ST. LOUIS, Feb. 9 /PRNewswire-FirstCall/ -- Centene Corporation (NYSE: CNC) today announced its financial results for the quarter and year ended December 31, 2009. The results of operations for our New Jersey health plan, University Health Plans, are classified as discontinued operations. The discussions below, with the exception of cash flow information, are in the context of continuing operations and all financial ratios exclude premium taxes.
2009 Highlights
Q4 Full Year
---- ----------
Premium and Service
Revenues (in millions) $1,050.8 $3,878.3
Consolidated HBR 83.9% 83.5%
Diluted EPS $0.53 $1.94
Cash flow from
operations (in
millions) $71.3 $248.2
Fourth Quarter Highlights
-- Quarter-end managed care at-risk membership of 1,455,600, an increase of
259,600 lives year over year.
-- Premium and Service Revenues of $1,050.8 million, representing 19.6%
year over year growth.
-- Health Benefits Ratio (HBR) of 83.9%.
-- General and Administrative (G&A) expense ratio of 12.7%.
-- Cash flow from operations of $71.3 million.
-- Days in claims payable of 50.1, including pharmacy claims payable.
-- Diluted earnings per share from continuing operations of $0.53.
Other Events
-- During the fourth quarter of 2009, CeltiCare Health Plan of
Massachusetts enrolled 27,300 members under our new managed healthcare
service contracts for the Commonwealth Bridge and Commonwealth Care
programs.
-- In November 2009, we announced we were selected to provide managed care
services in Mississippi to Medicaid recipients through the Mississippi
Coordinated Access Network (MississippiCan) program. We are working with
the State and currently expect a 2010 start date.
-- In December 2009, Don Imholz was promoted to Executive Vice President
and Chief Information Officer, and in January 2010, Toni Simonetti was
appointed Senior Vice President of Public Affairs.
-- We recently completed the sale of an additional 5.75 million shares of
common stock, including the underwriters overallotment option, for a
public offering price of $19.25 per share. Net proceeds from the sale of
the additional shares were approximately $104.5 million. As a result of
the sale of these shares, the pro-forma debt to capital ratio is reduced
to 23.6% from 33.2% at December 31, 2009.
Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "Our commitment to quality and fundamentals drove solid 2009 results and we endeavor to maintain this momentum in 2010."
The following table depicts membership in Centene's managed care organizations, by state, at December 31, 2009 and 2008:
December 31,
------------
2009 2008
---- ----
Arizona 18,100 14,900
Florida 102,600 -
Georgia 309,700 288,300
Indiana 208,100 175,300
Massachusetts 27,800 -
Ohio 150,800 133,400
South Carolina 48,600 31,300
Texas 455,100 428,000
Wisconsin 134,800 124,800
------- -------
Total at-risk membership 1,455,600 1,196,000
--------- ---------
Non-risk membership 63,700* 3,700
------- -----
Total 1,519,300 1,199,700
========= =========
* Increase mainly due to consolidation of our Access Health Solutions LLC
investment, effective January 1, 2009.
The following table depicts membership in Centene's managed care organizations, by member category, at December 31, 2009 and 2008:
December 31,
------------
2009 2008
---- ----
Medicaid 1,081,400 877,400
CHIP & Foster Care 263,600 257,300
ABD & Medicare 82,800 61,300
Other State programs 27,800 -
------ ---
Total at-risk membership 1,455,600 1,196,000
--------- ---------
Non-risk membership 63,700 3,700
------ -----
Total 1,519,300 1,199,700
========= =========
Statement of Operations
For the fourth quarter of 2009, Premium and Service Revenues increased 19.6% to $1,050.8 million from $878.8 million in the fourth quarter of 2008. The increase was primarily driven by membership growth in all states, premium rate increases, the consolidation of Access and conversion of members to our at-risk plan in Florida. The consolidated HBR, which reflects medical costs as a percent of premium revenues, was 83.9%. A reconciliation of the change in HBR from the prior year same period and from the immediately preceding quarter is presented below:
Q4:2009 vs. Q4:2008 Q4:2009 vs. Q3:2009
------------------- -------------------
Fourth Quarter 2008 82.3% Third Quarter 2009 83.7%
New markets reserved at New markets reserved at higher
higher rates 1.6 rates 1.1
Impact of additional
costs related to the Impact of additional costs
flu 0.8 related to the flu 0.3
Decrease in Texas CHIP/
Perinate rates 0.6 Rate increases (1.2)
----
Improvements in ABD
markets (1.7) Fourth Quarter 2009 83.9%
====
Net change in other
markets 0.3
---
Fourth Quarter 2009 83.9%
====
