Centene Corporation Reports 2006 Fourth Quarter Results

February 6, 2007 at 6:01 AM EST

ST. LOUIS--(BUSINESS WIRE)--Feb. 6, 2007--Centene Corporation (NYSE: CNC) today announced its financial results for the quarter and year ended December 31, 2006.

                          Highlights
--------------------------------------------------------------
                                           Q4       Full Year
                                      ------------------------
Total Revenues (in millions)                $697.4   $2,279.0
Medicaid/SCHIP HBR                            82.1%      82.6%
EPS                                          $0.31     $(1.01)
EPS excluding Impairment/Exit Costs          $0.41      $1.03
--------------------------------------------------------------
    Fourth Quarter Summary

    --  Year-end Medicaid Managed Care membership of 1.3 million,
        including 138,900 Kansas and Missouri members.

    --  Membership growth of 44.8% over the 2005 fourth quarter.

    --  Revenues of $697.4 million, a 64.8% increase over the 2005
        fourth quarter.

    --  Earnings per diluted share of $0.41, excluding $7.4 million
        (pre-tax) FirstGuard exit costs, compared to $0.31 in the 2005
        fourth quarter.

    --  Health Benefits Ratio (HBR) for Centene's Medicaid and SCHIP
        populations, which reflects medical costs as a percent of
        premium revenues, of 82.1%.

    --  Medicaid Managed Care G&A expense ratio of 12.7% and Specialty
        Services G&A ratio of 14.4%.

    --  Operating cash flows of $70.5 million.

    --  Days in claims payable of 46.4.

    Other Events

    --  Commenced operations in the 16 new counties awarded in the
        Northwest market of Ohio.

    --  Commenced Arizona Long-Term Care contract effective October 1,
        2006.

    --  Awarded an Ohio Medicaid ABD contract in all four regions in
        which we submitted a bid.

    --  Received notice of tentative contract award of the Texas
        Comprehensive Health Care for Foster Care, subject to contract
        finalization.

    --  Announced definitive agreement to divest the assets of
        FirstGuard Health Plan, Inc., our Missouri health plan. The
        sale was completed effective February 1, 2007.

    --  Exited Kansas Medicaid market.

Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "Our fourth quarter results were consistent with our expectations, with strong growth in Georgia, Texas, and Ohio. Our overall Medicaid and SCHIP HBR was 82.1%, as guided. We saw a decline in our Indiana membership as we initiated re-contracting with our physician network and due to the state's decision to implement a one-month freeze on assigning members into new plans. Our Indiana plan continues to require focused attention on pharmacy costs; we believe that we have begun to favorably impact the medical cost trend in that state. In addition, the company-wide medical management initiatives that we put in place earlier this year are giving us added visibility of trends and we continue to evaluate further steps to more effectively control and manage these costs.

"We are pleased with the performance of our Georgia business which has exceeded our expectations, reaching 308,800 members at year-end. While we faced some specific challenges regarding provider claims due to a substantial number of doctors signing contracts at the last minute, we are paying current claims in a timely fashion and expect to have the backlog for the older claims cleared up by the end of February.

"We were disappointed with the loss of our contract to serve the state of Kansas' Medicaid recipients. We have managed a smooth transition of our membership and have recognized all of the significant financial charges in 2006. Additionally, we sold our Missouri health plan assets to Healthcare USA when the state continued its unfavorable posture towards Medicaid; this transaction closed on February 1, 2007. We expect to incur minimal additional exit costs in 2007.

"In Ohio, the state commenced its Aged, Blind or Disabled (ABD) roll-out in the Northeast and Southwest regions on January 1, and February 1, respectively; we expect the East Central and Northwest regions to begin enrolling members in March and April. Our contract to serve Texas Star Plus members commenced on February 1, a slight delay from the original January 1 start date. We look forward to serving the health needs of these recipients.

"We've closed the fourth quarter and year with the knowledge and confidence that we have taken considerable steps to address and resolve our medical management issues and look forward to pursuing the growth opportunities that exist in our core business and specialty companies with the goal of covering more of the nation's 50 million uninsured Americans," concluded Neidorff.

