-- Diluted EPS of $1.44; Adjusted Diluted EPS of $1.83 --
-- Raises Total Revenue and
Adjusted EPS Guidance --
ST.
LOUIS, April 26, 2022 /PRNewswire/ -- Centene
Corporation (NYSE: CNC) announced today its financial results for
the first quarter ended March 31, 2022, reporting diluted
earnings per share (EPS) of $1.44 and
adjusted diluted EPS of $1.83.
In summary, the 2022 first quarter results were as follows:
Total revenues (in
millions)
|
$
37,185
|
Premium and service
revenues (in millions)
|
$
34,232
|
Health benefits
ratio
|
87.3 %
|
SG&A expense
ratio
|
8.0 %
|
Adjusted SG&A
expense ratio (1)
|
7.7 %
|
GAAP diluted
EPS
|
$
1.44
|
Adjusted diluted EPS
(1)
|
$
1.83
|
Total cash flow
provided by operations (in millions)
|
$
1,151
|
|
|
(1) A full reconciliation of the
adjusted diluted EPS and adjusted SG&A expenses is shown
beginning on page 5 of this release.
|
"Our strong first quarter performance demonstrates Centene's
ability to deliver on our financial goals while continuing to make
progress against our Value Creation initiatives," said Sarah M. London, Chief Executive Officer of
Centene. "As we look ahead, consistency of results and operational
excellence will remain top priorities for this management team as
we drive towards sustainable and profitable long-term growth."
"While it is still early in the year, we are pleased to start
strong across all of our business lines. Our updated full year 2022
outlook reflects the Company's positive momentum as well as our
refreshed expectations around the timing of Medicaid
redeterminations," said Drew Asher,
Executive Vice President and Chief Financial Officer of
Centene.
First Quarter Highlights
- March 31, 2022 managed care
membership of 26.2 million, an increase of 1.9 million members, or
8%, compared to March 31, 2021.
- Total revenues of $37.2 billion
for the first quarter of 2022, representing 24% growth compared to
the first quarter of 2021.
- Premium and service revenues of $34.2
billion for the first quarter of 2022, representing 22%
growth compared to the first quarter of 2021.
- Health benefits ratio (HBR) of 87.3% for the first quarter of
2022, compared to 86.8% in the first quarter of 2021.
- Selling, general and administrative (SG&A) expense ratio of
8.0% for the first quarter of 2022, compared to 7.9% for the first
quarter of 2021.
- Adjusted SG&A expense ratio of 7.7% for the first quarter
of 2022, compared to 7.6% for the first quarter of 2021.
- Diluted EPS for the first quarter of 2022 of $1.44, compared to $1.19 for the first quarter of 2021.
- Adjusted diluted EPS for the first quarter of 2022 of
$1.83, compared to $1.63 for the first quarter of 2021.
- Operating cash flow of $1.2
billion, or 1.4 times net earnings, for the first quarter
2022.
Other Events
- In April 2022, Michael Neidorff, our long-time Chairman and
Chief Executive Officer, passed away. Mr. Neidorff's leadership of
Centene for more than 25 years has been instrumental to the
Company's growth and success, and his commitment to providing
affordable, high-quality healthcare will live on in Centene's
mission.
- In March 2022, Centene announced
that Sarah London, Vice Chairman of
Centene, was appointed Chief Executive Officer, succeeding
Michael Neidorff.
- In March 2022, Centene announced
its subsidiary, Managed Health Services, was selected by the
Indiana Department of Administration to continue serving Hoosier
Healthwise and Health Indiana Plan members with Medicaid and
Medicaid alternative managed care and care coordination services.
The new contract is anticipated to begin January 1, 2023.
- In February 2022, Centene
announced its subsidiary, Louisiana Healthcare Connections, was
selected by the Louisiana Department of Health to continue
administering quality, integrated healthcare services to Medicaid
enrollees across the state. The new statewide contract is
anticipated to begin July 1,
2022.
