ST. LOUIS, April 25, 2017
/PRNewswire/ -- Centene Corporation (NYSE: CNC) announced
today its financial results for the first quarter ended
March 31, 2017, reporting diluted earnings per share (EPS) of
$0.79, and Adjusted Diluted EPS of
$1.12. A summary of diluted EPS is
highlighted below:
GAAP diluted
EPS
|
$
|
0.79
|
|
Amortization of
acquired intangible assets
|
0.14
|
|
Health Net
acquisition related expenses
|
0.02
|
|
Penn Treaty
assessment expense
|
0.17
|
|
Adjusted
Diluted EPS
|
$
|
1.12
|
|
Our previous annual guidance included $0.20 per diluted share of conservatism
associated with lower margins on the Health Insurance Marketplace
business. Due to the performance of the marketplace business
in the first quarter of 2017, $0.04
of the original $0.20 of conservatism
was recognized. The Company's updated annual GAAP diluted EPS and
Adjusted Diluted EPS guidance includes the remaining $0.16 per diluted share of conservatism
associated with the 2017 Health Insurance Marketplace margins.
In the three months ended March 31,
2017, the Company recognized $47 million for our estimated share of the
undiscounted guaranty association assessment resulting from a court
ordered liquidation of the Pennsylvania based Penn Treaty Network America
Insurance Company and its subsidiary (Penn Treaty) as selling,
general and administrative (SG&A) expenses.
In summary, the 2017 first quarter results were as follows:
Total revenues (in
millions)
|
$
|
11,724
|
|
|
Health benefits
ratio
|
87.6
|
%
|
|
SG&A expense
ratio
|
9.8
|
%
|
|
SG&A expense
ratio, excluding the Penn Treaty assessment and Health Net
acquisition related expenses
|
9.3
|
%
|
|
GAAP diluted
EPS
|
$
|
0.79
|
|
|
Adjusted Diluted
EPS
|
$
|
1.12
|
|
|
Total cash flow
provided by operations (in millions)
|
$
|
1,248
|
|
|
Michael F. Neidorff, Centene's
Chairman and Chief Executive Officer, stated, "We are pleased with
the operating results for the first quarter, providing momentum for
the remainder of the year."
The following discussions, with the exception of cash flow
information, are in the context of continuing operations.
First Quarter Highlights
- March 31, 2017 managed care membership of 12.1 million, an
increase of 605,000 members, or 5% over 2016.
- Total revenues for the first quarter of 2017 of $11.7 billion, representing 69% growth, compared
to the first quarter of 2016.
- Health benefits ratio (HBR) of 87.6% for the first quarter of
2017, compared to 88.7% in the first quarter of 2016.
- SG&A expense ratio of 9.8% for the first quarter of 2017,
compared to 11.3% for the first quarter of 2016.
- SG&A expense ratio excluding the Penn Treaty assessment and
Health Net acquisition related expenses of 9.3% for the first
quarter of 2017, compared to 8.3% for the first quarter of
2016.
- Operating cash flow of $1.2
billion for the first quarter of 2017.
- Diluted EPS for the first quarter of 2017 of $0.79, compared to $(0.12) for the first quarter of 2016.
- Adjusted Diluted EPS for the first quarter of 2017 of
$1.12, compared to $0.74 for the first quarter of 2016.
Other Events
- In February 2017, we announced
the appointment of Chris Koster to
Senior Vice President, Corporate Services.
Accreditations & Awards
- In April 2017, at the 2017 Hermes
Creative Awards, we earned several Platinum and Gold awards,
including recognition for numerous book and video
publications.
- In January 2017, at the 2017 AVA
Digital Awards, our subsidiary, Envolve, Inc., earned a Gold award
for its "Did You Know?" Clinical Leader Video Series and Honorable
Mention award for its health tip animation series.