The following table depicts membership in Centene's managed care organizations by state at December 31, 2006 and 2005:

                                                     2006      2005
                                                   ---------- --------
Georgia                                              308,800       --
Indiana                                              183,100  193,300
New Jersey                                            58,900   56,500
Ohio                                                 109,200   58,700
Texas                                                298,500  242,000
Wisconsin                                            164,800  172,100
                                                   ---------- --------
   Subtotal                                        1,123,300  722,600
Kansas                                               107,000  113,300
Missouri                                              31,900   36,000
                                                   ---------- --------
   Total                                           1,262,200  871,900
                                                   ========== ========

The following table depicts membership in Centene's managed care organizations by member category at December 31, 2006 and 2005:

                                                 2006         2005
                                             ------------- -----------
Medicaid                                       887,300     573,100
SCHIP                                          216,200     134,600
SSI                                             19,800 (a)  14,900 (b)
                                             ------------- -----------
   Subtotal                                  1,123,300     722,600
Kansas and Missouri Medicaid/SCHIP members     138,900     149,300
                                             ------------- -----------
   Total                                     1,262,200     871,900
                                             ============= ===========
    (a) 10,200 at-risk; 9,600 ASO

    (b) 8,100 at-risk; 6,800 ASO

    Statement of Operations

    --  For the 2006 fourth quarter, revenues increased 64.8% to
        $697.4 million from $423.2 million in the 2005 fourth quarter.
        Our fourth quarter 2006 revenue in Kansas and Missouri totaled
        $79.6 million.

    --  The HBR for Centene's Medicaid and SCHIP populations, which
        reflects medical costs as a percent of premium revenues, was
        82.1% for the three months ended December 31, 2006, a decrease
        of 0.2% over the comparable 2005 period. The HBR for the three
        months ended December 31, 2006 did not include any overall
        adverse medical cost development related to prior periods.

    --  General and administrative (G&A) expense as a percent of
        revenues for the Medicaid Managed Care segment was 12.7% in
        the fourth quarter of 2006 compared to 10.3% in the fourth
        quarter of 2005, increasing primarily because of premium taxes
        enacted in certain markets and FirstGuard exit costs. Fourth
        quarter 2006 premium taxes were $17.4 million. The Medicaid
        Managed Care G&A ratio would have been 10.4% excluding those
        premium taxes, and 9.3% excluding the premium taxes and $7.4
        million of FirstGuard exit costs.

    --  Operating earnings of $18.7 million, including $7.4 million of
        FirstGuard exit costs, compared to $20.4 million in the 2005
        fourth quarter.

    --  Earnings per diluted share of $0.31. Earnings per diluted
        share of $0.41, excluding the FirstGuard exit costs, compared
        to $0.31 in the 2005 fourth quarter.

    --  For the year ended December 31, 2006, revenues increased 51.3%
        to $2.3 billion from $1.5 billion in 2005. Our 2006 revenues
        in Kansas and Missouri totaled $317.0 million. Medicaid
        Managed Care G&A expenses including premium tax and FirstGuard
        exit costs as a percent of revenues increased to 12.6% in 2006
        compared to 10.5% in 2005. Net loss in 2006 of $43.6 million,
        or $1.01 per diluted share, including a non-cash intangible
        asset impairment charge related to the loss of the Kansas
        contract of $87.1 million pre-tax and the FirstGuard exit
        costs of $7.4 million pre-tax. Net earnings, excluding the
        impairment charge and exit costs, were $45.9 million or $1.03
        per diluted share in 2006.

    Balance Sheet and Cash Flow

At December 31, 2006, the Company had cash and investments of $508.7 million, including $479.8 million held by its regulated entities and $28.9 million held by its unregulated entities. Medical claims liabilities totaled $280.4 million, representing 46.4 days in claims payable.

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, September 30, 2006                       45.3
Increase in claims inventory                                      1.1
                                                                 -----
Days in claims payable, December 31, 2006                        46.4
                                                                 =====

Outlook

The table below depicts the Company's guidance for the 2007 first quarter and full year:

                                            Q1 2007         2007
                                         ------------- ---------------
                                          Low    High    Low    High
Revenue (in millions)                     $635   $645  $2,700  $2,800
Earnings per diluted share               $0.24  $0.27   $1.51   $1.61
----------------------------------------------------------------------