The increase in the fourth quarter of 2009 over the comparable period in 2008 was due to the effect of reserving at higher rates for new markets, the March 1, 2009 rate decrease for our CHIP/Perinate product in Texas which brought the HBR more in line with our normal range and the impact of additional costs related to the flu. We also experienced improvements in our ABD product, particularly in Ohio and South Carolina. Sequentially, the increase in the HBR reflects the impact of the aforementioned new markets, additional costs related to the flu along with the effect of rate increases, including the rate increase in Georgia for the period July 1, 2009 to December 31, 2009, recorded in the fourth quarter. Consolidated G&A expense as a percent of premium and service revenues was 12.7% in the fourth quarter of 2009, a decrease from 13.8% in the fourth quarter of 2008. The reduction in the G&A ratio between years reflects improved leveraging of our costs over a higher revenue base and the impact of additional revenue from new business (Florida and South Carolina). Earnings per diluted share from continuing operations were $0.53, compared to $0.53 in the fourth quarter of 2008. When compared to the fourth quarter of 2008, we anticipated and experienced an increase in costs related to the flu of approximately $8.3 million. This was partially offset by decreases in pharmacy and other medical expense categories and a lower G&A expense ratio as discussed above. For the year ended December 31, 2009, Premium and Service Revenues increased 18.4% to $3.9 billion in 2009 from $3.3 billion in 2008. G&A expenses as a percent of Premium and Service Revenues decreased to 13.3% in 2009, compared to 13.6% in 2008. Earnings from operations increased to $138.1 million in 2009 from $131.6 million in 2008. Net earnings from continuing operations, were $86.1 million, or $1.94 per diluted share in 2009 compared to $84.2 million, or $1.90 per diluted share in 2008. Recording the Georgia premium rate increase for the period from July 1, 2007 to December 31, 2007 during the first quarter of 2008 had the effect of increasing our 2008 revenue and pre-tax earnings by $20.8 million, or $0.28 per diluted share.
Balance Sheet and Cash Flow
At December 31, 2009, the Company had cash and investments of $986.1 million, including $949.9 million held by its regulated entities and $36.2 million held by its unregulated entities. Medical claims liabilities totaled $470.9 million, representing 50.1 days in claims payable, an increase of 1.2 days from September 30, 2009. Total debt was $307.7 million and debt to capitalization was 33.2%. Year to date cash flow from operations was $248.2 million.
Days in claims payable have been adjusted to reflect the inclusion of pharmacy claims payable. A reconciliation of the Company's change in days in claims payable from the immediately preceding quarter-end is presented below:
Days in claims payable, September 30, 2009 48.9
Timing of medical claims processing 1.0
Pharmacy 0.2
---
Days in claims payable, December 31, 2009 50.1
Outlook
The table below depicts the Company's annual guidance from continuing operations for 2010:
Full Year 2010
--------------
Low High
--- ----
Premium and Service
revenues (in millions) $4,350 $4,450
Earnings per diluted share
(EPS) $1.70 $1.80
HBR % 84.0% 86.0%
G&A % 12.4% 12.9%
Diluted Shares Outstanding
(in thousands) 50,500
The Company is adjusting the EPS range of its earnings guidance to reflect the issuance of 5.75 million common shares of stock related to the Company's recently completed stock offering, which is partially offset by a reduction in interest expense from the pay down of our revolving credit facility.
Conference Call
As previously announced, the Company will host a conference call Tuesday, February 9, 2010, at 8:30 A.M. (Eastern Time) to review the financial results for the fourth quarter ended December 31, 2009, 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 800-273-1254 in the U.S. and Canada; 973-638-3440 from abroad, or via a live, audio webcast on the Company's website at www.centene.com, under the Investors section. A replay will be available for on-demand listening shortly after the completion of the call until 11:59 PM (Eastern Time) on Tuesday, February 23, 2010, 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 51681793.
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 Children's Health Insurance Program (CHIP), as well as Aged, Blind, or Disabled (ABD), Foster Care, Long-Term Care and Medicare (Special Needs Plans). The Company operates local health plans and offers a wide range of health insurance solutions to individuals and the rising number of uninsured Americans. It also contracts with other healthcare and commercial organizations to provide specialty services including behavioral health, life and health management, managed vision, telehealth services, pharmacy benefits management and medication adherence. Information regarding Centene is available via the Internet at www.centene.com.