Membership
The following table sets forth the Company's membership by state
for its managed care organizations:
|
March
31,
|
|
2017
|
|
2016
|
Arizona
|
684,300
|
|
|
607,000
|
|
Arkansas
|
98,100
|
|
|
50,700
|
|
California
|
2,980,100
|
|
|
3,125,400
|
|
Florida
|
872,000
|
|
|
660,800
|
|
Georgia
|
568,300
|
|
|
495,500
|
|
Illinois
|
253,800
|
|
|
239,100
|
|
Indiana
|
335,800
|
|
|
290,300
|
|
Kansas
|
133,100
|
|
|
141,100
|
|
Louisiana
|
484,100
|
|
|
381,200
|
|
Massachusetts
|
44,200
|
|
|
52,400
|
|
Michigan
|
2,100
|
|
|
2,600
|
|
Minnesota
|
9,500
|
|
|
9,500
|
|
Mississippi
|
349,500
|
|
|
328,300
|
|
Missouri
|
106,100
|
|
|
100,000
|
|
Nebraska
|
79,200
|
|
|
—
|
|
New
Hampshire
|
77,800
|
|
|
81,500
|
|
New Mexico
|
7,100
|
|
|
—
|
|
Ohio
|
328,900
|
|
|
314,000
|
|
Oregon
|
211,900
|
|
|
209,000
|
|
South
Carolina
|
121,900
|
|
|
107,700
|
|
Tennessee
|
21,900
|
|
|
20,100
|
|
Texas
|
1,243,900
|
|
|
1,036,700
|
|
Vermont
|
1,600
|
|
|
1,500
|
|
Washington
|
254,400
|
|
|
226,500
|
|
Wisconsin
|
71,700
|
|
|
78,400
|
|
Total at-risk
membership
|
9,341,300
|
|
|
8,559,300
|
|
TRICARE
eligibles
|
2,804,100
|
|
|
2,819,700
|
|
Non-risk
membership
|
—
|
|
|
161,400
|
|
Total
|
12,145,400
|
|
|
11,540,400
|
|
The following table sets forth our membership by line of
business:
|
March
31,
|
|
2017
|
|
2016
|
Medicaid:
|
|
|
|
TANF, CHIP &
Foster Care
|
5,714,100
|
|
|
5,464,200
|
|
ABD &
LTC
|
825,600
|
|
|
757,600
|
|
Behavioral
Health
|
466,900
|
|
|
456,500
|
|
Commercial
|
1,864,700
|
|
|
1,487,900
|
|
Medicare & Duals
(1)
|
328,100
|
|
|
334,100
|
|
Correctional
|
141,900
|
|
|
59,000
|
|
Total at-risk
membership
|
9,341,300
|
|
|
8,559,300
|
|
TRICARE
eligibles
|
2,804,100
|
|
|
2,819,700
|
|
Non-risk
membership
|
—
|
|
|
161,400
|
|
Total
|
12,145,400
|
|
|
11,540,400
|
|
|
|
|
|
(1) Membership
includes Medicare Advantage, Medicare Supplement, Special Needs
Plans, and Medicare-Medicaid Plans.
|
The following table sets forth additional membership statistics,
which are included in the membership information above:
|
March
31,
|
|
2017
|
|
2016
|
Dual-eligible
|
458,700
|
|
|
435,100
|
|
Health Insurance
Marketplace
|
1,188,700
|
|
|
683,000
|
|
Medicaid
Expansion
|
1,091,300
|
|
|
984,900
|
|
Statement of Operations: Three Months Ended March 31,
2017
- For the first quarter of 2017, total revenues increased 69% to
$11.7 billion from $7.0 billion in the comparable period in 2016.
The increase over prior year was primarily a result of the
acquisition of Health Net, as well as the impact from expansions
and new programs in many of our states in 2016 and 2017, and growth
in the Health Insurance Marketplace business in 2017. Premium and
service revenue increased 5% sequentially; however, total revenues
decreased 2% sequentially partially due to the health insurer fee
moratorium, which suspended the health insurance provider fee for
the 2017 calendar year. Also, the fourth quarter of 2016 benefited
from $500 million of additional
revenue associated with pass through payments from the state of
California and $195 million of additional revenue associated
with the minimum medical loss ratio (MLR) amendment in California. These sequential revenue decreases
were partially offset by growth in the business.
- HBR of 87.6% for the first quarter of 2017 represents a
decrease from 88.7% in the comparable period in 2016 and an
increase from 84.8% in the fourth quarter of 2016. The year over
year HBR decrease is primarily attributable to the acquisition of
Health Net, which operates at a lower HBR due to a greater mix of
commercial business and growth in the Health Insurance Marketplace
business in 2017. Sequentially, HBR increased from 84.8% from the
fourth quarter of 2016. The fourth quarter of 2016 benefited from
the recognition of revenue relating to amendments to our
California contracts with the
Department of Health Care Services to amend the Medicaid expansion
minimum MLR definition. HBR also increased sequentially due to an
increase in flu related costs over the fourth quarter.
