- Centene Corporation Reports 2012 First Quarter Earnings of $0.45 Per Diluted Share and Increases Guidance for 2012 -

ST. LOUIS, April 24, 2012 /PRNewswire/ -- Centene Corporation (NYSE: CNC) today announced its financial results for the quarter ended March 31, 2012.

First Quarter Highlights

Quarter-end managed care at-risk membership of 2,149,500, an increase of 39% year over year.
Premium and Service Revenues of $1.7 billion, representing 41% year over year growth.
Health Benefits Ratio of 88.2%, compared to 84.9% in the prior year and 85.9% in the fourth quarter of 2011.
General and Administrative expense ratio of 9.8%, compared to 12.0% in the prior year.
Diluted earnings per share of $0.45, compared to $0.46 from the prior year.
Employees increased from 4,500 at March 31, 2011 to 5,700 at March 31, 2012, reflecting our continued business expansion.

Other Events

In January 2012, we were selected to contract with the Washington Health Care Authority to serve Medicaid beneficiaries in the state. Operations are expected to commence in the third quarter of 2012.
In February 2012, we announced that we were selected to contract with the Office of Administration for Missouri to serve Medicaid beneficiaries in all three regions of the state. Operations are expected to commence in the third quarter of 2012.
In February 2012, we announced that Superior HealthPlan received an Excellent Accreditation rating by the National Committee for Quality Assurance (NCQA). Superior HealthPlan is the only Medicaid plan in Texas to earn an Excellent Accreditation, the highest rating by NCQA.
In March 2012, we began operating under contracts in Texas that expanded its operations through new service areas including the 10 county Hidalgo Service Area and the Medicaid Rural Service Areas of West Texas, Central Texas and North-East Texas, as well as the addition of STAR+PLUS in the Lubbock Service Area. The expansion also added the management of outpatient pharmacy benefits in all service areas and products, as well as inpatient facility services for the STAR+PLUS program. At March 31, 2012, we served over 300,000 additional Texas members compared to December 31, 2011.
In March 2012, Standard & Poor's raised its outlook to positive from stable and affirmed its counterparty credit and senior unsecured debt rating of BB.
In April 2012, we were notified by the Ohio Department of Job and Family Services that Buckeye Community Health Plan, our Ohio subsidiary, was not awarded a contract to continue serving Medicaid members in Ohio, effective January 2013. We have filed a formal protest contesting the awards.

Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "While underlying trend remains predictable, results were mixed due to seasonality of medical costs particularly in March, continued high medical costs in Kentucky, and general and administrative costs at higher levels associated with an additional 370,000 members in Texas. We continue to expect solid full year 2012 results as evidenced by our increased financial guidance. This guidance includes our newest states of Missouri and Washington, as well as the additional Texas lives."

The following table depicts membership in Centene's managed care organizations, by state:

	March 31,
	2012	2011
Arizona	23,100	22,600
Florida	199,500	188,800
Georgia	306,000	303,300
Illinois	17,400	―
Indiana	206,300	209,400
Kentucky	145,700	―
Louisiana	51,300	―
Massachusetts	36,000	34,100
Mississippi	29,500	―
Ohio	161,000	160,900
South Carolina	86,700	84,900
Texas	811,000	456,700
Wisconsin	76,000	81,800
Total at-risk membership	2,149,500	1,542,500
Non-risk membership	―	10,400
Total	2,149,500	1,552,900

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

	March 31,
	2012	2011
Medicaid	1,634,800	1,169,700
CHIP & Foster Care	218,800	208,900
ABD & Medicare	247,400	123,800
Hybrid Programs	41,500	35,200
Long-term Care	7,000	4,900
Total at-risk membership	2,149,500	1,542,500
Non-risk membership	―	10,400
Total	2,149,500	1,552,900

