnings performance in the first
quarter of 2018.
Balance Sheet and Cash Flow
At March 31, 2018, the Company had cash, investments and
restricted deposits of $11.9 billion,
including $452 million held by
unregulated entities. Medical claims liabilities totaled
$4.8 billion. The Company's days in
claims payable was 43, which is an increase of two days over the
fourth quarter of 2017 due to growth in the Health Insurance
Marketplace business, growth in new markets, and the timing of
claims payments. Total debt was $5.2
billion, which includes $675
million of borrowings on the $1.5
billion revolving credit facility at quarter-end. The debt
to capitalization ratio was 40.3% at March 31, 2018, excluding
the $60 million non-recourse mortgage
note.
Cash flow provided by operations for the three months ended
March 31, 2018 was $1.8 billion
due to net earnings, an increase in medical claims liabilities,
primarily resulting from growth in the Health Insurance Marketplace
business, and an increase in other long-term liabilities, driven by
the recognition of risk adjustment payable for Health Insurance
Marketplace in 2018. Cash provided by operations was also driven by
increases in unearned revenue, due to the receipt of several April
capitation payments received in March.
Outlook
The Company's annual guidance for 2018 has been updated for the
following items:
- An increase to GAAP diluted EPS and Adjusted Diluted EPS of
$0.05 associated with the performance
of the business in the first quarter of 2018;
- A change in the timing of the anticipated closing of the
Proposed Fidelis Acquisition from April 1,
2018 to July 1, 2018, as well
as a change in the assumed timing of the equity and debt financing
from March 1, 2018 to May 1, 2018. The ultimate timing of the financings will depend on market
conditions;
- The impact of undertakings that Centene is expected to enter
into as part of the regulatory approval process for the Proposed
Fidelis Acquisition with the New York
State Department of Health. It is expected that one of the
undertakings, among others, will include a $340 million contribution by Centene to the
State of New York to be paid over
a five-year period for initiatives consistent with our mission of
providing high quality healthcare to vulnerable populations within
New York State. Upon the closing
of the Proposed Fidelis Acquisition, the present value of the
$340 million contribution to the
State of New York, estimated to be
approximately $325 million, will be
expensed in SG&A; and
- The net effect of the acquisitions of CMG, MHM, and Interpreta
and the investment in RxAdvance.
A rollforward of certain captions of the Company's current 2018
guidance from its previous guidance is as follows (Total Revenues
in billions, per share data in dollars):
|
|
Total
Revenues
|
|
GAAP diluted
EPS
|
|
Adjusted Diluted
EPS
|
|
Previous Guidance
Range
|
|
$60.6 -
$61.4
|
|
$5.91 -
$6.25
|
|
$6.95 -
$7.35
|
|
Q1
Performance
|
|
—
|
|
0.05
|
|
0.05
|
|
Timing of Fidelis
Care Financing & Acquisition
|
|
(2.7) -
(2.9)
|
|
(0.21)
|
|
(0.25)
|
|
Undertakings for the
Proposed Fidelis Acquisition
|
|
—
|
|
(1.26)
|
|
—
|
|
Recent Acquisitions
and Investments
|
|
0.3 - 0.5
|
|
(0.13)
|
|
—
|
|
Revised Guidance
Range
|
|
$58.2 -
$59.0
|
|
$4.36 -
$4.70
|
|
$6.75 -
$7.15
|
|
|
|
|
|
|
|
|
|
The Company's full updated annual guidance for 2018 is as
follows:
|
|
Full Year
2018
|
|
|
|
Low
|
|
High
|
|
Total revenues (in
billions)
|
|
$
|
58.2
|
|
|
$
|
59.0
|
|
|
GAAP diluted
EPS
|
|
$
|
4.36
|
|
|
$
|
4.70
|
|
|
Adjusted Diluted EPS
(1)
|
|
$
|
6.75
|
|
|
$
|
7.15
|
|
|
HBR
|
|
85.9
|
%
|
|
86.4
|
%
|
|
SG&A expense
ratio
|
|
10.2
|
%
|
|
10.7
|
%
|
|
Adjusted SG&A
expense ratio (2)
|
|
9.4
|
%
|
|
9.9
|
%
|
|
Effective tax
rate
|
|
34.0
|
%
|
|
36.0
|
%
|
|
Diluted shares
outstanding (in millions)
|
|
196.5
|
|
|
197.5
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Adjusted Diluted EPS
excludes amortization of acquired intangible assets of $0.81 to
$0.83 per diluted share and acquisition related expenses of $1.58
to $1.62 per diluted share.
|
|
|
(2)
|
Adjusted SG&A
expense ratio excludes acquisition related expenses of $415 million
to $420 million.
|
Conference Call
As previously announced, the Company will host a conference call
Tuesday, April 24, 2018, at approximately 8:30 AM (Eastern Time) to review the financial
results for the first quarter ended March 31,
2018. Michael Neidorff and Jeffrey
Schwaneke will host the conference call.