- The SG&A expense ratio was 9.8% for the first quarter of
2017, compared to 11.3% for the first quarter of 2016 and 10.0% for
the fourth quarter of 2016.
- The SG&A expense ratio excluding the Penn Treaty assessment
and Health Net acquisition related expenses was 9.3% for the first
quarter of 2017, compared to 8.3% for the first quarter of 2016.
The increase in the SG&A expense ratio excluding the Penn
Treaty assessment and Health Net acquisition related expenses is
primarily attributable to the addition of the Health Net business,
which operates at a higher SG&A ratio due to a greater mix of
commercial and Medicare business. Sequentially, the SG&A
expense ratio excluding the Penn Treaty assessment and Health Net
acquisition related expenses decreased from 9.9% from the fourth
quarter of 2016 due to a higher level of seasonal costs related to
the open enrollment period for the Health Insurance Marketplace
business and a charitable contribution to our foundation in the
fourth quarter of 2016.
Balance Sheet and Cash Flow
At March 31, 2017, the Company had cash, investments and
restricted deposits of $10.3 billion,
including $306 million held by its
unregulated entities. Medical claims liabilities totaled
$4.3 billion. The Company's days in
claims payable was 41. Total debt was $4.6
billion, which includes $100
million of borrowings on the $1
billion revolving credit facility at quarter-end. The debt
to capitalization ratio was 43.0% at March 31, 2017, excluding
the $63 million non-recourse mortgage
note.
Cash flow provided by operations for the three months ended
March 31, 2017 was $1.2 billion.
The cash provided by operating activities during the quarter was
due to net earnings, an increase in medical claims liabilities
resulting from growth in the Health Insurance Marketplace business
and the commencement of the Nebraska health plan, an increase in other
long-term liabilities driven by the recognition of risk adjustment
payable for Health Insurance Marketplace in 2017 and an increase in
unearned revenue primarily due to the receipt of several April
capitation payments in March.
A reconciliation of the Company's change in days in claims
payable from the immediately preceding quarter-end is presented
below:
|
|
|
Days in claims
payable, December 31, 2016
|
42
|
|
Timing of claims
payments
|
(1)
|
|
Days in claims
payable, March 31, 2017
|
41
|
|
|
|
|
Outlook
The table below depicts the Company's updated annual guidance
for 2017. The Company's annual GAAP diluted EPS and Adjusted
Diluted EPS guidance includes the remaining $0.16 per diluted share of conservatism
associated with 2017 Health Insurance Marketplace margins.
|
|
Full Year
2017
|
|
|
|
Low
|
|
High
|
|
Total revenues (in
billions)
|
|
$
|
46.0
|
|
|
$
|
46.8
|
|
|
GAAP diluted
EPS
|
|
$
|
3.75
|
|
|
$
|
4.15
|
|
|
Adjusted Diluted EPS
(1)
|
|
$
|
4.50
|
|
|
$
|
4.90
|
|
|
HBR
|
|
87.0
|
%
|
|
87.5
|
%
|
|
SG&A expense
ratio
|
|
9.1
|
%
|
|
9.6
|
%
|
|
Adjusted SG&A
expense ratio (2)
|
|
9.0
|
%
|
|
9.5
|
%
|
|
Effective tax
rate
|
|
39.0
|
%
|
|
41.0
|
%
|
|
Diluted shares
outstanding (in millions)
|
|
176.9
|
|
|
177.9
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Adjusted Diluted EPS
excludes amortization of acquired intangible assets of $0.54 to
$0.58 per diluted share, Health Net acquisition related expenses of
$0.02 to $0.03 per diluted share, and Penn Treaty assessment
expense of $0.17 per diluted share.
|
(2)
|
Adjusted SG&A
expense ratio excludes Health Net acquisition related expenses of
$5 million to $8 million and the Penn Treaty assessment expense of
$47 million.
|
Conference Call
As previously announced, the Company will host a conference call
Tuesday, April 25, 2017, at approximately 8:30 AM (Eastern Time) to review the financial
results for the first quarter ended March 31, 2017, and to
discuss its business outlook. 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: 5591957 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 24, 2018, at the
aforementioned URL. In addition, a digital audio playback will be
available until 9:00 AM (Eastern
Time) on Tuesday, May 2, 2017,
by dialing 1-877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad, and
entering access code 10103060.
