Centene Corporation Reports 2010 Second Quarter Earnings

July 27, 2010 at 6:03 AM EDT

ST. LOUIS, July 27, 2010 /PRNewswire via COMTEX/ --

Centene Corporation (NYSE: CNC) today announced net earnings from continuing operations for the quarter ended June 30, 2010, of $23.0 million, or $0.45 per diluted share. The discussions below, with the exception of cash flow information, are in the context of continuing operations and all financial ratios exclude premium taxes.

Second Quarter Highlights

  • Quarter-end managed care at-risk membership of 1,531,800, an increase of 242,800 members, or 18.8% year over year.
  • Premium and Service Revenues of $1.051 billion, representing 12.8% year over year growth.
  • Health Benefits Ratio (HBR) of 83.8%, compared to 83.1% in the prior year.
  • General and Administrative (G&A) expense ratio of 12.7%, compared to 13.9% in the prior year.
  • Earnings from operations of $41.7 million, compared to $31.4 million in the prior year.
  • Earnings from continuing operations, net of income tax expense, increased 11.0% year over year to $23.0 million. Within the quarter, we incurred a $0.03 charge per diluted share to write off a deferred tax asset associated with our Georgia health plan and benefited by $0.03 per diluted share from a shift in start up costs for Mississippi from the second to the third quarter.
  • Diluted earnings per share from continuing operations of $0.45.
  • Days in claims payable of 48.2, including pharmacy claims payable.
  • Estimated 2010 composite premium rate increase between 1% and 3%.

Other Events

  • In May 2010, our Texas health plan was awarded a new ABD contract in the Dallas service area subject to execution of a final contract. The new contract is expected to commence during the first quarter of 2011.
  • In June 2010, we completed the acquisition of certain assets of Carolina Crescent Health Plan. We now serve 92,600 at-risk members in South Carolina as of June 30, 2010.
  • In June 2010, our Indiana health plan was selected to negotiate a statewide managed care contract effective January 1, 2011. Upon successful execution of the contract, we will continue to serve Hoosier Healthwise members and begin serving Healthy Indiana Plan members.
  • In July 2010, we closed on the acquisition of certain assets of NovaSys Health, LLC, a leading third party administrator in Arkansas that will complement our existing Celtic business.

Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "Our team continues to focus on fundamentals and driving Centene to be a low-cost producer. These are key factors in producing another solid quarterly report and for the long-term success of our enterprise."

The following table depicts membership in Centene's managed care organizations, by state, at June 30, 2010 and 2009:


                                        June 30,
                                        --------
                                     2010             2009
                                     ----             ----
    Arizona                        19,300           16,200
    Florida                       113,100           22,300
    Georgia                       295,600          292,800
    Indiana                       212,700          196,100
    Massachusetts                  30,100                -
    Ohio                          159,300          141,200
    South Carolina                 92,600           46,000
    Texas                         475,500          443,200
    Wisconsin                     133,600          131,200
                                  -------          -------
        Total at-risk
         membership             1,531,800        1,289,000
    Non-risk membership            50,900          114,000
                                   ------          -------
        Total                   1,582,700        1,403,000
                                =========        =========


The following table depicts membership in Centene's managed care organizations, by member category, at June 30, 2010 and 2009:


                                 June 30,
                                 --------
                                     2010           2009
                                     ----           ----
    Medicaid                    1,135,500        958,600
    CHIP & Foster Care            272,400        261,400
    ABD & Medicare                 93,800         69,000
    Other State programs           30,100              -
                                   ------            ---
        Total at-risk
         membership             1,531,800      1,289,000
    Non-risk membership            50,900        114,000
                                   ------        -------
        Total                   1,582,700      1,403,000
                                =========      =========


Statement of Operations

  • Premium and service revenues increased 12.8% for the three months ended June 30, 2010 over 2009 as a result of membership growth in each of our states. This increase was moderated by the removal of pharmacy services in two states beginning in 2010. These pharmacy carve outs had the effect of reducing 2010 second quarter revenue by approximately $48 million.
  • The consolidated HBR for the three months ended June 30, 2010 of 83.8% was an increase of 0.7% over the comparable period in 2009. A reconciliation of the change in HBR from the prior year is presented below:

       Second Quarter 2009                          83.1%
        New markets reserved at higher rates         0.6
        Net changes in existing markets              0.1
                                                     ---
       Second Quarter 2010                          83.8%
                                                    ====




  • Consolidated G&A expense as a percent of premium and service revenues was 12.7% in the second quarter of 2010, a decrease from 13.9% in the second quarter of 2009. The decrease reflects the leveraging of our expenses over higher revenues and the impact of our ongoing focus on system enhancements and operational efficiencies. Additionally, we benefited by $0.03 per diluted share from a shift in start up costs for Mississippi from the second to the third quarter.
  • Effective July 1, 2010, our Georgia health plan will begin paying premium taxes and will no longer be subject to income taxes. Accordingly, the deferred tax asset related to state net operating loss carry forwards was written off. The write off increased income tax expense during the second quarter by $1.7 million, or $0.03 per diluted share.
  • Earnings per diluted share from continuing operations were $0.45, compared to $0.47 in the second quarter of 2009.

Balance Sheet and Cash Flow

At June 30, 2010, we had cash and investments of $852.4 million, including $813.0 million held by our regulated entities and $39.4 million held by our unregulated entities. Medical claims liabilities totaled $455.4 million, representing 48.2 days in claims payable, an increase of 0.5 days from March 31, 2010. Total debt was $252.8 million and debt to capitalization was 24.5%.

Cash flow from operations through June 30, 2010 was $(98.3) million and was impacted by 1) $86.0 million decrease in unearned revenue due to advance payments received in December 2009 for January 2010 premium payments and 2) $57.7 million increase in premium and related receivables for June premium payments deferred by several states until July 2010. During the second half of 2010, we expect cash flow from operations to return to historical levels, although the timing of premium payments from each state can vary from period to period.

A reconciliation of the change in days in claims payable from the immediately preceding quarter-end is presented below:


    Days in claims payable, March 31, 2010                   47.7
       Timing of claims payments                              0.8
       Payment of annual provider bonuses                    (0.5)
       Impact of new business                                 0.3
       Pharmacy payment timing                               (0.1)
    Days in claims payable, June 30, 2010                    48.2
                                                             ====




Outlook

The table below depicts our guidance from continuing operations for 2010:


                                   Full Year
                                      2010
                                  ----------
                                    Low      High
                                    ---      ----
    Premium and Service
     revenues (in millions)       $4,350     $4,450
    Earnings per diluted
     share (EPS)                   $1.78      $1.86
    HBR %                          83.5%      84.5%
    G&A %                          12.4%      12.9%

    Diluted Shares
     Outstanding (in
     thousands)                      50,500




Based upon known rate adjustments and preliminary discussions with our states that finalize rates in the second half of the year, we currently estimate our 2010 composite premium rate increase to be between 1% and 3%.

Conference Call

As previously announced, we will host a conference call Tuesday, July 27, 2010, at 8:30 A.M. (Eastern Time) to review the financial results for the second quarter ended June 30, 2010, and to discuss our 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 800-860-2442 in the U.S. and Canada; +1-412-858-4600 from abroad; or via a live, audio webcast on our website at www.centene.com, under the Investors section.

A 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, 2011, at the aforementioned URL, or by dialing 877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad and entering the playback conference number 442132.

About Centene Corporation

Centene Corporation, a Fortune 500 company, is a leading multi-line healthcare enterprise that provides programs and related services to the rising number of 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, in addition to other state-sponsored programs, and Medicare (Special Needs Plans). Centene's CeltiCare subsidiary offers states unique, "exchange based" and other cost-effective coverage solutions for low-income populations. 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, life and health management, managed vision, telehealth services, and pharmacy benefits management.