Investors and other interested parties are invited to listen to
the conference call by dialing 1-877-883-0383 in the U.S. and
Canada; +1-412-902-6506 from
abroad, including the following Elite Entry Number: 1778901 to
expedite caller registration; or via a live, audio webcast on the
Company's website at www.centene.com, under the Investors
section.
A webcast replay will be available for on-demand listening
shortly after the completion of the call for the next twelve months
or until 11:59 PM (Eastern Time) on
Tuesday, April 23, 2019, at the aforementioned URL. In
addition, a digital audio playback will be available until
9:00 AM (Eastern Time) on Tuesday,
May 1, 2018, by dialing 1-877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad, and
entering access code 10118311.
Non-GAAP Financial Presentation
The Company is providing certain non-GAAP financial measures in
this release as the Company believes that these figures are helpful
in allowing investors to more accurately assess the ongoing nature
of the Company's operations and measure the Company's performance
more consistently across periods. The Company uses the presented
non-GAAP financial measures internally to allow management to focus
on period-to-period changes in the Company's core business
operations. Therefore, the Company believes that this information
is meaningful in addition to the information contained in the GAAP
presentation of financial information. The presentation of this
additional non-GAAP financial information is not intended to be
considered in isolation or as a substitute for the financial
information prepared and presented in accordance with
GAAP.
Specifically, the Company believes the presentation of non-GAAP
financial information that excludes amortization of acquired
intangible assets, acquisition related expenses, as well as other
items, allows investors to develop a more meaningful understanding
of the Company's performance over time. The tables below provide
reconciliations of non-GAAP items ($ in millions, except per share
data):
|
Three Months
Ended
March 31,
|
|
2018
|
|
2017
|
GAAP net
earnings
|
$
|
340
|
|
|
$
|
139
|
|
Amortization of
acquired intangible assets
|
39
|
|
|
40
|
|
Acquisition related
expenses
|
21
|
|
|
5
|
|
Penn Treaty
assessment expense (1)
|
—
|
|
|
47
|
|
Income tax effects of
adjustments (2)
|
(14)
|
|
|
(34)
|
|
Adjusted
net earnings
|
$
|
386
|
|
|
$
|
197
|
|
|
|
(1)
|
Additional expense for the
Company's estimated share of guaranty association assessment
resulting from the liquidation of the Penn Treaty for the three
months ended March 31, 2017.
|
|
|
(2)
|
The income tax
effects of adjustments are based on the effective income tax rates
applicable to adjusted (non-GAAP) results.
|
|
Three Months
Ended
March 31,
|
|
Annual
Guidance
December
31,
2018
|
|
2018
|
|
2017
|
|
GAAP diluted
EPS
|
$
|
1.91
|
|
|
$
|
0.79
|
|
|
$4.36 -
$4.70
|
Amortization of
acquired intangible assets (1)
|
0.17
|
|
|
0.14
|
|
|
$0.81 -
$0.83
|
Acquisition related
expenses (2)
|
0.09
|
|
|
0.02
|
|
|
$1.58 -
$1.62
|
Penn Treaty
assessment expense (3)
|
—
|
|
|
0.17
|
|
|
—
|
Adjusted
Diluted EPS
|
$
|
2.17
|
|
|
$
|
1.12
|
|
|
$6.75 -
$7.15
|
|
|
(1)
|
The amortization of
acquired intangible assets per diluted share presented above is net
of an income tax benefit of $0.05 and $0.09 for the three months
ended March 31, 2018 and 2017, respectively, and an estimated
$0.24 to $0.25 for the year ended December 31, 2018.
|
|
|
(2)
|
The acquisition related
expenses per diluted share presented above are net of an income tax
benefit of $0.03 and $0.01 for the three months ended
March 31, 2018 and 2017, respectively, and an estimated $0.51
to $0.52 for the year ended December 31, 2018.
|
|
|
(3)
|
The Penn Treaty
assessment expense per diluted share presented above is net of an
income tax benefit of $0.09 for the three months ended March 31,
2017.