Statement of Operations: Three Months Ended March 31, 2012

For the first quarter of 2012, Premium and Service Revenues increased 41% to $1.7 billion from $1.2 billion in the first quarter of 2011. The increase was primarily driven by new operations in Mississippi, Illinois, Kentucky and Louisiana as well as the Texas and Arizona expansions, pharmacy carve-ins and overall membership growth.
Consolidated HBR of 88.2% for the first quarter of 2012 represents an increase of 330 basis points from the comparable period in 2011 and an increase from 85.9% from the fourth quarter of 2011. The increase year over year is primarily due to (1) the addition of our Kentucky market which we continue to record at a high HBR, (2) higher medical costs in Texas specifically in March and a September 1, 2011 premium rate decrease in our existing Texas service areas (excluding the expansion), (3) higher seasonal medical costs in our South Carolina market and (4) increased medical costs in our individual health business. The increase sequentially is due to retroactive premium rate increases recorded in the fourth quarter of 2011 associated with Georgia and Florida, as well as increased medical costs in our existing Texas service areas.
Consolidated G&A expense ratio for the first quarter of 2012 was 9.8%, compared to 12.0% in the prior year. The year over year decrease reflects the leveraging of our expenses over higher revenues in 2012 and a reduction in performance based compensation expense in 2012. The G&A ratio in 2011 reflects a 50 basis point increase as a result of the general and administrative costs recorded in our Mississippi market for the first quarter without recording the corresponding revenue.
Earnings from operations were $34.2 million in the first quarter 2012 compared to $39.1 million in the first quarter 2011. Net earnings were $24.0 million in the first quarter 2012, relatively flat compared to $23.7 million in the first quarter of 2011.
Earnings per diluted share were $0.45 in the first quarter of 2012 compared to $0.46 in the prior year.

Balance Sheet and Cash Flow

At March 31, 2012, the Company had cash, investments and restricted deposits of $1,202.4 million, including $35.5 million held by its unregulated entities. Medical claims liabilities totaled $708.8 million, representing 44.7 days in claims payable. Total debt was $350.4 million and debt to capitalization was 21.8% at March 31, 2012 excluding the $77.2 million non-recourse mortgage note. Cash flows from operations for the quarter ended March 31, 2012 were $(32.1) million, which reflects the delay of $71.2 million in premium payments from one of our state customers.

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, 2011	45.3
Impact of new business	0.5
Timing of claim payments	(1.1)
Days in claims payable, March 31, 2012	44.7

Outlook

The table below depicts the Company's updated annual guidance for 2012 including our newest states of Missouri and Washington, as well as the additional Texas lives:

	Full Year 2012
	Low	High
Premium and Service Revenues (in millions)	$ 7,700	$ 8,100
Diluted EPS	$ 2.64	$ 2.84
Consolidated Health Benefits Ratio	87.0%	88.0%
General & Administrative expense ratio	9.5%	10.0%

Diluted Shares Outstanding (in thousands)	53,400

The guidance provided in the table above excludes any impairment charge associated with the loss of the Ohio contract, which is currently under appeal. Absent a successful appeal, the Company expects a material non-cash impairment charge will be recorded in its 2012 consolidated statement of operations for the year ended December 31, 2012. As of March 31, 2012, Buckeye Community Health Plan had goodwill and net intangible assets of $42.8 million.

Conference Call

As previously announced, the Company will host a conference call Tuesday, April 24, 2012, at 8:30 A.M. (Eastern Time) to review the financial results for the first quarter ended March 31, 2012, and to discuss its business outlook. Michael F. Neidorff and William N. Scheffel will host the conference call. Investors and other interested parties are invited to listen to the conference call by dialing 1-800-860-2442 in the U.S. and Canada; +1-412-858-4600 from abroad; 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 p.m. (Eastern Time) on Tuesday, April 23, 2013, at the aforementioned URL. In addition, a digital audio playback will be available until 9:00 a.m. (Eastern Time) on Wednesday, May 2, 2012, by dialing 1-877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad, and entering access code 10011606.

About Centene Corporation

Centene Corporation, a Fortune 500 company, is a leading multi-line healthcare enterprise that provides programs and related services to the rising number of under-insured and uninsured individuals. Many receive benefits provided under Medicaid, including the State Children's Health Insurance Program (CHIP), as well as Aged, Blind or Disabled (ABD), Foster Care and long-term care, in addition to other state-sponsored/hybrid programs, and Medicare (Special Needs Plans). Centene's CeltiCare subsidiary offers states unique, "exchange based" and other cost-effective coverage solutions for low-income populations. The Company operates local health plans and offers a range of health insurance solutions. It also contracts with other healthcare and commercial organizations to provide specialty services including behavioral health, life and health management, managed vision, telehealth services, and pharmacy benefits management.

The information provided in this press release contains forward-looking statements that relate to future events and future financial performance of Centene. Subsequent events and developments may cause the Company's estimates to change. The Company disclaims any obligation to update this forward-looking financial information in the future. Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, regulatory, competitive and other factors that may cause Centene's or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Actual results may differ from projections or estimates due to a variety of important factors, including Centene's ability to accurately predict and effectively manage health benefits and other operating expenses, competition, membership and revenue projections, timing of regulatory contract approval, 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, or the loss of any appeal of or protest to any such expiration, cancellation or suspension, by state governments would also negatively affect Centene.

