Centene Corporation Reports Nineteenth Consecutive Quarter of Increased Profitability

ST. LOUIS--(BUSINESS WIRE)--April 26, 2004--Centene Corporation (NYSE:CNC) today announced its financial results for the quarter ended March 31, 2004.

    First Quarter Highlights

    --  Revenues of $225.5 million, a 27% increase over the first
        quarter of 2003.

    --  Earnings from operations of $14.7 million, a 45% increase over
        the first quarter of 2003.

    --  Diluted earnings per share of $0.47.

    --  Organic membership growth of 15% over the first quarter of

    --  Medicaid Managed Care segment G&A of 10.4% (GAAP) and 9.9%
        (non-GAAP), exclusive of the effect of the premium tax.

    --  Operating cash flows of $12.4 million, a 25% increase over the
        first quarter of 2003.

    --  Entered fifth market, Ohio, effective January 1, 2004.

    --  Days in claims payable of 55.4.

    --  New management and board appointments.

Michael F. Neidorff, Centene's president and chief executive officer, said, "Our financial results continue to be in line with our expectations and are an ongoing validation of our ability to work effectively with states to implement our Margin Protection Program(TM). This program combines rate protection with policy initiatives that reduce costs and improve health outcomes for our recipients. To date, we have been successful in effecting changes that reduce inappropriate emergency room visits, and each of our markets has approved the implementation of our preferred drug list. We will continue to work with our states on policies which we believe will enable them to have better control over their Medicaid expenditures."

"Growth in our markets has been consistent with our objectives, and we are particularly pleased with the trends in Indiana and Wisconsin. In Texas, the state altered administrative enrollment procedures that resulted in a sequential quarter decrease in membership in the SCHIP population. We are working with our members to make them aware of such changes and are demonstrating to the state that the savings we generate will enable them to expand the enrollment base within existing budgetary goals. In Ohio, our newest market, we are on track in Toledo and remain focused on building our provider network in additional markets for future expansion," continued Neidorff.

"I would like to welcome Lisa Wilson, the newest member of our senior management team. Ms. Wilson has been working with Centene since our initial public offering in 2001 and has made significant contributions to our investor relations program, along with building awareness of the Company with the Wall Street investment community. I also welcome John Roberts, Executive Director of Civic Progress, and a former managing partner of Arthur Andersen LLP, to our Board of Directors and Audit Committee. Mr. Roberts' perspective on corporate governance and financial transparency will be invaluable as we continue to build Centene to conform to the highest standards," concluded Neidorff.

Membership totaled 522,400 at March 31, 2004, a 24.6% increase from 419,300 at March 31, 2003. The Company experienced solid growth in its Indiana, Texas and Wisconsin markets year-over-year, while membership in the New Jersey market was stable. Ohio contributed 23,800 members to the quarter through the acquisition of certain Medicaid-related assets from Family Health Plan, Inc., effective January 1, 2004. The state of Texas implemented administrative policy changes that require SCHIP members to re-enroll every six months versus annually and implemented a 90-day waiting period for enrollment. The net effect of these changes was a reduction in the state's SCHIP membership and in the Company's membership in this category from the fourth quarter of 2003. The Company is proactively reaching out to its members to make them aware of the new procedures required for enrollment under the new guidelines.

The following table depicts membership in Centene's managed care organizations by state at March 31, 2004 and 2003:

                                              2004        2003
                                           ---------    --------

        Indiana                              125,400     104,800
        New Jersey                            54,000      52,700
        Ohio                                  23,800          --
        Texas                                154,000     122,700
        Wisconsin                            165,200     139,100
                                           ---------    --------

        TOTAL                                522,400     419,300
                                           =========    ========

The following table depicts membership in Centene's managed care organizations by member category at March 31, 2004 and 2003:

                                              2004        2003
                                           ---------    --------
        Medicaid                             446,900     344,700
        SCHIP                                 65,900      66,600
        SSI                                    9,600(a)    8,000(b)
                                           ---------    --------

        TOTAL                               522,400     419,300
                                           =========    ========

(a) 4,400 at-risk; 5,200 ASO
(b) 4,200 at-risk; 3,800 ASO
    Statement of Earnings Highlights

    --  For the first quarter of 2004, revenues increased 27.1% to
        $225.5 million from $177.4 million in the first quarter of
        2003. Net of acquisitions, revenue growth was $27.1 million,
        or 15.3%, over the same prior year period.

