Press Release

Centene Corporation Reports 2015 First Quarter Results And Raises Guidance
-- Revenue increase of 42% and diluted earnings per share (EPS) from continuing operations of $0.52 --

ST. LOUIS, April 28, 2015 /PRNewswire/ -- Centene Corporation (NYSE: CNC) today announced its financial results for the quarter ended March 31, 2015.  The following discussions, with the exception of cash flow information, are in the context of continuing operations.

Premium and Service Revenues (in millions)

$

4,761


Consolidated Health Benefits Ratio

89.8

%

General & Administrative expense ratio

8.5

%

Diluted earnings per share (EPS)

$

0.52


Total cash flow from operations (in millions)

$

45


Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "We had a strong start to 2015, delivering exceptional top and bottom line growth compared to last year.  We continue to be successful in executing on our robust growth pipeline while maintaining operational discipline."

First Quarter Highlights

  • March 31, 2015 managed care membership of 4.4 million, an increase of 1.4 million members, or 44% compared to the first quarter of 2014.
  • Premium and service revenues for the first quarter of $4.8 billion, representing 42% growth compared to the first quarter of 2014.
  • Health Benefits Ratio of 89.8% for the first quarter 2015, compared to 89.3% in the first quarter of 2014.
  • General and Administrative expense ratio of 8.5% for the first quarter of 2015, compared to 8.8% in the first quarter of 2014.
  • Operating cash flow of $45 million for the first quarter of 2015.
  • Diluted EPS for the first quarter of 2015 of $0.52, compared to $0.29 in 2014.

Other Events

  • In April 2015, our Indiana subsidiary, Managed Health Services, began operating under an expanded contract with the Indiana Family & Social Services Administration to provide services to its ABD Medicaid enrollees who qualify for the new Hoosier Care Connect Program.
  • In April 2015, Centurion was recommended for an award by the Mississippi Department of Corrections to provide comprehensive correctional healthcare services.  The contract is expected to commence in the third quarter of 2015.
  • In March 2015, we began operating under an expanded STAR+PLUS contract with the Texas Health and Human Service Commission (HHSC) to include nursing facility benefits.  We also began operating under a new contract with the Texas HHSC and the Centers for Medicare and Medicaid Services to serve dual-eligible members in three counties as part of the state's dual demonstration program.
  • In March 2015, our Missouri subsidiary, Home State Health, was selected by the Missouri Division of Purchasing and Materials Management to continue providing managed care services to MO HealthNet Managed Care beneficiaries.  The new contract will be effective in the third quarter of 2015.
  • In February 2015, Superior HealthPlan was tentatively recommended for a contract award by the Texas HHSC to continue to serve STAR Health (Foster Care) Medicaid recipients.  The new STAR Health contract is expected to commence in the third quarter of 2015.

Accreditations & Senior Management Additions

  • In April 2015, we announced the appointment of Marcela Manjarrez Williams to Senior Vice President and Chief Communications Officer and the appointment of Ken Yamaguchi, M.D. to Executive Vice President and Chief Medical Officer.
  • In April 2015, Nurtur, our health and wellness subsidiary, received full Disease Management Accreditation renewal from URAC, a Washington, DC-based healthcare accrediting organization that establishes quality standards for the healthcare industry.  In February 2015, Nurtur also received a three-year Wellness and Health Promotion Accreditation renewal from the National Committee for Quality Assurance (NCQA) for its wellness services.
  • In March 2015, NurseWise, our national multilingual nurse triage and health education subsidiary, also received full Health Call Center Accreditation renewal from URAC.