|
|
Three Months
Ended
March 31,
|
|
Three Months
Ended
December 31,
|
|
2018
|
|
2017
|
|
2017
|
GAAP SG&A
expenses
|
$
|
1,316
|
|
|
$
|
1,091
|
|
|
$
|
1,260
|
|
Acquisition related
expenses
|
21
|
|
|
5
|
|
|
7
|
|
Penn Treaty
assessment expense
|
—
|
|
|
47
|
|
|
—
|
|
Charitable
contribution
|
—
|
|
|
—
|
|
|
40
|
|
Adjusted SG&A
expenses
|
$
|
1,295
|
|
|
$
|
1,039
|
|
|
$
|
1,213
|
|
About Centene Corporation
Centene Corporation, a Fortune 100 company, is a diversified,
multi-national healthcare enterprise that provides a portfolio of
services to government sponsored and commercial healthcare
programs, focusing on under-insured and uninsured individuals. Many
receive benefits provided under Medicaid, including the State
Children's Health Insurance Program (CHIP), as well as Aged, Blind
or Disabled (ABD), Foster Care and
Long-Term Services and Supports (LTSS), in addition to other
state-sponsored programs, Medicare (including the Medicare
prescription drug benefit commonly known as "Part D"), dual
eligible programs and programs with the U.S. Department of Defense
and U.S. Department of Veterans Affairs. Centene also provides
healthcare services to groups and individuals delivered through
commercial health plans. Centene operates local health plans and
offers a range of health insurance solutions. It also contracts
with other healthcare and commercial organizations to provide
specialty services including behavioral health management, care
management software, correctional healthcare services, dental
benefits management, commercial programs, home-based primary care
services, life and health management, vision benefits management,
pharmacy benefits management, specialty pharmacy and telehealth
services.
Centene uses its investor relations website to publish important
information about the Company, including information that may be
deemed material to investors. Financial and other information about
Centene is routinely posted and is accessible on Centene's investor
relations website, http://www.centene.com/investors.
Forward-Looking Statements
The company and its representatives may from time to time
make written and oral forward-looking statements within the meaning
of the Private Securities Litigation Reform Act ("PSLRA") of 1995,
including statements in this and other press releases, in
presentations, filings with the Securities and Exchange Commission
("SEC"), reports to stockholders and in meetings with investors and
analysts. In particular, the information provided in this press
release may contain certain forward-looking statements with respect
to the financial condition, results of operations and business of
Centene and certain plans and objectives of Centene with respect
thereto, including but not limited to the expected benefits of the
acquisition (Health Net Acquisition) of Health Net, Inc. (Health
Net) and the proposed acquisition of New
York State Catholic Health Plan, Inc., d/b/a Fidelis Care
New York (Fidelis Care) (Proposed
Fidelis Acquisition or Fidelis Care Transaction). These
forward-looking statements can be identified by the fact that they
do not relate only to historical or current facts. Without limiting
the foregoing, forward-looking statements often use words such as
"anticipate", "seek", "target", "expect", "estimate", "intend",
"plan", "goal", "believe", "hope", "aim", "continue", "will",
"may", "can", "would", "could" or "should" or other words of
similar meaning or the negative thereof. We intend such
forward-looking statements to be covered by the safe-harbor
provisions for forward-looking statements contained in PSLRA. A
number of factors, variables or events could cause actual plans and
results to differ materially from those expressed or implied in
forward-looking statements. Such factors include, but are not
limited to, Centene's ability to accurately predict and effectively
manage health benefits and other operating expenses and reserves;
competition; membership and revenue declines or unexpected trends;
changes in healthcare practices, new technologies and advances in
medicine; increased healthcare costs; changes in economic,
political or market conditions; changes in federal or state laws or
regulations, including changes with respect to income tax reform or
government healthcare programs as well as changes with respect to
the Patient Protection and Affordable Care Act and the Health Care
and Education Affordability Reconciliation Act and any regulations
enacted thereunder that may result from changing political
conditions; rate cuts or other payment reductions or delays by
governmental payors and other risks and uncertainties affecting
Centene's government businesses; Centene's ability to adequately
price products on federally facilitated and state based Health
Insurance Marketplaces; tax matters; disasters or major epidemics;
the outcome of legal and regulatory proceedings; changes in
expected contract start dates; provider, state, federal and other
contract changes and timing of regulatory approval of contracts;
the expiration, suspension or termination of Centene or
Fidelis Care's contracts with
federal or state governments (including but not limited to
Medicaid, Medicare, TRICARE or other customers); the difficulty of
predicting the timing or outcome of pending or future litigation or