    --  The health benefits ratio (HBR), which reflects medical
        services costs as a percent of premium revenues, was 81.0%
        (GAAP) compared to 83.4% (GAAP) for the same period in 2003.
        Excluding $1.1 million in premium revenue attributable to the
        premium tax imposed by the state of Texas on September 1,
        2003, the HBR was 81.4% (non-GAAP) for the current quarter.
        This was slightly below the Company's targeted range of 81.5%
        to 83.5%, due primarily to the successful implementation of
        initiatives to reduce inappropriate emergency room usage and
        to establish preferred drug lists.

    --  Consolidated general and administrative (G&A) expenses, which
        includes the Medicaid Managed Care segment and Specialty
        Services, as a percent of revenues increased to 12.6% (GAAP)
        in 2004 from 10.9% (GAAP) in the first quarter of 2003.
        Excluding the effect of the premium tax on G&A expenses and
        including the effects of the Company's specialty business,
        which has a higher overall G&A ratio, the expense ratio was
        12.2% (non-GAAP) in total, and 9.9% (non-GAAP) for the
        Medicaid Managed Care segment compared to 10.5% (GAAP) for the
        same prior year period.

    --  Earnings from operations increased 44.7% to $14.7 million from
        $10.1 million in 2003.

    --  Net earnings improved to $10.1 million, or $0.47 per diluted
        share, compared to $7.2 million, or $0.40 per diluted share,
        for the first quarter of 2003.

    Balance Sheet and Cash Flow Highlights

At March 31, 2004, the Company held cash and investments of $288.7 million, a portion of which is restricted due to state regulatory requirements. Medical claims liabilities totaled $109.8 million, representing 55.4 days in claims payable.

Cash flows from operating activities of $12.4 million for the quarter ended March 31, 2004, reflect a 25.4% increase year-over-year.


Karey L. Witty, Centene's chief financial officer, commented, "We are updating our guidance and anticipate 2004 revenue in the range of $940 to $950 million and net earnings of $1.91 to $1.96 per share. This does not include the potential impact of any acquisitions we may undertake during 2004."

Conference Call

As previously announced, the Company will host a conference call tomorrow, April 27, 2004, at 8:15 a.m. (Eastern Time) to review the financial results for the first quarter ended March 31, 2004, and to discuss its business outlook. Michael F. Neidorff and Karey L. Witty will host the conference call. Investors are invited to participate in the conference call by dialing (800) 273-1254 in the United States and Canada, and (706) 679-8592 for international participants, or via a live Internet broadcast at the Company's website, www.centene.com. A replay of the call will be available from April 27, 2004, shortly after completion of the call and ending on May 11, 2004, at 11:59 p.m. Investors may dial (800) 642-1687 in the United States and (706) 645-9291 from abroad and enter access number 6572189. Additionally, the webcast will be archived for the same period at www.centene.com.

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 pro forma (non-GAAP) information presented above in the fifth bullet under "First Quarter Highlights", second and third bullet under "Statement of Earnings Highlights" and presented below in tables excludes the impact of a premium tax enacted in September 2003. This assumption has been made in the non-GAAP financial measures as management believes that this assumption generally provides a more consistent measure of the Company's performance.

The Company uses the presented non-GAAP financial measures internally to focus management on period-to-period changes in the Company's core business. 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.

