CENTENE CO. ST. LOUIS, April 28, 2015 /PRNewswire/ -- Centene Corporation (NYSE: CNC) today announced its financial results for the quarter ended March 31, 2015. The following discussions, with the exception of cash flow information, are in the context of continuing operations.
Premium and Service Revenues (in
millions) $4,761
Consolidated Health Benefits Ratio 89.8%
General & Administrative expense
ratio 8.5%
Diluted earnings per share (EPS) $0.52
Total cash flow from operations (in
millions) $45
----------------------------------- ---
Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "We had a strong start to 2015, delivering exceptional top and bottom line growth compared to last year. We continue to be successful in executing on our robust growth pipeline while maintaining operational discipline."
First Quarter Highlights
-- March 31, 2015 managed care membership of 4.4 million, an increase of
1.4 million members, or 44% compared to the first quarter of 2014.
-- Premium and service revenues for the first quarter of $4.8 billion,
representing 42% growth compared to the first quarter of 2014.
-- Health Benefits Ratio of 89.8% for the first quarter 2015, compared to
89.3% in the first quarter of 2014.
-- General and Administrative expense ratio of 8.5% for the first quarter
of 2015, compared to 8.8% in the first quarter of 2014.
-- Operating cash flow of $45 million for the first quarter of 2015.
-- Diluted EPS for the first quarter of 2015 of $0.52, compared to $0.29 in
2014.
Other Events
-- In April 2015, our Indiana subsidiary, Managed Health Services, began
operating under an expanded contract with the Indiana Family & Social
Services Administration to provide services to its ABD Medicaid
enrollees who qualify for the new Hoosier Care Connect Program.
-- In April 2015, Centurion was recommended for an award by the Mississippi
Department of Corrections to provide comprehensive correctional
healthcare services. The contract is expected to commence in the third
quarter of 2015.
-- In March 2015, we began operating under an expanded STAR+PLUS contract
with the Texas Health and Human Service Commission (HHSC) to include
nursing facility benefits. We also began operating under a new contract
with the Texas HHSC and the Centers for Medicare and Medicaid Services
to serve dual-eligible members in three counties as part of the state's
dual demonstration program.
-- In March 2015, our Missouri subsidiary, Home State Health, was selected
by the Missouri Division of Purchasing and Materials Management to
continue providing managed care services to MO HealthNet Managed Care
beneficiaries. The new contract will be effective in the third quarter
of 2015.
-- In February 2015, Superior HealthPlan was tentatively recommended for a
contract award by the Texas HHSC to continue to serve STAR Health
(Foster Care) Medicaid recipients. The new STAR Health contract is
expected to commence in the third quarter of 2015.
Accreditations & Senior Management Additions
-- In April 2015, we announced the appointment of Marcela Manjarrez
Williams to Senior Vice President and Chief Communications Officer and
the appointment of Ken Yamaguchi, M.D. to Executive Vice President and
Chief Medical Officer.
-- In April 2015, Nurtur, our health and wellness subsidiary, received full
Disease Management Accreditation renewal from URAC, a Washington,
DC-based healthcare accrediting organization that establishes quality
standards for the healthcare industry. In February 2015, Nurtur also
received a three-year Wellness and Health Promotion Accreditation
renewal from the National Committee for Quality Assurance (NCQA) for its
wellness services.
-- In March 2015, NurseWise, our national multilingual nurse triage and
health education subsidiary, also received full Health Call Center
Accreditation renewal from URAC.
Membership
The following table sets forth the Company's membership by state for its managed care organizations:
March 31,
---------
2015 2014
---- ----
Arizona 202,200 169,800
Arkansas 43,200 16,400
California 171,200 118,100
Florida 463,100 230,300
Georgia 405,600 331,400
Illinois 184,800 22,400
Indiana 227,700 198,700
Kansas 143,700 145,000
Louisiana 359,500 149,800
Massachusetts 64,500 50,800
Minnesota 9,500 9,400
Mississippi 141,900 85,400
Missouri 75,600 58,100
New Hampshire 67,500 37,100
Ohio 296,000 181,800
South Carolina 106,000 96,300
Tennessee 20,800 21,100
Texas 974,900 904,000
Vermont 1,600 -
Washington 207,100 151,700
Wisconsin 82,100 70,800
------ ------
Total at-risk membership 4,248,500 3,048,400
Non-risk membership 153,200 -
------- ---
Total 4,401,700 3,048,400
========= =========
At March 31, 2015, the Company served 331,800 Medicaid members in Medicaid expansion programs in California, Illinois, Indiana, Massachusetts, New Hampshire, Ohio and Washington included in the table above.
