Press Release

Centene Corporation Reports 2016 First Quarter Results & Updates 2016 Guidance

ST. LOUIS, April 26, 2016 /PRNewswire/ -- Centene Corporation (NYSE: CNC) today announced its financial results for the first quarter ended March 31, 2016.  On March 24, 2016, Centene acquired all of the issued and outstanding shares of Health Net, Inc. (Health Net).  Our consolidated financial statements as of and for the three months ended March 31, 2016 reflect eight days of Health Net operations.  The following discussions, with the exception of cash flow information, are in the context of continuing operations.

For the first quarter of 2016, we reported a diluted net loss per share of $(0.13) and adjusted diluted earnings per share (Adjusted Diluted EPS) of $0.74 when excluding Health Net acquisition related expenses and intangible amortization.  A reconciliation of GAAP diluted net loss per share to Adjusted Diluted EPS is highlighted below:

GAAP diluted net earnings (loss) per share

$

(0.13)


Health Net acquisition related expenses

0.83


Amortization of acquired intangible assets

0.04


Adjusted Diluted EPS

$

0.74


In summary, the 2016 first quarter results were as follows:

Total Revenues (in millions)

$

6,953



Health Benefits Ratio

88.7

%


General & Administrative expense ratio

11.3

%


General & Administrative expense ratio excluding Health Net acquisition related expenses

8.3

%


GAAP diluted net loss per share

$

(0.13)



Adjusted Diluted EPS

$

0.74



Total cash flow from operations (in millions)

$

195



Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "We are pleased to have closed the Health Net transaction, as expected, in the first quarter.  This acquisition is transformational -- building on our critical mass and new products and capabilities that will enhance the sustainability of our long-term growth.  The integration process is proceeding as planned and we look forward to continued success in 2016 and beyond."

First Quarter Highlights

  • On March 24, 2016, we acquired all of the issued and outstanding shares of Health Net for approximately $6.0 billion, including the assumption of debt.  This strategic acquisition broadens our current service offerings, providing expansion in Medicaid and Medicare programs.  This acquisition provides further diversification across our markets and products through the addition of government-sponsored care under federal contracts with the Department of Defense and the U.S. Department of Veteran's Affairs, as well as Medicare Advantage.  Our consolidated financial statements as of and for the three months ended March 31, 2016 reflect eight days of Health Net operations.
  • March 31, 2016 managed care membership of 11.5 million, an increase of 7.1 million members, or 162% compared to the first quarter of 2015.
  • Total revenues for the first quarter of $7.0 billion, representing 36% growth compared to the first quarter of 2015.
  • Health Benefits Ratio of 88.7% for the first quarter of 2016, compared to 89.8% in the first quarter of 2015.
  • General and Administrative expense ratio of 11.3%, or 8.3% excluding Health Net acquisition related expenses for the first quarter of 2016, compared to 8.3% in the first quarter of 2015.
  • Operating cash flow of $195 million for the first quarter of 2016.
  • Diluted loss per share for the first quarter of 2016 of $(0.13), or $0.74 of Adjusted Diluted EPS when excluding Health Net acquisition related expenses and intangible amortization.  In comparison, diluted EPS for the first quarter of 2015 was $0.52, or $0.55 Adjusted Diluted EPS when excluding intangible amortization. 

Other Events

  • In April 2016, our Nebraska subsidiary, Nebraska Total Care, executed a contract with the Nebraska Department of Health and Human Services' Division of Medicaid and Long-Term Care as one of three managed care organizations to administer its new Heritage Health Program for Medicaid, ABD and CHIP enrollees.  The contract is expected to commence in the first quarter of 2017, pending regulatory approval.
  • In April 2016, Centurion of Mississippi, LLC was selected to provide correctional healthcare services for the Mississippi Department of Corrections (MDOC).  Centurion began providing healthcare services to the MDOC in July 2015 under a one-year emergency contract.  The new three-year contract will begin in July 2016.
  • In April 2016, Centurion of Florida, LLC began providing correctional healthcare services for the Florida Department of Corrections in Regions 1, 2 and 3.
  • In April 2016, Coordinated Care of Washington began operating as the sole contractor with the Washington State Health Care Authority to provide foster care services through the Apple Health Foster Care contract.
  • In April 2016, we announced the appointment of Mark Brooks to Senior Vice President and Chief Information Officer.
  • In April 2016, the Health Net Federal Services call center operations earned the ranking of first place for large call centers (those with more than 250 full-time representatives) in BenchmarkPortal's Top 100 Call Center Contest.
  • In April 2016, Centene was awarded the Hispanic Health Leadership Award by the National Hispanic Medical Association.
  • In March 2016, Centene was added to the S&P 500 Index.

