Centene Corporation Reports 2019 Results
2020 Outlook
The Company expects to provide consolidated 2020 annual guidance, including
In summary, the 2019 fourth quarter and full year results were as follows:
2019 Results |
||||||||
Q4 |
Full Year |
|||||||
Total revenues (in millions) |
$ |
18,863 |
$ |
74,639 |
||||
Health benefits ratio |
88.4 |
% |
87.3 |
% |
||||
SG&A expense ratio |
9.6 |
% |
9.3 |
% |
||||
GAAP diluted EPS |
$ |
0.49 |
$ |
3.14 |
||||
Adjusted Diluted EPS (1) |
$ |
0.73 |
$ |
4.42 |
||||
Total cash flow (used in) provided by operations (in millions) |
$ |
(651) |
$ |
1,483 |
||||
(1) A full reconciliation of Adjusted Diluted EPS is shown beginning on page seven of this release. |
"I am pleased with our performance in the fourth quarter and full year 2019, resulting in 24% full year top and bottom line growth. This caps off another successful year for
On January 23, 2020, we acquired all of the issued and outstanding shares of WellCare. The transaction is valued at approximately
Fourth Quarter and Full Year Highlights
December 31, 2019 managed care membership of 15.2 million, an increase of 1.1 million members, or 8%, overDecember 31, 2018 .- Total revenues of
$18.9 billion for the fourth quarter of 2019, representing 14% growth compared to the fourth quarter of 2018, and$74.6 billion for the full year 2019, representing 24% growth year-over-year. - Health benefits ratio (HBR) of 88.4% for the fourth quarter of 2019, compared to 86.8% in the fourth quarter of 2018, and 87.3% for the full year 2019, compared to 85.9% for the full year 2018.
- Selling, general and administrative (SG&A) expense ratio of 9.6% for the fourth quarter of 2019, compared to 9.9% for the fourth quarter of 2018. SG&A expense ratio of 9.3% for the full year 2019, compared to 10.7% for the full year 2018.
- Adjusted SG&A expense ratio of 9.5% for the fourth quarter of 2019, compared to 9.9% for the fourth quarter of 2018. Adjusted SG&A expense ratio of 9.2% for the full year 2019, compared to 10.0% for the full year 2018.
- Diluted EPS for the fourth quarter of 2019 of
$0.49 , compared to$0.57 for the fourth quarter of 2018, a decrease of 14%. Diluted EPS for the full year 2019 of$3.14 , compared to$2.26 for the full year 2018, an increase of 39%. - Adjusted Diluted EPS for the fourth quarter of 2019 of
$0.73 , compared to$0.69 for the fourth quarter of 2018, an increase of 6%. Adjusted Diluted EPS for the full year 2019 of$4.42 , compared to$3.54 for the full year 2018, an increase of 25%. - Operating cash flow of
$(651) million and$1.5 billion for the fourth quarter and full year 2019, respectively, representing 1.1x net earnings for the full year 2019. Operating cash flow for the fourth quarter of 2019 was negatively affected by the timing of payments from several of our customers, including state directed payments.
Other Events
- In
January 2020 ,Centene acquired all of the issued and outstanding shares of WellCare. The transaction is valued at approximately$19.6 billion , including the assumption of$1.95 billion of outstanding debt. The WellCare acquisition brings a high-qualityMedicare platform and further extends our robustMedicaid offerings. In connection with the closing of the WellCare acquisition,Anthem, Inc. acquired WellCare's Missouri Medicaid health plan, a WellCare Missouri Medicare Advantage health plan, and WellCare's Nebraska Medicaid health plan. CVS Health Corporation acquired portions ofCentene's Illinois Medicaid andMedicare Advantage health plans.Centene also completed the exchange of substantially all of WellCare's outstanding senior notes of approximately$1.95 billion aggregate principal amount of new notes issued byCentene and cash. Finally, theCentene board welcomed WellCare board membersWilliam Trubeck andJames Dallas toCentene's board of directors. - In
February 2020 ,Centene announced the appointment ofChris Koster to Senior Vice President, Secretary and General Counsel, effectiveFebruary 19, 2020 .Centene also announced the appointment ofKeith Williamson , former Secretary and General Counsel, to President ofthe Centene Charitable Foundation . - In
February 2020 ,Centene announced the appointment ofJennifer Gilligan to Senior Vice President, Investor Relations, effective uponEdmund Kroll's retirement inApril 2020 . - In
February 2020 ,Centene began operating inIllinois under the first phase of an expanded contract for the Medicaid Managed Care Program. The expanded contract includes children who are in need through theDepartment of Children and Family Services/Youth Care by theIllinois Department of Healthcare and Family Services andFoster Care . - In