The information provided in this press release contains forward-looking statements that relate to future events and future financial performance of Centene. Subsequent events and developments may cause the Company's estimates to change. The Company disclaims any obligation to update this forward-looking financial information in the future. Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, regulatory, competitive and other factors that may cause Centene's or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Actual results may differ from projections or estimates due to a variety of important factors, including Centene's ability to accurately predict and effectively manage health benefits and other operating expenses, competition, changes in healthcare practices, changes in federal or state laws or regulations, inflation, provider contract changes, new technologies, reduction in provider payments by governmental payors, major epidemics, disasters and numerous other factors affecting the delivery and cost of healthcare. The expiration, cancellation or suspension of Centene's Medicaid Managed Care contracts by state governments would also negatively affect Centene.
(Tables Follow)
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
December 31,
----------------------------
2009 2008
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents of
continuing operations $400,951 $370,999
Cash and cash equivalents of
discontinued operations 2,801 8,100
----------- -----------
Total cash and cash equivalents 403,752 379,099
Premium and related receivables, net of
allowance for uncollectible accounts
of $1,338 and $1,304, respectively 103,456 92,531
Short-term investments, at fair value
(amortized cost $39,230 and $108,469,
respectively) 39,554 109,393
Other current assets 64,866 75,333
Current assets of discontinued
operations other than cash 4,506 9,987
----------- -----------
Total current assets 616,134 666,343
Long-term investments, at fair value
(amortized cost $514,256 and $329,330,
respectively) 525,497 332,411
Restricted deposits, at fair value
(amortized cost $20,048 and $9,124,
respectively) 20,132 9,254
Property, software and equipment, net of
accumulated depreciation of $103,883
and $74,194, respectively 230,421 175,858
Goodwill 224,587 163,380
Intangible assets, net 22,479 17,575
Other long-term assets 36,829 59,083
Long-term assets of discontinued
operations 26,285 27,248
----------- -----------
Total assets $1,702,364 $1,451,152
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims liability $470,932 $384,360
Accounts payable and accrued expenses 132,001 208,243
Unearned revenue 91,644 17,107
Current portion of long-term debt 646 255
Current liabilities of discontinued
operations 20,685 31,013
----------- -----------
Total current liabilities 715,908 640,978
Long-term debt 307,085 264,637
Other long-term liabilities 59,561 43,539
Long-term liabilities of discontinued
operations 383 726
----------- -----------
Total liabilities 1,082,937 949,880
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value;
authorized 100,000,000 shares;
issued and outstanding 45,593,383
and 45,071,179 shares, respectively 46 45
Additional paid-in capital 281,806 263,835
Accumulated other comprehensive income:
Unrealized gain on investments,
net of tax 7,348 3,152
Retained earnings 358,907 275,236
Treasury stock, at cost (2,414,010 and
2,083,415 shares, respectively) (47,262) (40,996)
----------- -----------
Total Centene stockholders' equity 600,845 501,272
Noncontrolling interest 18,582 -
----------- -----------
Total stockholders' equity 619,427 501,272
----------- -----------
Total liabilities and stockholders'
equity $1,702,364 $1,451,152
=========== ===========
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Revenues:
Premium $1,031,812 $860,811 $3,786,525 $3,199,360
Service 19,018 17,995 91,758 74,953
----------- ----------- ----------- -----------
Premium and service
revenues 1,050,830 878,806 3,878,283 3,274,313
Premium tax 41,896 23,952 224,581 90,202
----------- ----------- ----------- -----------
Total revenues 1,092,726 902,758 4,102,864 3,364,515
----------- ----------- ----------- -----------
Expenses:
Medical costs 865,415 708,163 3,163,523 2,640,335
Cost of services 14,425 13,453 60,789 56,920
General and administrative
expenses 133,005 121,343 514,529 444,733
Premium tax 42,103 24,329 225,888 90,966
----------- ----------- ----------- -----------
Total operating
expenses 1,054,948 867,288 3,964,729 3,232,954
----------- ----------- ----------- -----------
Earnings from
operations 37,778 35,470 138,135 131,561
Other income (expense):
Investment and other
income 3,910 6,004 15,691 21,728
Interest expense (4,108) (4,237) (16,318) (16,673)
----------- ----------- ----------- -----------
Earnings from
continuing
operations, before
income tax expense 37,580 37,237 137,508 136,616
Income tax expense 13,781 13,971 48,841 52,435
----------- ----------- ----------- -----------
Earnings from
continuing
operations,
net of income
tax expense 23,799 23,266 88,667 84,181
Discontinued operations,
net of income tax
(benefit) expense
of $(56), $(671),
$(1,204) and $(281),
respectively (28) (1,843) (2,422) (684)
----------- ----------- ----------- -----------
Net earnings 23,771 21,423 86,245 83,497
Noncontrolling interest 56 - 2,574 -
----------- ----------- ----------- -----------
