CENTENE CO. ST. LOUIS, July 25, 2017 /PRNewswire/ -- Centene Corporation (NYSE: CNC) announced today its financial results for the second quarter ended June 30, 2017, reporting diluted earnings per share (EPS) of $1.44, and Adjusted Diluted EPS of $1.59. The second quarter of 2017 includes a $0.17 per diluted share net benefit related to the reconciliation of the 2016 risk adjustment under the Affordable Care Act (ACA) in connection with our Health Insurance Marketplace business. In addition, strong 2017 Marketplace performance exceeded our expectations in the second quarter by $0.12 diluted earnings per share.
In summary, the 2017 second quarter results were as follows:
Total revenues (in millions) $11,954
Health benefits ratio 86.3%
SG&A expense ratio 9.3%
GAAP diluted EPS $1.44
Adjusted Diluted EPS (1) $1.59
Total cash flow used in
operations (in millions) $(306)
------------------------- -----
(1) A full reconciliation of
Adjusted Diluted EPS is shown
on page seven of this release.
Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "We are pleased with the strong second quarter performance across our product lines. The Marketplace business continues to be particularly strong, confirming our business as usual approach."
The following discussions, with the exception of cash flow information, are in the context of continuing operations.
Second Quarter Highlights
-- June 30, 2017 managed care membership of 12.2 million, an increase of
788,300 members, or 7% compared to the second quarter of 2016.
-- Total revenues for the second quarter of 2017 of $12.0 billion,
representing 10% growth, compared to the second quarter of 2016.
-- Health benefits ratio (HBR) of 86.3% for the second quarter of 2017,
compared to 86.6% in the second quarter of 2016.
-- Selling, general and administrative (SG&A) expense ratio of 9.3% for the
second quarter of 2017, compared to 9.2% for the second quarter of 2016.
-- Adjusted SG&A expense ratio of 9.3% for the second quarter of 2017,
compared to 9.0% for the second quarter of 2016.
-- Operating cash flow of $(306) million for the second quarter of 2017 and
$942 million for the six months ended June 30, 2017.
-- Diluted EPS for the second quarter of 2017 of $1.44, compared to $0.98
for the second quarter of 2016.
-- Adjusted Diluted EPS for the second quarter of 2017 of $1.59, compared
to $1.29 for the second quarter of 2016.
Other Events
-- In July 2017, we announced our partnership with Schnuck Markets, Inc.
and Betty Jean Kerr People's Health Centers to launch a full-service
health center located within the Schnucks supermarket in Ferguson,
Missouri. Scheduled to open in November 2017, the People's Healthcare
Services Clinic by Home State Health represents our continued investment
in the city of Ferguson. Once the facility is fully operational, it will
be able to provide services to over 8,000 people annually.
-- In July 2017, our Georgia subsidiary, Peach State Health Plan, began
operating under a statewide managed care contract to continue serving
members enrolled in the Georgia Families managed care program, including
PeachCare for Kids and Planning for Healthy Babies. Through the new
contract, Peach State Health Plan is one of four managed care
organizations providing medical, behavioral, dental and vision health
benefits for its members.
-- In July 2017, our Nevada subsidiary, SilverSummit Healthplan, began
serving Medicaid recipients enrolled in Nevada's Medicaid managed care
program.
-- In July 2017, our specialty solutions subsidiary, Envolve, Inc., began
providing health plan management services for Medicaid operations in
Maryland.
-- In June 2017, our Mississippi subsidiary, Magnolia Health, was selected
by the Mississippi Division of Medicaid to continue serving Medicaid
recipients enrolled in the Mississippi Coordinated Access Network
(MississippiCAN). Pending regulatory approval, the new three-year
agreement, which also includes the option of two one-year extensions, is
expected to commence midyear 2018.
-- In June 2017, we announced that we are expanding our offerings in the
2018 Health Insurance Marketplace. We are planning to enter Kansas,
Missouri and Nevada in 2018, and expanding our footprint in six existing
markets: Florida, Georgia, Indiana, Ohio, Texas, and Washington.