January 2020 ,Centene announced its subsidiarySocial Health Bridge has launched a new community partnership with theNHP Foundation , and its affiliate, Operation Pathways, to bring affordable housing to the localLouisiana community. Launching inNew Orleans, Louisiana , on-site staff will help residents access education health events, preventative and social determinants of health screenings, and community referral assistance on premise at the housing community. - In
January 2020 ,Centene expanded its offerings in the Health Insurance Marketplace in ten existing markets:Arizona ,Florida ,Georgia ,Kansas ,North Carolina ,Ohio ,South Carolina ,Tennessee ,Texas andWashington . - In
January 2020 ,Centene began operating under a one-year emergency contract extension in response to protested contract awards.Louisiana's state procurement officer overturned theLouisiana Department of Health's plan to awardMedicaid contracts to four health plans, excluding Centene'sLouisiana subsidiary. According to the chief procurement officer, the state health department failed to follow state law or its own evaluation and bid guidelines in its award. - In
December 2019 ,Centene issued approximately$1.0 billion of 4.75% Senior Notes due 2025 (the "Additional 2025 Notes"),$2.5 billion of new 4.25% Senior Notes due 2027 (the "2027 Notes") and$3.5 billion of new 4.625% Senior Notes due 2029 (the "2029 Notes").Centene used the net proceeds of the 2027 Notes and the 2029 Notes and a portion of the Additional 2025 Notes to finance the cash consideration payable in connection with the WellCare acquisition and to pay related fees and expenses. - In
November 2019 ,Centene announced itsTexas subsidiary, Superior HealthPlan, was awarded by theTexas Health and Human Services Commission a contract to continue to provide healthcare services to enrollees in the state's STAR+PLUS program. The contract is expected to be effective onSeptember 1, 2020 , and will allow Superior HealthPlan to offer coverage in two new service areas, for a total of nine service areas. - In
October 2019 ,Centene announced that retired United States Air Force GeneralLori J. Robinson was elected to serve onCentene's Board of Directors as a Class I director. General Robinson was appointed to the Nominating and Governance Committee and the Government and Regulatory Affairs Committee.
Accreditations & Awards
- In
January 2020 , FORTUNE magazine namedCentene to its 2020 list of Blue Ribbon Companies for appearing on at least four of the 10 most rigorous 2019 annual rankings. - In
January 2020 , FORTUNE magazine namedCentene to its 2020 list of the World's Most Admired Companies. - In
December 2019 ,Centene's Texas subsidiary, Superior HealthPlan, earned Accreditation from theNational Committee for Quality Assurance (NCQA). - In
November 2019 , severalCentene subsidiaries earned Accreditation from NCQA, includingCenpatico Behavioral Health ,Pennsylvania Health and Wellness, and Western Sky Community Care.
Membership
The following table sets forth our membership by line of business:
December 31, |
|||||
2019 |
2018 |
||||
Medicaid: |
|||||
TANF, CHIP & Foster Care |
7,528,700 |
7,356,200 |
|||
ABD & LTSS |
1,043,500 |
1,002,100 |
|||
Behavioral Health |
66,500 |
36,500 |
|||
Total Medicaid |
8,638,700 |
8,394,800 |
|||
Commercial |
2,331,100 |
1,978,000 |
|||
Medicare (1) |
404,500 |
416,900 |
|||
International |
599,800 |
151,600 |
|||
Correctional |
180,000 |
151,300 |
|||
Total at-risk membership |
12,154,100 |
11,092,600 |
|||
TRICARE eligibles |
2,860,700 |
2,858,900 |
|||
Non-risk membership |
227,000 |
219,700 |
|||
Total |
15,241,800 |
14,171,200 |
(1) |
Membership includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and Medicare-Medicaid Plans (MMP). |
The following table sets forth additional membership statistics, which are included in the membership information above:
December 31, |
|||||
2019 |
2018 |
||||
Dual-eligible (2) |
639,200 |
598,200 |
|||
Health Insurance Marketplace |
1,805,200 |
1,459,100 |
|||
Medicaid Expansion |
1,346,700 |
1,262,100 |
(2) |
Membership includes dual-eligible ABD & LTSS and dual-eligible Medicare membership in the table above. |
Revenues
The following table sets forth supplemental revenue information ($ in millions):
Three Months Ended December 31, |