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CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited)

	March 31, 2012			December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	432,998	$	573,698
Premium and related receivables		278,233		157,450
Short-term investments		126,221		130,499
Other current assets		82,925		78,363
Total current assets		920,377		940,010
Long-term investments		605,866		506,140
Restricted deposits		37,361		26,818
Property, software and equipment, net		352,710		349,622
Goodwill		281,981		281,981
Intangible assets, net		26,122		27,430
Other long-term assets		58,730		58,335
Total assets	$	2,283,147	$	2,190,336
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims liability	$	708,754	$	607,985
Accounts payable and accrued expenses		158,356		216,504
Unearned revenue		17,977		9,890
Current portion of long-term debt		3,235		3,234
Total current liabilities		888,322		837,613
Long-term debt		347,162		348,344
Other long-term liabilities		68,544		67,960
Total liabilities		1,304,028		1,253,917

Commitments and contingencies

Stockholders' equity:
Common stock, $.001 par value; authorized 100,000,000 shares; 54,214,037 issued and 51,458,501 outstanding at March 31, 2012, and 53,586,726 issued and 50,864,618 outstanding at December 31, 2011		54		54
Additional paid-in capital		443,111		421,981
Accumulated other comprehensive income:
Unrealized gain on investments, net of tax		6,237		5,761
Retained earnings		588,939		564,961
Treasury stock, at cost (2,755,536 and 2,722,108 shares, respectively)		(58,632)		(57,123)
Total Centene stockholders' equity		979,709		935,634
Noncontrolling interest		(590)		785
Total stockholders' equity		979,119		936,419
Total liabilities and stockholders' equity	$	2,283,147	$	2,190,336

CENTENE CORPORATION AND SUBSIDIARIES

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

	Three Months Ended March 31,
	2012		2011
Revenues:
Premium	$	1,634,850	$	1,152,777
Service		28,618		26,384
Premium and service revenues		1,663,468		1,179,161
Premium tax		48,680		37,196
Total revenues		1,712,148		1,216,357
Expenses:
Medical costs		1,442,676		978,567
Cost of services		23,337		20,176
General and administrative expenses		163,187		141,088
Premium tax expense		48,750		37,429
Total operating expenses		1,677,950		1,177,260
Earnings from operations		34,198		39,097
Other income (expense):
Investment and other income		5,291		3,749
Interest expense		(4,799)		(5,695)
Earnings from operations, before income tax expense		34,690		37,151
Income tax expense		12,087		14,328
Net earnings		22,603		22,823
Noncontrolling interest		(1,375)		(922)
Net earnings attributable to Centene Corporation	$	23,978	$	23,745

Net earnings per common share attributable to Centene Corporation:
Basic earnings per common share	$	0.47	$	0.48
Diluted earnings per common share	$	0.45	$	0.46

Weighted average number of common shares outstanding:
Basic		51,125,674		49,750,430
Diluted		53,509,243		51,811,721

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

	Three Months Ended March 31,
	2012		2011

Cash flows from operating activities:
Net earnings	$	22,603	$	22,823
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization		16,613		14,325
Stock compensation expense		6,375		4,394
Deferred income taxes		5,855		(700)
Changes in assets and liabilities
Premium and related receivables		(120,784)		4,216
Other current assets		(10,723)		(1,636)
Other assets		524		151
Medical claims liabilities		100,769		13,430
Unearned revenue		8,576		10,106
Accounts payable and accrued expenses		(60,826)		26,268
Other operating activities		(1,078)		614
Net cash (used in) provided by operating activities		(32,096)		93,991
Cash flows from investing activities:
Capital expenditures		(14,980)		(16,882)
Purchases of investments		(255,212)		(40,423)
Sales and maturities of investments		149,341		45,327
Net cash used in investing activities		(120,851)		(11,978)
Cash flows from financing activities:
Proceeds from exercise of stock options		9,079		6,518
Proceeds from borrowings		—		127,300
Payment of long-term debt		(795)		(152,577)
Excess tax benefits from stock compensation		5,472		1,132
Common stock repurchases		(1,509)		(402)
Debt issue costs		—		(6,105)
Net cash provided by (used in) financing activities		12,247		(24,134)
Net (decrease) increase in cash and cash equivalents		(140,700)		57,879
Cash and cash equivalents, beginning of period		573,698		434,166
Cash and cash equivalents, end of period	$	432,998	$	492,045

Supplemental disclosures of cash flow information:
Interest paid	$	1,589	$	1,714
Income taxes paid	$	20,514	$	9,567

Supplemental disclosure of non-cash investing and financing activities:
Capital expenditures	$	381	$	1,477

