Centene Corporation Reports 2007 Second Quarter Results

ST. LOUIS--(BUSINESS WIRE)--Centene Corporation (NYSE: CNC) today announced its financial results for the quarter ended June 30, 2007. The revenues, general and administrative expenses and related financial ratios included in this release present premium taxes on a gross basis consistent with our past reporting practice.

---------------------------------------------------------------------
                         Q2 2007 Highlights
Total Revenues (in millions)                                   $727.7
Medicaid/SCHIP HBR                                               80.6%
Diluted EPS (as reported)                                      $ 0.40
Diluted EPS excluding FirstGuard activity                      $ 0.27
----------------------------------------------------------------------
    Second Quarter Summary

    --  Quarter-end Medicaid Managed Care membership of 1.1 million

    --  Revenues of $727.7 million, a 46.9% increase over the 2006
        second quarter.

    --  Earnings per diluted share of $0.27, excluding FirstGuard
        activity, compared to $0.11 in the 2006 second quarter.

    --  Health Benefits Ratio (HBR) for Centene's Medicaid and SCHIP
        populations, which reflects medical costs as a percent of
        premium revenues, of 80.6%.

    --  Medicaid Managed Care G&A expense ratio of 14.0% and Specialty
        Services G&A ratio of 15.8%.

    --  Operating cash flows of $23.9 million.

    --  Days in claims payable of 46.8.

    Other Events

    --  In April 2007, we acquired PhyTrust of South Carolina, a
        physician-driven company that served over 31,100 members at
        June 30, 2007.

    --  In July 2007, we acquired a minority interest in Access Health
        Solutions, LLC (Access), the third largest Medicaid managed
        care entity in Florida. Access currently serves approximately
        90,000 members.

Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "During the second quarter, overall results for revenue, membership growth and earnings were consistent with our expectations, and our Medicaid and SCHIP HBR improved by 170 basis points sequentially.

"In Texas, we continue to see growing membership in both SCHIP and SSI, with the Texas STAR Plus overall membership consistent with our expectations. To date, we have 31,400 Star Plus members under management. Recently, the state of Texas indicated its intent to delay the implementation of the Foster Care contract award, which we won in March. We now expect operations to commence in 2008. The state is currently working on its readiness review and we are supporting them in this process. We remain confident that our technology platform will enable us to provide the state more effective tracking of these members and offer a more consistent quality of healthcare for the recipients.

"In Georgia, membership was 281,400, within our guided range. While cost and utilization trends in the state are high, we began to see those trends moderate later in the quarter. We expect trends to continue to moderate as our medical management initiatives take hold and have implemented margin protection initiatives effective August 1 with the state.

"We will continue to focus our efforts on opportunities to effectively manage our costs as we build the business. There remain numerous avenues to grow on a sustainable basis in Medicaid managed care." concluded Neidorff.

The following table depicts membership in Centene's managed care organizations by state at June 30, 2007 and 2006:

                                                    2007       2006
                                                ----------- ----------
 Georgia                                            281,400    216,000
 Indiana                                            161,700    193,000
 New Jersey                                          59,100     59,000
 Ohio                                               128,200     73,100
 South Carolina                                      31,100         --
 Texas                                              333,900    235,800
 Wisconsin                                          136,100    174,600
                                                  ---------  ---------
    Subtotal                                      1,131,500    951,500

 Kansas and Missouri                                     --    150,000
                                                  ---------  ---------
    Total                                         1,131,500  1,101,500
                                                  =========  =========

The following table depicts membership in Centene's managed care organizations by member category at June 30, 2007 and 2006:

                                               2007         2006
                                           -----------   ----------
Medicaid                                       846,900      755,400
SCHIP                                          216,500      179,700
SSI                                             68,100(a)    16,400(b)
                                            ----------   ----------
    Subtotal                                 1,131,500      951,500

Kansas and Missouri Medicaid/SCHIP members          --      150,000
                                            ----------   ----------
    Total                                    1,131,500    1,101,500
                                            ==========   ==========

  (a) 64,000 at-risk; 4,100 ASO
  (b) 8,900 at-risk; 7,500 ASO
----------------------------------------------------------------------
    Statement of Operations

    --  For the 2007 second quarter, revenues increased 46.9% to
        $727.7 million from $495.3 million in the 2006 second quarter.