Year Ended December 31, |
||||||||||||||||||||
2019 |
2018 |
% Change |
2019 |
2018 |
% Change |
||||||||||||||||
Medicaid |
$ |
12,818 |
$ |
11,394 |
12 |
% |
$ |
50,404 |
$ |
39,427 |
28 |
% |
|||||||||
Commercial |
3,560 |
3,060 |
16 |
% |
14,747 |
12,391 |
19 |
% |
|||||||||||||
Medicare (3) |
1,398 |
1,365 |
2 |
% |
5,675 |
5,093 |
11 |
% |
|||||||||||||
Other |
1,087 |
740 |
47 |
% |
3,813 |
3,205 |
19 |
% |
|||||||||||||
Total Revenues |
$ |
18,863 |
$ |
16,559 |
14 |
% |
$ |
74,639 |
$ |
60,116 |
24 |
% |
|||||||||
(3) Medicare includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and MMP. |
Statement of Operations: Three Months Ended December 31, 2019
- For the fourth quarter of 2019, total revenues increased 14% to
$18.9 billion from$16.6 billion in the comparable period in 2018. The increase over the prior year was primarily due to growth in the Health Insurance Marketplace business, expansions and new programs in many of our states in 2019, particularlyArkansas ,Illinois ,Iowa ,New Mexico andPennsylvania , and our recent acquisitions inSpain . These increases were partially offset by the health insurer fee moratorium in 2019. - HBR of 88.4% for the fourth quarter of 2019 represents an increase from 86.8% in the comparable period in 2018. The year over year increase was attributable to the Health Insurance Marketplace business where margins have normalized, as expected, from favorable performance in 2018. The increase was also due to the health insurer fee moratorium and a moderate increase in flu related costs. HBR for the fourth quarter was higher than our expectations driven by higher than expected medical costs on our Marketplace business and slightly higher than projected flu costs. Overall, the Marketplace business performed well in 2019 with margins within our stated 5% - 10% range.
- HBR increased sequentially from 88.2% in the third quarter of 2019. The increase was primarily attributable to normal seasonality in the Health Insurance Marketplace business.
- The SG&A expense ratio was 9.6% for the fourth quarter of 2019, compared to 9.9% in the fourth quarter of 2018. The Adjusted SG&A expense ratio was 9.5% for the fourth quarter of 2019, compared to 9.9% in the fourth quarter of 2018. The SG&A and Adjusted SG&A expense ratios both benefited from the leveraging of expenses over higher revenues and lower variable compensation costs in 2019. The decrease to the SG&A expense ratio was partially offset by an increase in acquisition related expenses over the fourth quarter of 2018.
- During the fourth quarter of 2019,
Centene redeemed the outstanding principal balance on its$1,400 million 5.625% Senior Notes dueFebruary 15, 2021 , plus applicable premium for early redemption and accrued and unpaid interest through the redemption date.Centene recognized a pre-tax loss on extinguishment of$30 million on the redemption of the$1,400 million 5.625% Senior Notes, including the call premium, the write-off of unamortized debt issuance costs and a loss on the termination of the$600 million interest rate swap agreement associated with the notes. - The effective tax rate was 22.3% for the fourth quarter of 2019, compared to 32.5% in the fourth quarter of 2018. The decrease in the effective tax rate was due to the impact of the health insurer fee moratorium.
Statement of Operations: Year Ended December 31, 2019
- For the full year 2019, total revenues increased 24% to
$74.6 billion from$60.1 billion in the comparable period of 2018. The increase over the prior year was primarily due to the acquisition ofFidelis Care , growth in the Health Insurance Marketplace business, and expansions and new programs in many of our states in 2018 and 2019, particularlyArkansas ,Illinois ,Iowa ,New Mexico andPennsylvania . These increases were partially offset by the health insurer fee moratorium in 2019. Total revenues also increased due to at-risk, state directed and pass through payments of approximately$825 million from theState of California and pass through payments of approximately$531 million from theState of New York . - HBR of 87.3% for the full year 2019 represents an increase from 85.9% in the comparable period in 2018. The HBR increase compared to last year was driven by the Health Insurance Marketplace business where margins have normalized, as expected, from the favorable performance in 2018 and the health insurer fee moratorium. Also, the 2018 HBR benefited from the recognition of the IHSS program reconciliation.