Accreditations & Awards
- In March 2022, Centene was
awarded the Innovation Award for Health Equity by the National
Committee for Quality Assurance (NCQA). The award recognizes
Centene's data-driven Health Equity Improvement Model for being a
leading-edge strategy for improving health equity and healthcare
quality through innovative and creative solutions.
- In February 2022, Centene's
subsidiary, Trillium Community Health Plan, earned Accreditation
from the NCQA.
Membership
The following table sets forth our membership by line of
business:
|
March 31,
|
|
2022
|
|
2021
|
Traditional Medicaid
(1)
|
13,590,100
|
|
12,307,400
|
High Acuity Medicaid
(2)
|
1,682,800
|
|
1,529,000
|
Total Medicaid
|
15,272,900
|
|
13,836,400
|
Commercial
Marketplace
|
2,031,000
|
|
1,900,900
|
Commercial
Group
|
449,700
|
|
483,400
|
Total Commercial
|
2,480,700
|
|
2,384,300
|
Medicare
(3)
|
1,452,500
|
|
1,138,500
|
Medicare PDP
|
4,169,700
|
|
4,109,700
|
Total at-risk membership (4)
|
23,375,800
|
|
21,468,900
|
TRICARE
eligibles
|
2,862,400
|
|
2,881,400
|
Total
|
26,238,200
|
|
24,350,300
|
|
|
|
|
(1) Membership includes
TANF, Medicaid Expansion, CHIP, Foster Care and Behavioral
Health.
(2) Membership includes ABD,
IDD, LTSS and MMP Duals.
(3) Membership includes
Medicare Advantage and Medicare Supplement.
(4) Membership includes 1,231,500 and
1,086,300 dual-eligible beneficiaries for the periods ending
March 31, 2022, and March 31, 2021,
respectively.
|
Revenues
The following table sets forth supplemental revenue information
($ in millions):
|
Three Months Ended March 31,
|
|
2022
|
|
2021
|
|
% Change
|
Medicaid
|
$
24,076
|
|
$
20,191
|
|
19 %
|
Commercial
|
4,132
|
|
3,898
|
|
6 %
|
Medicare
(5)
|
5,757
|
|
4,339
|
|
33 %
|
Other
|
3,220
|
|
1,555
|
|
107 %
|
Total Revenues
|
$
37,185
|
|
$
29,983
|
|
24 %
|
(5) Medicare includes Medicare
Advantage, Medicare Supplement and Medicare PDP.
|
|
|
|
|
|
|
Statement of Operations: Three Months Ended March 31, 2022
- For the first quarter of 2022, total revenues increased 24% to
$37.2 billion from $30.0 billion in the comparable period of 2021.
The increase was due to organic Medicaid growth, partially due to
the ongoing suspension of eligibility redeterminations, 28%
membership growth in the Medicare business (16% growth since
December 31, 2021), our recent
acquisitions of Magellan Health (Magellan) and Circle Health, the
commencement of our contracts in North
Carolina, and $1.9 billion of
additional premium tax revenue and retroactive state directed
payments.
- HBR of 87.3% for the first quarter of 2022 represents an
increase from 86.8% in the comparable period in 2021. The increase
was primarily due to a return to more normalized traditional
Medicaid medical utilization as compared to the first quarter of
2021, partially offset by pricing actions and lower traditional
utilization in the Marketplace business.
- The cost of service ratio was 84.8% for the first quarter of
2022, compared to 88.7% in the same period in 2021. The decrease in
the cost of service ratio was driven by the acquisition of the
Circle Health business, which operates at a lower cost of service
ratio.