Membership

The following table sets forth the Company's membership by state for its managed care organizations:


March 31,


2015


2014

Arizona

202,200


169,800

Arkansas

43,200


16,400

California

171,200


118,100

Florida

463,100


230,300

Georgia

405,600


331,400

Illinois

184,800


22,400

Indiana

227,700


198,700

Kansas

143,700


145,000

Louisiana

359,500


149,800

Massachusetts

64,500


50,800

Minnesota

9,500


9,400

Mississippi

141,900


85,400

Missouri

75,600


58,100

New Hampshire

67,500


37,100

Ohio

296,000


181,800

South Carolina

106,000


96,300

Tennessee

20,800


21,100

Texas

974,900


904,000

Vermont

1,600


Washington

207,100


151,700

Wisconsin

82,100


70,800

Total at-risk membership

4,248,500


3,048,400

Non-risk membership

153,200


Total

4,401,700


3,048,400

At March 31, 2015, the Company served 331,800 Medicaid members in Medicaid expansion programs in California, Illinois, Indiana, Massachusetts, New Hampshire, Ohio and Washington included in the table above.

The following table sets forth our membership by line of business:


March 31,


2015


2014

Medicaid

3,133,900


2,169,100

CHIP & Foster Care

233,600


269,200

ABD, Medicare & Duals

410,400


300,500

Long Term Care (LTC)

71,200


51,800

Health Insurance Marketplaces

161,700


39,700

Hybrid Programs 1


14,400

Behavioral Health

195,100


162,700

Correctional Healthcare Services

42,600


41,000

Total at-risk membership

4,248,500


3,048,400

Non-risk membership

153,200


Total

4,401,700


3,048,400





1 In February 2015, hybrid programs in Indiana and Massachusetts were converted to Medicaid expansion contracts.

The following table identifies our dual-eligible membership by line of business.  The membership tables above include these members.


March 31,


2015


2014

ABD

112,600


72,800

LTC

52,000


41,300

Medicare

6,800


6,500

Medicaid / Medicare Duals

12,600


Total

184,000


120,600

Statement of Operations: Three Months Ended March 31, 2015

  • For the first quarter of 2015, Premium and Service Revenues increased 42% to $4.8 billion from $3.4 billion in the first quarter of 2014.  The increase was a result of a full quarter's impact from expansions or new programs in 2014 in many of our states, particularly Florida, Illinois and Ohio.
  • Consolidated HBR of 89.8% for the first quarter of 2015 represents an increase from 89.3% in the comparable period in 2014 and an increase from 89.3% in the fourth quarter of 2014. The year over year HBR increase is primarily attributable to an increase in higher acuity membership and higher flu related costs over the prior year.
  • The following table compares the results for new business and existing business for the quarters ended March 31:

2015


2014

Premium and Service Revenue




New business

23%


20%

Existing business

77%


80%





HBR




New business

91.0%


93.1%

Existing business

89.5%


88.3%

  • Consolidated G&A expense ratio for the first quarter of 2015 was 8.5%, compared to 8.8% in the prior year.  The year over year decrease in the G&A ratio reflects the leveraging of expenses over higher revenues in 2015 as well as the impact of transaction costs recognized in 2014.  
  • Diluted earnings per share of $0.52 in the first quarter of 2015, compared to $0.29 in 2014.  Diluted earnings per share in 2014 was impacted by $0.11 of net cost associated with the health insurer fee and acquisition transaction costs. 

Balance Sheet and Cash Flow

At March 31, 2015, the Company had cash, investments and restricted deposits of $3.4 billion, including $97 million held by its unregulated entities.  Medical claims liabilities totaled $2.0 billion, representing 45.5 days in claims payable.  Total debt was $1.1 billion, which includes $125 million of borrowings on the $500 million revolving credit facility at quarter end.  Debt to capitalization was 36.6% at March 31, 2015, excluding the $69 million non-recourse mortgage note. 

Cash flow from operations for the three months ended March 31, 2015, was $45 million, or 0.7 times net earnings.  Cash flow was reduced in the first quarter as a result of a one time change in payment terms for one of our states.

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




Days in claims payable, December 31, 2014

44.2


Timing of claim payments

1.3


Days in claims payable, March 31, 2015

45.5





Outlook

The table below depicts the Company's annual GAAP guidance for 2015.