About Centene Corporation

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

The information provided in the first and second paragraphs following the bullet listing under "First Quarter Highlights" and in the paragraph under "Outlook" above contain 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)


                   (In thousands, except share data)

                                           March 31,    December 31,
                                               2004          2003
                                           ----------- ---------------

Current assets:
      Cash and cash equivalents               $44,363         $64,346
      Premium and related receivables, net
       of allowances of $718 and $607,
       respectively                            21,634          20,308
      Short-term investments, at fair
       value (amortized cost $32,705 and
       $15,192, respectively)                  32,708          15,160
      Deferred income taxes                     3,174           2,732
      Other current assets                      9,231           7,755
                                           ----------- ---------------
            Total current assets              111,110         110,301
Long-term investments, at fair value
 (amortized cost $189,432 and $183,749,
 respectively)                                191,057         184,811
Restricted deposits, at fair value
 (amortized cost $20,190 and $20,201,
 respectively)                                 20,592          20,364
Property, software and equipment               24,056          23,106
Goodwill                                       18,408          13,066
Intangible assets                               7,428           6,294
Other assets                                    4,732           4,750
                                           ----------- ---------------
            Total assets                     $377,383        $362,692
                                           =========== ===============


Current liabilities:
      Medical claims liabilities             $109,841        $106,569
      Accounts payable and accrued
       expenses                                17,733          17,965
      Unearned revenue                          3,736           3,673
      Current portion of long-term debt
       and notes payable                          288             579
                                           ----------- ---------------
            Total current liabilities         131,598         128,786
Long-term debt                                  7,544           7,616
Other liabilities                               5,613           6,175
                                           ----------- ---------------
            Total liabilities                 144,755         142,577
Stockholders' equity:
      Common stock, $.001 par value;
       authorized 40,000,000 shares;
       issued and outstanding 20,255,580
       and 20,131,924 shares, respectively         20              20
      Additional paid-in capital              159,237         157,380
      Accumulated other comprehensive income:
      Unrealized gain on investments, net
       of tax                                   1,258             740
      Retained earnings                        72,113          61,975
                                           ----------- ---------------
            Total stockholders' equity        232,628         220,115
                                           ----------- ---------------
            Total liabilities and
             stockholders' equity            $377,383        $362,692
                                           =========== ===============


                   (In thousands, except share data)

                                                 Three Months Ended
                                                      March 31,
                                                  2004        2003
                                               ----------- -----------
   Premiums                                      $222,690    $176,212
   Services                                         2,835       1,222
                                               ----------- -----------
      Total revenues                              225,525     177,434
                                               ----------- -----------
   Medical costs                                  180,448     146,907
   Cost of services                                 2,016         975
   General and administrative expenses             28,377      19,405
                                               ----------- -----------
      Total operating expenses                    210,841     167,287
                                               ----------- -----------
         Earnings from operations                  14,684      10,147
Other income (expense):
   Investment and other income                      1,510         974
   Interest expense                                   (90)        (27)
                                               ----------- -----------
         Earnings before income taxes              16,104      11,094
Income tax expense                                  5,966       4,233
Minority interest                                      --         300
                                               ----------- -----------
      Net earnings                                $10,138      $7,161
                                               =========== ===========

Earnings per share:
   Basic earnings per common share                  $0.50       $0.44
   Diluted earnings per common share                $0.47       $0.40

Weighted average number of shares outstanding:
   Basic                                       20,192,009  16,348,274
   Diluted                                     21,533,870  17,757,266


                            (In thousands)

                                                    Three Months Ended
                                                        March 31,
                                                    2004       2003
                                                  ---------- ---------