- The SG&A expense ratio was 8.0% for the first quarter of
2022, compared to 7.9% in the first quarter of 2021. The adjusted
SG&A expense ratio was 7.7% for the first quarter of 2022,
compared to 7.6% in the first quarter of 2021. The increases were
due to the additions of the Magellan and Circle Health businesses,
which operate at higher SG&A expense ratios due to the nature
of the businesses. These impacts were partially offset by the
leveraging of expenses over higher revenues as a result of
increased membership and retroactive state directed payments. The
SG&A expense ratio increased in 2022 due to higher acquisition
related costs as a result of the Magellan Acquisition, partially
offset by reduced restructuring charges compared to 2021. Beginning
in 2022, we have included a separate line item for depreciation
expense on the Consolidated Statement of Operations, which was
previously included within SG&A expenses. Prior period
information has been conformed to the current presentation,
including the resulting SG&A expense ratios.
- The effective tax rate was 25.8% for the first quarter of 2022,
compared to 25.9% in the first quarter of 2021. For the first
quarter of 2022, our effective tax rate on adjusted earnings was
25.1%, compared to 25.4% in the first quarter of 2021.
Balance Sheet
At March 31, 2022, the Company had cash, investments and
restricted deposits of $28.2 billion
and maintained $637 million of cash
and cash equivalents in our unregulated entities, including
$417 million in our international
subsidiaries (a material portion of which is expected to be used to
satisfy contractual obligations). Medical claims liabilities
totaled $16.3 billion. The Company's
days in claims payable was 53 days, which is an increase of one day
over the fourth quarter of 2021. Total debt was $18.9 billion, which included $213 million of borrowings on our $2.0 billion revolving credit facility at quarter
end. The debt to capitalization ratio was 40.7% at March 31,
2022, excluding $182 million of
non-recourse debt.
Outlook
The Company's guidance has been updated to reflect the
following:
- Increased pass through revenue payments recorded in the first
quarter of 2022, resulting in additional premium tax revenue of
approximately $1.5 billion,
- Increased state directed premium payments recorded in the first
quarter of 2022, resulting in additional premium revenue of
approximately $500 million,
- Increased premium revenue due to Medicare and Medicaid growth
of approximately $2 billion,
including an update to reflect the ongoing suspension of Medicaid
eligibility redeterminations to August 1,
2022, and
- Increased Adjusted EPS to $5.40-$5.55.
These items will be further discussed on our conference call.
The Company's annual guidance for 2022 is as follows:
|
|
Full Year 2022
|
|
|
|
Low
|
|
High
|
|
Total revenues (in
billions)
|
|
$
139.9
|
|
$
141.9
|
|
Premium and service
revenues (in billions)
|
|
$
132.3
|
|
$
134.3
|
|
GAAP diluted
EPS
|
|
$ 4.19
|
|
$ 4.30
|
|
Adjusted Diluted EPS
(1)
|
|
$ 5.40
|
|
$ 5.55
|
|
HBR
|
|
87.6 %
|
|
88.2 %
|
|
SG&A expense
ratio
|
|
7.9 %
|
|
8.4 %
|
|
Adjusted SG&A
expense ratio (2)
|
|
7.8 %
|
|
8.3 %
|
|
Effective tax
rate
|
|
25.5 %
|
|
26.5 %
|
|
Adjusted effective tax
rate (3)
|
|
25.0 %
|
|
26.0 %
|
|
Diluted shares
outstanding (in millions)
|
|
590.5
|
|
593.5
|
|
|
|
|
|
|
|
(1) A full reconciliation of
adjusted diluted EPS is shown beginning on page 5 of this
release.
|
(2) Adjusted SG&A
expense ratio excludes acquisition related expenses of $134 million
to $149 million.
|
(3) Adjusted effective tax
rate excludes income tax effects of adjustments of $214 million to
$221 million.
|
Conference Call
As previously announced, the Company will host a conference call
Tuesday, April 26, 2022, at approximately 8:30 AM (Eastern Time) to review the financial
results for the first quarter ended March 31, 2022.