J. Per Brodin, Centene's Chief Financial Officer, stated, "The 2007 guidance reflects our previously announced intention to begin reporting our revenue net of premium taxes. This guidance also excludes any gain or loss from the sale of our Missouri health plan or tax benefits from the stock of our Kansas health plan and the effect of the tentative Texas Foster Care award. Our expected sequential change in EPS is summarized as follows:

                                                          Low    High
                                                         ------ ------
Q4 2006 adjusted non-GAAP EPS                            $0.41  $0.41
Q4 2006 FirstGuard net earnings                          (0.14) (0.14)
Reallocated corporate overhead                           (0.05) (0.05)
Profit improvement and growth                             0.02   0.05
                                                         ------ ------
Q1 2007 earnings per diluted share                       $0.24  $0.27
---------------------------------------------------------======-======

"The reallocated corporate overhead costs represent the centralized infrastructure for managing claims payment, IT, finance and other costs needed to support our FirstGuard operations. Our growth plans require us to maintain the existing infrastructure and will allow us to operate at an appropriate G&A ratio in 2007."

Conference Call

As previously announced, the Company will host a conference call Tuesday, February 6, 2007, at 8:30 A.M. (Eastern Time) to review the financial results for the fourth quarter and year ended December 31, 2006, and to discuss its business outlook. Michael F. Neidorff and J. Per Brodin will host the conference call. Investors are invited to participate in the conference call by dialing 800-273-1254 in the U.S. and Canada, 706-679-8592 from abroad, or via a live Internet broadcast on the Company's website at www.centene.com, under the Investor Relations section. A replay will be available for on-demand listening shortly after the completion of the call until 11:59 P.M. (Eastern Time) on February 20, 2007 at the aforementioned URL, or by dialing 800-642-1687 in the U.S. and Canada, or 706-645-9291 from abroad, and entering access code 6573810.

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 individuals to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently.

The non-GAAP information presented above in the "highlights" table, fourth bullet under "Fourth Quarter Summary" and fifth and sixth bullets under "Statement of Operations" excludes the non-cash intangible asset impairment charge related to the Kansas contract non-renewal notification and exit costs for the Kansas and Missouri health plans. This exclusion has been made in the non-GAAP financial measures as management believes that these costs are an unusual event.

The Company uses the presented non-GAAP financial measures internally to focus management on period-to-period changes in the Company's core business. 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.

The following unaudited tables reconcile the Company's Statement of Operations for the fourth quarter and full year of 2006 on a GAAP basis to a non-GAAP basis. The non-GAAP basis excludes the FirstGuard impairment and exit costs.

                                             Three Months Ended
                                              December 31, 2006
                                       -------------------------------
                                                 FirstGuard
                                                  Impairment
                                                  and Exit
                                         GAAP       Costs    Non-GAAP
                                       --------- ----------- ---------

Total revenues                         $697,400     $     -  $697,400
Expenses:
  Medical costs                         556,560           -   556,560
  Cost of services                       15,457           -    15,457
  General and administrative expenses   106,637      (7,349 )  99,288
                                       --------- ----------- ---------
   Total operating expenses             678,654      (7,349 ) 671,305
                                       --------- ----------- ---------
      Earnings from operations           18,746       7,349    26,095
  Investment and other income, net        2,736          30     2,766
                                       --------- ----------- ---------
      Earnings before income taxes       21,482       7,379    28,861
Income Tax Expense                        7,649       2,870    10,519
                                       --------- ----------- ---------
    Net earnings                       $ 13,833     $ 4,509  $ 18,342
                                       ========= =========== =========

Diluted earnings (loss) per common
 share                                 $   0.31              $   0.41
                                               Year Ended
                                            December 31, 2006
                                   -----------------------------------
                                               FirstGuard
                                                Impairment
                                                and Exit
                                      GAAP        Costs     Non-GAAP
                                   ----------- ----------- -----------

Total revenues                     $2,279,020    $      -  $2,279,020
Expenses:
 Medical costs                      1,819,811           -   1,819,811
 Cost of services                      60,735           -      60,735
 General and administrative
  expenses                            346,284     (13,342 )   332,942
 Impairment loss                       81,098     (81,098 )         -
                                   ----------- ----------- -----------
   Total operating expenses         2,307,928     (94,440 ) 2,213,488
                                   ----------- ----------- -----------
       Earnings (loss) from
        operations                    (28,908 )    94,440      65,532
 Investment and other income, net       7,256          30       7,286
                                   ----------- ----------- -----------
      Earnings (loss) before
       income taxes                   (21,652 )    94,470      72,818
Income Tax Expense                     21,977       4,968      26,945
                                   ----------- ----------- -----------
    Net earnings                   $  (43,629 )  $ 89,502  $   45,873
                                   =========== =========== ===========