government investigations; challenges to Centene or Fidelis Care's contract awards; cyber-attacks or
other privacy or data security incidents; the possibility that the
expected synergies and value creation from acquired businesses,
including, without limitation, the Health Net Acquisition and the
Proposed Fidelis Acquisition, will not be realized, or will not be
realized within the expected time period, including, but not
limited to, as a result of any failure to obtain any regulatory,
governmental or third party consents or approvals in connection
with the Proposed Fidelis Acquisition (including any such approvals
under the New York Non-For-Profit Corporation Law) or any
conditions, terms, obligations or restrictions imposed in
connection with the receipt of such consents or approvals; the
exertion of management's time and Centene's resources, and other
expenses incurred and business changes required in connection with
complying with the undertakings in connection with any regulatory,
governmental or third party consents or approvals for the Health
Net Acquisition or the Proposed Fidelis Acquisition; disruption
caused by significant completed and pending acquisitions, including
the Health Net Acquisition and the Proposed Fidelis Acquisition,
making it more difficult to maintain business and operational
relationships; the risk that unexpected costs will be incurred in
connection with the completion and/or integration of acquisition
transactions, including among others, the Health Net Acquisition
and the Proposed Fidelis Acquisition; changes in expected closing
dates, estimated purchase price and accretion for acquisitions; the
risk that acquired businesses and pending acquisitions, including
Health Net and Fidelis Care, will
not be integrated successfully; the risk that the conditions to the
completion of the Proposed Fidelis Acquisition may not be satisfied
or completed on a timely basis, or at all; failure to obtain or
receive any required regulatory approvals, consents or clearances
for the Proposed Fidelis Acquisition, and the risk that, even if so
obtained or received, regulatory authorities impose conditions on the completion of the
transaction that could require the exertion of management's time
and Centene's resources, or otherwise have an adverse effect on
Centene or the completion of the Proposed Fidelis Acquisition;
business uncertainties and contractual restrictions while the
Proposed Fidelis Acquisition is pending, which could adversely
affect Centene's business and operations; change of control
provisions or other provisions in certain agreements to which
Fidelis Care is a party, which may
be triggered by the completion of the Proposed Fidelis Acquisition;
loss of management personnel and other key employees due to
uncertainties associated with the Proposed Fidelis Acquisition; the
risk that, following completion of the Proposed Fidelis
Acquisition, the combined company may not be able to effectively
manage its expanded operations; restrictions and limitations that
may stem from the financing arrangements that the combined company
will enter into in connection with the Proposed Fidelis
Acquisition; Centene's ability to achieve improvement in the
Centers for Medicare and Medicaid Services (CMS) Star ratings and
maintain or achieve improvement in other quality scores in each
case that can impact revenue and future growth; availability of
debt and equity financing, on terms that are favorable to Centene;
inflation; foreign currency fluctuations; and risks and
uncertainties discussed in the reports that Centene has filed with
the SEC. These forward-looking statements reflect Centene's current
views with respect to future events and are based on numerous
assumptions and assessments made by Centene in light of its
experience and perception of historical trends, current conditions,
business strategies, operating environments, future developments
and other factors it believes appropriate. By their nature,
forward-looking statements involve known and unknown risks and
uncertainties and are subject to change because they relate to
events and depend on circumstances that will occur in the future.
The factors described in the context of such forward-looking
statements in this press release could cause Centene's plans with
respect to the Health Net Acquisition, actual results, performance
or achievements, industry results and developments to differ
materially from those expressed in or implied by such
forward-looking statements. Although it is currently believed that
the expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will
prove to have been correct and persons reading this press release
are therefore cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date of this
press release. Centene does not assume any obligation to update the
information contained in this press release (whether as a result of
new information, future events or otherwise), except as required by
applicable law. This list of important factors is not intended to
be exhaustive. We discuss certain of these matters more fully, as
well as certain other risk factors that may affect Centene's
business operations, financial condition and results of operations,
in Centene's filings with the SEC, including the annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K.