The following table sets forth our membership by line of business:
March 31,
---------
2015 2014
---- ----
Medicaid 3,133,900 2,169,100
CHIP &
Foster
Care 233,600 269,200
ABD,
Medicare &
Duals 410,400 300,500
Long Term
Care (LTC) 71,200 51,800
Health
Insurance
Marketplaces 161,700 39,700
Hybrid
Programs
(1) - 14,400
Behavioral
Health 195,100 162,700
Correctional
Healthcare
Services 42,600 41,000
Total at-
risk
membership 4,248,500 3,048,400
Non-risk
membership 153,200 -
Total 4,401,700 3,048,400
========= =========
1 In February 2015, hybrid programs in Indiana and Massachusetts were
converted to Medicaid expansion contracts.
The following table identifies our dual-eligible membership by line of business. The membership tables above include these members.
March 31,
---------
2015 2014
---- ----
ABD 112,600 72,800
LTC 52,000 41,300
Medicare 6,800 6,500
Medicaid / Medicare Duals 12,600 -
------ ---
Total 184,000 120,600
======= =======
Statement of Operations: Three Months Ended March 31, 2015
-- For the first quarter of 2015, Premium and Service Revenues increased
42% to $4.8 billion from $3.4 billion in the first quarter of 2014. The
increase was a result of a full quarter's impact from expansions or new
programs in 2014 in many of our states, particularly Florida, Illinois
and Ohio.
-- Consolidated HBR of 89.8% for the first quarter of 2015 represents an
increase from 89.3% in the comparable period in 2014 and an increase
from 89.3% in the fourth quarter of 2014. The year over year HBR
increase is primarily attributable to an increase in higher acuity
membership and higher flu related costs over the prior year.
-- The following table compares the results for new business and existing
business for the quarters ended March 31:
2015 2014
---- ----
Premium and Service
Revenue
New business 23% 20%
Existing business 77% 80%
HBR
New business 91.0% 93.1%
Existing business 89.5% 88.3%
-- Consolidated G&A expense ratio for the first quarter of 2015 was 8.5%,
compared to 8.8% in the prior year. The year over year decrease in the
G&A ratio reflects the leveraging of expenses over higher revenues in
2015 as well as the impact of transaction costs recognized in 2014.
-- Diluted earnings per share of $0.52 in the first quarter of 2015,
compared to $0.29 in 2014. Diluted earnings per share in 2014 was
impacted by $0.11 of net cost associated with the health insurer fee and
acquisition transaction costs.
Balance Sheet and Cash Flow
At March 31, 2015, the Company had cash, investments and restricted deposits of $3.4 billion, including $97 million held by its unregulated entities. Medical claims liabilities totaled $2.0 billion, representing 45.5 days in claims payable. Total debt was $1.1 billion, which includes $125 million of borrowings on the $500 million revolving credit facility at quarter end. Debt to capitalization was 36.6% at March 31, 2015, excluding the $69 million non-recourse mortgage note.
Cash flow from operations for the three months ended March 31, 2015, was $45 million, or 0.7 times net earnings. Cash flow was reduced in the first quarter as a result of a one time change in payment terms for one of our states.
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, 2014 44.2
Timing of claim payments 1.3
Days in claims payable,
March 31, 2015 45.5
====
Outlook
The table below depicts the Company's annual GAAP guidance for 2015.
Full Year 2015
--------------
Low High
--- ----
Premium and Service Revenues
(in millions) $20,500 $21,000
Diluted EPS $2.60 $2.72
Consolidated Health Benefits
Ratio 89.2% 89.6%
General & Administrative
expense ratio 8.0% 8.4%
Effective Tax Rate 48.0% 50.0%
Diluted Shares Outstanding (in
millions) 123.0 124.0
Consistent with our policy, the above table does not include acquisitions that have not yet closed.
Conference Call
As previously announced, the Company will host a conference call Tuesday, April 28, 2015, at 8:30 AM (Eastern Time) to review the financial results for the first quarter ended March 31, 2015, and to discuss its business outlook. Michael F. Neidorff and William N. Scheffel will host the conference call.