-- In June 2017, Centurion began operating under an expanded contract to
provide correctional healthcare services for the Florida Department of
Corrections in South Florida.
-- In May 2017, our Washington subsidiary, Coordinated Care of Washington,
was selected by the Washington State Health Care Authority to provide
managed care services to Apple Health's Fully Integrated Managed Care
(FIMC) beneficiaries in the North Central Region. The contract is
expected to commence January 1, 2018.
-- In May 2017, our Missouri subsidiary, Home State Health, began providing
managed care services to MO HealthNet Managed Care beneficiaries under
an expanded statewide contract.
Accreditations & Awards
-- In July 2017, FORTUNE magazine announced Centene's position of #244 in
its annual ranking of the largest companies globally by revenue. Centene
jumped 226 spots from #470, making us the fastest growing company on the
list.
-- In June 2017, FORTUNE magazine announced Centene's position of #66 in
its annual ranking of America's largest companies by revenue. Centene
jumped 58 spots from #124.
-- In May 2017, at Decision Health's Eighth Annual Case in Point Platinum
Awards, Centene and three of its subsidiaries (Home State Health,
Centurion, and Envolve, Inc.) were honored for four of our innovative
member programs.
-- In April 2017, our subsidiary, Health Net Federal Services, LLC, was
awarded the International Organization for Standardization (ISO)
9001:2015 certification, an internationally recognized standard for
quality management systems.
Membership
The following table sets forth the Company's membership by state for its managed care organizations:
June 30,
2017 2016
---- ----
Arizona 669,500 597,700
Arkansas 91,900 52,800
California 2,925,800 3,097,600
Florida 871,100 726,200
Georgia 540,400 493,300
Illinois 254,600 234,700
Indiana 340,000 291,000
Kansas 130,000 144,800
Louisiana 484,600 375,300
Massachusetts 54,100 47,100
Michigan 2,300 2,200
Minnesota 9,500 9,500
Mississippi 343,600 323,800
Missouri 278,300 102,900
Nebraska 78,800 -
New Hampshire 77,100 79,700
New Mexico 7,100 7,100
Ohio 332,700 319,000
Oregon 213,600 221,500
South Carolina 121,000 113,700
Tennessee 22,200 20,800
Texas 1,226,800 1,037,000
Vermont 1,600 1,600
Washington 248,500 239,700
Wisconsin 70,800 76,100
------ ------
Total at-risk membership 9,395,900 8,615,100
TRICARE eligibles 2,823,200 2,815,700
Total 12,219,100 11,430,800
========== ==========
The following table sets forth our membership by line of business:
June 30,
2017 2016
---- ----
Medicaid:
TANF, CHIP & Foster Care 5,854,400 5,541,200
ABD & LTC 843,500 757,500
Behavioral Health 466,500 455,800
Commercial 1,743,600 1,391,500
Medicare & Duals (1) 327,500 332,600
Correctional 160,400 136,500
------- -------
Total at-risk membership 9,395,900 8,615,100
TRICARE eligibles 2,823,200 2,815,700
Total 12,219,100 11,430,800
========== ==========
(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:
June 30,
2017 2016
---- ----
Dual-eligible 467,500 436,100
Health Insurance Marketplace 1,084,600 617,700
Medicaid Expansion 1,101,900 1,004,200
Statement of Operations: Three Months Ended June 30, 2017
-- For the second quarter of 2017, total revenues increased 10% to $12.0
billion from $10.9 billion in the comparable period in 2016. The
increase over prior year was primarily a result of growth in the Health
Insurance Marketplace business in 2017 and expansions and new programs
in many of our states in 2016 and 2017, partially offset by lower
membership in the commercial business in California as a result of
margin improvement actions taken last year, the moratorium of the Health
Insurer Fee in 2017, and lower specialty pharmacy revenues.
Sequentially, total revenues increased 2% over the first quarter of 2017
mainly due to favorable risk adjustments in our Health Insurance
Marketplace business recorded in the second quarter of 2017, as well as
the commencement of our new contract in Missouri.