Net earnings
attributable to
Centene Corporation $23,715 $21,423 $83,671 $83,497
=========== =========== =========== ===========
Amounts attributable to
Centene Corporation
common shareholders:
Earnings from continuing
operations, net of
income tax expense $23,743 $23,266 $86,093 $84,181
Discontinued operations,
net of income tax
(benefit) expense (28) (1,843) (2,422) (684)
----------- ----------- ----------- -----------
Net earnings $23,715 $21,423 $83,671 $83,497
=========== =========== =========== ===========
Net earnings (loss) per share
attributable to Centene
Corporation:
Basic:
Continuing operations $0.55 $0.54 $2.00 $1.95
Discontinued operations - (0.04) (0.06) (0.02)
----------- ----------- ----------- -----------
Earnings per common
share $0.55 $0.50 $1.94 $1.93
=========== =========== =========== ===========
Diluted:
Continuing operations $0.53 $0.53 $1.94 $1.90
Discontinued operations - (0.04) (0.05) (0.02)
----------- ----------- ----------- -----------
Earnings per common
share $0.53 $0.49 $1.89 $1.88
=========== =========== =========== ===========
Weighted average number
of shares outstanding:
Basic 43,068,502 42,957,593 43,034,791 43,275,187
Diluted 44,513,679 44,043,749 44,316,467 44,398,955
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Year Ended December 31,
---------------------------
2009 2008
--------- ---------
Cash flows from operating activities:
Net earnings $86,245 $83,497
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 44,004 35,414
Stock compensation expense 14,634 15,328
(Gain) loss on sale of investments, net (141) 4,988
Impairment loss - 2,546
Deferred income taxes 3,696 1,286
Changes in assets and liabilities:
Premium and related receivables 2,379 (1,548)
Other current assets (1,263) (4,244)
Other assets 9 (2,700)
Medical claims liability 79,000 47,283
Unearned revenue 78,345 (36,447)
Accounts payable and accrued expenses (60,915) 74,166
Other operating activities 2,202 2,409
--------- ---------
Net cash provided by operating
activities 248,195 221,978
--------- ---------
Cash flows from investing activities:
Capital expenditures (83,113) (65,156)
Purchase of investments (791,194) (549,652)
Sales and maturities of investments 642,783 546,264
Investments in acquisitions, net of
cash acquired, and investment in
equity method investee (38,563) (85,377)
--------- ---------
Net cash used in investing
activities (270,087) (153,921)
--------- ---------
Cash flows from financing activities:
Proceeds from exercise of stock options 2,365 5,354
Proceeds from borrowings 659,059 236,005
Payment of long-term debt (616,219) (178,491)
Distributions to noncontrolling
interest (3,170) -
Contribution from noncontrolling
interest 11,219 -
Excess tax benefits from stock
compensation 53 3,100
Common stock repurchases (6,304) (23,510)
Debt issue costs (458) -
--------- ---------
Net cash provided by financing
activities 46,545 42,458
--------- ---------
Net increase in cash and cash
equivalents 24,653 110,515
--------- ---------
Cash and cash equivalents, beginning
of period 379,099 268,584
--------- ---------
Cash and cash equivalents, end of period $403,752 $379,099
========= =========
Supplemental disclosures of cash flow
information:
Interest paid $15,428 $15,312
Income taxes paid $52,928 $36,801
Supplemental disclosure of non-cash
investing and financing activities:
Contribution from noncontrolling interest $5,875 $-
CENTENE CORPORATION
CONTINUING OPERATIONS SUPPLEMENTAL FINANCIAL DATA
Q4 Q3 Q2 Q1 Q4
2009 2009 2009 2009 2008
--------- --------- --------- --------- ---------
MEMBERSHIP
Managed Care:
Arizona 18,100 17,400 16,200 15,500 14,900
Florida 102,600 84,400 22,300 29,100 -
Georgia 309,700 303,400 292,800 289,300 288,300
Indiana 208,100 200,700 196,100 179,100 175,300
Massachusetts 27,800 500 - - -
Ohio 150,800 151,200 141,200 137,000 133,400
South Carolina 48,600 46,100 46,000 48,500 31,300
Texas 455,100 450,200 443,200 421,100 428,000
Wisconsin 134,800 132,500 131,200 127,700 124,800
--------- --------- --------- --------- ---------
Total at-risk
membership 1,455,600 1,386,400 1,289,000 1,247,300 1,196,000
--------- --------- --------- --------- ---------
Non-risk
membership 63,700 63,200 114,000 96,000 3,700
--------- --------- --------- --------- ---------
TOTAL 1,519,300 1,449,600 1,403,000 1,343,300 1,199,700
========= ========= ========= ========= =========
Medicaid 1,081,400 1,040,000 958,600 921,100 877,400
CHIP & Foster
Care 263,600 263,400 261,400 256,900 257,300
ABD & Medicare 82,800 82,500 69,000 69,300 61,300
Other State
programs 27,800 500 - - -
--------- --------- --------- --------- ---------
Total at-risk
membership 1,455,600 1,386,400 1,289,000 1,247,300 1,196,000
--------- --------- --------- --------- ---------
Non-risk
membership 63,700 63,200 114,000 96,000 3,700
--------- --------- --------- --------- ---------
TOTAL 1,519,300 1,449,600 1,403,000 1,343,300 1,199,700
========= ========= ========= ========= =========
Specialty Services(a):
Cenpatico
Behavioral
Health
Arizona 120,100 117,300 110,500 104,700 105,000
Kansas 41,400 41,000 41,100 40,600 41,100
Bridgeway Health
Solutions
Long-term Care 2,600 2,500 2,400 2,300 2,100
--------- --------- --------- --------- ---------
TOTAL 164,100 160,800 154,000 147,600 148,200
========= ========= ========= ========= =========
(a) Includes external
membership only.