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, Health Net 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,
|
|
2017
|
|
2016
|
GAAP net earnings
(loss) from continuing operations
|
$
|
139
|
|
|
$
|
(15)
|
|
Amortization of
acquired intangible assets
|
40
|
|
|
9
|
|
Health Net
acquisition related expenses
|
5
|
|
|
189
|
|
Penn Treaty
assessment expense (1)
|
47
|
|
|
—
|
|
Income tax effects of
adjustments (2)
|
(34)
|
|
|
(87)
|
|
Adjusted net
earnings from continuing operations
|
$
|
197
|
|
|
$
|
96
|
|
|
|
(1)
|
Additional expense of
$47 million for the Company's estimated share of guaranty
association assessment resulting from the liquidation of Penn
Treaty.
|
(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,
|
|
2017
|
|
2016
|
|
2017
|
GAAP diluted earnings
(loss) per share (EPS)
|
$
|
0.79
|
|
|
$
|
(0.12)
|
|
|
$3.75 -
$4.15
|
Amortization of
acquired intangible assets (1)
|
0.14
|
|
|
0.04
|
|
|
$0.54 -
$0.58
|
Health Net
acquisition related expenses (2)
|
0.02
|
|
|
0.82
|
|
|
$0.02 -
$0.03
|
Penn Treaty
assessment expense (3)
|
0.17
|
|
|
—
|
|
|
$0.17
|
Adjusted
Diluted EPS from continuing operations
|
$
|
1.12
|
|
|
$
|
0.74
|
|
|
$4.50 -
$4.90
|
|
|
(1)
|
The amortization of
acquired intangible assets per diluted share presented above are
net of an income tax benefit of $0.09 and $0.03 for the three
months ended March 31, 2017 and 2016, respectively and
estimated $0.31 to $0.35 for the year ended December 31,
2017.
|
(2)
|
The Health Net
acquisition related expenses per diluted share presented above are
net of an income tax benefit of $0.01 and $0.64 for the three
months ended March 31, 2017 and 2016, respectively and
estimated $0.01 to $0.02 for the year ended December 31,
2017.
|
(3)
|
The Penn Treaty
assessment expense per diluted share is net of an income tax
benefit of $0.09 for the three months ended March 31, 2017 and
estimated for the year ended December 31, 2017.
|
|
Three Months
Ended
March 31,
|
|
2017
|
|
2016
|
GAAP SG&A
expenses
|
$
|
1,091
|
|
|
$
|
722
|
|
Health Net
acquisition related expenses
|
5
|
|
|
189
|
|
Penn Treaty
assessment expense
|
47
|
|
|
—
|
|
Adjusted SG&A
expenses
|
$
|
1,039
|
|
|
$
|
533
|
|
About Centene Corporation
Centene Corporation 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 Care
(LTC), 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, in-home health services, life
and health management, managed vision, 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 of Health Net, Inc. 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
health care costs; changes in economic, political or market
conditions; changes in federal or state laws or regulations,
including changes with respect to government health care 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's contracts with federal or state
governments (including but not limited to Medicaid, Medicare, and
TRICARE); challenges to Centene'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, will not
be realized, or will not be realized within the expected time
period, including, but not limited to, as a result of conditions,
terms, obligations or restrictions imposed by regulators in
connection with their approval of, or consent to, the acquisition;
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 certain
regulatory approvals; disruption from the acquisition making it
more difficult to maintain business and operational relationships;
the risk that unexpected costs will be incurred in connection with,