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)
                                                       (Unaudited)

                                                June 30,          December 31,
                                                  2010                2009
                                                 ----                 ----
    ASSETS
     Current assets:
      Cash and
         cash
         equivalents
         of
         continuing
         operations,
         including
         $5,154
         and
         $8,667,
         respectively,
         from
         consolidated
         variable
         interest
         entities                                $264,723             $400,951
        Cash
         and
         cash
         equivalents
         of
         discontinued
         operations                                   877                2,801
                                                      ---                -----
        Total
         cash
         and
         cash
         equivalents                              265,600              403,752
         Premium
         and
         related
         receivables,
         net
         of
         allowance
         for
         uncollectible
         accounts
         of
         $1,336
         and
         $1,338,
         respectively,
          including
          $7,266
          and
          $11,313,
          respectively,
          from
          consolidated
          variable
          interest
          entities                                164,420              103,456
        Short-
         term
         investments,
         at
         fair
         value
         (amortized
         cost
         $29,542
         and
         $39,230,
         respectively)                             29,660               39,554
        Other
         current
         assets,
         including
         $3,918
         and
         $4,507,
         respectively,
         from
         consolidated
         variable
         interest
         entities                                  83,843               64,866
         Current
         assets
         of
         discontinued
         operations
         other
         than
         cash                                       2,314                4,506
                                                    -----                -----
            Total
             current
             assets                               545,837              616,134
    Long-
     term
     investments,
     at
     fair
     value
     (amortized
     cost
     $522,589
     and
     $514,256,
     respectively)                                537,399              525,497
     Restricted
     deposits,
     at
     fair
     value
     (amortized
     cost
     $20,485
     and
     $20,048,
     respectively)                                 20,570               20,132
     Property,
     software
     and
     equipment,
     net
     of
     accumulated
     depreciation
     of
     $118,995
     and
     $103,883,
     respectively,
      including
      $138,998 and $89,219,
      respectively,
      from
      consolidated
      variable
      interest
      entities                                    313,839              230,421
    Goodwill                                      244,304              224,587
     Intangible
     assets,
     net                                           24,589               22,479
    Other
     long-
     term
     assets                                        35,557               36,829
    Long-
     term
     assets
     of
     discontinued
     operations                                    11,442               26,285
                                                   ------               ------
            Total
             assets                            $1,733,537           $1,702,364
                                               ==========           ==========
     LIABILITIES
     AND
     STOCKHOLDERS'
     EQUITY
     Current
     liabilities:
         Medical
         claims
         liability                               $455,375             $470,932
         Accounts
         payable
         and
         accrued
         expenses,
         including
         $30,366
         and
         $14,020,
         respectively,
         from
         consolidated
          variable
          interest
          entities                                167,613              132,001
         Unearned
         revenue                                    5,695               91,644
         Current
         portion
         of
         long-
         term
         debt                                         771                  646
         Current
         liabilities
         of
         discontinued
         operations                                 7,365               20,685
                                                    -----               ------
            Total
             current
             liabilities                          636,819              715,908
    Long-
     term
     debt                                         252,028              307,085
    Other
     long-
     term
     liabilities                                   64,870               59,561
    Long-
     term
     liabilities
     of
     discontinued
     operations                                       652                  383
                                                      ---                  ---
            Total
             liabilities                          954,369            1,082,937

     Commitments
     and
     contingencies

     Stockholders'
     equity:
        Common
         stock,
         $.001
         par
         value;
         authorized
         100,000,000
         shares;
         51,654,541
         issued
         and
         49,210,505
         outstanding
         at
         June
          30,
          2010,
          and
          45,593,383
          shares
          issued
          and
          43,179,373
          shares
          outstanding
          at
          December
          31,
          2009                                         52                   46
         Additional
         paid-
         in
         capital                                  395,926              281,806
         Accumulated
         other
         comprehensive
         income:
          Unrealized
          gain
          on
          investments,
          net
          of
          tax                                       9,400                7,348
         Retained
         earnings                                 405,682              358,907
         Treasury
         stock,
         at
         cost
         (2,444,036
         and
         2,414,010
         shares,
         respectively)                           (47,830)             (47,262)
                                                  -------              -------
        Total
         Centene
         Corporation
         stockholders'
         equity                                   763,230              600,845
         Noncontrolling
         interest                                  15,938               18,582
                                                   ------               ------
            Total
             stockholders'
             equity                               779,168              619,427
                                                  -------              -------
            Total
             liabilities
             and
             stockholders'
             equity                            $1,733,537           $1,702,364