Full Year 2015




Low


High


Premium and Service Revenues (in millions)


$

20,500



$

21,000



Diluted EPS


$

2.60



$

2.72



Consolidated Health Benefits Ratio


89.2

%


89.6

%


General & Administrative expense ratio


8.0

%


8.4

%


Effective Tax Rate


48.0

%


50.0

%


Diluted Shares Outstanding (in millions)


123.0



124.0









Consistent with our policy, the above table does not include acquisitions that have not yet closed.

Conference Call

As previously announced, the Company will host a conference call Tuesday, April 28, 2015, at 8:30 AM (Eastern Time) to review the financial results for the first quarter ended March 31, 2015, and to discuss its business outlook.  Michael F. Neidorff and William N. Scheffel will host the conference call. 

Investors and other interested parties are invited to listen to the conference call by dialing 1-866-739-7850 in the U.S. and Canada; +1-412-902-6577 from abroad; or via a live, audio webcast on the Company's website at www.centene.com, under the Investors section.  Or, participants can register for the conference call in advance by navigating to http://dpregister.com/10061838, to receive a dial-in number upon registration.  A webcast replay will be available for on-demand listening shortly after the completion of the call for the next twelve months or until 11:59 PM (Eastern Time) on Tuesday, April 26, 2016, at the aforementioned URL. In addition, a digital audio playback will be available until 9:00 AM Eastern Time on Wednesday, May 6, 2015, by dialing 1-877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad, and entering access code 10061838.

Other Information

The discussion in the third bullet under the heading "Statement of Operations: Three Months Ended March 31, 2015" contains financial information for new and existing businesses.  Existing businesses are primarily state markets or significant geographic expansion in an existing state or product that we have managed for four complete quarters.  New businesses are primarily new state markets or significant geographic expansion in an existing state or product that conversely, we have not managed for four complete quarters.

About Centene Corporation

Centene Corporation, a Fortune 500 company, is a diversified, multi-national healthcare enterprise that provides a portfolio of services to government-sponsored healthcare programs, focusing on under-insured and uninsured individuals.  Many receive benefits provided under Medicaid, including the State Children's Health Insurance Program (CHIP), as well as Aged, Blind or Disabled (ABD), Foster Care and Long Term Care (LTC), in addition to other state-sponsored/hybrid programs, and Medicare (Special Needs Plans).  The Company operates local health plans and offers a range of health insurance solutions.  It also contracts with other healthcare and commercial organizations to provide specialty services including behavioral health management, care management software, correctional healthcare services, dental benefits management, in-home health services, life and health management, managed vision, pharmacy benefits management, specialty pharmacy and telehealth services.

The information provided in this press release contains forward-looking statements that relate to future events and future financial performance of Centene.  Subsequent events and developments may cause the Company's estimates to change.  The Company disclaims any obligation to update this forward-looking financial information in the future.  Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, regulatory, competitive and other factors that may cause Centene's or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Actual results may differ from projections or estimates due to a variety of important factors, including Centene's ability to accurately predict and effectively manage health benefits and other operating expenses and reserves; competition; membership and revenue projections; timing of regulatory contract approval; changes in healthcare practices; changes in federal or state laws or regulations, including the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act and any regulations enacted thereunder; changes in expected contract start dates; changes in expected closing dates, estimated purchase price and accretion for acquisitions; inflation; foreign currency fluctuations; provider and state contract changes; new technologies; advances in medicine; reduction in provider payments by governmental payors; major epidemics; disasters and numerous other factors affecting the delivery and cost of healthcare; the expiration, cancellation or suspension of our Medicare or Medicaid managed care contracts by federal or state governments; the outcome of pending legal proceedings; availability of debt and equity financing, on terms that are favorable to us; and general economic and market conditions, as well as those factors disclosed in the Company's publicly filed documents.