    --  The HBR for Centene's Medicaid and SCHIP populations, which
        reflects medical costs as a percent of premium revenues, was
        80.6%, a decrease of 3.4% over 2006. The HBR for the three
        months ended June 30, 2006, includes approximately 2.2% ($9.7
        million) for adverse medical cost development in estimated
        medical claims liabilities from the first quarter of 2006. The
        decrease in the current year is primarily attributable to the
        adverse development in the prior year and increased premium
        taxes. Sequentially, our Medicaid and SCHIP HBR decreased from
        82.3% in the 2007 first quarter to 80.6% because of decreases
        in our Indiana, Texas, and Wisconsin markets, primarily
        related to inpatient and pharmacy cost trends. The 2007 second
        quarter reflects expected claims reserve development and is
        based on consistent reserving methodology.

    --  G&A expense as a percent of revenues for the Medicaid Managed
        Care segment was 14.0% in the second quarter of 2007 compared
        to 12.3% in the second quarter of 2006. The increase in the
        Medicaid Managed Care G&A expense ratio for the three months
        ended June 30, 2007 primarily reflects increased premium
        taxes. Premium taxes were $19.9 million in the 2007 second
        quarter and $6.9 million in the 2006 second quarter. This
        increase was offset by the leveraging of our expenses over
        higher revenues, especially in our Georgia health plan. The
        second quarter of 2006 included two months of Georgia
        implementation costs for which there was no associated
        revenue.

    --  Operating earnings were $16.9 million, including a $3.3
        million gain on the sale of FirstGuard Missouri and $3.4
        million of net expense for other FirstGuard activity.
        Excluding the gain and other FirstGuard activity, operating
        earnings were $17.0 million compared to $6.3 million in the
        2006 second quarter.

    --  The second quarter results included a tax benefit from the
        stock abandonment of our Missouri health plan, a gain from the
        sale of our Missouri health plan, a contribution to our
        charitable foundation from the sale proceeds and additional
        FirstGuard activity. The net effect of these activities was
        $0.13 accretive to earnings per diluted share.

    --  Earnings per diluted share of $0.40. Earnings per diluted
        share of $0.27, excluding the FirstGuard activity, compared to
        $0.11 in the 2006 second quarter.

    --  For the six months ended June 30, 2007, revenues increased
        47.2% to $1.4 billion from $950.4 million for the same period
        in the prior year. Medicaid Managed Care G&A expenses as a
        percent of revenues increased to 13.5% in the first six months
        of 2007 compared to 12.1% in the first six months of 2006.
        Earnings from operations, excluding the FirstGuard activity,
        increased to $32.8 million in the first six months of 2007
        from $18.9 million in the first six months of 2006. Net
        earnings, excluding the FirstGuard activity, were $23.6
        million or $0.53 per diluted share in the first six months of
        2007.

    Balance Sheet and Cash Flow

At June 30, 2007, the Company had cash and investments of $593.7 million, including $527.9 million held by its regulated entities and $65.8 million held by its unregulated entities. Medical claims liabilities totaled $295.3 million, representing 46.8 days in claims payable. Total debt was $201.1 million and debt to capitalization was 34.0%.

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

Days in claims payable, March 31, 2007                            46.4
Remaining FirstGuard reserves                                      0.4
                                                                  ----
Days in claims payable, June 30, 2007                             46.8
                                                                  ====

Outlook

The table below depicts the Company's guidance for the 2007 third quarter and full year.

                                             Q3 2007 (1)      2007 (1)
                                             ----------- -------------
                                              Low  High   Low    High
                                             ----- ----- ------ ------
Revenue (in millions)                        $ 740 $ 750 $2,900 $2,940
Earnings per diluted share                   $0.35 $0.38 $ 1.36 $ 1.45
 (1) Excludes FirstGuard Activity
-------------------------------------------- -------------------------

Eric R. Slusser, Centene's Chief Financial Officer, stated, "The 2007 third quarter and full year guidance reflects continued in-range HBR performance, reasonable rate increases, continued SSI earnings growth and rigorous G&A focus. The tightened ranges for 2007 revenue and earnings per share reflect the delay of the Texas Foster Care Program from the 2007 fourth quarter to 2008."