-- HBR of 86.3% for the second quarter of 2017 represents a decrease from
86.6% in the comparable period in 2016 and a decrease from 87.6% in the
first quarter of 2017. The year over year decrease is primarily
attributable to growth in the Health Insurance Marketplace business,
which operates at a lower HBR. The sequential HBR decrease is primarily
attributable to favorable risk adjustments in our Health Insurance
Marketplace business recorded in the second quarter of 2017 and normal
seasonality.
-- The SG&A expense ratio was 9.3% for the second quarter of 2017, compared
to 9.2% for the second quarter of 2016 and 9.8% for the first quarter of
2017. The increase in the SG&A expense ratio is primarily attributable
to higher variable compensation expenses based on the performance of the
business in 2017 and increased business expansion costs, partially
offset by higher Health Net acquisition related expenses in 2016.
-- The Adjusted SG&A expense ratio was 9.3% for the second quarter of 2017,
compared to 9.0% for the second quarter of 2016. The increase in the
Adjusted SG&A expense ratio is primarily attributable to higher variable
compensation expenses based on the performance of the business in 2017
and increased business expansion costs. Sequentially, the Adjusted SG&A
expense ratio is consistent with the first quarter of 2017.
Balance Sheet and Cash Flow
At June 30, 2017, the Company had cash, investments and restricted deposits of $10.0 billion, including $291 million held by unregulated entities. Medical claims liabilities totaled $4.2 billion. The Company's days in claims payable was 40. Total debt was $4.7 billion, which includes $150 million of borrowings on the $1 billion revolving credit facility at quarter-end. The debt to capitalization ratio was 42.1% at June 30, 2017, excluding the $63 million non-recourse mortgage note.
Cash flow used in operations for the three months ended June 30, 2017 was $(306) million. Cash flow from operating activities was negatively affected during the quarter due to an increase in premium and related receivables of approximately $750 million as a result of the timing of June capitation payments from several of our states. This was partially offset by an increase in other long-term liabilities driven by the recognition of risk adjustment payable for Health Insurance Marketplace in 2017.
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,
March 31, 2017 41
Timing of claims payments (1)
Days in claims payable, June
30, 2017 40
===
Outlook
The table below depicts the Company's updated annual guidance for 2017. We have adjusted our guidance to reflect the following items:
-- The strong performance for the second quarter;
-- An increase in our business expansion cost range to $0.42 - $0.47 per
diluted share reflecting the shortening of the open enrollment period
for the Health Insurance Marketplace and additional investments in
growth initiatives in Medicare and Marketplace for 2018; and
-- An increase in our margin expectations for the Marketplace business for
2017.
Full Year 2017
Low High
--- ----
Total revenues (in billions) $46.4 $47.2
GAAP diluted EPS $3.96 $4.29
Adjusted Diluted EPS (1) $4.70 $5.06
HBR 87.0% 87.4%
SG&A expense ratio 9.4% 9.8%
Adjusted SG&A expense ratio (2) 9.3% 9.7%
Effective tax rate 39.0% 41.0%
Diluted shares outstanding (in
millions) 176.3 177.3
(1) Adjusted Diluted EPS excludes
amortization of acquired
intangible assets of $0.55 to
$0.57 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, July 25, 2017, at approximately 8:30 AM (Eastern Time) to review the financial results for the second quarter ended June 30, 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: 7772527 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, July 24, 2018, at the aforementioned URL. In addition, a digital audio playback will be available until 9:00 AM (Eastern Time) on Tuesday, August 1, 2017, by dialing 1-877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad, and entering access code 10110042.