Investors and other interested parties are invited to listen to
the conference call by dialing 1-877-883-0383 in the U.S. and
Canada; +1-412-902-6506 from
abroad, including the following Elite Entry Number: 7792929 to
expedite caller registration; 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 PM (Eastern Time) on
Tuesday, April 25, 2023, at the aforementioned URL. In
addition, a digital audio playback will be available until
9:00 AM (Eastern Time) on Tuesday,
May 3, 2022, by dialing 1-877-344-7529 in the U.S., 1-855-669-9658
in Canada, or +1-412-317-0088 from
abroad, and entering access code 9978555.
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 March 31,
|
|
2022
|
|
2021
|
GAAP net earnings
attributable to Centene
|
$
849
|
|
$
699
|
Amortization of
acquired intangible assets
|
199
|
|
195
|
Acquisition related
expenses
|
97
|
|
47
|
Other adjustments
(1)
|
2
|
|
102
|
Income tax effects of
adjustments (2)
|
(67)
|
|
(83)
|
Adjusted net
earnings
|
$
1,080
|
|
$
960
|
|
|
|
|
(1)
|
Other adjustments
include the following items:
|
|
2022:
|
|
|
(a)
|
legal fees related to
the pharmacy benefits manager (PBM) legal settlement reserve
established in 2021 of $2 million for the three months ended
March 31, 2022.
|
|
2021:
|
|
|
(a)
|
debt extinguishment
costs of $46 million for the three months ended March 31, 2021;
and
|
|
(b)
|
severance costs due to
a restructuring of $56 million for the three months ended March 31,
2021.
|
(2)
|
The income tax effects
of adjustments are based on the effective income tax rates
applicable to each adjustment.
|
|
|
|
Three Months Ended
March 31,
|
|
Annual Guidance
December 31, 2022
|
|
2022
|
|
2021
|
|
GAAP diluted EPS
attributable to Centene
|
$
1.44
|
|
$
1.19
|
|
$4.19 -
$4.30
|
Amortization of
acquired intangible assets (3)
|
0.26
|
|
0.25
|
|
$1.02 -
$1.04
|
Acquisition related
expenses (4)
|
0.13
|
|
0.06
|
|
$0.19 -
$0.21
|
Other adjustments
(5)
|
—
|
|
0.13
|
|
$—
|
Adjusted diluted
EPS
|
$
1.83
|
|
$
1.63
|
|
$5.40 -
$5.55
|
|
|
|
|
|
|
|
|
(3)
|
The amortization of
acquired intangible assets per diluted share presented above is net
of an income tax benefit of $0.08 and $0.08 for the three months
ended March 31, 2022 and 2021, respectively, and an estimated
$0.32 to $0.33 for the year ended December 31,
2022.
|
(4)
|
The acquisition related
expenses per diluted share presented above are net of an income tax
benefit of $0.03 and $0.02 for the three months ended
March 31, 2022 and 2021, respectively, and an estimated $0.04
to $0.05 for the year ended December 31, 2022.
|
(5)
|
Other adjustments
include the following items:
|
|
2022:
|
|
|
(a)
|
legal fees related to
the PBM legal settlement reserve established in 2021 of $0.00 per
diluted share, net of income tax benefit of $0.00, for the three
months ended March 31, 2022, and an estimated $0.00 per
diluted share, net of an estimated income tax benefit of $0.00 for
the year ended December 31, 2022.
|
|
2021:
|
|
|
(a)
|
debt extinguishment
costs of $0.06 per diluted share, net of an income tax benefit of
$0.02 for the three months ended March 31, 2021; and
|
|
(b)
|
severance costs due to
a restructuring of $0.07 per diluted share, net of an income tax
benefit of $0.02 for the three months ended March 31,
2021.