Conference Call

As previously announced, the Company will host a conference call Tuesday, July 24, 2007, at 8:30 A.M. (Eastern Time) to review the financial results for the second quarter ended June 30, 2007, and to discuss its business outlook. Michael F. Neidorff, Eric R. Slusser and J. Per Brodin will host the conference call. Investors are invited to participate in the conference call by dialing 800-273-1254 in the U.S. and Canada, 706-679-8592 from abroad, or via a live internet broadcast on the Company's website at www.centene.com, under the Investor Relations section. A replay will be available for on-demand listening shortly after the completion of the call until 11:59 P.M. (Eastern Time) on August 7, 2007 at the aforementioned URL, or by dialing 800-642-1687 in the U.S. and Canada, or 706-645-9291 from abroad, and entering access code 1100685.

Non-GAAP Financial Presentation

The Company is providing certain non-GAAP financial measures in this release as the Company believes that these figures are helpful in allowing individuals to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently.

The non-GAAP information presented above in the "highlights" table, third bullet under "Second Quarter Summary" and fourth through seventh bullets under "Statement of Operations" excludes the tax benefit related to the stock of our Kansas and Missouri health plans and other activity for the Kansas and Missouri health plans, collectively, FirstGuard Activity. This exclusion has been made in the non-GAAP financial measures as management believes that the tax benefit is an unusual event and the Kansas and Missouri health plans are not indicative of future company operations.

The Company uses the presented non-GAAP financial measures internally to focus management 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.

The following table reconciles the Company's Statement of Operations for the second quarter of 2007 on a GAAP basis to a non-GAAP basis. The non-GAAP basis excludes the FirstGuard Activity (in thousands, except share data).

                                              Three Months Ended
                                                 June 30, 2007
                                          ----------------------------
                                                   FirstGuard
                                            GAAP    Activity  Non-GAAP
                                          -------- ---------- --------

Total revenues                            $727,738    $     7 $727,731
Expenses:
    Medical costs                          574,862       (284) 575,146
    Cost of services                        16,670         --   16,760
    General and administrative expenses    122,596      3,715  118,881
    Gain on sale of FirstGuard Missouri     (3,254)    (3,254)      --
                                          -------- ---------- --------
      Total operating expenses             710,874        177  710,697
                                          -------- ---------- --------
       Earnings (loss) from operations      16,864       (170)  17,034
    Investment and other income, net         1,735       (640)   2,375
                                          -------- ---------- --------
         Earnings (loss) before income
          taxes                             18,599       (810)  19,409
Income tax (benefit) expense                   817     (6,557)   7,374
                                          -------- ---------- --------
       Net earnings                       $ 17,782    $ 5,747 $ 12,035
                                          ======== ========== ========

Diluted earnings per common share         $   0.40            $   0.27

Premium Tax Presentation

The Company reports premium taxes as a component of revenues and general and administrative expenses (gross basis). The following table shows the Company's Medicaid/SCHIP HBR and the Medicaid Managed Care G&A ratio on a gross basis as reported as well as on a net basis with premium taxes recorded as a reduction of revenues for analytical purposes.

                                                 Medicaid Managed Care
                            Medicaid/SCHIP HBR         G&A Ratio
            Premium Taxes  --------------------- ---------------------
            (in thousands) Current (Gross)  Net  Current (Gross)  Net
            -------------- --------------- ----- --------------- -----
2007
    Q1             $18,216          82.3%  84.8%           13.0% 10.5%
    Q2              19,874          80.6   83.1            14.0  11.5
            --------------
Year to Date       $38,090          81.5   84.0            13.5  11.0
            ==============

2006
    Q1             $ 4,305          82.8%  83.7%           11.9% 11.0%
    Q2               6,876          84.0   85.3            12.3  11.0
    Q3              13,830          82.0   84.0            13.0  11.0
    Q4              17,442          82.1   84.4            12.7  10.4
            --------------
Total Year         $42,453          82.6   84.3            12.6  10.8
            ==============