This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain risk factors that may affect our business operations, financial condition and results of operations, in our filings with the Securities and Exchange Commission, including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

 [Tables Follow]

 

CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions except share data)
(Unaudited)






March 31, 2015


December 31, 2014

ASSETS




Current assets:




Cash and cash equivalents

$

1,666


$

1,610

Premium and related receivables

1,245


912

Short term investments

151


177

Other current assets

528


335

Total current assets

3,590


3,034

Long term investments

1,527


1,280

Restricted deposits

98


100

Property, software and equipment, net

450


445

Goodwill

786


754

Intangible assets, net

131


120

Other long term assets

114


91

Total assets

$

6,696


$

5,824





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Medical claims liability

$

1,950


$

1,723

Accounts payable and accrued expenses

1,002


768

Return of premium payable

269


236

Unearned revenue

117


168

Current portion of long term debt

5


5

Total current liabilities

3,343


2,900

Long term debt

1,123


874

Other long term liabilities

238


159

Total liabilities

4,704


3,933

Commitments and contingencies




Redeemable noncontrolling interests

155


148

Stockholders' equity:




Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued or outstanding at March 31, 2015 and December 31, 2014


Common stock, $.001 par value; authorized 200,000,000 shares; 124,562,959 issued and 118,886,912 outstanding at March 31, 2015, and 124,274,864 issued and 118,433,416 outstanding at December 31, 2014


Additional paid-in capital

870


840

Accumulated other comprehensive loss

(1)


(1)

Retained earnings

1,066


1,003

Treasury stock, at cost (5,676,047 and 5,841,448 shares, respectively)

(98)


(98)

Total Centene stockholders' equity

1,837


1,744

Noncontrolling interest


(1)

Total stockholders' equity

1,837


1,743

Total liabilities and stockholders' equity

$

6,696


$

5,824

 

CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share data)
(Unaudited)




Three Months Ended March 31,


2015


2014

Revenues:




Premium

$

4,299


$

3,071

Service

462


281

Premium and service revenues

4,761


3,352

Premium tax and health insurer fee

370


108

Total revenues

5,131


3,460

Expenses:




Medical costs

3,861


2,743

Cost of services

402


242

General and administrative expenses

403


296

Premium tax expense

281


78

Health insurer fee expense

55


31

Total operating expenses

5,002


3,390

Earnings from operations

129


70

Other income (expense):




Investment and other income

9


5

Interest expense

(10)


(7)

Earnings from continuing operations, before income tax expense

128


68

Income tax expense

63


35

Earnings from continuing operations, net of income tax expense

65


33

Discontinued operations, net of income tax expense of $0 and $0, respectively

(1)


(1)

Net earnings

64


32

(Earnings) loss attributable to noncontrolling interests

(1)


1

Net earnings attributable to Centene Corporation

$

63


$

33





Amounts attributable to Centene Corporation common shareholders:








Earnings from continuing operations, net of income tax expense

$

64


$

34

Discontinued operations, net of income tax expense (benefit)

(1)


(1)

Net earnings

$

63


$

33





Net earnings (loss) per common share attributable to Centene Corporation:








Basic:




Continuing operations

$

0.54


$

0.30

Discontinued operations

(0.01)


(0.01)

Basic earnings per common share

$

0.53


$

0.29





Diluted:




Continuing operations

$

0.52


$

0.29

Discontinued operations

(0.01)


(0.01)

Diluted earnings per common share

$

0.51


$

0.28





Weighted average number of common shares outstanding:








Basic

118,783,755


114,967,752

Diluted

122,572,366


118,722,532

 

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)




Three Months Ended March 31,


2015


2014

Cash flows from operating activities:




Net earnings

$

64



$

32


Adjustments to reconcile net earnings to net cash provided by operating activities








Depreciation and amortization

27



20


Stock compensation expense

16



11


Deferred income taxes

(6)



(8)