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 Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
GAAP net earnings
from continuing
operations $254 $171 $393 $156
Amortization of
acquired
intangible assets 39 43 79 52
Health Net
acquisition
related expenses 1 25 6 214
Penn Treaty
assessment
expense (1) - - 47 -
Income tax effects
of adjustments
(2) (14) (14) (48) (101)
Adjusted net
earnings from
continuing
operations $280 $225 $477 $321
==== ==== ==== ====
(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 Six Months Ended Annual
June 30, June 30, Guidance
December 31,
2017
----
2017 2016 2017 2016
---- ---- ---- ----
GAAP diluted
earnings per
share (EPS) $1.44 $0.98 $2.23 $1.02 $3.96 - $4.29
Amortization of
acquired
intangible assets
(1) 0.14 0.15 0.28 0.20 $0.55 - $0.57
Health Net
acquisition
related expenses
(2) 0.01 0.16 0.03 0.89 $0.02 - $0.03
Penn Treaty
assessment
expense (3) - - 0.17 - $0.17
--- --- ---- --- -----
Adjusted Diluted
EPS from
continuing
operations $1.59 $1.29 $2.71 $2.11 $4.70 - $5.06
===== ===== ===== ===== =============
(1) The amortization of acquired
intangible assets per diluted
share presented above are net
of an income tax benefit of
$0.08 and $0.10 for the three
months ended June 30, 2017 and
2016, respectively, and $0.17
and $0.14 for the six months
ended June 30, 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
(expense) of $0.00 and $(0.02)
for the three months ended June
30, 2017 and 2016,
respectively, and $0.01 and
$0.52 for the six months ended
June 30, 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 six months ended
June 30, 2017 and estimated for
the year ended December 31,
2017.
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
GAAP
SG&A
expenses $1,065 $949 $2,156 $1,671
Health
Net
acquisition
related
expenses 1 25 6 214
Penn
Treaty
assessment
expense - - 47 -
--- --- --- ---
Adjusted
SG&A
expenses $1,064 $924 $2,103 $1,457
====== ==== ====== ======
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 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 shares in thousands and per share data in dollars)
June 30, 2017 December 31, 2016
------------- -----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $4,425 $3,930
Premium and related receivables 3,901 3,098
Short-term investments 586 505
Other current assets 736 832
--- ---
Total current assets 9,648 8,365
Long-term investments 4,816 4,545
Restricted deposits 137 138
Property, software and equipment, net 912 797
Goodwill 4,712 4,712
Intangible assets, net 1,466 1,545
Other long-term assets 149 95
--- ---
Total assets $21,840 $20,197
======= =======
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND
STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims liability $4,170 $3,929
Accounts payable and accrued expenses 4,238 4,377
Unearned revenue 554 313
Current portion of long-term debt 4 4
--- ---
Total current liabilities 8,966 8,623
Long-term debt 4,716 4,651
Other long-term liabilities 1,630 869
----- ---
Total liabilities 15,312 14,143
Commitments and contingencies
Redeemable noncontrolling interests 136 145
Stockholders' equity:
Preferred stock, $0.001 par value;
authorized 10,000 shares; no shares
issued or outstanding at June 30, 2017
and December 31, 2016 - -
Common stock, $0.001 par value;
authorized 400,000 shares; 178,900
issued and 172,467 outstanding at June
30, 2017, and 178,134 issued and 171,919
outstanding at December 31, 2016 - -
Additional paid-in capital 4,258 4,190
Accumulated other comprehensive earnings
(loss) 1 (36)
Retained earnings 2,313 1,920
Treasury stock, at cost (6,433 and 6,215
shares, respectively) (194) (179)
---- ----
Total Centene stockholders' equity 6,378 5,895
Noncontrolling interest 14 14
--- ---
Total stockholders' equity 6,392 5,909
----- -----
Total liabilities, redeemable
noncontrolling interests and
stockholders' equity $21,840 $20,197
======= =======