About Centene Corporation

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

The information provided in this press release contains forward-looking statements that relate to future events and future financial performance of Centene. Subsequent events and developments may cause the Company's estimates to change. The Company disclaims any obligation to update this forward-looking financial information in the future. Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, regulatory, competitive and other factors that may cause Centene's or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Actual results may differ from projections or estimates due to a variety of important factors, including Centene's ability to accurately predict and effectively manage health benefits and other operating expenses, competition, changes in healthcare practices, changes in federal or state laws or regulations, inflation, provider contract changes, new technologies, reduction in provider payments by governmental payors, major epidemics, disasters and numerous other factors affecting the delivery and cost of healthcare. The expiration, cancellation or suspension of Centene's Medicaid Managed Care contracts by state governments would also negatively affect Centene.

                 CENTENE CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS
                  (In thousands, except share data)

                                               June 30,   December 31,
                                                 2007         2006
                                              ----------- ------------
                                                    (Unaudited)
                   ASSETS
Current assets:
     Cash and cash equivalents                $  236,443   $  271,047
     Premium and related receivables             113,491       91,664
     Short-term investments, at fair value
      (amortized cost $43,636 and $67,199,
      respectively)                               43,360       66,921
     Other current assets                         46,257       22,189
                                              ----------- ------------
       Total current assets                      439,551      451,821
Long-term investments, at fair value
 (amortized cost $288,993 and $146,980,
 respectively)                                   287,719      145,417
Restricted deposits, at fair value (amortized
 cost $26,328 and $25,422, respectively)          26,220       25,265
Property, software and equipment, net            131,829      110,688
Goodwill                                         136,316      135,877
Other intangible assets, net                      14,472       16,202
Other assets                                      13,895        9,710
                                              ----------- ------------
        Total assets                          $1,050,002   $  894,980
                                              =========== ============

    LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Medical claims liabilities               $  295,340   $  280,441
     Accounts payable and accrued expenses       111,697       72,723
     Unearned revenue                             42,019       33,816
     Current portion of long-term debt               972          971
                                              ----------- ------------
       Total current liabilities                 450,028      387,951
Long-term debt                                   200,162      174,646
Other liabilities                                  8,779        5,960
                                              ----------- ------------
        Total liabilities                        658,969      568,557
Stockholders' equity:
     Common stock, $.001 par value;
      authorized 100,000,000 shares; issued
      and outstanding 43,664,105 and
      43,369,918 shares, respectively                 44           44
     Additional paid-in capital                  217,705      209,340
     Accumulated other comprehensive income:
     Unrealized loss on investments, net of
      tax                                         (1,046)      (1,251)
     Retained earnings                           174,330      118,290
                                              ----------- ------------
        Total stockholders' equity               391,033      326,423
                                              ----------- ------------
        Total liabilities and stockholders'
         equity                               $1,050,002   $  894,980
                                              =========== ============
                 CENTENE CORPORATION AND SUBSIDIARIES

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

                     For the Three Months      For the Six Months
                        Ended June 30,            Ended June 30,
                   ------------------------  ------------------------
                      2007         2006         2007         2006
                   -----------  -----------  -----------  -----------
                         (Unaudited)               (Unaudited)

Revenues:
   Premium         $   707,723  $   476,079  $ 1,356,966  $   911,641
   Service              20,015       19,214       41,607       38,730
                   -----------  -----------  -----------  -----------
   Total revenues      727,738      495,293    1,398,573      950,371
                   -----------  -----------  -----------  -----------
Expenses:
   Medical costs       574,862      400,229    1,110,268      761,901
   Cost of
    services            16,670       14,317       32,300       29,905
   General
    and
    administrative
    expenses           122,596       74,441      229,462      139,663
   Gain on sale of
    FirstGuard
    Missouri            (3,254)          --       (7,472)          --
                   -----------  -----------  -----------  -----------
   Total operating
    expenses           710,874      488,987    1,364,558      931,469
                   -----------  -----------  -----------  -----------
Earnings from
 operations             16,864        6,306       34,015       18,902
Other income
 (expense):
   Investment and
    other income         5,948        3,891       10,449        7,431
   Interest
    expense             (4,213)      (2,456)      (7,345)      (4,454)
                   -----------  -----------  -----------  -----------
     Earnings
      before
      income taxes      18,599        7,741       37,119       21,879
Income tax
 (benefit) expense         817        2,776      (18,874)       8,148
                   -----------  -----------  -----------  -----------
   Net earnings    $    17,782  $     4,965  $    55,993  $    13,731
                   ===========  ===========  ===========  ===========