among other things, the acquisition and/or the integration; changes
in expected closing dates, estimated purchase price and accretion
for acquisitions; the risk that acquired businesses will not be
integrated successfully; Centene's ability to maintain or achieve
improvement in the Centers for Medicare and Medicaid Services (CMS)
Star ratings and other quality scores that impact revenue;
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 share data)
|
|
|
March 31,
2017
|
|
December 31,
2016
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
4,839
|
|
|
$
|
3,930
|
|
Premium and related
receivables
|
3,121
|
|
|
3,098
|
|
Short-term
investments
|
725
|
|
|
505
|
|
Other current
assets
|
723
|
|
|
832
|
|
Total current
assets
|
9,408
|
|
|
8,365
|
|
Long-term
investments
|
4,636
|
|
|
4,545
|
|
Restricted
deposits
|
140
|
|
|
138
|
|
Property, software
and equipment, net
|
841
|
|
|
797
|
|
Goodwill
|
4,712
|
|
|
4,712
|
|
Intangible assets,
net
|
1,504
|
|
|
1,545
|
|
Other long-term
assets
|
121
|
|
|
95
|
|
Total
assets
|
$
|
21,362
|
|
|
$
|
20,197
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Medical claims
liability
|
$
|
4,290
|
|
|
$
|
3,929
|
|
Accounts payable and
accrued expenses
|
4,275
|
|
|
4,377
|
|
Unearned
revenue
|
633
|
|
|
313
|
|
Current portion of
long-term debt
|
4
|
|
|
4
|
|
Total current
liabilities
|
9,202
|
|
|
8,623
|
|
Long-term
debt
|
4,643
|
|
|
4,651
|
|
Other long-term
liabilities
|
1,295
|
|
|
869
|
|
Total
liabilities
|
15,140
|
|
|
14,143
|
|
Commitments and
contingencies
|
|
|
|
Redeemable
noncontrolling interests
|
138
|
|
|
145
|
|
Stockholders'
equity:
|
|
|
|
Preferred stock,
$0.001 par value; authorized 10,000,000 shares; no shares issued or
outstanding at March 31, 2017 and December 31, 2016
|
—
|
|
|
—
|
|
Common stock, $0.001
par value; authorized 400,000,000 shares; 178,669,935 issued and
172,271,202 outstanding at March 31, 2017, and 178,134,306 issued
and 171,919,071 outstanding at December 31, 2016
|
—
|
|
|
—
|
|
Additional paid-in
capital
|
4,224
|
|
|
4,190
|
|
Accumulated other
comprehensive loss
|
(21)
|
|
|
(36)
|
|
Retained
earnings
|
2,059
|
|
|
1,920
|
|
Treasury stock, at
cost (6,398,733 and 6,215,235 shares, respectively)
|
(192)
|
|
|
(179)
|
|
Total Centene
stockholders' equity
|
6,070
|
|
|
5,895
|
|
Noncontrolling
interest
|
14
|
|
|
14
|
|
Total stockholders'
equity
|
6,084
|
|
|
5,909
|
|
Total liabilities and
stockholders' equity
|
$
|
21,362
|
|
|
$
|
20,197
|
|
CENTENE
CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(In millions,
except share data)
|
(Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
Revenues:
|
|
|
|
Premium
|
$
|
10,638
|
|
|
$
|
5,986
|
|
Service
|
527
|
|
|
425
|
|
Premium and service
revenues
|
11,165
|
|
|
6,411
|
|
Premium tax and
health insurer fee
|
559
|
|
|
542
|
|
Total
revenues
|
11,724
|
|
|
6,953
|
|
Expenses:
|
|
|
|
Medical
costs
|
9,322
|
|
|
5,311
|
|
Cost of
services
|
441
|
|
|
367
|
|
Selling, general and
administrative expenses
|
1,091
|
|
|
722
|
|
Amortization of
acquired intangible assets
|
40
|
|
|
9
|
|
Premium tax
expense
|
590
|
|
|
450
|
|
Health insurer fee
expense
|
—
|
|
|
74
|
|
Total operating
expenses
|
11,484
|
|
|
6,933
|
|
Earnings from
operations
|
240
|
|
|
20
|
|
Other income
(expense):
|
|
|
|
Investment and other
income
|
41
|
|
|
15
|
|
Interest
expense
|
(62)
|
|
|
(33)
|
|
Earnings from
continuing operations, before income tax expense
|
219
|
|
|
2
|
|
Income tax
expense
|
87
|
|
|
16
|
|
Earnings (loss) from
continuing operations, net of income tax expense
