CENTENE CO. ST. LOUIS, July 28, 2015 /PRNewswire/ -- Centene Corporation (NYSE: CNC) today announced its financial results for the quarter ended June 30, 2015. The following discussions, with the exception of cash flow information, are in the context of continuing operations.
Premium and Service Revenues (in
millions) $5,184
Consolidated Health Benefits Ratio 89.1%
General & Administrative expense
ratio 8.5%
Diluted earnings per share (EPS) $0.72
Total cash flow from operations
(in millions) $350
------------------------------- ----
Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "Our strong second quarter results offer further evidence of Centene's positive financial and operating momentum. Our pending Health Net acquisition will enhance our long-term growth opportunities by adding greater product diversity and scale."
Second Quarter Highlights
-- June 30, 2015 managed care membership of 4.6 million, an increase of 1.3
million members, or 38% compared to the second quarter of 2014.
-- Premium and service revenues for the second quarter of $5.2 billion,
representing 39% growth compared to the second quarter of 2014.
-- Health Benefits Ratio of 89.1% for the second quarter of 2015, compared
to 88.9% in the second quarter of 2014 and 89.8% in the first quarter of
2015.
-- General and Administrative expense ratio of 8.5% for the second quarter
of 2015, compared to 8.6% in the second quarter of 2014 and 8.5% in the
first quarter of 2015.
-- Operating cash flow of $350 million for the second quarter of 2015.
-- Diluted EPS for the second quarter of 2015 of $0.72, including $0.01 of
diluted EPS associated with Health Net, Inc. (Health Net) merger related
expenses, compared to $0.39 in 2014.
Other Events
-- In July 2015, Centene announced that the Company and two direct, newly
formed subsidiaries of the Company had entered into a definitive merger
agreement with Health Net under which Centene will acquire all of the
issued and outstanding shares of Health Net. The transaction is valued
at approximately $6.8 billion (based on the Centene closing stock price
on July 1, 2015), including the assumption of debt. The transaction is
expected to close in early 2016 and is subject to approval by Centene
and Health Net shareholders and other customary closing conditions.
-- In July 2015, Centurion began operating under a new contract with the
Mississippi Department of Corrections to provide comprehensive
correctional healthcare services.
-- In July 2015, Centene's Mississippi subsidiary, Magnolia Health, began
operating under a two-year CHIP contract with the State of Mississippi.
-- In June 2015, the Company received regulatory approval of its previously
announced acquisition of Agate Resources, Inc. The transaction is
expected to close in the third quarter of 2015.
-- In May 2015, the Company completed the acquisition of Fidelis SecureCare
of Michigan, Inc. (Fidelis). Fidelis began operating under a new
contract with the Michigan Department of Community Health and the
Centers for Medicare and Medicaid Services to provide integrated
healthcare services to members who are dually eligible for Medicare and
Medicaid in Macomb and Wayne counties in May 2015. Passive enrollment
began in July 2015.
-- In May 2015, Centene's Florida subsidiary, Sunshine Health, was
tentatively recommended for a statewide contract award by the Florida
Healthy Kids Corporation to manage healthcare services for children ages
five through 18 in all 11 regions of Florida. The two-year contract
award is expected to commence in the fourth quarter of 2015.
-- In the fourth quarter of 2015, Centene's Louisiana subsidiary, Louisiana
Healthcare Connections, expects to begin operating under an expanded
contract to include behavioral health benefits, and Magnolia Health
anticipates operating under an expanded contract to include the
inpatient benefit for Medicaid and ABD members.
Awards
-- In June 2015, the Company was awarded the Corporate Anti-Bullying Hero
Award at Auburn University's Anti-Bullying Summit.
-- In June 2015, FORTUNE magazine announced Centene's position of #186 in
its annual ranking of America's largest companies by revenue.
-- In May 2015, at the Case In Point Platinum Awards, Centene and its
subsidiaries were honored with awards in five categories: Women/Children
Case Management, Disease Management/Population Health, Integrated Case
Management and Embedded Case Management, Managed Care Case Management,
and Nurse Call Center. Centene was also recognized for four titles in
its member educational book series at the Hermes Creative Awards.