Gain on settlement of contingent consideration

(10)




Changes in assets and liabilities




Premium and related receivables

(334)



(119)


Other current assets

(3)



3


Other assets

(13)



(14)


Medical claims liabilities

227



196


Unearned revenue

(51)



35


Accounts payable and accrued expenses

58



91


Other long term liabilities

68



4


Other operating activities

2



1


Net cash provided by operating activities

45



252


Cash flows from investing activities:




Capital expenditures

(27)



(18)


Purchases of investments

(307)



(167)


Sales and maturities of investments

111



112


Proceeds from asset sale

7




Investments in acquisitions, net of cash acquired

(9)



(77)


Net cash used in investing activities

(225)



(150)


Cash flows from financing activities:




Proceeds from exercise of stock options

2



2


Proceeds from borrowings

500



645


Payment of long term debt

(253)



(519)


Excess tax benefits from stock compensation

3




Common stock repurchases

(4)



(2)


Contribution from noncontrolling interest



5


Debt issue costs

(4)




Payment of contingent consideration obligation

(8)




Net cash provided by financing activities

236



131


Net increase in cash and cash equivalents

56



233


Cash and cash equivalents, beginning of period

1,610



1,038


Cash and cash equivalents, end of period

$

1,666



$

1,271


Supplemental disclosures of cash flow information:




Interest paid

$

2



$

2


Income taxes paid

$

24



$

21


Equity issued in connection with acquisitions

$

13



$

132


 

CENTENE CORPORATION
SUPPLEMENTAL FINANCIAL DATA FROM CONTINUING OPERATIONS












Q1


Q4


Q3


Q2


Q1


2015


2014


2014


2014


2014

MANAGED CARE MEMBERSHIP










Arizona

202,200



204,000



202,500



189,200



169,800


Arkansas

43,200



38,400



36,600



31,100



16,400


California

171,200



163,900



144,700



131,100



118,100


Florida

463,100



425,700



411,200



313,800



230,300


Georgia

405,600



389,100



382,600



373,000



331,400


Illinois

184,800



87,800



31,300



29,500



22,400


Indiana

227,700



197,700



199,500



200,500



198,700


Kansas

143,700



143,300



144,200



146,100



145,000


Louisiana

359,500



152,900



150,800



148,600



149,800


Massachusetts

64,500



48,400



46,600



47,200



50,800


Minnesota

9,500



9,500



9,500



9,400



9,400


Mississippi

141,900



108,700



99,300



97,400



85,400


Missouri

75,600



71,000



64,900



58,700



58,100


New Hampshire

67,500



62,700



56,600



39,500



37,100


Ohio

296,000



280,100



261,000



225,900



181,800


South Carolina

106,000



109,700



106,500



101,800



96,300


Tennessee

20,800



21,000



21,200



21,300



21,100


Texas

974,900



971,000



961,100



921,500



904,000


Vermont

1,600










Washington

207,100



194,400



192,500



193,800



151,700


Wisconsin

82,100



83,200



74,700



67,300



70,800


Total at-risk membership

4,248,500



3,762,500



3,597,300



3,346,700



3,048,400


Non-risk membership

153,200



298,400



303,500






TOTAL

4,401,700



4,060,900



3,900,800



3,346,700



3,048,400












Medicaid

3,133,900



2,754,900



2,578,300



2,385,500



2,169,100


CHIP & Foster Care

233,600



222,700



247,700



261,800



269,200


ABD, Medicare & Duals

410,400



392,700



383,400



329,700



300,500


LTC

71,200



60,800



55,200



53,500



51,800


Health Insurance Marketplaces

161,700



74,500



76,000



75,700



39,700


Hybrid Programs



18,900



19,900



17,000



14,400


Behavorial Health

195,100



197,000



195,500



182,200



162,700


Correctional Healthcare Services

42,600



41,000



41,300



41,300



41,000


Total at-risk membership

4,248,500



3,762,500



3,597,300



3,346,700



3,048,400


Non-risk membership

153,200



298,400



303,500






TOTAL

4,401,700



4,060,900



3,900,800



3,346,700



3,048,400






















REVENUE PER MEMBER PER MONTH(a)