Membership

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


March 31,


2016


2015

Arizona

607,000



202,200


Arkansas

50,700



43,200


California

3,125,400



171,200


Florida

660,800



463,100


Georgia

495,500



405,600


Illinois

239,100



184,800


Indiana

290,300



227,700


Kansas

141,100



143,700


Louisiana

381,200



359,500


Massachusetts

52,400



64,500


Michigan

2,600




Minnesota

9,500



9,500


Mississippi

328,300



141,900


Missouri

100,000



75,600


New Hampshire

81,500



67,500


Ohio

314,000



296,000


Oregon

209,000




South Carolina

107,700



106,000


Tennessee

20,100



20,800


Texas

1,036,700



974,900


Vermont

1,500



1,600


Washington

226,500



207,100


Wisconsin

78,400



82,100


Total at-risk membership

8,559,300



4,248,500


TRICARE eligibles

2,819,700




Non-risk membership

161,400



153,200


Total

11,540,400



4,401,700


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


March 31,


2016


2015

Medicaid:




TANF, CHIP & Foster Care

5,464,200



3,372,200


ABD & LTC

757,600



457,500


Behavioral Health

456,500



195,100


Commercial

1,518,900



161,700


Medicare & Duals

303,100



19,400


Correctional

59,000



42,600


Total at-risk membership

8,559,300



4,248,500


TRICARE eligibles

2,819,700




Non-risk membership

161,400



153,200


Total

11,540,400



4,401,700


At March 31, 2016, the Company served 984,900 members in Medicaid expansion programs in nine states and 362,300 dual-eligible members, compared to 331,800 members in Medicaid expansion programs in seven states and 184,000 dual-eligible members at March 31, 2015.  At March 31, 2016, the Company served 683,000 members in Health Insurance Marketplaces, compared to 161,700 at March 31, 2015. 

Statement of Operations: Three Months Ended March 31, 2016

  • For the first quarter of 2016, Total Revenues increased 36% to $7.0 billion from $5.1 billion in the first quarter of 2015.  The increase was primarily a result of the impact from expansions, acquisitions or new programs in many of our states in 2015 and the acquisition of Health Net.
  • HBR of 88.7% for the first quarter of 2016 represents a decrease from 89.8% in the comparable period in 2015 and an increase from 88.0% in the fourth quarter of 2015.  The year over year HBR decrease is primarily attributable to improvement in medical expense in the higher acuity populations and membership growth in Medicaid expansion and Health Insurance Marketplace, which operate at a lower HBR.  HBR increased from 88.0% in the fourth quarter of 2015 to 88.7% in the first quarter of 2016, primarily attributable to an increase in flu related costs over the fourth quarter.
  • The following table compares the results for new business and existing business for the quarters ended March 31:

2016


2015

Premium and Service Revenue




New business

18

%


23

%

Existing business

82

%


77

%





HBR




New business

90.6

%


91.0

%

Existing business

88.3

%


89.5

%

  • G&A expense ratio of 11.3%, or 8.3% excluding Health Net acquisition related expenses for the first quarter of 2016, compared to 8.3% in the first quarter of 2015.
  • Diluted loss per share for the first quarter of 2016 of $(0.13), or $0.74 of Adjusted Diluted EPS when excluding Health Net acquisition related expenses and intangible amortization.  In comparison, diluted EPS for the first quarter of 2015 was $0.52, or $0.55 Adjusted Diluted EPS when excluding intangible amortization. 