Diluted earnings (loss) per common
 share                             $    (1.01 )            $     1.03

About Centene Corporation

Centene Corporation is a leading multi-line healthcare enterprise that provides programs and related services to individuals receiving benefits under Medicaid, including the State Children's Health Insurance Program (SCHIP) and Supplemental Security Income (SSI). The Company operates health plans in Georgia, Indiana, New Jersey, Ohio, Texas and Wisconsin. In addition, the Company contracts with other healthcare and commercial organizations to provide specialty services including behavioral health, disease management, long-term care, managed vision, nurse triage, pharmacy benefits management and treatment compliance. Information regarding Centene is available via the Internet at www.centene.com.

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, competition, changes in healthcare practices, changes in federal or state laws or regulations, inflation, provider contract changes, new technologies, 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 Centene's Medicaid Managed Care contracts by state governments would also negatively affect Centene.

                            (Tables Follow)
                 CENTENE CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS
                  (In thousands, except share data)

                                                      December 31,
                                                   -------------------
                                                     2006      2005
                                                   --------- ---------
                      ASSETS
Current assets:
    Cash and cash equivalents                      $271,047  $147,358
    Premium and related receivables, net of
     allowances of $155 and $343, respectively       91,664    44,108
    Short-term investments, at fair value
     (amortized cost $67,199 and $56,863,
     respectively)                                   66,921    56,700
    Other current assets                             22,189    24,439
                                                    --------  --------
         Total current assets                       451,821   272,605
Long-term investments, at fair value (amortized
 cost $146,980 and $126,039, respectively)          145,417   123,661
Restricted deposits, at fair value (amortized cost
 $25,422 and $22,821, respectively)                  25,265    22,555
Property, software and equipment, net               110,688    67,199
Goodwill                                            135,877   157,278
Other intangible assets, net                         16,202    17,368
Other assets                                          9,710     7,364
                                                    --------  --------
         Total assets                              $894,980  $668,030
                                                    ========  ========
       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Medical claims liabilities                     $280,441  $170,514
    Accounts payable and accrued expenses            72,723    29,790
    Unearned revenue                                 33,816    13,648
    Current portion of long-term debt and notes
     payable                                            971       699
                                                    --------  --------
         Total current liabilities                  387,951   214,651
Long-term debt                                      174,646    92,448
Other liabilities                                     5,960     8,883
                                                    --------  --------
         Total liabilities                          568,557   315,982
Stockholders' equity:
    Common stock, $.001 par value; authorized
     100,000,000 shares; issued and outstanding
     43,369,918 and 42,988,230 shares,
     respectively                                        44        43
    Additional paid-in capital                      209,340   191,840
    Accumulated other comprehensive income:
      Unrealized loss on investments, net of tax     (1,251)   (1,754)
    Retained earnings                               118,290   161,919
                                                    --------  --------
         Total stockholders' equity                 326,423   352,048
                                                    --------  --------
         Total liabilities and stockholders'
          equity                                   $894,980  $668,030
                                                    ========  ========

           See notes to consolidated financial statements.
                 CENTENE CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF OPERATIONS
                  (In thousands, except share data)

                      Three Months Ended            Year Ended
                         December 31,              December 31,
                   ------------------------- -------------------------
                      2006         2005         2006         2005
                   ------------ ------------ ------------ ------------
                          (Unaudited)
Revenues:
  Premium          $   677,137  $   416,872  $ 2,199,439  $ 1,491,899
  Service               20,263        6,346       79,581       13,965
                   ------------ ------------ ------------ ------------
    Total revenues     697,400      423,218    2,279,020    1,505,864
                   ------------ ------------ ------------ ------------
Expenses:
  Medical costs        556,560      345,888    1,819,811    1,226,909
  Cost of services      15,457        2,278       60,735        5,851
  General and
   administrative
   expenses            106,637       54,639      346,284      193,913
  Impairment loss           --           --       81,098           --
                   ------------ ------------ ------------ ------------
    Total
     operating
     expenses          678,654      402,805    2,307,928    1,426,673
                   ------------ ------------ ------------ ------------
    Earnings
     (loss) from
     operations         18,746       20,413      (28,908)      79,191
Other income
 (expense):
  Investment and
   other income          5,836        3,194       17,892       10,655
  Interest expense      (3,100)      (1,604)     (10,636)      (3,990)
                   ------------ ------------ ------------ ------------
     Earnings
      (loss)
      before
      income taxes      21,482       22,003      (21,652)      85,856
Income tax expense       7,649        8,137       21,977       30,224
                   ------------ ------------ ------------ ------------
     Net earnings
      (loss)       $    13,833  $    13,866  $   (43,629) $    55,632
                   ============ ============ ============ ============