|
132
|
|
|
(14)
|
|
Discontinued
operations, net of income tax (benefit)
|
—
|
|
|
(1)
|
|
Net earnings
(loss)
|
132
|
|
|
(15)
|
|
(Earnings) loss
attributable to noncontrolling interests
|
7
|
|
|
(1)
|
|
Net earnings
(loss) attributable to Centene Corporation
|
$
|
139
|
|
|
$
|
(16)
|
|
|
|
|
|
Amounts
attributable to Centene Corporation common
shareholders:
|
|
|
|
|
|
|
|
Earnings (loss) from
continuing operations, net of income tax expense
|
$
|
139
|
|
|
$
|
(15)
|
|
Discontinued
operations, net of income tax (benefit)
|
—
|
|
|
(1)
|
|
Net earnings
(loss)
|
$
|
139
|
|
|
$
|
(16)
|
|
|
|
|
|
Net earnings
(loss) per common share attributable to Centene
Corporation:
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
Continuing
operations
|
$
|
0.81
|
|
|
$
|
(0.12)
|
|
Discontinued
operations
|
—
|
|
|
(0.01)
|
|
Basic earnings
(loss) per common share
|
$
|
0.81
|
|
|
$
|
(0.13)
|
|
|
|
|
|
Diluted:
|
|
|
|
Continuing
operations
|
$
|
0.79
|
|
|
$
|
(0.12)
|
|
Discontinued
operations
|
—
|
|
|
(0.01)
|
|
Diluted
earnings (loss) per common share
|
$
|
0.79
|
|
|
$
|
(0.13)
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
Basic
|
172,073,968
|
|
|
125,543,076
|
|
Diluted
|
175,836,290
|
|
|
125,543,076
|
|
CENTENE
CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(In
millions)
|
(Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
Net earnings
(loss)
|
$
|
132
|
|
|
$
|
(15)
|
|
Adjustments to
reconcile net earnings (loss) to net cash provided by operating
activities
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
86
|
|
|
35
|
|
Stock compensation
expense
|
32
|
|
|
51
|
|
Deferred income
taxes
|
(51)
|
|
|
(17)
|
|
Gain on contingent
consideration
|
—
|
|
|
(1)
|
|
Changes in assets and
liabilities
|
|
|
|
Premium and related
receivables
|
59
|
|
|
(174)
|
|
Other
assets
|
89
|
|
|
(46)
|
|
Medical claims
liabilities
|
358
|
|
|
196
|
|
Unearned
revenue
|
320
|
|
|
(64)
|
|
Accounts payable and
accrued expenses
|
(237)
|
|
|
35
|
|
Other long-term
liabilities
|
459
|
|
|
192
|
|
Other operating
activities, net
|
1
|
|
|
4
|
|
Net cash provided by
operating activities
|
1,248
|
|
|
196
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(83)
|
|
|
(45)
|
|
Purchases of
investments
|
(594)
|
|
|
(212)
|
|
Sales and maturities
of investments
|
349
|
|
|
203
|
|
Investments in
acquisitions, net of cash acquired
|
—
|
|
|
(782)
|
|
Other investing
activities, net
|
(1)
|
|
|
—
|
|
Net cash used in
investing activities
|
(329)
|
|
|
(836)
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from
long-term debt
|
560
|
|
|
3,790
|
|
Payments of long-term
debt
|
(560)
|
|
|
(1,388)
|
|
Common stock
repurchases
|
(13)
|
|
|
(22)
|
|
Debt issuance
costs
|
—
|
|
|
(51)
|
|
Other financing
activities, net
|
3
|
|
|
(13)
|
|
Net cash (used in)
provided by financing activities
|
(10)
|
|
|
2,316
|
|
Net increase in cash
and cash equivalents
|
909
|
|
|
1,676
|
|
Cash and cash
equivalents, beginning of period
|
3,930
|
|
|
1,760
|
|
Cash and cash
equivalents, end of period
|
$
|
4,839
|
|
|
$
|
3,436
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
Interest
paid
|
$
|
72
|
|
|
$
|
3
|
|
Income taxes
paid
|
$
|
2
|
|
|
$
|
33
|
|
Equity issued in
connection with acquisitions
|
$
|
—
|
|
|
$
|
3,105
|
|
CENTENE
CORPORATION
|
SUPPLEMENTAL
FINANCIAL DATA FROM CONTINUING OPERATIONS
|
|
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
|
2017
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
MANAGED CARE
MEMBERSHIP BY STATE
|