Balance Sheet and Cash Flow

At March 31, 2016, the Company had cash, investments and restricted deposits of $7.8 billion, including $139 million held by its unregulated entities.  Medical claims liabilities totaled $3.9 billion.  The Company's days in claims payable was 66, 42 on a pro-forma basis to include a full quarter of Health Net medical costs.  Total debt was $4.3 billion, which includes $515 million of borrowings on the $1.0 billion revolving credit facility at quarter end.  Debt to capitalization was 44.3% at March 31, 2016, excluding the $66 million non-recourse mortgage note.  Cash flow from operations for the three months ended March 31, 2016, was $195 million.

Our consolidated financial statements as of and for the three months ended March 31, 2016 reflect eight days of Health Net operations.  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, 2015

44


Impact of Health Net acquisition

(2)


Days in claims payable, March 31, 2016 1

42





1 A pro-forma adjustment has been made to medical costs to include a full quarter of Health Net medical costs.  Using actual medical costs, days in claims payable was 66.

Outlook

The table below depicts the Company's updated annual guidance for 2016.



Full Year 2016




Low


High


Total Revenues (in billions)


$

39.0



$

39.8



GAAP diluted EPS


$

2.45



$

2.80



Adjusted diluted EPS1


$

4.00



$

4.35



HBR


87.0

%


87.5

%


G&A expense ratio


9.4

%


9.9

%


G&A expense ratio, excluding acquisition related costs


9.0

%


9.5

%


Effective tax rate


55.0

%


57.0

%


Diluted shares outstanding (in millions)


162.5



163.5











1Adjusted diluted earnings per share excludes approximately $1.00 to $1.05 per diluted share of Health Net acquisition related expenses and total intangible amortization associated with acquisitions of $0.50 to $0.55 per diluted share.

Conference Call

As previously announced, the Company will host a conference call Tuesday, April 26, 2016, at 8:30 AM (Eastern Time) to review the financial results for the first quarter ended March 31, 2016, and to discuss its business outlook.  Michael Neidorff and Jeffrey Schwaneke will host the conference call.

Investors and other interested parties are invited to listen to the conference call by dialing 1-877-883-0383 in the U.S. and Canada; +1-412-902-6506 from abroad, including the following Elite Entry Number: 2633125 to expedite caller registration; or via a live, audio webcast on the Company's website at www.centene.com, under the Investors section.

A webcast replay will be available for on-demand listening shortly after the completion of the call for the next twelve months or until 11:59 PM (Eastern Time) on Tuesday, April 25, 2017, at the aforementioned URL. In addition, a digital audio playback will be available until 9:00 AM Eastern Time on Tuesday, May 3, 2016, by dialing 1-877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad, and entering access code 10083202.

Other Information

The discussion in the third bullet under the heading "Statement of Operations: Three Months Ended March 31, 2016" 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.

Non-GAAP Financial Presentation

The Company is providing certain non-GAAP financial measures in this release as the Company believes that these figures are helpful in allowing investors to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently across periods. The Company uses the presented non-GAAP financial measures internally to allow management to focus on period-to-period changes in the Company's core business operations. Therefore, the Company believes that this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Specifically, the Company believes the presentation of non-GAAP financial information which excludes Health Net acquisition related expenses and intangible amortization allows investors to understand the Company's performance more consistently.  The table below provides a reconciliation of non-GAAP items ($ in millions, except share data): 


Three Months Ended March 31,


2016


2015





GAAP general and administrative expenses

$

722



$

396


Health Net acquisition related expenses

189




General and administrative expenses, excluding Health Net acquisition related expenses

$

533



$

396






GAAP diluted net earnings (loss) per share

$

(0.13)



$

0.52


Health Net acquisition related expenses

0.83




Amortization of acquired intangible assets

0.04



0.03


Adjusted Diluted EPS

$

0.74



$

0.55


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 programs, Medicare (including the Medicare prescription drug benefit commonly known as "Part D"), as well as programs with the U.S. Department of Defense and U.S. Department of Veterans Affairs. Centene operates local health plans and offers a range of health insurance solutions. It also contracts with other healthcare and commercial organizations to provide specialty services including behavioral health management, care management software, correctional healthcare services, dental benefits management, in-home health services, life and health management, managed vision, pharmacy benefits management, specialty pharmacy and telehealth services.

Centene uses its investor relations website to publish important information about the Company, including information that may be deemed material to investors. Financial and other information about Centene is routinely posted and is accessible on Centene's investor relations website, http://www.centene.com/investors.