Net earnings
 (loss) per share:
  Basic earnings
   (loss) per
   common share    $      0.32  $      0.32  $     (1.01) $      1.31
  Diluted earnings
   (loss) per
   common share    $      0.31  $      0.31  $     (1.01) $      1.24

Weighted average
 number of shares
 outstanding:
  Basic             43,263,237   42,885,900   43,160,860   42,312,522
  Diluted           44,631,117   44,812,159   43,160,860   45,027,633

           See notes to consolidated financial statements.
                 CENTENE CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (In thousands)

                                               Year Ended December 31,
                                               -----------------------
                                                  2006        2005
                                               ----------- -----------

Cash flows from operating activities:
    Net earnings (loss)                         $ (43,629)  $  55,632
    Adjustments to reconcile net earnings
     (loss) to net cash provided by operating
     activities--
         Depreciation and amortization             20,600      13,069
         Excess tax benefits from stock
          compensation                                 --       6,469
         Stock compensation expense                14,904       4,974
         Impairment loss                           88,268          --
         Deferred income taxes                     (6,692)      1,786
    Changes in assets and liabilities--
         Premium and related receivables          (39,765)    (10,305)
         Other current assets                       5,352      (6,177)
         Other assets                                  91        (525)
         Medical claims liabilities               108,003       4,534
         Unearned revenue                          20,035       8,182
         Accounts payable and accrued expenses     28,136      (4,215)
         Other operating activities                  (271)        624
                                               ----------- -----------
              Net cash provided by operating
               activities                         195,032      74,048
                                               ----------- -----------
Cash flows from investing activities:
    Purchase of property, software and
     equipment                                    (50,318)    (26,909)
    Purchase of investments                      (319,322)   (150,444)
    Sales and maturities of investments           286,155     176,387
    Acquisitions, net of cash acquired            (66,772)    (55,485)
                                               ----------- -----------
              Net cash used in investing
               activities                        (150,257)    (56,451)
                                               ----------- -----------
Cash flows from financing activities:
    Proceeds from exercise of stock options         6,953       5,621
    Proceeds from borrowings                       94,359      45,000
    Payment of long-term debt and notes
     payable                                      (17,355)     (4,552)
    Excess tax benefits from stock
     compensation                                   3,043          --
    Common stock repurchases                       (7,833)         --
    Other financing activities                       (253)       (413)
                                               ----------- -----------
              Net cash provided by financing
               activities                          78,914      45,656
                                               ----------- -----------
              Net increase in cash and cash
               equivalents                        123,689      63,253
                                               ----------- -----------
Cash and cash equivalents, beginning of period    147,358      84,105
                                               ----------- -----------
Cash and cash equivalents, end of period        $ 271,047   $ 147,358
                                               =========== ===========

    Interest paid                               $  10,680   $   3,291
    Income taxes paid                           $  16,418   $  31,287

Supplemental schedule of non-cash investing
 and financing activities:
    Common stock issued for acquisitions        $      --   $   8,991
    Property acquired under capital leases      $     366   $   5,026

           See notes to consolidated financial statements.
                         CENTENE CORPORATION