Membership
The following table sets forth the Company's membership by state for its managed care organizations:
June 30,
--------
2015 2014
---- ----
Arizona 210,900 189,200
Arkansas 45,400 31,100
California 178,700 131,100
Florida 470,300 313,800
Georgia 405,000 373,000
Illinois 209,100 29,500
Indiana 250,400 200,500
Kansas 143,000 146,100
Louisiana 358,900 148,600
Massachusetts 61,500 47,200
Michigan 2,700 -
Minnesota 10,900 9,400
Mississippi 250,600 97,400
Missouri 82,600 58,700
New Hampshire 70,800 39,500
Ohio 287,100 225,900
South Carolina 112,600 101,800
Tennessee 21,400 21,300
Texas 969,700 921,500
Vermont 2,800 -
Washington 214,100 193,800
Wisconsin 78,600 67,300
------ ------
Total at-risk membership 4,437,100 3,346,700
Non-risk membership 176,600 -
------- ---
Total 4,613,700 3,346,700
========= =========
At June 30, 2015, the Company served 368,900 Medicaid members in Medicaid expansion programs in California, Illinois, Massachusetts, New Hampshire, Ohio and Washington and Indiana HIP 2.0, included in the table above.
The following table sets forth our membership by line of business:
June 30,
--------
2015 2014
---- ----
Medicaid 3,300,600 2,385,500
CHIP & Foster Care 230,500 261,800
ABD, Medicare &
Duals 414,300 329,700
Long Term Care
(LTC) 72,800 53,500
Health Insurance
Marketplaces 167,400 75,700
Hybrid Programs
(1) - 17,000
Behavioral Health 203,900 182,200
Correctional
Healthcare
Services 47,600 41,300
Total at-risk
membership 4,437,100 3,346,700
Non-risk
membership 176,600 -
Total 4,613,700 3,346,700
========= =========
1 In February 2015, hybrid programs 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.
June 30,
--------
2015 2014
---- ----
ABD 106,100 89,300
LTC 53,100 41,800
Medicare 8,500 6,800
Medicaid / Medicare Duals 19,700 1,400
------ -----
Total 187,400 139,300
======= =======
Statement of Operations: Three Months Ended June 30, 2015
Three Months Ended
------------------
June 30, June 30, March 31,
2015 2014 2015
--------- --------- ----------
(in
millions)
----------
Total
Revenues $5,506 $4,024 $5,131
Premium Tax
and Health
Insurer Fee
Revenues (322) (283) (370)
Premium and
Service
Revenues $5,184 $3,741 $4,761
====== ====== ======
-- For the second quarter of 2015, Premium and Service Revenues increased
39% to $5.2 billion from $3.7 billion in the second quarter of 2014. The
increase was primarily a result of the impact from expansions or new
programs in many of our states, particularly Florida, Illinois,
Louisiana, Mississippi, Ohio and Texas.
-- Premium Tax and Health Insurer Fee Revenues were $322 million in the
second quarter of 2015, compared to $283 million in the comparable
period in 2014 and $370 million in the first quarter of 2015. The
decrease of $48 million from the first quarter of 2015 was due to a
lower amount of hospital assessments received in the second quarter of
2015.
-- Consolidated HBR of 89.1% for the second quarter of 2015 represents an
increase from 88.9% in the comparable period in 2014 and a decrease from
89.8% in the first quarter of 2015. The year over year HBR increase is
primarily attributable to a higher HBR associated with new programs in
two of our states. The sequential decrease is due to normal seasonality.
-- The following table compares the results for new business and existing
business for the quarters ended June 30:
2015 2014
---- ----
Premium and Service
Revenue
New business 22% 26%
Existing business 78% 74%
HBR
New business 91.3% 91.8%
Existing business 88.5% 87.9%
-- The new business HBR decreased compared to last year as a result of
a higher portion of new business associated with Medicaid, which
operates at a lower HBR.
-- The existing business HBR increased compared to last year as a
result of higher acuity business, including Florida LTC, being
classified as existing business in the current year.
-- Consolidated G&A expense ratio for the second quarter of 2015 was 8.5%,
compared to 8.6% in the prior year. The year over year decrease in the
G&A ratio reflects the leveraging of expenses over higher revenues in
2015.
-- Diluted earnings per share of $0.72 in the second quarter of 2015,
compared to $0.39 in 2014. Diluted earnings per share in 2014 was
impacted by $0.08 of net cost associated with the health insurer fee.
Balance Sheet and Cash Flow
At June 30, 2015, the Company had cash, investments and restricted deposits of $3.7 billion, including $82 million held by its unregulated entities. Medical claims liabilities totaled $2.1 billion. The Company's days in claims payable was 45.5, consistent with the first quarter of 2015. Total debt was $1.1 billion, which includes $150 million of borrowings on the $500 million revolving credit facility at quarter end. Debt to capitalization was 35.7% at June 30, 2015, excluding the $69 million non-recourse mortgage note.
Cash flow from operations for the three months ended June 30, 2015, was $350 million, or 4.0 times net earnings.
