Centene Corporation Reports 2009 Fourth Quarter and Full Year Earnings

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:
      B

SOURCE Centene Corporation

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