- The SG&A expense ratio was 9.3% for the full year 2019, compared to 10.7% for the full year 2018. The year-over-year decrease was primarily due to
$336 million of lower acquisition related expenses. The Adjusted SG&A expense ratio was 9.2% for the full year 2019, compared to 10.0% for the full year 2018. The SG&A and Adjusted SG&A expense ratios both decreased due to the acquisition ofFidelis Care , which operates at a lower SG&A expense ratio, the Veterans Affairs contract expiration in 2018, and lower variable compensation costs in 2019. - For the full year 2019, the effective tax rate was 26.5%, consistent with our previous guidance.
Balance Sheet
At December 31, 2019, the Company had cash, investments and restricted deposits of
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, 2019 |
48 |
|
State directed payments |
(2) |
|
Timing of claims payments |
(1) |
|
Days in claims payable, December 31, 2019 |
45 |
|
State directed payments that we receive at the end of each quarter are recorded as a component of medical claims liability until paid. We have received state directed payments at the end of most quarters, which has increased our medical claims liability and our days in claims payable. In the fourth quarter of 2019, we did not have any material state directed payments included in our medical claims liability, which decreased our days in claims payable by two days.
Outlook
The Company expects to provide consolidated 2020 annual guidance, including the WellCare acquisition, on
Conference Call
As previously announced, the Company will host a conference call
Investors and other interested parties are invited to listen to the conference call by dialing 1-877-883-0383 in the U.S. and
A webcast replay will be available for on-demand listening shortly after the completion of the call for the next twelve months or until
Non-GAAP Financial Presentation
The Company is providing certain non-GAAP financial measures in this release as the Company believes that these figures are helpful in allowing investors to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently across periods. The Company uses the presented non-GAAP financial measures internally to allow management to focus on period-to-period changes in the Company's core business operations. Therefore, the Company believes that this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.
Specifically, the Company believes the presentation of non-GAAP financial information that excludes amortization of acquired intangible assets and acquisition related expenses, as well as other items, allows investors to develop a more meaningful understanding of the Company's performance over time. The tables below provide reconciliations of non-GAAP items ($ in millions, except per share data):
Three Months Ended December 31, |
Year Ended December 31, |
||||||||||||||
2019 |
2018 |
2019 |
2018 |
||||||||||||
GAAP net earnings attributable to Centene |
$ |
209 |
$ |
241 |
$ |
1,321 |
$ |
900 |
|||||||
Amortization of acquired intangible assets |
64 |
62 |
258 |
211 |
|||||||||||
Acquisition related expenses |
38 |
2 |
104 |
425 |
|||||||||||
Other adjustments (1) |
30 |
— |
301 |
30 |
|||||||||||
Income tax effects of adjustments (2) |
(32) |
(15) |
(127) |
(155) |
|||||||||||
Adjusted net earnings |
$ |
309 |
$ |
290 |
$ |
1,857 |
$ |
1,411 |
(1) |
Other adjustments include the non-cash goodwill and intangible asset impairment of $271 million for the year ended December 31, 2019, debt extinguishment costs of $30 million for the three months and year ended December 31, 2019, and the impact of retroactive changes to the California minimum MLR of $30 million for the year ended December 31, 2018. |
(2) |
The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. |
Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
GAAP diluted EPS attributable to Centene |
$ |
0.49 |
$ |
0.57 |
$ |
3.14 |
$ |
2.26 |
||||||||
Amortization of acquired intangible assets (1) |
0.12 |
0.12 |
0.47 |
0.41 |
||||||||||||
Acquisition related expenses (2) |
0.07 |
— |
0.19 |
0.81 |
||||||||||||
Other adjustments (3) |
0.05 |
— |
0.62 |
0.06 |
||||||||||||
Adjusted Diluted EPS |
$ |
0.73 |
$ |
0.69 |
$ |
4.42 |
$ |
3.54 |
(1) |
The amortization of acquired intangible assets per diluted share presented above is net of an income tax benefit of $0.04 and $0.04 for the three months ended December 31, 2019 and 2018, respectively, and $0.14 and $0.12 for the year ended December 31, 2019 and 2018, respectively. |
(2) |
The acquisition related expenses per diluted share presented above are net of an income tax benefit of $0.02 and $0.00 for the three months ended December 31, 2019 and 2018, respectively, and $0.06 and $0.25 for the year ended December 31, 2019 and 2018, respectively. Acquisition related expenses for 2019 include net carrying costs on the $7.0 billion senior notes issued in preparation of the WellCare acquisition of approximately $13 million, or $0.02 per diluted share, net of an income tax benefit of approximately $0.01. |
(3) |
The non-cash impairment is net of an income tax benefit of $0.08 for the year ended December 31, 2019. Debt extinguishment costs are net of an estimated income tax benefit of $0.02 for the three months and year ended December 31, 2019. The California Minimum MLR adjustment is net of an income tax benefit of $0.02 for the year ended December 31, 2018. |
Three Months Ended December 31, |
Year Ended December 31, |
||||||||||||||
2019 |
2018 |
2019 |
2018 |
||||||||||||
GAAP SG&A expenses |
$ |
1,733 |
$ |
1,556 |
$ |
6,533 |
$ |
6,043 |
|||||||
Acquisition related expenses |
24 |
— |
85 |
421 |
|||||||||||
Adjusted SG&A expenses |
$ |
1,709 |
$ |
1,556 |
$ |
6,448 |
$ |
5,622 |
To provide clarity on the way management defines certain key metrics and ratios, the Company is providing a description of how the metric or ratio is calculated as follows:
- Health Benefits Ratio (HBR) (GAAP) = Medical costs divided by premium revenues.