Arizona
|
|
684,300
|
|
|
598,300
|
|
|
601,500
|
|
|
597,700
|
|
|
607,000
|
|
Arkansas
|
|
98,100
|
|
|
58,600
|
|
|
57,700
|
|
|
52,800
|
|
|
50,700
|
|
California
|
|
2,980,100
|
|
|
2,973,500
|
|
|
3,004,500
|
|
|
3,097,600
|
|
|
3,125,400
|
|
Florida
|
|
872,000
|
|
|
716,100
|
|
|
732,700
|
|
|
726,200
|
|
|
660,800
|
|
Georgia
|
|
568,300
|
|
|
488,000
|
|
|
498,000
|
|
|
493,300
|
|
|
495,500
|
|
Illinois
|
|
253,800
|
|
|
237,700
|
|
|
236,700
|
|
|
234,700
|
|
|
239,100
|
|
Indiana
|
|
335,800
|
|
|
285,800
|
|
|
289,600
|
|
|
291,000
|
|
|
290,300
|
|
Kansas
|
|
133,100
|
|
|
139,700
|
|
|
145,100
|
|
|
144,800
|
|
|
141,100
|
|
Louisiana
|
|
484,100
|
|
|
472,800
|
|
|
455,600
|
|
|
375,300
|
|
|
381,200
|
|
Massachusetts
|
|
44,200
|
|
|
48,300
|
|
|
45,300
|
|
|
47,100
|
|
|
52,400
|
|
Michigan
|
|
2,100
|
|
|
2,000
|
|
|
2,100
|
|
|
2,200
|
|
|
2,600
|
|
Minnesota
|
|
9,500
|
|
|
9,400
|
|
|
9,400
|
|
|
9,500
|
|
|
9,500
|
|
Mississippi
|
|
349,500
|
|
|
310,200
|
|
|
313,900
|
|
|
323,800
|
|
|
328,300
|
|
Missouri
|
|
106,100
|
|
|
105,700
|
|
|
104,700
|
|
|
102,900
|
|
|
100,000
|
|
Nebraska
|
|
79,200
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
New
Hampshire
|
|
77,800
|
|
|
77,400
|
|
|
78,400
|
|
|
79,700
|
|
|
81,500
|
|
New Mexico
|
|
7,100
|
|
|
7,100
|
|
|
7,100
|
|
|
7,100
|
|
|
—
|
|
Ohio
|
|
328,900
|
|
|
316,000
|
|
|
319,500
|
|
|
319,000
|
|
|
314,000
|
|
Oregon
|
|
211,900
|
|
|
217,800
|
|
|
218,400
|
|
|
221,500
|
|
|
209,000
|
|
South
Carolina
|
|
121,900
|
|
|
122,500
|
|
|
119,700
|
|
|
113,700
|
|
|
107,700
|
|
Tennessee
|
|
21,900
|
|
|
21,700
|
|
|
21,600
|
|
|
20,800
|
|
|
20,100
|
|
Texas
|
|
1,243,900
|
|
|
1,072,400
|
|
|
1,041,600
|
|
|
1,037,000
|
|
|
1,036,700
|
|
Vermont
|
|
1,600
|
|
|
1,600
|
|
|
1,700
|
|
|
1,600
|
|
|
1,500
|
|
Washington
|
|
254,400
|
|
|
238,400
|
|
|
240,500
|
|
|
239,700
|
|
|
226,500
|
|
Wisconsin
|
|
71,700
|
|
|
73,800
|
|
|
75,100
|
|
|
76,100
|
|
|
78,400
|
|
Total at-risk
membership
|
|
9,341,300
|
|
|
8,594,800
|
|
|
8,620,400
|
|
|
8,615,100
|
|
|
8,559,300
|
|
TRICARE
eligibles
|
|
2,804,100
|
|
|
2,847,000
|
|
|
2,815,700
|
|
|
2,815,700
|
|
|
2,819,700
|
|
Non-risk
membership
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
161,400
|
|
Total
|
|
12,145,400
|
|
|
11,441,800
|
|
|
11,436,100
|
|
|
11,430,800
|
|
|
11,540,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicaid:
|
|
|
|
|
|
|
|
|
|
|
TANF, CHIP
& Foster Care
|
|
5,714,100
|
|
|
5,630,000
|
|
|
5,583,900
|
|
|
5,541,200
|
|
|
5,464,200
|
|
ABD &
LTC
|
|
825,600
|
|
|
785,400
|
|
|
754,900
|
|
|
757,500
|
|
|
757,600
|
|
Behavioral
Health
|
|
466,900
|
|
|
466,600
|
|
|
465,300
|
|
|
455,800
|
|
|
456,500
|
|
Commercial
|
|
1,864,700
|
|
|
1,239,100
|
|
|
1,333,000
|
|
|
1,391,500
|
|
|
1,487,900
|
|
Medicare & Duals
(1)
|
|
328,100
|
|
|
334,300
|
|
|
333,500
|
|
|
332,600
|
|
|
334,100
|
|
Correctional
|
|
141,900
|
|
|
139,400
|
|
|
149,800
|
|
|
136,500
|
|
|
59,000
|
|
Total at-risk
membership
|
|
9,341,300
|
|
|
8,594,800
|
|
|
8,620,400
|
|
|
8,615,100
|
|
|
8,559,300
|
|
TRICARE
eligibles
|
|
2,804,100
|
|
|
2,847,000
|
|
|
2,815,700
|
|
|
2,815,700
|
|
|
2,819,700
|
|
Non-risk
membership
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
161,400
|
|
Total
|
|
12,145,400
|
|
|
11,441,800
|
|
|
11,436,100
|
|
|
11,430,800
|
|
|
11,540,400
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Membership includes Medicare Advantage, Medicare Supplement,
Special Needs Plans, and Medicare-Medicaid Plans.