[Tables Follow]
CENTENE
CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(In millions,
except shares in thousands and per share data in
dollars)
|
|
|
March 31,
2018
|
|
December 31,
2017
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
5,668
|
|
|
$
|
4,072
|
|
Premium and trade
receivables
|
3,648
|
|
|
3,413
|
|
Short-term
investments
|
507
|
|
|
531
|
|
Other current
assets
|
1,153
|
|
|
687
|
|
Total current
assets
|
10,976
|
|
|
8,703
|
|
Long-term
investments
|
5,535
|
|
|
5,312
|
|
Restricted
deposits
|
140
|
|
|
135
|
|
Property, software
and equipment, net
|
1,250
|
|
|
1,104
|
|
Goodwill
|
5,295
|
|
|
4,749
|
|
Intangible assets,
net
|
1,519
|
|
|
1,398
|
|
Other long-term
assets
|
455
|
|
|
454
|
|
Total
assets
|
$
|
25,170
|
|
|
$
|
21,855
|
|
|
|
|
|
LIABILITIES,
REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS'
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Medical claims
liability
|
$
|
4,771
|
|
|
$
|
4,286
|
|
Accounts payable and
accrued expenses
|
4,962
|
|
|
4,165
|
|
Return of premium
payable
|
515
|
|
|
549
|
|
Unearned
revenue
|
638
|
|
|
328
|
|
Current portion of
long-term debt
|
4
|
|
|
4
|
|
Total current
liabilities
|
10,890
|
|
|
9,332
|
|
Long-term
debt
|
5,172
|
|
|
4,695
|
|
Other long-term
liabilities
|
1,520
|
|
|
952
|
|
Total
liabilities
|
17,582
|
|
|
14,979
|
|
Commitments and
contingencies
|
|
|
|
Redeemable
noncontrolling interests
|
8
|
|
|
12
|
|
Stockholders'
equity:
|
|
|
|
Preferred stock,
$0.001 par value; authorized 10,000 shares; no shares issued or
outstanding at March 31, 2018 and December 31, 2017
|
—
|
|
|
—
|
|
Common stock, $0.001
par value; authorized 400,000 shares; 180,643 issued and 176,795
outstanding at March 31, 2018, and 180,379 issued and 173,437
outstanding at December 31, 2017
|
—
|
|
|
—
|
|
Additional paid-in
capital
|
4,592
|
|
|
4,349
|
|
Accumulated other
comprehensive (loss)
|
(54)
|
|
|
(3)
|
|
Retained
earnings
|
3,104
|
|
|
2,748
|
|
Treasury stock, at
cost (3,848 and 6,942 shares, respectively)
|
(139)
|
|
|
(244)
|
|
Total
Centene stockholders' equity
|
7,503
|
|
|
6,850
|
|
Noncontrolling
interest
|
77
|
|
|
14
|
|
Total stockholders'
equity
|
7,580
|
|
|
6,864
|
|
Total liabilities,
redeemable noncontrolling interests and stockholders'
equity
|
$
|
25,170
|
|
|
$
|
21,855
|
|
CENTENE
CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(In millions,
except per share data in dollars)
|
(Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
Revenues:
|
|
|
|
Premium
|
$
|
11,903
|
|
|
$
|
10,638
|
|
Service
|
653
|
|
|
527
|
|
Premium and service
revenues
|
12,556
|
|
|
11,165
|
|
Premium tax and
health insurer fee
|
638
|
|
|
559
|
|
Total
revenues
|
13,194
|
|
|
11,724
|
|
Expenses:
|
|
|
|
Medical
costs
|
10,039
|
|
|
9,322
|
|
Cost of
services
|
543
|
|
|
441
|
|
Selling, general and
administrative expenses
|
1,316
|
|
|
1,091
|
|
Amortization of
acquired intangible assets
|
39
|
|
|
40
|
|
Premium tax
expense
|
546
|
|
|
590
|
|
Health
insurer fee expense
|
171
|
|
|
—
|
|
Total operating
expenses
|
12,654
|
|
|
11,484
|
|
Earnings from
operations
|
540
|
|
|
240
|
|
Other income
(expense):
|
|
|
|
Investment and other
income
|
41
|
|
|
41
|
|
Interest
expense
|
(68)
|
|
|