- SG&A Expense Ratio (GAAP) = Selling, general and administrative expenses divided by premium and service revenues.
- Adjusted SG&A Expenses (non-GAAP) = Selling, general and administrative expenses, less acquisition related expenses.
- Adjusted SG&A Expense Ratio (non-GAAP) = Adjusted selling, general and administrative expenses divided by premium and service revenues.
- Adjusted Net Earnings (non-GAAP) = Net earnings less amortization of acquired intangible assets, less acquisition related expenses, less the goodwill and intangible impairment, less debt extinguishment costs, less the 2018 impact of retroactive changes to the
California minimum MLR, net of the income tax effect of the adjustments. - Adjusted Diluted EPS (non-GAAP) = Adjusted net earnings divided by weighted average common shares outstanding on a fully diluted basis.
- Debt to Capitalization Ratio (GAAP) = Total debt, divided by total debt plus total stockholder's equity.
- Debt to Capitalization Ratio Excluding Non-Recourse Debt (non-GAAP) = Total debt less non-recourse debt, divided by total debt less non-recourse debt plus total stockholder's equity.
- Average Medical Claims Expense (GAAP) = Medical costs for the period, divided by number of days in such period. Average Medical Claims Expense is most often calculated for the quarterly reporting period.
- Days in Claims Payable (GAAP) = Medical claims liabilities, divided by average medical claims expense. Days in Claims Payable is most often calculated for the quarterly reporting period.
In addition, the following terms referenced in this press release and other Company filings are defined as follows:
- State Directed Payments: Payments directed by a state that have minimal risk, but are administered as a premium adjustment. These payments are recorded as premium revenue and medical costs at close to a 100% HBR. The Company has little visibility to the timing of these payments until they are paid by a state.
- Pass Through Payments: Non-risk supplemental payments from a state that the Company is required to pass through to designated contracted providers. These payments are recorded as premium tax revenue and premium tax expense.
About
Forward-Looking Statements
All statements, other than statements of current or historical fact, contained in this press release are forward-looking statements. Without limiting the foregoing, forward-looking statements often use words such as "believe," "anticipate," "plan," "expect," "estimate," "intend," "seek," "target," "goal," "may," "will," "would," "could," "should," "can," "continue" and other similar words or expressions (and the negative thereof).