Investors and other interested parties are invited to listen to the conference call by dialing 1-866-739-7850 in the U.S. and Canada; +1-412-902-6577 from abroad; or via a live, audio webcast on the Company's website at www.centene.com, under the Investors section. Or, participants can register for the conference call in advance by navigating to http://dpregister.com/10061838, to receive a dial-in number upon registration. 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 26, 2016, at the aforementioned URL. In addition, a digital audio playback will be available until 9:00 AM Eastern Time on Wednesday, May 6, 2015, by dialing 1-877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad, and entering access code 10061838.
Other Information
The discussion in the third bullet under the heading "Statement of Operations: Three Months Ended March 31, 2015" contains financial information for new and existing businesses. Existing businesses are primarily state markets or significant geographic expansion in an existing state or product that we have managed for four complete quarters. New businesses are primarily new state markets or significant geographic expansion in an existing state or product that conversely, we have not managed for four complete quarters.
About Centene Corporation
Centene Corporation, a Fortune 500 company, is a diversified, multi-national healthcare enterprise that provides a portfolio of services to government-sponsored 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/hybrid programs, and Medicare (Special Needs Plans). The Company 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.
The information provided in this press release contains forward-looking statements that relate to future events and future financial performance of Centene. Subsequent events and developments may cause the Company's estimates to change. The Company disclaims any obligation to update this forward-looking financial information in the future. Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, regulatory, competitive and other factors that may cause Centene's or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Actual results may differ from projections or estimates due to a variety of important factors, including Centene's ability to accurately predict and effectively manage health benefits and other operating expenses and reserves; competition; membership and revenue projections; timing of regulatory contract approval; changes in healthcare practices; changes in federal or state laws or regulations, including the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act and any regulations enacted thereunder; changes in expected contract start dates; changes in expected closing dates, estimated purchase price and accretion for acquisitions; inflation; foreign currency fluctuations; provider and state contract changes; new technologies; advances in medicine; reduction in provider payments by governmental payors; major epidemics; disasters and numerous other factors affecting the delivery and cost of healthcare; the expiration, cancellation or suspension of our Medicare or Medicaid managed care contracts by federal or state governments; the outcome of pending legal proceedings; availability of debt and equity financing, on terms that are favorable to us; and general economic and market conditions, as well as those factors disclosed in the Company's publicly filed documents.
This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain risk factors that may affect our business operations, financial condition and results of operations, in our filings with the Securities and Exchange Commission, including our 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)
(Unaudited)
March 31, 2015 December 31, 2014
-------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $1,666 $1,610
Premium and related receivables 1,245 912
Short term investments 151 177
Other current assets 528 335
--- ---
Total current assets 3,590 3,034
Long term investments 1,527 1,280
Restricted deposits 98 100
Property, software and equipment, net 450 445
Goodwill 786 754
Intangible assets, net 131 120
Other long term assets 114 91
--- ---
Total assets $6,696 $5,824
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims liability $1,950 $1,723
Accounts payable and accrued expenses 1,002 768
Return of premium payable 269 236
Unearned revenue 117 168
Current portion of long term debt 5 5
--- ---
Total current liabilities 3,343 2,900