Forward-Looking Statements

The information provided in this press release may contain certain forward-looking statements with respect to the financial condition, results of operations and business of Centene and certain plans and objectives of Centene with respect thereto, including the expected benefits of the acquisition of Health Net. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "hope", "aim", "continue", "will", "may", "would", "could" or "should" or other words of similar meaning or the negative thereof. There are several factors which could cause actual plans and results to differ materially from those expressed or implied in forward-looking statements. Such factors include, but are not limited to, the possibility that the expected synergies and value creation from the acquisition will not be realized, or will not be realized within the expected time period, including, but not limited to, as a result of conditions, terms, obligations or restrictions imposed by regulators in connection with their approval of, or consent to, the acquisition; the exertion of management's time and Centene's resources, and other out-of-pocket expenses incurred in connection with complying with the undertakings in connection with certain regulatory approvals; the risk that the businesses will not be integrated successfully; disruption from the acquisition making it more difficult to maintain business and operational relationships; the risk that unexpected costs will be incurred; changes in economic conditions or political conditions; changes in federal or state laws or regulations, including the Patient Protection and Affordable Care Act and the Health Care Education Affordability Reconciliation Act and any regulations enacted thereunder; provider and state contract changes; the outcome of pending legal or regulatory proceedings; reduction in provider payments by governmental payors; the expiration or termination of Centene'sMedicare or Medicaid managed care contracts with federal or state governments; tax matters; increased health care costs; and risks and uncertainties discussed in the reports that Centene has filed with the Securities and Exchange Commission (the "SEC"). These forward-looking statements reflect Centene's current views with respect to future events and are based on numerous assumptions and assessments made by Centene in light of its experience and perception of historical trends, current conditions, business strategies, operating environments, future developments and other factors it believes appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will occur in the future.  The factors described in the context of such forward-looking statements in this announcement could cause Centene's plans with respect to the acquisition, actual results, performance or achievements, industry results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and persons reading this announcement are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this announcement. Centene does not assume any obligation to update the information contained in this announcement (whether as a result of new information, future events or otherwise), except as required by applicable law.  This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain 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)






March 31, 2016


December 31, 2015


(Unaudited)



ASSETS




Current assets:




Cash and cash equivalents

$

3,436



$

1,760


Premium and related receivables

2,529



1,279


Short term investments

269



176


Other current assets

1,317



390


Total current assets

7,551



3,605


Long term investments

3,973



1,927


Restricted deposits

143



115


Property, software and equipment, net

580



518


Goodwill

4,442



842


Intangible assets, net

1,646



155


Other long term assets

317



177


Total assets

$

18,652



$

7,339






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Medical claims liability

$

3,863



$

2,298


Accounts payable and accrued expenses

3,228



976


Return of premium payable

579



207


Unearned revenue

197



143


Current portion of long term debt

4



5


Total current liabilities

7,871



3,629


Long term debt

4,276



1,216


Other long term liabilities

1,052



170


Total liabilities

13,199



5,015


Commitments and contingencies




Redeemable noncontrolling interests

144



156


Stockholders' equity:




Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued or outstanding at March 31, 2016 and December 31, 2015




Common stock, $0.001 par value; authorized 400,000,000 shares; 175,952,159 issued and 170,449,444 outstanding at March 31, 2016, and 126,855,477 issued and 120,342,981 outstanding at December 31, 2015




Additional paid-in capital

4,084



956


Accumulated other comprehensive earnings (loss)

10



(10)


Retained earnings

1,341



1,358


Treasury stock, at cost (5,502,715 and 6,512,496 shares, respectively)

(138)



(147)


Total Centene stockholders' equity

5,297



2,157


Noncontrolling interest

12



11


Total stockholders' equity

5,309



2,168


Total liabilities and stockholders' equity

$

18,652



$

7,339


 

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share data)

(Unaudited)




Three Months Ended March 31,


2016


2015

Revenues:




Premium

$

5,986



$

4,299


Service

425



462


Premium and service revenues

6,411



4,761


Premium tax and health insurer fee

542



370


Total revenues

6,953



5,131


Expenses:




Medical costs

5,311



3,861


Cost of services

367



402


General and administrative expenses

722



396


Amortization of acquired intangible assets

9



7


Premium tax expense

450



281


Health insurer fee expense

74



55


Total operating expenses

6,933



5,002


Earnings from operations

20



129


Other income (expense):




Investment and other income

15



9


Interest expense

(33)



(10)


Earnings from continuing operations, before income tax expense

2



128


Income tax expense

17



63


Earnings (loss) from continuing operations, net of income tax expense

(15)



65


Discontinued operations, net of income tax

(1)



(1)


Net earnings (loss)

(16)



64


(Earnings) loss attributable to noncontrolling interests

(1)



(1)


Net earnings (loss) attributable to Centene Corporation

$

(17)



$

63






Amounts attributable to Centene Corporation common shareholders:

Earnings (loss) from continuing operations, net of income tax expense

$

(16)



$

64


Discontinued operations, net of income tax

(1)



(1)


Net earnings (loss)

$

(17)



$

63






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

Basic:




Continuing operations

$

(0.13)



$

0.54


Discontinued operations

(0.01)



(0.01)


Basic earnings (loss) per common share

$

(0.14)



$

0.53






Diluted:




Continuing operations

$

(0.13)



$

0.52


Discontinued operations

(0.01)



(0.01)


Diluted earnings (loss) per common share

$

(0.14)



$

0.51






Weighted average number of common shares outstanding:

Basic

125,543,076


118,783,755

Diluted

125,543,076


122,572,366

 

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)




Three Months Ended March 31,


2016


2015

Cash flows from operating activities:




Net earnings (loss)

$

(16)



$

64


Adjustments to reconcile net earnings (loss) to net cash provided by operating activities




Depreciation and amortization

35



27


Stock compensation expense

51



16


Deferred income taxes

(17)



(6)


Gain on contingent consideration

(1)



(10)


Changes in assets and liabilities




Premium and related receivables

(174)



(334)


Other current assets

(35)



(3)


Medical claims liabilities

196



227


Unearned revenue

(64)



(51)


Accounts payable and accrued expenses

35



58


Other long term liabilities

192



68


Other operating activities, net

(7)



(11)


Net cash provided by operating activities

195



45


Cash flows from investing activities:




Capital expenditures

(45)



(27)


Purchases of investments

(212)



(307)


Sales and maturities of investments

203



111


Investments in acquisitions, net of cash acquired

(782)



(9)


Other investing activities, net



7


Net cash used in investing activities

(836)



(225)


Cash flows from financing activities:




Proceeds from borrowings

3,790



500


Payment of long term debt

(1,388)



(253)


Common stock repurchases

(22)



(4)


Purchase of noncontrolling interest

(14)




Debt issue costs

(51)



(4)


Other financing activities, net

2



(3)


Net cash provided by financing activities

2,317



236


Net increase in cash and cash equivalents

1,676



56


Cash and cash equivalents, beginning of period

1,760



1,610


Cash and cash equivalents, end of period

$

3,436



$

1,666


Supplemental disclosures of cash flow information:




Interest paid

$

3



$

2


Income taxes paid

$

33



$

24


Equity issued in connection with acquisitions

$

3,105



$

13


 