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

                                          Three Months
                                              Ended
                                            ------------
                                            June 30,
                                            --------
                                     2010                 2009
                                     ----
    Revenues:
        Premium                            $1,025,928             $909,698
        Service                                24,682               21,591
                                               ------               ------
            Premium and service
             revenues                       1,050,610              931,289
        Premium tax                            26,162              108,180
            Total revenues                  1,076,772            1,039,469
                                            ---------            ---------
    Expenses:
        Medical costs                         859,335              755,706
        Cost of services                       15,707               14,559
        General and
         administrative
         expenses                             133,470              129,221
        Premium tax                            26,551              108,548
            Total operating
             expenses                       1,035,063            1,008,034
                                            ---------            ---------
            Earnings from
             operations                        41,709               31,435
    Other income (expense):
        Investment and other
         income                                 4,142                4,418
        Interest expense                       (3,869)              (4,160)
                                               ------               ------
            Earnings from
             continuing operations,
             before income                     41,982               31,693
             tax expense
        Income tax expense                     17,254               11,789
                                               ------               ------
            Earnings from
             continuing operations,
             net of income                     24,728               19,904
             tax expense
    Discontinued
     operations, net of
     income tax (benefit)                        (226)                (485)
     expense of $(90),
      $(196), $4,350 and
      $(356),                                    ----                 ----
      respectively
            Net earnings                       24,502               19,419
    Noncontrolling interest
     (loss)                                     1,729                 (811)
                                                -----                 ----
            Net earnings
             attributable to
             Centene Corporation              $22,773              $20,230
                                              =======              =======

    Amounts attributable to
     Centene Corporation
     common
     stockholders:
        Earnings from
         continuing operations,
         net of income tax                    $22,999              $20,715
        expense
        Discontinued
         operations, net of
         income tax (benefit)                    (226)                (485)
         expense                                 ----                 ----
        Net earnings                          $22,773              $20,230
                                              =======              =======

    Net earnings (loss) per
     common share
     attributable to
     Centene Corporation:
        Basic:
         Continuing operations                  $0.46                $0.48
         Discontinued operations                    -                (0.01)
                                                  ---                -----
         Earnings per common
          share                                 $0.46                $0.47
                                                =====                =====
        Diluted:
          Continuing operations                 $0.45                $0.47
          Discontinued operations                   -                (0.01)
                                                  ---                -----
          Earnings per common
           share                                $0.45                $0.46
                                                =====                =====

    Weighted average number
     of shares outstanding:
          Basic                            49,135,552           43,001,157
          Diluted                          50,866,318           44,242,339



                                              Six Months
                                                Ended
                                               ----------
                                              June 30,
                                              --------
                                       2010                 2009
                                       ----                 ----
    Revenues:
        Premium                              $2,025,243           $1,794,704
        Service                                  47,589               45,440
                                                 ------               ------
            Premium and service
             revenues                         2,072,832            1,840,144
        Premium tax                              72,661              131,760
            Total revenues                    2,145,493            1,971,904
                                              ---------            ---------
    Expenses:
        Medical costs                         1,699,043            1,495,046
        Cost of services                         32,859               30,521
        General and
         administrative expenses                268,977              251,500
        Premium tax                              73,294              132,490
                                                 ------              -------
            Total operating expenses          2,074,173            1,909,557
                                              ---------            ---------
            Earnings from operations             71,320               62,347
    Other income (expense):
        Investment and other
         income                                  11,199                8,031
        Interest expense                         (7,682)              (8,146)
                                                 ------               ------
            Earnings from continuing
             operations, before
             income                              74,837               62,232
             tax expense
        Income tax expense                       29,779               22,634
                                                 ------               ------
            Earnings from continuing
             operations, net of
             income                              45,058               39,598
             tax expense
    Discontinued operations,
     net of income tax
     (benefit)                                    3,694                 (934)
     expense of $(90), $(196),
      $4,350 and $(356),                          -----                 ----
      respectively
            Net earnings                         48,752               38,664
    Noncontrolling interest
     (loss)                                       1,977                  (24)
                                                  -----                  ---
            Net earnings attributable
             to Centene Corporation             $46,775              $38,688
                                                =======              =======