Outlook
The table below depicts the Company's annual GAAP guidance for 2015.
Full Year 2015
--------------
Low High
--- ----
Premium and Service Revenues
(in millions) $20,800 $21,200
Diluted EPS $2.74 $2.82
Consolidated Health Benefits
Ratio 89.1% 89.5%
General & Administrative
expense ratio 8.0% 8.4%
Effective Tax Rate 48.0% 50.0%
Diluted Shares Outstanding
(in millions) 123.0 124.0
The Company's guidance excludes merger related costs expected to be incurred in 2015 related to the Health Net transaction. These costs are estimated to be between $0.10 and $0.15 per diluted share for 2015. The transaction is expected to close in early 2016.
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, July 28, 2015, at 8:30 AM (Eastern Time) to review the financial results for the second quarter ended June 30, 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/10067851, 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, July 26, 2016, at the aforementioned URL. In addition, a digital audio playback will be available until 9:00 AM Eastern Time on Wednesday, August 5, 2015, by dialing 1-877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad, and entering access code 10067851.
Other Information
The discussion in the third bullet under the heading "Statement of Operations: Three Months Ended June 30, 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, Health Net'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 or Health Net'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. including our proposed merger with Health Net (Proposed Merger); 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 or Health Net's managed care contracts by federal or state governments (including but not limited to Medicare and Medicaid); the outcome of our or Health Net's pending legal proceedings; availability of debt and equity financing, on terms that are favorable to us; and changes in economic, political and market conditions; the expected closing date of the Proposed Merger; the possibility that the expected synergies and value creation from the Proposed Merger will not be realized, or will not be realized with the expected time period; the risk that acquired businesses will not be integrated successfully; disruption from the Proposed Merger making it more difficult to maintain business and operational relationships; the risk that unexpected costs related to the Proposed Merger will be incurred; the possibility that the Proposed Merger does not close, including, but not limited to, due to the failure to satisfy the closing conditions, including the receipt of approval of both Centene's stockholders and Health Net's stockholders; and the risk that financing for the Proposed Merger may not be available on favorable terms 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)
June 30, 2015 December
31, 2014
------------- ---------
ASSETS
Current assets:
Cash and cash
equivalents $1,967 $1,610
Premium and related
receivables 1,248 912
Short term investments 140 177
Other current assets 483 335
--- ---
Total current assets 3,838 3,034
Long term investments 1,541 1,280
Restricted deposits 101 100
Property, software and
equipment, net 462 445
Goodwill 811 754
Intangible assets, net 148 120
Other long term assets 121 91
--- ---
Total assets $7,022 $5,824
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims
liability $2,092 $1,723
Accounts payable and
accrued expenses 1,004 768
Return of premium
payable 289 236
Unearned revenue 68 168
Current portion of long
term debt 5 5
--- ---
Total current
liabilities 3,458 2,900
Long term debt 1,139 874
Other long term
liabilities 330 159
--- ---
Total liabilities 4,927 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 June
30, 2015 and December
31, 2014 - -
Common stock, $.001 par
value; authorized
200,000,000 shares;
124,812,343 issued and
119,087,944
outstanding at June
30, 2015, and
124,274,864 issued and
118,433,416
outstanding at
December 31, 2014 - -
Additional paid-in
capital 891 840
Accumulated other
comprehensive loss (4) (1)
Retained earnings 1,154 1,003
Treasury stock, at cost
(5,724,399 and
5,841,448 shares,
respectively) (101) (98)
---- ---
Total Centene
stockholders' equity 1,940 1,744
Noncontrolling interest - (1)
--- ---
Total stockholders'
equity 1,940 1,743