Earnings per
 share:
   Basic earnings
    per common
    share          $      0.41  $      0.12  $      1.29  $      0.32
   Diluted
    earnings per
    common share   $      0.40  $      0.11  $      1.25  $      0.31

Weighted average
 number of shares
 outstanding:
   Basic            43,617,360   43,169,590   43,525,848   43,079,243
   Diluted          44,815,369   44,839,149   44,871,114   44,794,558
                 CENTENE CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (In thousands)

                                                   Six Months Ended
                                                        June 30,
                                                  -------------------
                                                    2007      2006
                                                  --------- ---------
                                                      (Unaudited)

Cash flows from operating activities:
 Net earnings                                     $  55,993 $  13,731
 Adjustments to reconcile net earnings to net
  cash provided by operating activities --
   Depreciation and amortization                     12,991     9,541
   Stock compensation expense                         7,837     7,154
   Deferred income taxes                               (327)     (287)
   Gain on sale of FirstGuard Missouri               (7,472)       --
 Changes in assets and liabilities --
   Premium and related receivables                  (21,823)  (45,710)
   Other current assets                             (24,583)    1,859
   Other assets                                        (931)   (1,123)
   Medical claims liabilities                        15,035    16,690
   Unearned revenue                                   8,203     1,705
   Accounts payable and accrued expenses             11,832    10,658
   Other operating activities                         3,119       224
                                                  --------- ---------
       Net cash provided by operating activities     59,874    14,442
                                                  --------- ---------
Cash flows from investing activities:
 Purchases of property, software and equipment      (29,352)  (23,472)
 Purchases of investments                          (290,962) (113,665)
 Sales and maturities of investments                196,407    97,445
 Proceeds from asset sales                           14,102        --
 Acquisitions, net of cash acquired                  (5,336)  (60,710)
                                                  --------- ---------
       Net cash used in investing activities       (115,141) (100,402)
                                                  --------- ---------
Cash flows from financing activities:
 Proceeds from exercise of stock options              2,651     3,761
 Proceeds from borrowings                           191,000    71,967
 Payment of long-term debt                         (165,484)   (4,487)
 Excess tax benefits from stock compensation            797     1,977
 Common stock repurchases                            (3,231)   (3,180)
 Debt issue costs                                    (5,070)       --
                                                  --------- ---------
       Net cash provided by financing activities     20,663    70,038
                                                  --------- ---------
       Net decrease in cash and cash equivalents    (34,604)  (15,922)
                                                  --------- ---------
Cash and cash equivalents, beginning of period      271,047   147,358
                                                  --------- ---------
Cash and cash equivalents, end of period          $ 236,443 $ 131,436
                                                  ========= =========

 Interest paid                                    $   3,738 $   4,598
 Income taxes paid                                $   6,049 $   1,645
                         CENTENE CORPORATION

                     SUPPLEMENTAL FINANCIAL DATA

                                  Q2        Q1        Q4        Q3
                                 2007      2007      2006      2006
                               --------- --------- --------- ---------
MEMBERSHIP
Medicaid Managed Care:
   Georgia                       281,400   291,300   308,800   252,600
   Indiana                       161,700   176,700   183,100   198,100
   New Jersey                     59,100    59,100    58,900    59,100
   Ohio                          128,200   118,300   109,200    88,300
   South Carolina                 31,100        --        --        --
   Texas                         333,900   318,500   298,500   259,900
   Wisconsin                     136,100   139,400   164,800   167,100
                               --------- --------- --------- ---------
     Subtotal                  1,131,500 1,103,300 1,123,300 1,025,100
   Kansas and Missouri                --        --   138,900   144,600
                               --------- --------- --------- ---------
        TOTAL                  1,131,500 1,103,300 1,262,200 1,169,700
                               ========= ========= ========= =========