    Amounts attributable to
     Centene Corporation
     common
     stockholders:
        Earnings from continuing
         operations, net of
         income tax                             $43,081              $39,622
        expense
        Discontinued operations,
         net of income tax
         (benefit)                                3,694                 (934)
         expense                                  -----                 ----
        Net earnings                            $46,775              $38,688
                                                =======              =======

    Net earnings (loss) per
     common share
     attributable to
     Centene Corporation:
        Basic:
         Continuing operations                    $0.89                $0.92
         Discontinued operations                   0.08                (0.02)
                                                   ----                -----
         Earnings per common share                $0.97                $0.90
                                                  =====                =====
        Diluted:
          Continuing operations                   $0.86                $0.90
          Discontinued operations                  0.08                (0.02)
                                                   ----                -----
          Earnings per common share               $0.94                $0.88
                                                  =====                =====

    Weighted average number
     of shares outstanding:
          Basic                              48,203,312           43,034,390
          Diluted                            49,807,084           44,240,071


                          CENTENE CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (In thousands)
                                       (Unaudited)

                                                        Six Months Ended June
                                                              30,
                                                        ----------------------
                                                                 2010
                                                                 ----

    Cash flows from operating activities:
        Net earnings                                          $48,752
        Adjustments to reconcile net earnings to
         net cash (used in) provided by operating
         activities:
          Depreciation and amortization                        24,918
          Stock compensation expense                            6,888
          (Gain) loss on sale of investments, net              (3,987)
          (Gain) on sale of UHP                                (8,201)
          Deferred income taxes                                 4,928
        Changes in assets and liabilities:
          Premium and related receivables                     (57,718)
          Other current assets                                    948
          Other assets                                          1,719
          Medical claims liabilities                          (28,868)
          Unearned revenue                                    (85,950)
          Accounts payable and accrued expenses                (3,536)
          Other operating activities                            1,851
                                                                -----
              Net cash (used in) provided by operating
               activities                                     (98,256)
                                                              -------
    Cash flows from investing activities:
        Capital expenditures                                  (63,602)
        Purchases of investments                             (306,124)
        Proceeds from asset sales                              13,420
        Sales and maturities of investments                   291,735
        Investments in acquisitions, net of cash
         acquired                                             (21,473)
                                                              -------
              Net cash used in investing activities           (86,044)
                                                              -------
    Cash flows from financing activities:
        Proceeds from exercise of stock options                 1,759
        Proceeds from borrowings                               42,161
        Proceeds from stock offering                          104,534
        Payment of long-term debt                             (97,193)
        Distributions to noncontrolling interest               (4,840)
        Excess tax benefits from stock
         compensation                                             295
        Common stock repurchases                                 (568)
        Debt issue costs                                           --
              Net cash provided by financing activities        46,148
                                                               ------
              Net (decrease) increase in cash and cash
               equivalents                                   (138,152)
                                                             --------
    Cash and cash equivalents, beginning of
     period                                                   403,752
                                                              -------
    Cash and cash equivalents, end of period                 $265,600
                                                             ========

    Supplemental disclosures of cash flow
     information:
        Interest paid                                          $7,320
        Income taxes paid                                     $27,940

    Supplemental disclosure of non-cash
     investing and financing activities:
        Contribution from noncontrolling interest                $306



                                                        Six Months Ended June
                                                              30,
                                                        ----------------------
                                                                 2009
                                                                 ----