REVENUE PER MEMBER
PER MONTH(b) $226.42 $222.77 $219.75 $220.29 $218.52
CLAIMS(b)
Period-end
inventory 423,400 414,900 362,200 325,000 269,300
Average
inventory 279,000 227,100 234,500 267,600 288,600
Period-end
inventory
per member 0.29 0.30 0.28 0.26 0.23
(b) Revenue per member and claims information are presented for the
Managed Care at-risk members.
Q4 Q3 Q2 Q1 Q4
2009 2009 2009 2009 2008
--------- --------- --------- --------- ---------
DAYS IN CLAIMS PAYABLE
Medical 48.1 47.1 47.5 45.3 48.5
Pharmacy 2.0 1.8 1.5 1.8 1.4
--------- --------- --------- --------- ---------
TOTAL 50.1 48.9 49.0 47.1 49.9
========= ========= ========= ========= =========
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 $949.9 $911.4 $825.8 $816.8 $798.0
Unregulated 36.2 27.6 27.0 28.9 24.1
--------- --------- --------- --------- ---------
TOTAL $986.1 $939.0 $852.8 $845.7 $822.1
========= ========= ========= ========= =========
DEBT TO CAPITALIZATION 33.2% 31.9% 33.0% 34.6% 34.6%
Debt to Capitalization is calculated as follows: total debt divided by
(total debt + total equity). The pro-forma debt to capital ratio,
adjusted for the follow on stock offering which would have reduced total
debt by $84.0 million and increased total equity by $104.5 million, is
reduced to 23.6% from 33.2% at December 31, 2009.
Operating Ratios:
Three Months Ended Year Ended
December 31, December 31,
---------------- ----------------
2009 2008 2009 2008
------ ------ ------ ------
Health Benefits Ratios:
Medicaid and CHIP 85.3% 80.3% 84.6% 80.6%
ABD and Medicare 79.9 90.1 81.1 91.1
Specialty Services 81.8 85.4 80.2 83.8
Total 83.9 82.3 83.5 82.5
General & Administrative Expense
Ratios 12.7% 13.8% 13.3% 13.6%
MEDICAL CLAIMS LIABILITY (In thousands)
The changes in medical claims liability are summarized as follows:
Balance, December 31, 2008 $384,360
Acquisitions -
Incurred related to:
Current period 3,216,533
Prior period (53,010)
---------
Total incurred 3,163,523
=========
Paid related to:
Current period 2,752,983
Prior period 323,968
---------
Total paid 3,076,951
---------
Balance, December 31, 2009 $470,932
=========
Centene's claims reserving process utilizes a consistent actuarial
methodology to estimate Centene's ultimate liability. Any reduction in
the "Incurred related to: Prior period" amount may be offset as Centene
actuarially determines "Incurred related to: Current period." As such,
only in the absence of a consistent reserving methodology would favorable
development of prior period claims liability estimates reduce medical
costs. Centene believes it has consistently applied its claims reserving
methodology in each of the periods presented.
The amount of the "Incurred related to: Prior period" above includes the
effects of reserving under moderately adverse conditions, new markets
where we use a conservative approach in setting reserves during the
initial periods of operations, increased receipts from other third party
payors related to coordination of benefits and lower medical utilization
and cost trends for dates of service prior to December 31, 2008.
SOURCE Centene Corporation