$

349



$

360



$

354



$

344



$

340












CLAIMS(a)










Period-end inventory

1,217,000



1,086,600



1,021,200



771,900



832,600


Average inventory

841,000



806,000



660,200



603,700



584,700


Period-end inventory per member

0.29



0.29



0.28



0.23



0.27



(a) Revenue per member and claims information are presented for the Managed Care at-risk members.











NUMBER OF EMPLOYEES

14,800



13,400



12,900



12,300



11,200






















 


Q1


Q4


Q3


Q2


Q1


2015


2014


2014


2014


2014











DAYS IN CLAIMS PAYABLE (b)

45.5



44.2



43.1



42.9



42.6



(b) Days in Claims Payable is a calculation of Medical Claims Liabilities at the end of the period divided by average claims expense per calendar day for such period.











CASH, INVESTMENTS AND RESTRICTED DEPOSITS (in millions)

Regulated

$

3,345



$

3,082



$

2,829



$

2,353



$

2,167


Unregulated

97



85



70



50



49


TOTAL

$

3,442



$

3,167



$

2,899



$

2,403



$

2,216












DEBT TO CAPITALIZATION

38.0

%


33.5

%


36.4

%


35.3

%


36.2

%

DEBT TO CAPITALIZATION EXCLUDING NON-RECOURSE DEBT(c)

36.6

%


31.7

%


34.6

%


33.4

%


34.1

%


(c) The non-recourse debt represents the Company's mortgage note payable ($69 million at March 31, 2015).

Debt to Capitalization is calculated as follows: total debt divided by (total debt + total equity).

 

Operating Ratios:




Three Months Ended March 31,


2015


2014

Health Benefits Ratios:




Medicaid, CHIP, Foster Care & Health Insurance Marketplaces

87.6

%


86.9

%

ABD, LTC & Medicare

92.9



92.9


Specialty Services

85.2



87.7


  Total

89.8



89.3






Total General & Administrative Expense Ratio

8.5

%


8.8

%

 

MEDICAL CLAIMS LIABILITY (In millions)






The changes in medical claims liability are summarized as follows:






Balance, March 31, 2014


$

1,299


Incurred related to:



Current period


13,981


Prior period


(185)


Total incurred


13,796


Paid related to:



Current period


12,072


Prior period


1,073


Total paid


13,145


Balance, March 31, 2015


$

1,950


Centene's claims reserving process utilizes a consistent actuarial methodology to estimate Centene's ultimate liability.  Any reduction in the "Incurred related to: Prior period" amount may be offset as Centene actuarially determines "Incurred related to: Current period."  As such, only in the absence of a consistent reserving methodology would favorable development of prior period claims liability estimates reduce medical costs.  Centene believes it has consistently applied its claims reserving methodology in each of the periods presented.  Additionally, as a result of minimum HBR and other state return of premium programs, approximately $60 million of the "Incurred related to: Prior period" was reclassified to Return of Premium Payable.

The amount of the "Incurred related to: Prior period" above represents favorable development and includes the effects of reserving under moderately adverse conditions, new markets where we use a conservative approach in setting reserves during the initial periods of operations, receipts from other third party payors related to coordination of benefits and lower medical utilization and cost trends for dates of service prior to March 31, 2014. 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/centene-corporation-reports-2015-first-quarter-results-and-raises-guidance-300072946.html

SOURCE Centene Corporation

Investor Relations Inquiries, Edmund E. Kroll, Jr., Senior Vice President, Finance & Investor Relations, (212) 759-0382; Media Inquiries, Marcela Manjarrez Williams, Senior Vice President and Chief Communications Officer, (314) 725-4477