    Cash flows from operating activities:
        Net earnings                                          $38,664
        Adjustments to reconcile net earnings to
         net cash (used in) provided by operating
         activities:
          Depreciation and amortization                        20,892
          Stock compensation expense                            7,611
          (Gain) loss on sale of investments, net                 450
          (Gain) on sale of UHP                                    --
          Deferred income taxes                                 1,512
        Changes in assets and liabilities:
          Premium and related receivables                     (23,327)
          Other current assets                                  1,357
          Other assets                                           (608)
          Medical claims liabilities                           17,093
          Unearned revenue                                     44,129
          Accounts payable and accrued expenses               (49,377)
          Other operating activities                            3,723
                                                                -----
              Net cash (used in) provided by operating
               activities                                      62,119
                                                               ------
    Cash flows from investing activities:
        Capital expenditures                                  (29,833)
        Purchases of investments                             (415,052)
        Proceeds from asset sales                                  --
        Sales and maturities of investments                   377,320
        Investments in acquisitions, net of cash
         acquired                                              (7,621)
                                                               ------
              Net cash used in investing activities           (75,186)
                                                              -------
    Cash flows from financing activities:
        Proceeds from exercise of stock options                 1,109
        Proceeds from borrowings                              288,000
        Proceeds from stock offering                               --
        Payment of long-term debt                            (264,135)
        Distributions to noncontrolling interest                 (707)
        Excess tax benefits from stock
         compensation                                              15
        Common stock repurchases                               (5,447)
        Debt issue costs                                         (368)
              Net cash provided by financing activities        18,467
                                                               ------
              Net (decrease) increase in cash and cash
               equivalents                                      5,400
                                                                -----
    Cash and cash equivalents, beginning of
     period                                                   379,099
                                                              -------
    Cash and cash equivalents, end of period                 $384,499
                                                             ========

    Supplemental disclosures of cash flow
     information:
        Interest paid                                          $7,658
        Income taxes paid                                     $31,512

    Supplemental disclosure of non-cash
     investing and financing activities:
        Contribution from noncontrolling interest              $5,107


                   CENTENE CORPORATION
    CONTINUING OPERATIONS SUPPLEMENTAL FINANCIAL DATA

                                Q2        Q1                Q4
                                  2010      2010           2009
                                  ----      ----           ----
    MEMBERSHIP
    Managed Care:
        Arizona                 19,300    19,000           18,100
        Florida                113,100   105,900           102,600
        Georgia                295,600   301,000           309,700
        Indiana                212,700   211,400           208,100
        Massachusetts           30,100    26,900           27,800
        Ohio                   159,300   156,000           150,800
        South Carolina          92,600    53,900           48,600
        Texas                  475,500   459,600           455,100
        Wisconsin              133,600   134,900           134,800
                               -------   -------            -------
            Total at-risk
             membership      1,531,800 1,468,600           1,455,600
                             --------- ---------            ---------
        Non-risk membership     50,900    62,200           63,700
                                ------    ------            ------
            TOTAL            1,582,700 1,530,800           1,519,300
                             ========= =========            =========

        Medicaid             1,135,500 1,088,300           1,081,400
        CHIP & Foster Care     272,400   266,300           263,600
        ABD & Medicare          93,800    87,100           82,800
        Other State programs    30,100    26,900           27,800
                                ------    ------            ------
            Total at-risk
             membership      1,531,800 1,468,600           1,455,600
                             --------- ---------            ---------
        Non-risk membership     50,900    62,200           63,700
                                ------    ------            ------
            TOTAL            1,582,700 1,530,800           1,519,300
                             ========= =========            =========

    Specialty
     Services(a):
        Cenpatico Behavioral
         Health
          Arizona              119,700   119,300           120,100
          Kansas                39,100    39,800           41,400
    Bridgeway Health
     Solutions
        Long-term Care           2,800     2,700           2,600
            TOTAL              161,600   161,800           164,100
                               =======   =======            =======

    (a) Includes external
     membership only.

    REVENUE PER MEMBER
     PER MONTH(b)              $208.58         $ 215.95(c)       $226.42

    CLAIMS(b)
        Period-end inventory   480,400   341,400           423,400
        Average inventory      306,900   283,900           279,000
        Period-end inventory
         per member               0.31      0.23           0.29



                                          Q3             Q2
                                            2009     2009
                                            ----     ----
    MEMBERSHIP
    Managed Care:
        Arizona                           17,400            16,200
        Florida                           84,400            22,300
        Georgia                          303,400           292,800
        Indiana                          200,700           196,100
        Massachusetts                        500                -
        Ohio                             151,200           141,200
        South Carolina                    46,100            46,000
        Texas                            450,200           443,200
        Wisconsin                        132,500           131,200
                                         -------           -------
            Total at-risk membership   1,386,400         1,289,000
                                       ---------         ---------
        Non-risk membership               63,200           114,000
                                          ------           -------
            TOTAL                      1,449,600         1,403,000
                                       =========         =========