CENTENE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except shares in thousands and per share data in dollars) |
|||||||
December 31, |
December 31, |
||||||
ASSETS |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
12,123 |
$ |
5,342 |
|||
Premium and trade receivables |
6,247 |
5,150 |
|||||
Short-term investments |
863 |
722 |
|||||
Other current assets |
1,090 |
784 |
|||||
Total current assets |
20,323 |
11,998 |
|||||
Long-term investments |
7,717 |
6,861 |
|||||
Restricted deposits |
658 |
555 |
|||||
Property, software and equipment, net |
2,121 |
1,706 |
|||||
Goodwill |
6,863 |
7,015 |
|||||
Intangible assets, net |
2,063 |
2,239 |
|||||
Other long-term assets |
1,249 |
527 |
|||||
Total assets |
$ |
40,994 |
$ |
30,901 |
|||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY |
|||||||
Current liabilities: |
|||||||
Medical claims liability |
$ |
7,473 |
$ |
6,831 |
|||
Accounts payable and accrued expenses |
4,164 |
4,051 |
|||||
Return of premium payable |
824 |
666 |
|||||
Unearned revenue |
383 |
385 |
|||||
Current portion of long-term debt |
88 |
38 |
|||||
Total current liabilities |
12,932 |
11,971 |
|||||
Long-term debt |
13,638 |
6,648 |
|||||
Other long-term liabilities |
1,732 |
1,259 |
|||||
Total liabilities |
28,302 |
19,878 |
|||||
Commitments and contingencies |
|||||||
Redeemable noncontrolling interests |
33 |
10 |
|||||
Stockholders' equity: |
|||||||
Preferred stock, $.001 par value; authorized 10,000 shares; no shares issued or outstanding at December 31, 2019 and December 31, 2018 |
— |
— |
|||||
Common stock, $.001 par value; authorized 800,000 shares; 421,508 issued and 415,048 outstanding at December 31, 2019, and 417,695 issued and 412,478 outstanding at December 31, 2018 |
— |
— |
|||||
Additional paid-in capital |
7,647 |
7,449 |
|||||
Accumulated other comprehensive earnings (loss) |
134 |
(56) |
|||||
Retained earnings |
4,984 |
3,663 |
|||||
Treasury stock, at cost (6,460 and 5,217 shares, respectively) |
(214) |
(139) |
|||||
Total Centene stockholders' equity |
12,551 |
10,917 |
|||||
Noncontrolling interest |
108 |
96 |
|||||
Total stockholders' equity |
12,659 |
11,013 |
|||||
Total liabilities, redeemable noncontrolling interests and stockholders' equity |
$ |
40,994 |
$ |
30,901 |
CENTENE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except shares in thousands and per share data in dollars) (Unaudited) |
|||||||||||||||
Three Months Ended |
Year Ended |
||||||||||||||
2019 |
2018 |
2019 |
2018 |
||||||||||||
Revenues: |
|||||||||||||||
Premium |
$ |
17,210 |
$ |
14,990 |
$ |
67,439 |
$ |
53,629 |
|||||||
Service |
802 |
659 |
2,925 |
2,806 |
|||||||||||
Premium and service revenues |
18,012 |
15,649 |
70,364 |
56,435 |
|||||||||||
Premium tax and health insurer fee |
851 |
910 |
4,275 |
3,681 |
|||||||||||
Total revenues |
18,863 |
16,559 |
74,639 |
60,116 |
|||||||||||
Expenses: |
|||||||||||||||
Medical costs |
15,220 |
13,012 |
58,862 |
46,057 |
|||||||||||
Cost of services |
687 |
563 |
2,465 |
2,386 |
|||||||||||
Selling, general and administrative expenses |
1,733 |
1,556 |
6,533 |
6,043 |
|||||||||||
Amortization of acquired intangible assets |
64 |
62 |
258 |
211 |
|||||||||||
Premium tax expense |
882 |
801 |
4,469 |
3,252 |
|||||||||||
Health insurer fee expense |
— |
177 |
— |
709 |
|||||||||||
Goodwill and intangible impairment |
— |
— |
271 |
— |
|||||||||||
Total operating expenses |
18,586 |
16,171 |
72,858 |
58,658 |
|||||||||||
Earnings from operations |
277 |
388 |
1,781 |
1,458 |
|||||||||||
Other income (expense): |
|||||||||||||||
Investment and other income |
126 |
67 |
443 |
253 |
|||||||||||
Debt extinguishment costs |
(30) |
— |
(30) |
— |
|||||||||||
Interest expense |
(113) |
(98) |
(412) |
(343) |
|||||||||||