(62)
|
|
Earnings from
operations, before income tax expense
|
513
|
|
|
219
|
|
Income tax
expense
|
175
|
|
|
87
|
|
Net
earnings
|
338
|
|
|
132
|
|
Loss attributable
to noncontrolling interests
|
2
|
|
|
7
|
|
Net earnings
attributable to Centene Corporation
|
$
|
340
|
|
|
$
|
139
|
|
|
|
|
|
Net earnings per
common share attributable to Centene Corporation:
|
Basic earnings per
common share
|
$
|
1.95
|
|
|
$
|
0.81
|
|
Diluted earnings per
common share
|
$
|
1.91
|
|
|
$
|
0.79
|
|
|
|
|
|
CENTENE
CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(In
millions)
|
(Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
Cash flows from
operating activities:
|
|
|
|
Net
earnings
|
$
|
338
|
|
|
$
|
132
|
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities
|
Depreciation and
amortization
|
104
|
|
|
86
|
|
Stock compensation
expense
|
33
|
|
|
32
|
|
Deferred income
taxes
|
30
|
|
|
(51)
|
|
Changes in assets and
liabilities
|
|
|
|
Premium and trade
receivables
|
(176)
|
|
|
59
|
|
Other
assets
|
51
|
|
|
89
|
|
Medical claims
liabilities
|
485
|
|
|
358
|
|
Unearned
revenue
|
317
|
|
|
320
|
|
Accounts payable and
accrued expenses
|
157
|
|
|
(237)
|
|
Other long-term
liabilities
|
477
|
|
|
459
|
|
Other operating
activities, net
|
30
|
|
|
1
|
|
Net cash provided by
operating activities
|
1,846
|
|
|
1,248
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(218)
|
|
|
(83)
|
|
Purchases of
investments
|
(765)
|
|
|
(582)
|
|
Sales and maturities
of investments
|
445
|
|
|
343
|
|
Acquisitions, net of
cash acquired
|
(226)
|
|
|
—
|
|
Other investing
activities, net
|
—
|
|
|
(1)
|
|
Net cash used in
investing activities
|
(764)
|
|
|
(323)
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from
long-term debt
|
2,015
|
|
|
560
|
|
Payments of long-term
debt
|
(1,491)
|
|
|
(560)
|
|
Common stock
repurchases
|
(9)
|
|
|
(13)
|
|
Other financing
activities, net
|
(2)
|
|
|
3
|
|
Net cash provided by
(used in) financing activities
|
513
|
|
|
(10)
|
|
Net increase in cash,
cash equivalents and restricted cash
|
1,595
|
|
|
915
|
|
Cash, cash
equivalents, and restricted cash and cash equivalents,
beginning of period
|
4,089
|
|
|
3,936
|
|
Cash, cash
equivalents, and restricted cash and cash equivalents, end of
period
|
$
|
5,684
|
|
|
$
|
4,851
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
Interest
paid
|
$
|
73
|
|
|
$
|
72
|
|
Income taxes
paid
|
$
|
1
|
|
|
$
|
2
|
|
Equity issued in
connection with acquisitions
|
$
|
324
|
|
|
$
|
—
|
|
CENTENE
CORPORATION
|
SUPPLEMENTAL
FINANCIAL DATA FROM CONTINUING OPERATIONS
|
|
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
|
2018
|
|
2017
|
|
2017
|
|
2017
|
|
2017
|
MANAGED CARE
MEMBERSHIP BY STATE
|
Arizona
|
|
639,800
|
|
|
640,500
|
|
|
659,500
|
|
|
669,500
|
|
|
684,300
|
|
Arkansas
|
|
92,300
|
|
|
85,700
|
|
|
89,900
|
|
|
91,900
|
|
|
98,100
|
|
California
|
|
2,903,600
|
|
|
2,877,800
|
|
|
2,928,600
|
|
|
2,925,800
|
|
|
2,980,100
|
|
Florida
|
|
1,090,600
|
|
|
848,800
|
|
|
852,600
|
|
|
871,100
|
|
|
872,000
|
|
Georgia
|
|
581,500
|
|
|
483,600
|
|
|
476,400
|
|
|
540,400
|
|
|
568,300
|
|
Illinois
|
|
238,400
|
|
|
239,500
|
|
|
251,000
|
|
|
254,600
|
|
|
253,800
|
|
Indiana
|
|
317,400
|
|