|
|
|
|
|
|
|
|
|
|
|
|
NUMBER OF
EMPLOYEES
|
|
30,900
|
|
|
30,500
|
|
|
29,400
|
|
|
28,900
|
|
|
28,000
|
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
2017
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
DAYS IN CLAIMS
PAYABLE (a)
|
41
|
|
|
42
|
|
|
41
|
|
|
43
|
|
|
66
|
|
(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. On a pro-forma basis, DCP
for Q1 2016 was 42, reflecting adjusted medical
costs to include a full quarter of Health Net operations.
|
|
|
|
|
|
|
|
|
|
|
CASH, INVESTMENTS
AND RESTRICTED DEPOSITS (in millions)
|
Regulated
|
$
|
10,034
|
|
|
$
|
8,854
|
|
|
$
|
7,825
|
|
|
$
|
7,324
|
|
|
$
|
7,682
|
|
Unregulated
|
306
|
|
|
264
|
|
|
268
|
|
|
196
|
|
|
139
|
|
Total
|
$
|
10,340
|
|
|
$
|
9,118
|
|
|
$
|
8,093
|
|
|
$
|
7,520
|
|
|
$
|
7,821
|
|
|
|
|
|
|
|
|
|
|
|
DEBT TO
CAPITALIZATION
|
43.3
|
%
|
|
44.1
|
%
|
|
44.5
|
%
|
|
44.8
|
%
|
|
44.6
|
%
|
DEBT TO
CAPITALIZATION EXCLUDING NON-RECOURSE DEBT
(b)
|
43.0
|
%
|
|
43.7
|
%
|
|
44.1
|
%
|
|
44.4
|
%
|
|
44.3
|
%
|
(b) The
non-recourse debt represents the Company's mortgage note payable
($63 million at March 31, 2017).
|
Debt to
capitalization is calculated as follows: total debt divided by
(total debt + total equity).
|
OPERATING
RATIOS
|
|
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
HBR
|
87.6
|
%
|
|
88.7
|
%
|
SG&A expense
ratio
|
9.8
|
%
|
|
11.3
|
%
|
Adjusted SG&A
expense ratio
|
9.3
|
%
|
|
8.3
|
%
|
MEDICAL CLAIMS LIABILITY
The changes in medical claims liability are summarized as
follows (in millions):
Balance, March 31,
2016
|
|
$
|
3,863
|
|
Incurred related
to:
|
|
|
Current
period
|
|
35,036
|
|
Prior
period
|
|
(389)
|
|
Total
incurred
|
|
34,647
|
|
Paid related
to:
|
|
|
Current
period
|
|
30,825
|
|
Prior
period
|
|
3,403
|
|
Total
paid
|
|
34,228
|
|
Balance, March 31,
2017, net
|
|
4,282
|
|
Plus: Reinsurance
recoverable
|
|
8
|
|
Balance, March 31,
2017
|
|
$
|
4,290
|
|
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, as a result of minimum HBR and other return of
premium programs, approximately $28
million of the "Incurred related to: Prior period" was
recorded as a reduction to premium revenues.
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, 2016, and
prior.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/centene-corporation-reports-2017-first-quarter-results--updates-2017-guidance-300444918.html
SOURCE Centene Corporation