Cash flows from operating activities:
   Net earnings                                     $10,138    $7,161
   Adjustments to reconcile net earnings to net
    cash provided by operating activities --
         Depreciation and amortization                2,271     1,379
         Stock compensation expense                      19         5
         Minority interest                               --      (300)
         Gain on sale of investments                   (253)     (293)
   Changes in assets and liabilities --
         Premium and related receivables             (1,326)   (1,982)
         Other current assets                        (1,476)     (626)
         Deferred income taxes                         (755)      803
         Other assets                                    13        58
         Medical claims liabilities                   3,272     3,586
         Accounts payable and accrued expenses        1,211      (187)
         Unearned revenue                                63        19
         Other operating activities                    (812)      236
                                                  ---------- ---------
                  Net cash provided by operating
                   activities                        12,365     9,859
                                                  ---------- ---------
Cash flows from investing activities:
   Purchase of property, software and equipment      (2,126)     (684)
   Purchase of investments                          (93,742)  (42,055)
   Sales and maturities of investments               69,814    35,218
   Acquisitions, net of cash acquired                (6,983)   (2,283)
                                                  ---------- ---------
                  Net cash used in investing
                   activities                       (33,037)   (9,804)
                                                  ---------- ---------
Cash flows from financing activities:
   Reduction of long-term debt and notes payable       (363)       --
   Proceeds from stock options and employee stock
    purchase plan                                     1,052       259
                                                  ---------- ---------
                  Net cash provided by financing
                   activities                           689       259
                                                  ---------- ---------
                  Net (decrease) increase in cash
                   and cash equivalents             (19,983)      314
                                                  ---------- ---------
Cash and cash equivalents, beginning of period       64,346    59,656
                                                  ---------- ---------
Cash and cash equivalents, end of period            $44,363   $59,970
                                                  ========== =========

   Interest paid                                        $91       $18
   Income taxes paid                                 $3,390    $1,230

                          CENTENE CORPORATION


                                      Q1       Q4       Q3       Q2
                                    2004     2003     2003     2003
                                   -------- -------- -------- --------
   Indiana                         125,400  119,400  112,100  109,000
   New Jersey                       54,000   54,000   52,700   52,700
   Ohio                             23,800       --       --       --
   Texas                           154,000  158,400  152,100  131,400
   Wisconsin                       165,200  157,800  150,200  145,600
                                   -------- -------- -------- --------
TOTAL                              522,400  489,600  467,100  438,700
                                   ======== ======== ======== ========

   Medicaid                        446,900  411,800  389,200  361,700
   SCHIP                            65,900   68,400   68,600   68,800
   SSI                               9,600    9,400    9,300    8,200
                                   -------- -------- -------- --------
TOTAL                              522,400  489,600  467,100  438,700
                                   ======== ======== ======== ========

REVENUE PER MEMBER                 $145.19  $142.38  $143.98  $142.26

   Period-end inventory            102,300  131,000   59,400  109,900
   Average inventory               107,400  102,500   75,600   85,400
   Period-end inventory per member    0.20     0.27     0.13     0.25

DAYS IN CLAIMS PAYABLE (a)            55.4     59.0     52.5     52.0

(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.

ANNUALIZED RETURN ON EQUITY (b)    17.9%(c) 18.1%(c) 21.3%(c)    27.1%

(b) Annualized Return on Equity is calculated as follows: (net income
    for quarter x 4) divided by ((beginning of period equity + end of
    period equity) divided by 2).

(c) Reflects a 3,450,000 share follow-on offering completed August 13,

                                                   THREE MONTHS ENDED
                                                        MARCH 31,
                                                     2004      2003
                                                   ---------  --------
Medicaid (excluding SSI) and SCHIP                     80.6%     82.4%
SSI                                                    99.3     104.2
    Total (GAAP)                                       81.0      83.4
    Total (non-GAAP), excluding effect of
     premium tax                                       81.4      83.4


                                                THREE MONTHS ENDED
                                                        MARCH 31,
                                                   2004          2003
                                            -------------------- -----
                                             GAAP   non-GAAP (d)
                                            ------  ------------
Medicaid Managed Care                        10.4%          9.9% 10.5%
Specialty Services                           52.9          52.9  26.6
    Total                                    12.6          12.2  10.9

(d) Excluding effect of premium tax.

                       MEDICAL CLAIMS LIABILITIES
                            (In thousands)

Four rolling quarters of the changes in medical claims liabilities
are summarized as follows:
Balance, March 31, 2003                                       $94,767
Incurred related to:
   Current period                                             672,473
   Prior period                                               (12,740)
      Total incurred                                          659,733
Paid related to:
   Current period                                             569,940
   Prior period                                                74,719
      Total paid                                              644,659
Balance, March 31, 2004                                      $109,841

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.

    CONTACT: Centene Corporation
             Karey L. Witty, 314-725-4477
             Investor Relations:
             Lisa M. Wilson, 212-759-3929

    SOURCE: Centene Corporation