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2022
|
|
2021
|
GAAP SG&A
expenses
|
$
2,745
|
|
$
2,234
|
Less:
|
|
|
|
Acquisition related
expenses
|
99
|
|
46
|
Restructuring
costs
|
—
|
|
56
|
Legal fees related to
legal settlement
|
2
|
|
—
|
Adjusted SG&A
expenses
|
$
2,644
|
|
$
2,132
|
|
Note: Beginning in
2022, we have included a separate line item for depreciation
expense on the Consolidated Statement of Operations, which was
previously included within SG&A expenses. Prior period SG&A
expenses have been conformed to the current
presentation.
|
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.
- Cost of Service Ratio (GAAP) = Cost of services divided
by service revenues.
- Adjusted SG&A Expense Ratio (non-GAAP) = Adjusted
selling, general and administrative expenses divided by premium and
service revenues.
- Adjusted Effective Tax Rate (non-GAAP) = GAAP income tax
expense (benefit) excluding the income tax effects of adjustments
to net earnings divided by adjusted earnings (loss) before income
tax expense.
- Adjusted Net Earnings (non-GAAP) = Net earnings less
amortization of acquired intangible assets, less acquisition
related expenses, as well as adjustments for other items, 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 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 Centene Corporation
Centene Corporation, a Fortune 25 company, is a leading
healthcare enterprise that is committed to helping people live
healthier lives. The Company takes a local approach – with local
brands and local teams – to provide fully integrated, high-quality,
and cost-effective services to government-sponsored and commercial
healthcare programs, focusing on under-insured and uninsured
individuals. Centene offers affordable and high-quality
products to nearly 1 in 15 individuals across the nation, including
Medicaid and Medicare members (including Medicare Prescription Drug
Plans) as well as individuals and families served by
the Health Insurance Marketplace, the TRICARE program, and
individuals in correctional facilities. The Company also serves
several international markets, and contracts with other healthcare
and commercial organizations to provide a variety of specialty
services focused on treating the whole
person. Centene focuses on long-term growth and value
creation as well as the development of its people, systems, and
capabilities so that it can better serve its members, providers,
local communities, and government partners.
Centene uses its investor relations website to publish important
information about the Company, including information that may be
deemed material to investors. Financial and other information about
Centene is routinely posted and is accessible on Centene's investor
relations website, https://investors.centene.com/.
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 (the Company, our, or we) intends such
forward-looking statements to be covered by the safe-harbor
provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, and we are including this
statement for purposes of complying with these safe-harbor
provisions. In particular, these statements include, without
limitation, statements about our future operating or financial
performance, market opportunity, value creation strategy,
competition, expected activities in completed and future
acquisitions, including statements about the impact of our recently
completed acquisition of Magellan Health (the Magellan
Acquisition), other recent and future acquisitions and
dispositions, investments and the adequacy of our available cash
resources. These forward-looking statements reflect our current
views with respect to future events and are based on numerous
assumptions and assessments made by us in light of our experience
and perception of historical trends, current conditions, business
strategies, operating environments, future developments and other
factors we believe appropriate. By their nature, forward-looking
statements involve known and unknown risks and uncertainties and
are subject to change because they relate to events and depend on
circumstances that will occur in the future, including economic,
regulatory, competitive and other factors that may cause our or our
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. These statements
are not guarantees of future performance and are subject to risks,
uncertainties and assumptions. All forward-looking statements
included in this press release are based on information available
to us on the date hereof. Except as may be otherwise required by
law, we undertake no obligation to update or revise the
forward-looking statements included in this press release, whether
as a result of new information, future events or otherwise,
after the date hereof. You should not place undue reliance on
any forward-looking statements, as actual results may differ
materially from projections, estimates, or other forward-looking
statements due to a variety of important factors, variables and
events including, but not limited to: our ability to accurately
predict and effectively manage health benefits and other operating
expenses and reserves, including fluctuations in medical