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data in dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
Revenues:
Premium $10,905 $9,688 $21,543 $15,674
Service 536 588 1,063 1,013
--- --- ----- -----
Premium and service revenues 11,441 10,276 22,606 16,687
Premium tax and health insurer
fee 513 621 1,072 1,163
--- --- ----- -----
Total revenues 11,954 10,897 23,678 17,850
------ ------ ------ ------
Expenses:
Medical costs 9,413 8,385 18,735 13,696
Cost of services 456 515 897 882
Selling, general and
administrative expenses 1,065 949 2,156 1,671
Amortization of acquired
intangible assets 39 43 79 52
Premium tax expense 543 498 1,133 948
Health insurer fee expense - 130 - 204
--- --- --- ---
Total operating expenses 11,516 10,520 23,000 17,453
------ ------ ------ ------
Earnings from operations 438 377 678 397
Other income (expense):
Investment and other income 45 32 86 47
Interest expense (62) (52) (124) (85)
--- --- ---- ---
Earnings from continuing
operations, before income tax
expense 421 357 640 359
Income tax expense 169 187 256 203
--- --- --- ---
Earnings from continuing
operations, net of income tax
expense 252 170 384 156
Discontinued operations, net
of income tax (benefit) - (1) - (2)
--- --- --- ---
Net earnings 252 169 384 154
Loss attributable to
noncontrolling interests 2 1 9 -
--- --- --- ---
Net earnings attributable to
Centene Corporation $254 $170 $393 $154
==== ==== ==== ====
Amounts attributable to Centene Corporation common shareholders:
Earnings from continuing
operations, net of income tax
expense $254 $171 $393 $156
Discontinued operations, net
of income tax (benefit) - (1) - (2)
Net earnings $254 $170 $393 $154
==== ==== ==== ====
Net earnings (loss) per common share attributable to Centene Corporation:
Basic:
Continuing operations $1.47 $1.00 $2.28 $1.05
Discontinued operations - - - (0.01)
Basic earnings per common
share $1.47 $1.00 $2.28 $1.04
===== ===== ===== =====
Diluted:
Continuing operations $1.44 $0.98 $2.23 $1.02
Discontinued operations - (0.01) - (0.01)
Diluted earnings per common
share $1.44 $0.97 $2.23 $1.01
===== ===== ===== =====
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended June 30,
2017 2016
---- ----
Cash flows from operating activities:
Net earnings $384 $154
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities
Depreciation and amortization 173 111
Stock compensation expense 62 83
Deferred income taxes (58) (13)
Changes in assets and liabilities
Premium and related receivables (696) (1,121)
Other assets 65 (36)
Medical claims liabilities 243 188
Unearned revenue 241 (50)
Accounts payable and accrued
expenses (257) (8)
Other long-term liabilities 781 463
Other operating activities, net 4 6
--- ---
Net cash provided by (used in)
operating activities 942 (223)
--- ----
Cash flows from investing activities:
Capital expenditures (181) (94)
Purchases of investments (1,294) (956)
Sales and maturities of
investments 990 593
Investments in acquisitions, net
of cash acquired - (862)
Other investing activities, net (1) -
--- ---
Net cash used in investing
activities (486) (1,319)
---- ------
Cash flows from financing activities:
Proceeds from long-term debt 810 5,711
Payments of long-term debt (762) (3,124)
Common stock repurchases (15) (27)
Debt issuance costs - (59)
Other financing activities, net 6 (9)
Net cash provided by financing
activities 39 2,492
--- -----
Net increase in cash and cash
equivalents 495 950
--- ---
Cash and cash equivalents,
beginning of period 3,930 1,760
----- -----
Cash and cash equivalents, end
of period $4,425 $2,710
====== ======
Supplemental disclosures of cash flow
information:
Interest paid $99 $36
Income taxes paid $205 $222
Equity issued in connection with
acquisitions $ - $3,105
CENTENE CORPORATION
SUPPLEMENTAL FINANCIAL DATA FROM CONTINUING OPERATIONS
Q2 Q1 Q4 Q3 Q2
2017 2017 2016 2016 2016
---- ---- ---- ---- ----
MANAGED CARE MEMBERSHIP BY STATE