|
304,500
|
|
|
322,900
|
|
|
340,000
|
|
|
335,800
|
|
Kansas
|
|
151,500
|
|
|
129,100
|
|
|
127,300
|
|
|
130,000
|
|
|
133,100
|
|
Louisiana
|
|
485,900
|
|
|
485,500
|
|
|
483,300
|
|
|
484,600
|
|
|
484,100
|
|
Massachusetts
|
|
8,900
|
|
|
43,000
|
|
|
48,300
|
|
|
54,100
|
|
|
44,200
|
|
Michigan
|
|
2,800
|
|
|
2,500
|
|
|
2,400
|
|
|
2,300
|
|
|
2,100
|
|
Minnesota
|
|
9,400
|
|
|
9,400
|
|
|
9,500
|
|
|
9,500
|
|
|
9,500
|
|
Mississippi
|
|
347,600
|
|
|
329,900
|
|
|
335,600
|
|
|
343,600
|
|
|
349,500
|
|
Missouri
|
|
329,900
|
|
|
269,400
|
|
|
272,100
|
|
|
278,300
|
|
|
106,100
|
|
Nebraska
|
|
81,500
|
|
|
79,700
|
|
|
79,200
|
|
|
78,800
|
|
|
79,200
|
|
Nevada
|
|
74,600
|
|
|
34,900
|
|
|
16,800
|
|
|
—
|
|
|
—
|
|
New
Hampshire
|
|
82,900
|
|
|
74,800
|
|
|
76,400
|
|
|
77,100
|
|
|
77,800
|
|
New Mexico
|
|
7,200
|
|
|
7,100
|
|
|
7,100
|
|
|
7,100
|
|
|
7,100
|
|
Ohio
|
|
352,800
|
|
|
332,700
|
|
|
336,500
|
|
|
332,700
|
|
|
328,900
|
|
Oregon
|
|
199,300
|
|
|
205,200
|
|
|
209,700
|
|
|
213,600
|
|
|
211,900
|
|
Pennsylvania
|
|
22,400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
South
Carolina
|
|
119,300
|
|
|
117,800
|
|
|
118,600
|
|
|
121,000
|
|
|
121,900
|
|
Tennessee
|
|
22,000
|
|
|
22,200
|
|
|
22,100
|
|
|
22,200
|
|
|
21,900
|
|
Texas
|
|
1,260,100
|
|
|
1,233,500
|
|
|
1,236,700
|
|
|
1,226,800
|
|
|
1,243,900
|
|
Vermont
|
|
1,600
|
|
|
1,600
|
|
|
1,600
|
|
|
1,600
|
|
|
1,600
|
|
Washington
|
|
260,800
|
|
|
237,800
|
|
|
239,600
|
|
|
248,500
|
|
|
254,400
|
|
Wisconsin
|
|
74,900
|
|
|
70,200
|
|
|
70,200
|
|
|
70,800
|
|
|
71,700
|
|
Total at-risk
membership
|
|
9,759,000
|
|
|
9,166,700
|
|
|
9,273,900
|
|
|
9,395,900
|
|
|
9,341,300
|
|
TRICARE
eligibles
|
|
2,851,500
|
|
|
2,824,100
|
|
|
2,823,200
|
|
|
2,823,200
|
|
|
2,804,100
|
|
Non-risk
membership
|
|
218,900
|
|
|
216,300
|
|
|
213,900
|
|
|
—
|
|
|
—
|
|
Total
|
|
12,829,400
|
|
|
12,207,100
|
|
|
12,311,000
|
|
|
12,219,100
|
|
|
12,145,400
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicaid:
|
|
|
|
|
|
|
|
|
|
|
TANF,
CHIP & Foster Care
|
|
5,776,600
|
|
|
5,807,300
|
|
|
5,809,400
|
|
|
5,854,400
|
|
|
5,714,100
|
|
ABD
& LTSS
|
|
866,000
|
|
|
846,200
|
|
|
850,300
|
|
|
843,500
|
|
|
825,600
|
|
Behavioral Health
|
|
454,500
|
|
|
463,700
|
|
|
467,400
|
|
|
466,500
|
|
|
466,900
|
|
Total
Medicaid
|
|
7,097,100
|
|
|
7,117,200
|
|
|
7,127,100
|
|
|
7,164,400
|
|
|
7,006,600
|
|
Commercial
|
|
2,161,200
|
|
|
1,558,300
|
|
|
1,657,800
|
|
|
1,743,600
|
|
|
1,864,700
|
|
Medicare & MMP
(1)
|
|
343,400
|
|
|
333,700
|
|
|
331,000
|
|
|
327,500
|
|
|
328,100
|
|
Correctional
|
|
157,300
|
|
|
157,500
|
|
|
158,000
|
|
|
160,400
|
|
|
141,900
|
|
Total
at-risk membership
|
|
9,759,000
|
|
|
9,166,700
|
|
|
9,273,900
|
|
|
9,395,900
|
|
|
9,341,300
|
|
TRICARE
eligibles
|
|
2,851,500
|
|
|
2,824,100
|
|
|
2,823,200
|
|
|
2,823,200
|
|
|
2,804,100
|
|
Non-risk
membership
|
|
218,900
|
|
|
216,300
|
|
|
213,900
|
|
|
—
|
|
|
—
|
|
Total
|
|
12,829,400
|
|
|
12,207,100
|
|
|
12,311,000
|
|
|
12,219,100
|
|
|
12,145,400
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Membership
includes Medicare Advantage, Medicare Supplement, Special Needs
Plans, and MMP.