Long term debt 1,123 874
Other long term liabilities 238 159
--- ---
Total liabilities 4,704 3,933
Commitments and contingencies
Redeemable noncontrolling interests 155 148
Stockholders' equity:
Preferred stock, $0.001 par value;
authorized 10,000,000 shares; no shares
issued or outstanding at March 31, 2015
and December 31, 2014 - -
Common stock, $.001 par value;
authorized 200,000,000 shares;
124,562,959 issued and 118,886,912
outstanding at March 31, 2015, and
124,274,864 issued and 118,433,416
outstanding at December 31, 2014 - -
Additional paid-in capital 870 840
Accumulated other comprehensive loss (1) (1)
Retained earnings 1,066 1,003
Treasury stock, at cost (5,676,047 and
5,841,448 shares, respectively) (98) (98)
--- ---
Total Centene stockholders' equity 1,837 1,744
Noncontrolling interest - (1)
--- ---
Total stockholders' equity 1,837 1,743
----- -----
Total liabilities and stockholders'
equity $6,696 $5,824
====== ======
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share data)
(Unaudited)
Three Months Ended March 31,
----------------------------
2015 2014
---- ----
Revenues:
Premium $4,299 $3,071
Service 462 281
--- ---
Premium and service revenues 4,761 3,352
Premium tax and health insurer
fee 370 108
--- ---
Total revenues 5,131 3,460
----- -----
Expenses:
Medical costs 3,861 2,743
Cost of services 402 242
General and administrative
expenses 403 296
Premium tax expense 281 78
Health insurer fee expense 55 31
--- ---
Total operating expenses 5,002 3,390
----- -----
Earnings from operations 129 70
Other income (expense):
Investment and other income 9 5
Interest expense (10) (7)
--- ---
Earnings from continuing
operations, before income tax
expense 128 68
Income tax expense 63 35
--- ---
Earnings from continuing
operations, net of income tax
expense 65 33
Discontinued operations, net
of income tax expense of $0
and $0, respectively (1) (1)
Net earnings 64 32
(Earnings) loss attributable
to noncontrolling interests (1) 1
--- ---
Net earnings attributable to
Centene Corporation $63 $33
=== ===
Amounts attributable to Centene
Corporation common shareholders:
Earnings from continuing
operations, net of income tax
expense $64 $34
Discontinued operations, net
of income tax expense
(benefit) (1) (1)
Net earnings $63 $33
=== ===
Net earnings (loss) per common share
attributable to Centene Corporation:
Basic:
Continuing operations $0.54 $0.30
Discontinued operations (0.01) (0.01)
Basic earnings per common
share $0.53 $0.29
===== =====
Diluted:
Continuing operations $0.52 $0.29
Discontinued operations (0.01) (0.01)
Diluted earnings per common
share $0.51 $0.28
===== =====
Weighted average number of common shares
outstanding:
Basic 118,783,755 114,967,752
Diluted 122,572,366 118,722,532
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended March 31,
----------------------------
2015 2014
---- ----
Cash flows from operating activities:
Net earnings $64 $32
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation and amortization 27 20
Stock compensation expense 16 11
Deferred income taxes (6) (8)
Gain on settlement of contingent
consideration (10) -
Changes in assets and liabilities
Premium and related receivables (334) (119)
Other current assets (3) 3
Other assets (13) (14)
Medical claims liabilities 227 196
Unearned revenue (51) 35
Accounts payable and accrued
expenses 58 91
Other long term liabilities 68 4
Other operating activities 2 1
--- ---
Net cash provided by operating
activities 45 252
--- ---
Cash flows from investing activities:
Capital expenditures (27) (18)
Purchases of investments (307) (167)
Sales and maturities of
investments 111 112
Proceeds from asset sale 7 -
Investments in acquisitions, net
of cash acquired (9) (77)
--- ---
Net cash used in investing
activities (225) (150)
---- ----
Cash flows from financing activities:
Proceeds from exercise of stock
options 2 2
Proceeds from borrowings 500 645
Payment of long term debt (253) (519)
Excess tax benefits from stock
compensation 3 -
Common stock repurchases (4) (2)
Contribution from noncontrolling
interest - 5
Debt issue costs (4) -
Payment of contingent
consideration obligation (8) -
--- ---
Net cash provided by financing
activities 236 131
Net increase in cash and cash
equivalents 56 233
--- ---
Cash and cash equivalents,
beginning of period 1,610 1,038
----- -----
Cash and cash equivalents, end
of period $1,666 $1,271
====== ======
Supplemental disclosures of cash flow
information:
Interest paid $2 $2
Income taxes paid $24 $21