----- -----
Total liabilities and
stockholders' equity $7,022 $5,824
====== ======
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share data)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2015 2014 2015 2014
---- ---- ---- ----
Revenues:
Premium $4,692 $3,331 $8,991 $6,402
Service 492 410 954 691
--- --- --- ---
Premium and service revenues 5,184 3,741 9,945 7,093
Premium tax and health
insurer fee 322 283 692 391
--- --- --- ---
Total revenues 5,506 4,024 10,637 7,484
----- ----- ------ -----
Expenses:
Medical costs 4,181 2,960 8,042 5,703
Cost of services 419 366 821 608
General and administrative
expenses 442 321 845 616
Premium tax expense 239 253 520 331
Health insurer fee expense 52 31 107 63
--- --- --- ---
Total operating expenses 5,333 3,931 10,335 7,321
----- ----- ------ -----
Earnings from operations 173 93 302 163
Other income (expense):
Investment and other income 10 7 19 12
Interest expense (11) (9) (21) (16)
--- --- --- ---
Earnings from continuing
operations, before income
tax expense 172 91 300 159
Income tax expense 84 45 147 79
--- --- --- ---
Earnings from continuing
operations, net of income
tax expense 88 46 153 80
Discontinued operations, net
of income tax expense
(benefit) of $0, $1, $(1),
and $1, respectively - 2 (1) 1
Net earnings 88 48 152 81
(Earnings) loss attributable
to noncontrolling interests - 1 (1) 1
--- --- --- ---
Net earnings attributable to
Centene Corporation $88 $49 $151 $82
=== === ==== ===
Amounts attributable to Centene Corporation common shareholders:
Earnings from continuing
operations, net of income
tax expense $88 $47 $152 $81
Discontinued operations, net
of income tax expense
(benefit) - 2 (1) 1
Net earnings $88 $49 $151 $82
=== === ==== ===
Net earnings (loss) per common share attributable to Centene Corporation:
Basic:
Continuing operations $0.74 $0.41 $1.28 $0.70
Discontinued operations - 0.01 (0.01) 0.01
Basic earnings per common
share $0.74 $0.42 $1.27 $0.71
===== ===== ===== =====
Diluted:
Continuing operations $0.72 $0.39 $1.24 $0.68
Discontinued operations - 0.02 (0.01) 0.01
Diluted earnings per common
share $0.72 $0.41 $1.23 $0.69
===== ===== ===== =====
Weighted average number of common shares outstanding:
Basic 119,003,569 115,517,366 118,894,269 115,244,078
Diluted 122,965,011 119,434,516 122,785,459 119,094,840
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended June 30,
-------------------------
2015 2014
---- ----
Cash flows from operating
activities:
Net earnings $152 $81
Adjustments to
reconcile net
earnings to net
cash provided by
operating
activities
Depreciation and
amortization 53 42
Stock compensation
expense 33 23
Deferred income
taxes (13) (11)
Gain on settlement
of contingent
consideration (10) -
Changes in assets and liabilities
Premium and
related
receivables (341) (161)
Other current
assets (28) 29
Other assets (30) (29)
Medical claims
liabilities 366 284
Unearned revenue (102) (18)
Accounts payable
and accrued
expenses 166 160
Other long term
liabilities 144 10
Other operating
activities 5 2
--- ---
Net cash provided
by operating
activities 395 412
--- ---
Cash flows from investing
activities:
Capital
expenditures (58) (42)
Purchases of
investments (513) (475)
Sales and
maturities of
investments 276 221
Proceeds from
asset sale 7 -
Investments in
acquisitions, net
of cash acquired (11) (94)
--- ---
Net cash used in
investing
activities (299) (390)
---- ----
Cash flows from financing
activities:
Proceeds from
exercise of stock
options 3 4
Proceeds from
borrowings 750 1,145
Payment of long
term debt (479) (945)
Excess tax
benefits from
stock
compensation 6 1
Common stock
repurchases (7) (5)
Contribution from
noncontrolling
interest - 5
Debt issue costs (4) (6)
Payment of
contingent
consideration
obligation (8) -
--- ---
Net cash provided
by financing
activities 261 199
Net increase in
cash and cash
equivalents 357 221
--- ---
Cash and cash
equivalents,
beginning of
period 1,610 1,038
----- -----
Cash and cash
equivalents, end
of period $1,967 $1,259
====== ======
Supplemental disclosures of cash
flow information:
Interest paid $27 $16
Income taxes paid $145 $110
Equity issued in
connection with
acquisitions $13 $132
CENTENE CORPORATION
SUPPLEMENTAL FINANCIAL DATA FROM CONTINUING OPERATIONS
Q2 Q1 Q4 Q3 Q2