CENTENE CORPORATION
SUPPLEMENTAL FINANCIAL DATA


	Q1		Q4		Q3		Q2		Q1
	2012		2011		2011		2011		2011
MEMBERSHIP
Managed Care:
Arizona	23,100		23,700		22,800		22,800		22,600
Florida	199,500		198,300		188,600		190,600		188,800
Georgia	306,000		298,200		298,000		303,100		303,300
Illinois	17,400		16,300		13,600		700		—
Indiana	206,300		206,900		205,300		206,700		209,400
Kentucky	145,700		180,700		—		—		—
Louisiana	51,300		—		—		—		—
Massachusetts	36,000		35,700		34,700		32,900		34,100
Mississippi	29,500		31,600		30,600		30,800		—
Ohio	161,000		159,900		162,200		159,900		160,900
South Carolina	86,700		82,900		86,500		82,800		84,900
Texas	811,000		503,800		494,500		470,400		456,700
Wisconsin	76,000		78,000		78,900		79,800		81,800
Total at-risk membership	2,149,500		1,816,000		1,615,700		1,580,500		1,542,500
Non-risk membership	―		4,900		10,600		10,400		10,400
TOTAL	2,149,500		1,820,900		1,626,300		1,590,900		1,552,900


Medicaid	1,634,800		1,336,800		1,189,900		1,172,400		1,169,700
CHIP & Foster Care	218,800		213,900		210,600		211,400		208,900
ABD & Medicare	247,400		218,000		171,700		156,300		123,800
Hybrid Programs	41,500		40,500		38,400		35,500		35,200
Long-term Care	7,000		6,800		5,100		4,900		4,900
Total at-risk membership	2,149,500		1,816,000		1,615,700		1,580,500		1,542,500
Non-risk membership	―		4,900		10,600		10,400		10,400
TOTAL	2,149,500		1,820,900		1,626,300		1,590,900		1,552,900

Specialty Services(a):
Cenpatico Behavioral Health
Arizona	162,100		168,900		175,500		173,200		172,700
Kansas	46,000		46,200		45,600		45,000		44,000
TOTAL	208,100		215,100		221,100		218,200		216,700

(a)Includes external membership only

REVENUE PER MEMBER PER MONTH(b)	$	269.42	$	261.95	$	245.27	$	240.57	$	238.31

CLAIMS(b)
Period-end inventory	735,000		495,500		482,900		415,700		527,100
Average inventory	457,400		367,590		312,400		332,300		347,900
Period-end inventory per member	0.34		0.27		0.30		0.26		0.34
(b) Revenue per member and claims information are presented for the Managed Care at-risk members

NUMBER OF EMPLOYEES	5,700		5,300		5,000		4,800		4,500

	Q1		Q4		Q3		Q2		Q1
	2012		2011		2011		2011		2011

DAYS IN CLAIMS PAYABLE (c)	44.7		45.3		43.6		43.4		43.4
(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	$	1,166.9	$	1,198.9	$	1,079.3	$	1,061.9	$	1,096.3
Unregulated		35.5		38.2		35.9		36.5		31.7
TOTAL	$	1,202.4	$	1,237.1	$	1,115.2	$	1,098.4	$	1,128.0

DEBT TO CAPITALIZATION	26.4%		27.3%		28.0%		28.1%		26.9%
DEBT TO CAPITALIZATION EXCLUDING NON-RECOURSE DEBT(d)	21.8%		22.6%		23.2%		23.0%		21.4%
Debt to Capitalization is calculated as follows: total debt divided by (total debt + total equity). (d) The non-recourse debt represents our mortgage note payable ($77.2 million at March 31, 2012).

Operating Ratios:
	Three Months Ended March 31,
	2012	2011
Health Benefits Ratios:
Medicaid and CHIP	87.4%	84.0%
ABD and Medicare	89.0	87.4
Specialty Services	90.7	85.4
Total	88.2	84.9

Total General & Administrative Expense Ratio	9.8%	12.0%

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

Balance, March 31, 2011	$	471,659
Incurred related to:
Current period		4,848,511
Prior period		(59,656)
Total incurred		4,788,855
Paid related to:
Current period		4,147,785
Prior period		403,975
Total paid		4,551,760
Balance, March 31, 2012	$	708,754

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 represents favorable development and includes the effects of reserving under moderately adverse conditions, new markets where we use a conservative approach in setting reserves during the initial periods of operations, receipts from other third party payors related to coordination of benefits and lower medical utilization and cost trends for dates of service prior to March 31, 2011.

SOURCE Centene Corporation