Equity issued in connection with
acquisitions $13 $132
CENTENE CORPORATION
SUPPLEMENTAL FINANCIAL DATA FROM CONTINUING OPERATIONS
Q1 Q4 Q3 Q2 Q1
2015 2014 2014 2014 2014
---- ---- ---- ---- ----
MANAGED CARE MEMBERSHIP
Arizona 202,200 204,000 202,500 189,200 169,800
Arkansas 43,200 38,400 36,600 31,100 16,400
California 171,200 163,900 144,700 131,100 118,100
Florida 463,100 425,700 411,200 313,800 230,300
Georgia 405,600 389,100 382,600 373,000 331,400
Illinois 184,800 87,800 31,300 29,500 22,400
Indiana 227,700 197,700 199,500 200,500 198,700
Kansas 143,700 143,300 144,200 146,100 145,000
Louisiana 359,500 152,900 150,800 148,600 149,800
Massachusetts 64,500 48,400 46,600 47,200 50,800
Minnesota 9,500 9,500 9,500 9,400 9,400
Mississippi 141,900 108,700 99,300 97,400 85,400
Missouri 75,600 71,000 64,900 58,700 58,100
New Hampshire 67,500 62,700 56,600 39,500 37,100
Ohio 296,000 280,100 261,000 225,900 181,800
South Carolina 106,000 109,700 106,500 101,800 96,300
Tennessee 20,800 21,000 21,200 21,300 21,100
Texas 974,900 971,000 961,100 921,500 904,000
Vermont 1,600 - - - -
Washington 207,100 194,400 192,500 193,800 151,700
Wisconsin 82,100 83,200 74,700 67,300 70,800
------ ------ ------ ------ ------
Total at-risk membership 4,248,500 3,762,500 3,597,300 3,346,700 3,048,400
--------- --------- --------- --------- ---------
Non-risk membership 153,200 298,400 303,500 - -
------- ------- ------- --- ---
TOTAL 4,401,700 4,060,900 3,900,800 3,346,700 3,048,400
========= ========= ========= ========= =========
Medicaid 3,133,900 2,754,900 2,578,300 2,385,500 2,169,100
CHIP & Foster Care 233,600 222,700 247,700 261,800 269,200
ABD, Medicare & Duals 410,400 392,700 383,400 329,700 300,500
LTC 71,200 60,800 55,200 53,500 51,800
Health Insurance
Marketplaces 161,700 74,500 76,000 75,700 39,700
Hybrid Programs - 18,900 19,900 17,000 14,400
Behavorial Health 195,100 197,000 195,500 182,200 162,700
Correctional Healthcare
Services 42,600 41,000 41,300 41,300 41,000
Total at-risk membership 4,248,500 3,762,500 3,597,300 3,346,700 3,048,400
--------- --------- --------- --------- ---------
Non-risk membership 153,200 298,400 303,500 - -
------- ------- ------- --- ---
TOTAL 4,401,700 4,060,900 3,900,800 3,346,700 3,048,400
========= ========= ========= ========= =========
REVENUE PER MEMBER PER
MONTH(a) $349 $360 $354 $344 $340
CLAIMS(a)
Period-end inventory 1,217,000 1,086,600 1,021,200 771,900 832,600
Average inventory 841,000 806,000 660,200 603,700 584,700
Period-end inventory
per member 0.29 0.29 0.28 0.23 0.27
(a) Revenue per member and claims information are presented for the Managed Care at-risk members.
NUMBER OF EMPLOYEES 14,800 13,400 12,900 12,300 11,200
Q1 Q4 Q3 Q2 Q1
2015 2014 2014 2014 2014
---- ---- ---- ---- ----
DAYS IN CLAIMS PAYABLE (b) 45.5 44.2 43.1 42.9 42.6
(b) 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 $3,345 $3,082 $2,829 $2,353 $2,167
Unregulated 97 85 70 50 49
--- --- --- --- ---
TOTAL $3,442 $3,167 $2,899 $2,403 $2,216
====== ====== ====== ====== ======
DEBT TO CAPITALIZATION 38.0% 33.5% 36.4% 35.3% 36.2%
DEBT TO CAPITALIZATION
EXCLUDING NON-RECOURSE
DEBT(c) 36.6% 31.7% 34.6% 33.4% 34.1%
(c) The non-recourse debt represents the Company's mortgage note payable ($69 million at March 31, 2015).
Debt to Capitalization is calculated as follows: total debt divided by (total debt + total equity).
Operating Ratios:
Three Months Ended March
31,
------------------------
2015 2014
---- ----
Health Benefits Ratios:
Medicaid, CHIP, Foster Care &
Health Insurance Marketplaces 87.6% 86.9%
ABD, LTC & Medicare 92.9 92.9
Specialty Services 85.2 87.7
Total 89.8 89.3
Total General & Administrative
Expense Ratio 8.5% 8.8%
MEDICAL CLAIMS LIABILITY (In millions)
The changes in medical claims liability are summarized as follows:
Balance, March 31, 2014 $1,299
Incurred related to:
Current period 13,981
Prior period (185)
----
Total incurred 13,796
======
Paid related to:
Current period 12,072
Prior period 1,073
-----
Total paid 13,145
======
Balance, March 31, 2015 $1,950
======
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 in each of the periods presented. Additionally, as a result of minimum HBR and other state return of premium programs, approximately $60 million of the "Incurred related to: Prior period" was reclassified to Return of Premium Payable.
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 prior to March 31, 2014.
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SOURCE Centene Corporation