Arizona 669,500 684,300 598,300 601,500 597,700
Arkansas 91,900 98,100 58,600 57,700 52,800
California 2,925,800 2,980,100 2,973,500 3,004,500 3,097,600
Florida 871,100 872,000 716,100 732,700 726,200
Georgia 540,400 568,300 488,000 498,000 493,300
Illinois 254,600 253,800 237,700 236,700 234,700
Indiana 340,000 335,800 285,800 289,600 291,000
Kansas 130,000 133,100 139,700 145,100 144,800
Louisiana 484,600 484,100 472,800 455,600 375,300
Massachusetts 54,100 44,200 48,300 45,300 47,100
Michigan 2,300 2,100 2,000 2,100 2,200
Minnesota 9,500 9,500 9,400 9,400 9,500
Mississippi 343,600 349,500 310,200 313,900 323,800
Missouri 278,300 106,100 105,700 104,700 102,900
Nebraska 78,800 79,200 - - -
New Hampshire 77,100 77,800 77,400 78,400 79,700
New Mexico 7,100 7,100 7,100 7,100 7,100
Ohio 332,700 328,900 316,000 319,500 319,000
Oregon 213,600 211,900 217,800 218,400 221,500
South Carolina 121,000 121,900 122,500 119,700 113,700
Tennessee 22,200 21,900 21,700 21,600 20,800
Texas 1,226,800 1,243,900 1,072,400 1,041,600 1,037,000
Vermont 1,600 1,600 1,600 1,700 1,600
Washington 248,500 254,400 238,400 240,500 239,700
Wisconsin 70,800 71,700 73,800 75,100 76,100
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Total at-risk membership 9,395,900 9,341,300 8,594,800 8,620,400 8,615,100
TRICARE eligibles 2,823,200 2,804,100 2,847,000 2,815,700 2,815,700
Total 12,219,100 12,145,400 11,441,800 11,436,100 11,430,800
========== ========== ========== ========== ==========
Medicaid:
TANF, CHIP & Foster Care 5,854,400 5,714,100 5,630,000 5,583,900 5,541,200
ABD & LTC 843,500 825,600 785,400 754,900 757,500
Behavioral Health 466,500 466,900 466,600 465,300 455,800
Commercial 1,743,600 1,864,700 1,239,100 1,333,000 1,391,500
Medicare & Duals (1) 327,500 328,100 334,300 333,500 332,600
Correctional 160,400 141,900 139,400 149,800 136,500
------- ------- ------- ------- -------
Total at-risk membership 9,395,900 9,341,300 8,594,800 8,620,400 8,615,100
TRICARE eligibles 2,823,200 2,804,100 2,847,000 2,815,700 2,815,700
Total 12,219,100 12,145,400 11,441,800 11,436,100 11,430,800
========== ========== ========== ========== ==========
(1) Membership includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and Medicare-Medicaid Plans.
NUMBER OF EMPLOYEES 31,500 30,900 30,500 29,400 28,900
Q2 Q1 Q4 Q3 Q2
2017 2017 2016 2016 2016
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DAYS IN CLAIMS PAYABLE (a) 40 41 42 41 43
(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 $9,673 $10,034 $8,854 $7,825 $7,324
Unregulated 291 306 264 268 196
--- --- --- --- ---
Total $9,964 $10,340 $9,118 $8,093 $7,520
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DEBT TO CAPITALIZATION 42.5% 43.3% 44.1% 44.5% 44.8%
DEBT TO CAPITALIZATION
EXCLUDING NON-RECOURSE DEBT
(b) 42.1% 43.0% 43.7% 44.1% 44.4%
(b) The non-recourse debt represents the Company's mortgage note payable ($63 million at June 30, 2017).
Debt to capitalization is calculated as follows: total debt divided by (total debt + total equity).
OPERATING RATIOS
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
HBR 86.3% 86.6% 87.0% 87.4%
SG&A
expense
ratio 9.3% 9.2% 9.5% 10.0%
Adjusted
SG&A
expense
ratio 9.3% 9.0% 9.3% 8.7%
MEDICAL CLAIMS LIABILITY
The changes in medical claims liability are summarized as follows (in millions):
Balance, June 30, 2016 $3,950
Incurred related to:
Current period 36,106
Prior period (431)
----
Total incurred 35,675
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Paid related to:
Current period 32,109
Prior period 3,356
Total paid 35,465
------
Balance, June 30, 2017, net 4,160
Plus: Reinsurance recoverable 10
---
Balance, June 30, 2017 $4,170
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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 $9 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 June 30, 2016, and prior.
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SOURCE Centene Corporation