CENTENE CORPORATION

SUPPLEMENTAL FINANCIAL DATA FROM CONTINUING OPERATIONS














Q1


Q4


Q3


Q2


Q1



2016


2015


2015


2015


2015

MANAGED CARE MEMBERSHIP BY STATE











Arizona


607,000



440,900



223,600



210,900



202,200


Arkansas


50,700



41,900



40,900



45,400



43,200


California


3,125,400



186,000



183,900



178,700



171,200


Florida


660,800



510,400



486,500



470,300



463,100


Georgia


495,500



408,600



406,700



405,000



405,600


Illinois


239,100



207,500



211,300



209,100



184,800


Indiana


290,300



282,100



276,700



250,400



227,700


Kansas


141,100



141,000



137,500



143,000



143,700


Louisiana


381,200



381,900



358,800



358,900



359,500


Massachusetts


52,400



61,500



63,700



61,500



64,500


Michigan


2,600



4,800



6,600



2,700




Minnesota


9,500



9,600



9,400



10,900



9,500


Mississippi


328,300



302,200



301,000



250,600



141,900


Missouri


100,000



95,100



88,400



82,600



75,600


New Hampshire


81,500



71,400



71,900



70,800



67,500


Ohio


314,000



302,700



308,100



287,100



296,000


Oregon


209,000



98,700



99,800






South Carolina


107,700



104,000



104,800



112,600



106,000


Tennessee


20,100



20,000



20,200



21,400



20,800


Texas


1,036,700



983,100



976,500



969,700



974,900


Vermont


1,500



1,700



1,500



2,800



1,600


Washington


226,500



209,400



208,600



214,100



207,100


Wisconsin


78,400



77,100



78,100



78,600



82,100


Total at-risk membership


8,559,300



4,941,600



4,664,500



4,437,100



4,248,500


TRICARE eligibles


2,819,700










Non-risk membership


161,400



166,300



169,900



176,600



153,200


Total


11,540,400



5,107,900



4,834,400



4,613,700



4,401,700













MANAGED CARE MEMBERSHIP BY LINE OF BUSINESS







Medicaid:











TANF, CHIP & Foster Care


5,464,200



3,763,400



3,719,900



3,536,000



3,372,200


ABD & LTC


757,600



478,600



473,700



454,000



457,500


Behavioral Health


456,500



456,800



216,700



203,900



195,100


Commercial


1,518,900



146,100



155,600



167,400



161,700


Medicare & Duals


303,100



37,400



39,300



28,200



19,400


Correctional


59,000



59,300



59,300



47,600



42,600


Total at-risk membership


8,559,300



4,941,600



4,664,500



4,437,100



4,248,500


TRICARE eligibles


2,819,700










Non-risk membership


161,400



166,300



169,900



176,600



153,200


Total


11,540,400



5,107,900



4,834,400



4,613,700



4,401,700













NUMBER OF EMPLOYEES

28,000



18,200



17,100



15,800



14,800


 


Q1


Q4


Q3


Q2


Q1


2016


2015


2015


2015


2015











DAYS IN CLAIMS PAYABLE (a)

66



44



45



46



46


(a) Days in Claims Payable is a calculation of Medical Claims Liabilities at the end of the period divided by average claims expense per calendar day for such period.  On a pro-forma basis, DCP for Q1 2016 is 42, reflecting adjusted medical costs to include a full quarter of Health Net operations.











CASH, INVESTMENTS AND RESTRICTED DEPOSITS (in millions)

Regulated

$

7,682



$

3,900



$

3,834



$

3,667



$

3,345


Unregulated

139



78



91



82



97


Total

$

7,821



$

3,978



$

3,925



$

3,749



$

3,442












DEBT TO CAPITALIZATION

44.6

%


36.0

%


38.4

%


37.1

%


38.0

%

DEBT TO CAPITALIZATION EXCLUDING NON-RECOURSE DEBT (b)

44.3

%


34.7

%


37.1

%


35.7

%


36.6

%

(b) The non-recourse debt represents the Company's mortgage note payable ($66 million at March 31, 2016).

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

 

OPERATING RATIOS


Three Months Ended March 31,


2016


2015

Health Benefits Ratio

88.7

%


89.8

%

General & Administrative expense ratio

11.3

%


8.3

%

General & Administrative expense ratio excluding Health Net acquisition related expenses

8.3

%


8.3

%

 

MEDICAL CLAIMS LIABILITY

The changes in medical claims liability are summarized as follows (in millions):

Balance, March 31, 2015


$

1,950


Acquisitions


1,450


Incurred related to:



Current period


18,900


Prior period


(208)


Total incurred


18,692


Paid related to:



Current period


16,520


Prior period


1,709


Total paid


18,229


Balance, March 31, 2016


$

3,863


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 return of premium programs, approximately $13 million of the "Incurred related to: Prior period" was recorded as a reduction to premium revenues.

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 March 31, 2015 and prior.

 


To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/centene-corporation-reports-2016-first-quarter-results--updates-2016-guidance-300257150.html

SOURCE Centene Corporation

Investor Relations Inquiries, Edmund E. Kroll, Jr., Senior Vice President, Finance & Investor Relations, (212) 759-0382, Media Inquiries, Marcela Manjarrez-Hawn, Senior Vice President and Chief Communications Officer, (314) 445-0790