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
2018
|
|
2017
|
|
2017
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
NUMBER OF
EMPLOYEES
|
34,800
|
|
|
33,700
|
|
|
32,400
|
|
|
31,500
|
|
|
30,900
|
|
|
|
|
|
|
|
|
|
|
|
DAYS IN CLAIMS
PAYABLE (a)
|
43
|
|
|
41
|
|
|
42
|
|
|
40
|
|
|
41
|
|
(a) Days in claims
payable is a calculation of medical claims liabilities at the end
of the period divided by average claims expense per calendar day
for such period.
|
|
|
|
|
|
|
|
|
|
|
CASH, INVESTMENTS
AND RESTRICTED DEPOSITS (in millions)
|
Regulated
|
$
|
11,398
|
|
|
$
|
9,740
|
|
|
$
|
9,633
|
|
|
$
|
9,673
|
|
|
$
|
10,034
|
|
Unregulated
|
452
|
|
|
310
|
|
|
308
|
|
|
291
|
|
|
306
|
|
Total
|
$
|
11,850
|
|
|
$
|
10,050
|
|
|
$
|
9,941
|
|
|
$
|
9,964
|
|
|
$
|
10,340
|
|
|
|
|
|
|
|
|
|
|
|
DEBT TO
CAPITALIZATION
|
40.6
|
%
|
|
40.6
|
%
|
|
41.5
|
%
|
|
42.5
|
%
|
|
43.3
|
%
|
DEBT TO
CAPITALIZATION EXCLUDING NON-RECOURSE DEBT
(b)
|
40.3
|
%
|
|
40.3
|
%
|
|
41.2
|
%
|
|
42.1
|
%
|
|
43.0
|
%
|
(b) The non-recourse
debt represents the Company's mortgage note payable ($60 million at
March 31, 2018).
|
Debt to
capitalization is calculated as follows: total debt divided by
(total debt + total equity).
|
OPERATING RATIOS
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
HBR
|
84.3
|
%
|
|
87.6
|
%
|
SG&A expense
ratio
|
10.5
|
%
|
|
9.8
|
%
|
Adjusted SG&A
expense ratio
|
10.3
|
%
|
|
9.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
MEDICAL CLAIMS LIABILITY
The changes in medical claims liability are summarized as
follows (in millions):
Balance, March 31,
2017
|
|
$
|
4,290
|
|
Reinsurance
recoverable
|
|
8
|
Balance, March 31,
2017, net
|
|
4,282
|
Incurred related
to:
|
|
|
Current
period
|
|
38,956
|
Prior
period
|
|
(388)
|
Total
incurred
|
|
38,568
|
Paid related
to:
|
|
|
Current
period
|
|
34,446
|
Prior
period
|
|
3,646
|
Total
paid
|
|
38,092
|
Balance, March 31,
2018, net
|
|
4,758
|
Plus: Reinsurance
recoverable
|
|
13
|
Balance, March 31,
2018
|
|
$
|
4,771
|
|
|
|
|
|
|
|
|
Centene's claims reserving process utilizes a consistent
actuarial methodology to estimate Centene's ultimate liability. Any
reduction in the "Incurred related to: Prior period" amount may be
offset as Centene actuarially determines "Incurred related to:
Current period." As such, only in the absence of a consistent
reserving methodology would favorable development of prior period
claims liability estimates reduce medical costs. Centene believes
it has consistently applied its claims reserving methodology.
Additionally, approximately $6
million was recorded as a reduction to premium revenues
resulting from development within "Incurred related to: Prior
period" due to minimum HBR and other return of premium
programs.
The amount of the "Incurred related to: Prior period" above
represents favorable development and includes the effects of
reserving under moderately adverse conditions, new markets where we
use a conservative approach in setting reserves during the initial
periods of operations, receipts from other third party payors
related to coordination of benefits and lower medical utilization
and cost trends for dates of service March 31, 2017, and
prior.
View original
content:http://www.prnewswire.com/news-releases/centene-corporation-reports-2018-first-quarter-results-and-adjusts-2018-guidance-300635033.html
SOURCE Centene Corporation