2015 2015 2014 2014 2014
---- ---- ---- ---- ----
MANAGED CARE MEMBERSHIP
Arizona 210,900 202,200 204,000 202,500 189,200
Arkansas 45,400 43,200 38,400 36,600 31,100
California 178,700 171,200 163,900 144,700 131,100
Florida 470,300 463,100 425,700 411,200 313,800
Georgia 405,000 405,600 389,100 382,600 373,000
Illinois 209,100 184,800 87,800 31,300 29,500
Indiana 250,400 227,700 197,700 199,500 200,500
Kansas 143,000 143,700 143,300 144,200 146,100
Louisiana 358,900 359,500 152,900 150,800 148,600
Massachusetts 61,500 64,500 48,400 46,600 47,200
Michigan 2,700 - - - -
Minnesota 10,900 9,500 9,500 9,500 9,400
Mississippi 250,600 141,900 108,700 99,300 97,400
Missouri 82,600 75,600 71,000 64,900 58,700
New Hampshire 70,800 67,500 62,700 56,600 39,500
Ohio 287,100 296,000 280,100 261,000 225,900
South Carolina 112,600 106,000 109,700 106,500 101,800
Tennessee 21,400 20,800 21,000 21,200 21,300
Texas 969,700 974,900 971,000 961,100 921,500
Vermont 2,800 1,600 - - -
Washington 214,100 207,100 194,400 192,500 193,800
Wisconsin 78,600 82,100 83,200 74,700 67,300
------ ------ ------ ------ ------
Total at-risk
membership 4,437,100 4,248,500 3,762,500 3,597,300 3,346,700
--------- --------- --------- --------- ---------
Non-risk membership 176,600 153,200 298,400 303,500 -
------- ------- ------- ------- ---
TOTAL 4,613,700 4,401,700 4,060,900 3,900,800 3,346,700
========= ========= ========= ========= =========
Medicaid 3,300,600 3,133,900 2,754,900 2,578,300 2,385,500
CHIP & Foster Care 230,500 233,600 222,700 247,700 261,800
ABD, Medicare & Duals 414,300 410,400 392,700 383,400 329,700
LTC 72,800 71,200 60,800 55,200 53,500
Health Insurance
Marketplaces 167,400 161,700 74,500 76,000 75,700
Hybrid Programs - - 18,900 19,900 17,000
Behavorial Health 203,900 195,100 197,000 195,500 182,200
Correctional
Healthcare Services 47,600 42,600 41,000 41,300 41,300
Total at-risk
membership 4,437,100 4,248,500 3,762,500 3,597,300 3,346,700
--------- --------- --------- --------- ---------
Non-risk membership 176,600 153,200 298,400 303,500 -
------- ------- ------- ------- ---
TOTAL 4,613,700 4,401,700 4,060,900 3,900,800 3,346,700
========= ========= ========= ========= =========
REVENUE PER MEMBER PER
MONTH(a) $356 $349 $360 $354 $344
CLAIMS(a)
Period-end inventory 1,501,600 1,217,000 1,086,600 1,021,200 771,900
Average inventory 946,500 841,000 806,000 660,200 603,700
Period-end inventory
per member 0.34 0.29 0.29 0.28 0.23
(a) Revenue per member and claims information are presented for the Managed Care at-risk members.
NUMBER OF EMPLOYEES 15,800 14,800 13,400 12,900 12,300
Q2 Q1 Q4 Q3 Q2
2015 2015 2014 2014 2014
---- ---- ---- ---- ----
DAYS IN CLAIMS PAYABLE (b) 45.5 45.5 44.2 43.1 42.9
(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 $3,667 $3,345 $3,082 $2,829 $2,353
Unregulated 82 97 85 70 50
--- --- --- --- ---
TOTAL $3,749 $3,442 $3,167 $2,899 $2,403
====== ====== ====== ====== ======
DEBT TO CAPITALIZATION 37.1% 38.0% 33.5% 36.4% 35.3%
DEBT TO CAPITALIZATION
EXCLUDING NON-RECOURSE
DEBT(c) 35.7% 36.6% 31.7% 34.6% 33.4%
(c) The non-recourse debt represents the Company's mortgage note payable ($69 million at June 30, 2015).
Debt to Capitalization is calculated as follows: total debt divided by (total debt + total equity).
Operating Ratios:
Three Months Ended June Six Months Ended June
30, 30,
------------------------ ----------------------
2015 2014 2015 2014
---- ---- ---- ----
Health Benefits
Ratios:
Medicaid, CHIP,
Foster Care &
Health Insurance
Marketplaces 85.6% 84.7% 86.5% 85.8%
ABD, LTC & Medicare 93.7 94.9 93.4 94.0
Specialty Services 86.9 80.4 86.0 84.0
Total 89.1 88.9 89.4 89.1
Total General &
Administrative
Expense Ratio 8.5% 8.6% 8.5% 8.7%
MEDICAL CLAIMS LIABILITY (In millions)
The changes in medical claims liability
are summarized as follows:
Balance, June 30, 2014 $1,394
Incurred related to:
Current period 15,216
Prior period (199)
----
Total incurred 15,017
======
Paid related to:
Current period 13,193
Prior period 1,126
-----
Total paid 14,319
======
Balance, June 30, 2015 $2,092
======
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 $65 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 June 30, 2014.
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SOURCE Centene Corporation