Earnings from operations, before income tax expense |
260 |
357 |
1,782 |
1,368 |
|||||||||||
Income tax expense |
58 |
116 |
473 |
474 |
|||||||||||
Net earnings |
202 |
241 |
1,309 |
894 |
|||||||||||
Loss attributable to noncontrolling interests |
7 |
— |
12 |
6 |
|||||||||||
Net earnings attributable to Centene Corporation |
$ |
209 |
$ |
241 |
$ |
1,321 |
$ |
900 |
|||||||
Net earnings per common share attributable to Centene Corporation: |
|||||||||||||||
Basic earnings per common share |
$ |
0.50 |
$ |
0.59 |
$ |
3.19 |
$ |
2.31 |
|||||||
Diluted earnings per common share |
$ |
0.49 |
$ |
0.57 |
$ |
3.14 |
$ |
2.26 |
|||||||
Weighted average number of common shares outstanding: |
|||||||||||||||
Basic |
414,044 |
411,068 |
413,487 |
390,248 |
|||||||||||
Diluted |
422,262 |
420,246 |
420,409 |
398,506 |
CENTENE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions, unaudited) |
||||||||
Year Ended December 31, |
||||||||
2019 |
2018 |
|||||||
Cash flows from operating activities: |
||||||||
Net earnings |
$ |
1,309 |
$ |
894 |
||||
Adjustments to reconcile net earnings to net cash provided by operating activities |
||||||||
Depreciation and amortization |
643 |
495 |
||||||
Stock compensation expense |
177 |
145 |
||||||
Goodwill and intangible impairment |
271 |
— |
||||||
Loss on debt extinguishment |
30 |
— |
||||||
Deferred income taxes |
55 |
(129) |
||||||
Changes in assets and liabilities |
||||||||
Premium and trade receivables |
(1,076) |
(1,173) |
||||||
Other assets |
(234) |
(38) |
||||||
Medical claims liabilities |
578 |
1,325 |
||||||
Unearned revenue |
(9) |
(52) |
||||||
Accounts payable and accrued expenses |
(421) |
(533) |
||||||
Other long-term liabilities |
185 |
258 |
||||||
Other operating activities, net |
(25) |
42 |
||||||
Net cash provided by operating activities |
1,483 |
1,234 |
||||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(730) |
(675) |
||||||
Purchases of investments |
(2,575) |
(3,846) |
||||||
Sales and maturities of investments |
1,809 |
1,991 |
||||||
Acquisitions, net of cash acquired |
(36) |
(2,055) |
||||||
Net cash used in investing activities |
(1,532) |
(4,585) |
||||||
Cash flows from financing activities: |
||||||||
Proceeds from the issuance of common stock |
— |
2,779 |
||||||
Proceeds from long-term debt |
24,721 |
6,077 |
||||||
Payments of long-term debt |
(17,803) |
(4,083) |
||||||
Common stock repurchases |
(75) |
(71) |
||||||
Purchase of noncontrolling interest |
— |
(74) |
||||||
Contribution from noncontrolling interest |
21 |
— |
||||||
Payments for debt extinguishment |
(23) |
— |
||||||
Debt issuance costs |
(25) |
(25) |
||||||
Other financing activities, net |
16 |
9 |
||||||
Net cash provided by financing activities |
6,832 |
4,612 |
||||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
(2) |
— |
||||||
Net increase in cash, cash equivalents, and restricted cash and equivalents |
6,781 |
1,261 |
||||||
Cash, cash equivalents, and restricted cash and cash equivalents, beginning of period |
5,350 |
4,089 |
||||||
Cash, cash equivalents, and restricted cash and cash equivalents, end of period |
$ |
12,131 |
$ |
5,350 |
||||
Supplemental disclosures of cash flow information: |
||||||||
Interest paid |
$ |
301 |
$ |
323 |
||||
Income taxes paid |
$ |
612 |
$ |
448 |
||||
Equity issued in connection with acquisitions |
$ |
— |
$ |
507 |
CENTENE CORPORATION SUPPLEMENTAL FINANCIAL DATA |
|||||||||||||||||||
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
|||||||||||||||
2019 |
2019 |
2019 |
2019 |
2018 |
|||||||||||||||
MANAGED CARE MEMBERSHIP BY LINE OF BUSINESS |
|||||||||||||||||||
Medicaid: |
|||||||||||||||||||
TANF, CHIP & Foster Care |
7,528,700 |
7,623,400 |
7,388,700 |
7,491,100 |
7,356,200 |
||||||||||||||
ABD & LTSS |