                     SUPPLEMENTAL FINANCIAL DATA

                                 Q4         Q3         Q2        Q1
                               2006       2006       2006      2006
                             ---------- ---------- ---------- --------
MEMBERSHIP
Medicaid Managed Care:
   Georgia                     308,800    252,600    216,000       --
   Indiana                     183,100    198,100    193,000  193,000
   New Jersey                   58,900     59,100     59,000   57,500
   Ohio                        109,200     88,300     73,100   59,000
   Texas                       298,500    259,900    235,800  237,500
   Wisconsin                   164,800    167,100    174,600  175,100
                             ---------- ---------- ---------- --------
     Subtotal                1,123,300  1,025,100    951,500  722,100
   Kansas                      107,000    112,400    117,100  118,200
   Missouri                     31,900     32,200     32,900   34,500
                             ---------- ---------- ---------- --------
        TOTAL                1,262,200  1,169,700  1,101,500  874,800
                             ========== ========== ========== ========

   Medicaid                    887,300    818,000    755,400  574,300
   SCHIP                       216,200    189,100    179,700  132,000
   SSI                          19,800     18,000     16,400   15,800
                             ---------- ---------- ---------- --------
     Subtotal                1,123,300  1,025,100    951,500  722,100
   Kansas and Missouri
    Medicaid and SCHIP
    members                    138,900    144,600    150,000  152,700
                             ---------- ---------- ---------- --------
        TOTAL                1,262,200  1,169,700  1,101,500  874,800
                             ========== ========== ========== ========

Specialty Services(a):
   Arizona                      94,500     94,500     93,600   92,300
   Kansas                       36,600     37,500     39,400   39,200
                             ---------- ---------- ---------- --------
        TOTAL                  131,100    132,000    133,000  131,500
                             ========== ========== ========== ========

(a) Includes behavioral health contracts only.

REVENUE PER MEMBER(b)          $173.75    $169.98   $ 159.33  $157.17

CLAIMS(b)
   Period-end inventory        296,100    233,500    186,200  229,800
   Average inventory           195,700    188,600    150,100  175,200
   Period-end inventory per
    member                        0.23       0.20       0.17     0.26

(b) Revenue per member and claims information are presented for the
 Medicaid Managed Care segment.

DAYS IN CLAIMS PAYABLE (c)        46.4       45.3       42.6     43.0

(c) 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 AND INVESTMENTS
(in millions)
   Regulated                   $ 479.8    $ 411.1   $  323.9  $ 314.0
   Unregulated                    28.9       29.0       25.5     25.8
                             ---------- ---------- ---------- --------
        TOTAL                  $ 508.7    $ 440.1   $  349.4  $ 339.8
                             ========== ========== ========== ========

ANNUALIZED RETURN ON EQUITY
 (d)                              17.5%    (83.8)%       5.4%     9.8%

(d) Annualized Return on Equity is calculated as follows: (net income
 for quarter x 4) divided by ((beginning of period equity + end of
 period equity) divided by 2).
HEALTH BENEFITS RATIO BY CATEGORY:

                               Three Months Ended      Year Ended
                                  December 31,         December 31,
                              ----------------------------------------
                                2006      2005       2006      2005
                              ----------------------------------------
   Medicaid and SCHIP             82.1%      82.3%      82.6%  81.8%
   SSI                            91.4      105.4       87.6   97.5
   Specialty Services             80.2       81.3       82.5   85.0
GENERAL AND ADMINISTRATIVE EXPENSE RATIO BY BUSINESS SEGMENT:

                                  Three Months Ended    Year Ended
                                      December 31,      December 31,
                                  ------------------------------------
                                    2006      2005     2006     2005
                                  ------------------------------------
   Medicaid Managed Care              12.7%     10.3%    12.6%   10.5%
   Specialty Services                 14.4      30.3     16.9    35.4
MEDICAL CLAIMS LIABILITIES
                             (In thousands)

Four rolling quarters of the changes in medical claims
 liabilities are summarized as follows:

   Balance, December 31, 2005                              $  170,514
   Acquisitions                                                 1,788
   Incurred related to:
     Current period                                         1,832,096
     Prior period                                             (12,285)
                                                      ----------------
        Total incurred                                      1,819,811
                                                      ================
   Paid related to:
     Current period                                         1,555,074
     Prior period                                             156,598
                                                      ----------------
        Total paid                                          1,711,672
                                                      ----------------
   Balance, December 31, 2006                              $  280,441
                                                      ================

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" claims 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.

CONTACT: Centene Corporation
Senior Vice President and Chief Financial Officer:
J. Per Brodin, 314-725-4477
or
Senior Vice President, Investor Relations:
Lisa M. Wilson, 212-759-3929

SOURCE: Centene Corporation