   Medicaid                      846,900   839,600   887,300   818,000
   SCHIP                         216,500   211,200   216,200   189,100
   SSI                            68,100    52,500    19,800    18,000
                               --------- --------- --------- ---------
     Subtotal                  1,131,500 1,103,300 1,123,300 1,025,100
   Kansas and Missouri
    Medicaid and SCHIP members        --        --   138,900   144,600
                               --------- --------- --------- ---------
        TOTAL                  1,131,500 1,103,300 1,262,200 1,169,700
                               ========= ========= ========= =========

Specialty Services(a):
   Arizona                        95,200    93,600    94,500    94,500
   Kansas                         37,500    36,600    36,600    37,500
                               --------- --------- --------- ---------
        TOTAL                    132,700   130,200   131,100   132,000
                               ========= ========= ========= =========

(a) Includes behavioral health contracts only.

REVENUE PER MEMBER(b)            $198.98   $185.90   $173.75   $169.98

CLAIMS(b)
   Period-end inventory          284,800   326,000   296,100   233,500
   Average inventory             244,600   239,400   195,700   188,600
   Period-end inventory per
    member                          0.26      0.30      0.23      0.20

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

                                  Q2        Q1        Q4        Q3
                                 2007      2007      2006      2006
                               --------- --------- --------- ---------
DAYS IN CLAIMS PAYABLE (c)          46.8      46.4      46.4      45.3
(c) Days in Claims Payable is a calculation of Medical Claims
 Liabilities at the end of the period divided by average claims
 expense per calendar day for such period.

CASH AND INVESTMENTS (in millions)
   Regulated                     $ 527.9   $ 491.0   $ 479.8   $ 411.1
   Unregulated                      65.8      71.8      28.9      29.0
                               --------- --------- --------- ---------
        TOTAL                    $ 593.7   $ 562.8   $ 508.7   $ 440.1
                               ========= ========= ========= =========

DEBT TO CAPITALIZATION (d)         34.0%     35.3%     35.0%     35.6%
(d)Debt to Capitalization is calculated as follows: total debt divided
 by (total debt + equity).
 HEALTH BENEFITS RATIO BY CATEGORY:

                                           Three Months  Six Months
                                              Ended         Ended
                                             June 30,      June 30,
                                           ------------  ------------
                                           2007   2006   2007   2006
                                           -----  -----  -----  -----
Medicaid and SCHIP                          80.6%  84.0%  81.5%  83.4%
SSI                                         87.5   87.6   87.2   87.6
Specialty Services                          75.9   83.7   77.5   83.9
GENERAL AND ADMINISTRATIVE EXPENSE RATIO BY BUSINESS SEGMENT:

                                           Three Months  Six Months
                                              Ended         Ended
                                             June 30,      June 30,
                                           ------------  ------------
                                           2007   2006   2007   2006
                                           -----  -----  -----  -----
Medicaid Managed Care                       14.0%  12.3%  13.5%  12.1%
Specialty Services                          15.8   17.4   15.8   19.3
MEDICAL CLAIMS LIABILITIES (In thousands)
Four rolling quarters of the changes in medical claims liabilities are
 summarized as follows:

Balance, June 30, 2006                                     $  187,204
Acquisitions                                                    1,788
Incurred related to:
  Current period                                            2,180,604
  Prior period                                                (12,426)
                                                           ----------
     Total incurred                                         2,168,178
                                                           ==========
Paid related to:
  Current period                                            1,889,731
  Prior period                                                172,099
                                                           ----------
     Total paid                                             2,061,830
                                                           ----------
Balance, June 30, 2007                                     $  295,340
                                                           ==========

Centene's claims reserving process utilizes a consistent actuarial methodology to estimate Centene's ultimate liability. Any reduction in the "Incurred related to: Prior period" claims may be offset as Centene actuarially determines "Incurred related to: Current period." As such, only in the absence of a consistent reserving methodology would favorable development of prior period claims liability estimates reduce medical costs. Centene believes it has consistently applied its claims reserving methodology in each of the periods presented.

Source: Centene Corporation