1,043,500 |
1,045,700 |
997,900 |
1,036,200 |
1,002,100 |
||||||||||||||
Behavioral Health |
66,500 |
73,300 |
68,800 |
56,000 |
36,500 |
||||||||||||||
Total Medicaid |
8,638,700 |
8,742,400 |
8,455,400 |
8,583,300 |
8,394,800 |
||||||||||||||
Commercial |
2,331,100 |
2,388,500 |
2,449,400 |
2,472,700 |
1,978,000 |
||||||||||||||
Medicare (1) |
404,500 |
404,500 |
398,500 |
393,900 |
416,900 |
||||||||||||||
International |
599,800 |
462,400 |
463,100 |
151,600 |
151,600 |
||||||||||||||
Correctional |
180,000 |
187,200 |
153,900 |
153,200 |
151,300 |
||||||||||||||
Total at-risk membership |
12,154,100 |
12,185,000 |
11,920,300 |
11,754,700 |
11,092,600 |
||||||||||||||
TRICARE eligibles |
2,860,700 |
2,860,700 |
2,855,800 |
2,855,800 |
2,858,900 |
||||||||||||||
Non-risk membership |
227,000 |
227,800 |
228,100 |
211,900 |
219,700 |
||||||||||||||
Total |
15,241,800 |
15,273,500 |
15,004,200 |
14,822,400 |
14,171,200 |
||||||||||||||
(1) Membership includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and MMP. |
|||||||||||||||||||
NUMBER OF EMPLOYEES |
56,600 |
53,600 |
52,000 |
48,100 |
47,300 |
||||||||||||||
DAYS IN CLAIMS PAYABLE |
45 |
48 |
47 |
48 |
48 |
||||||||||||||
CASH, INVESTMENTS AND RESTRICTED DEPOSITS (in millions) |
|||||||||||||||||||
Regulated |
$ |
14,204 |
$ |
14,734 |
$ |
15,101 |
$ |
14,303 |
$ |
13,002 |
|||||||||
Unregulated (2) |
7,157 |
855 |
801 |
507 |
478 |
||||||||||||||
Total |
$ |
21,361 |
$ |
15,589 |
$ |
15,902 |
$ |
14,810 |
$ |
13,480 |
|||||||||
DEBT TO CAPITALIZATION |
52.0 |
% |
36.2 |
% |
36.8 |
% |
36.9 |
% |
37.8 |
% |
|||||||||
DEBT TO CAPITALIZATION EXCLUDING NON-RECOURSE DEBT (3) |
51.7 |
% |
35.6 |
% |
36.3 |
% |
36.5 |
% |
37.4 |
% |
(2) |
Unregulated cash, investments and restricted deposits for the fourth quarter of 2019 include the net proceeds from our $7.0 billion senior note issuance in advance of the closing of the WellCare acquisition. |
||||||||||||||||||
(3) |
Excluding non-recourse debt and the senior debt issued to fund the WellCare acquisition in advance of closing, our debt to capital was 34.3%. The non-recourse debt represents the Company's mortgage note payable ($54 million at December 31, 2019) and construction loan payable ($140 million at December 31, 2019). The WellCare related senior notes represent $6,921 million of long-term debt as of December 31, 2019. |
OPERATING RATIOS
Three Months Ended December 31, |
Year Ended December 31, |
||||||||||
2019 |
2018 |
2019 |
2018 |
||||||||
HBR |
88.4 |
% |
86.8 |
% |
87.3 |
% |
85.9 |
% |
|||
SG&A expense ratio |
9.6 |
% |
9.9 |
% |
9.3 |
% |
10.7 |
% |
|||
Adjusted SG&A expense ratio |
9.5 |
% |
9.9 |
% |
9.2 |
% |
10.0 |
% |
MEDICAL CLAIMS LIABILITY
The changes in medical claims liability are summarized as follows (in millions):
Balance, December 31, 2018 |
$ |
6,831 |
||
Less: reinsurance recoverable |
27 |
|||
Balance, December 31, 2018, net |
6,804 |
|||
Acquisitions and purchase accounting adjustments |
59 |
|||
Incurred related to: |
||||
Current period |
59,539 |
|||
Prior period |
(677) |
|||
Total incurred |
58,862 |
|||
Paid related to: |
||||
Current period |
52,453 |
|||
Prior period |
5,819 |
|||
Total paid |
58,272 |
|||
Balance, December 31, 2019, net |
7,453 |
|||
Plus: reinsurance recoverable |
20 |
|||
Balance, December 31, 2019 |
$ |
7,473 |
||
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 December 31, 2018, and prior.
View original content:http://www.prnewswire.com/news-releases/centene-corporation-reports-2019-results-300998127.html
SOURCE
Investor Relations Inquiries, Edmund E. Kroll, Jr., Senior Vice President, Finance & Investor Relations, (212) 759-0382; Media Inquiries, Marcela Manjarrez-Hawn, Senior Vice President and Chief Communications Officer, (314) 445-0790