        Medicaid                       1,040,000           958,600
        CHIP & Foster Care               263,400           261,400
        ABD & Medicare                    82,500            69,000
        Other State programs                 500                -
                                             ---              ---
            Total at-risk membership   1,386,400         1,289,000
                                       ---------         ---------
        Non-risk membership               63,200           114,000
                                          ------           -------
            TOTAL                      1,449,600         1,403,000
                                       =========         =========

    Specialty Services(a):
        Cenpatico Behavioral Health
          Arizona                        117,300           110,500
          Kansas                          41,000            41,100
    Bridgeway Health Solutions
        Long-term Care                     2,500             2,400
            TOTAL                        160,800           154,000
                                         =======           =======

    (a) Includes external
     membership only.

    REVENUE PER MEMBER PER
     MONTH(b)                            $222.77           $219.75

    CLAIMS(b)
        Period-end inventory             414,900           362,200
        Average inventory                227,100           234,500
        Period-end inventory per
         member                             0.30              0.28


    (b) Revenue per member and claims information are presented for the
    Managed Care at-risk members.
    (c) Reduction in revenue per member per month is a result of the
    pharmacy carve-outs in 2010.



                        Q2             Q1            Q4
                           2010           2010           2009
                           ----           ----           ----

    DAYS IN CLAIMS
     PAYABLE
    Medical                47.2           46.6           48.1
    Pharmacy                1.0            1.1            2.0
                            ---            ---            ---
    TOTAL                  48.2           47.7           50.1
                           ====           ====           ====
    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            $813.0         $917.9         $949.9
    Unregulated            39.4           51.3           36.2
                           ----           ----           ----
    TOTAL                $852.4         $969.2         $986.1
                         ======         ======         ======

    DEBT TO
     CAPITALIZATION        24.5%          23.7%          33.2%
    Debt to
     Capitalization
     is calculated
     as follows:
     total debt
     divided by
     (total debt +
     total
     equity).




                           Q3               Q2
                                2009           2009
                                ----           ----

    DAYS IN CLAIMS
     PAYABLE
    Medical                     47.1           47.5
    Pharmacy                     1.8            1.5
                                 ---            ---
    TOTAL                       48.9           49.0
                                ====           ====
    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                 $911.4         $825.8
    Unregulated                 27.6           27.0
                                ----           ----
    TOTAL                     $939.0         $852.8
                              ======         ======

    DEBT TO
     CAPITALIZATION    31.9%           33.0%
    Debt to
     Capitalization
     is calculated
     as follows:
     total debt
     divided by
     (total debt +
     total
     equity).


    Operating Ratios:

                                 Three
                                 Months           Six Months
                                 Ended              Ended
                               June 30,           June 30,
                             2010           2009     2010        2009
    Health Benefits
     Ratios:
      Medicaid and CHIP  83.4%          83.7%    84.5%       84.2%
      ABD and Medicare   86.5           82.6     83.4        82.0
      Specialty Services 81.7           79.8     81.2        79.0
      Total              83.8           83.1     83.9        83.3

    Total General &
     Administrative
     Expense             12.7%          13.9%    13.0%       13.7%
    Ratio



    MEDICAL CLAIMS LIABILITY (In thousands)
    The changes in medical claims liability are
    summarized as follows:

      Balance, June 30, 2009           $406,834
       Incurred related to:
          Current period              3,427,022
           Prior period                 (59,502)
                                        -------
          Total incurred              3,367,520
                                      =========
         Paid related to:
          Current period              2,980,741
           Prior period                 338,238
                                        -------
            Total paid                3,318,979
                                      ---------
      Balance, June 30, 2010           $455,375
                                       ========



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.

The amount of the "Incurred related to: Prior period" above 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, increased 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, 2009.

SOURCE Centene Corporation