utilization rates due to the impact of COVID-19; the
risk that the election of new directors, changes in senior
management, and inability to retain key personnel may create
uncertainty or negatively impact our ability to execute quickly and
effectively; uncertainty as to the expected financial
performance of the combined company following the recent completion
of the Magellan Acquisition; the possibility that the
expected synergies and value creation from the Magellan Acquisition
or the acquisition of WellCare Health Plans, Inc.(the WellCare
Acquisition) (or other acquired businesses) will not be realized,
or will not be realized within the respective expected time
periods; disruption from the integration of the Magellan
Acquisition or from the integration of the WellCare Acquisition,
unexpected costs, or similar risks from other acquisitions we may
announce or complete from time to time, including potential adverse
reactions or changes to business relationships with customers,
employees, suppliers or regulators, making it more difficult to
maintain business and operational relationships; a downgrade
of the credit rating of our indebtedness; competition; membership
and revenue declines or unexpected trends; changes in healthcare
practices, new technologies, and advances in medicine; increased
healthcare costs; changes in economic, political or market
conditions; changes in federal or state laws or regulations,
including changes with respect to income tax reform or government
healthcare programs as well as changes with respect to the Patient
Protection and Affordable Care Act and the Health Care and
Education Affordability Reconciliation Act (collectively referred
to as the ACA) and any regulations enacted thereunder that may
result from changing political conditions, the new administration
or judicial actions; rate cuts or other payment reductions or
delays by governmental payors and other risks and uncertainties
affecting our government businesses; our ability to adequately
price products; tax matters; disasters or major epidemics; changes
in expected contract start dates; provider, state, federal, foreign
and other contract changes and timing of regulatory approval of
contracts; the expiration, suspension, or termination of our
contracts with federal or state governments (including, but not
limited to, Medicaid, Medicare, TRICARE or other customers); the
difficulty of predicting the timing or outcome of legal or
regulatory proceedings or matters, including, but not limited to,
our ability to resolve claims and/or allegations made by states
with regard to past practices, including at Envolve Pharmacy
Solutions, Inc. (Envolve), as our pharmacy benefits manager (PBM)
subsidiary, within the reserve estimate we recorded in 2021 and on
other acceptable terms, or at all, or whether additional claims,
reviews or investigations relating to our PBM business will be
brought by states, the federal government or shareholder litigants,
or government investigations; timing and extent of benefits from
strategic value creation initiatives, including the possibility
that these initiatives will not be successful, or will not be
realized within the expected time periods; challenges to our
contract awards; cyber-attacks or other privacy or data security
incidents; the exertion of management's time and our resources, and
other expenses incurred and business changes required in connection
with complying with the undertakings in connection with any
regulatory, governmental or third party consents or approvals for
acquisitions; changes in expected closing dates, estimated purchase
price and accretion for acquisitions; restrictions and limitations
in connection with our indebtedness; our ability to maintain or
achieve improvement in the Centers for Medicare and Medicaid
Services (CMS) Star ratings and maintain or achieve improvement in
other quality scores in each case that can impact revenue and
future growth; availability of debt and equity financing, on terms
that are favorable to us; inflation; foreign currency fluctuations
and risks and uncertainties discussed in the reports that Centene
has filed with the Securities and Exchange Commission. This list of
important factors is not intended to be exhaustive. We discuss
certain of these matters more fully, as well as certain other
factors that may affect our business operations, financial
condition and results of operations, in our filings with the
Securities and Exchange Commission (SEC), including our annual
report on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K. Due to these important factors and risks, we
cannot give assurances with respect to our future performance,
including without limitation our ability to maintain adequate
premium levels or our ability to control our future medical and
selling, general and administrative costs.
CENTENE CORPORATION AND
SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
(In millions, except shares in thousands and per
share data in dollars)
|
|
|
March 31,
2022
|
|
December 31,
2021
|
ASSETS
|
(Unaudited)
|
|
|
Current
assets:
|
|
|
|
Cash and cash equivalents
|
$
11,237
|
|
$
13,118
|
Premium and trade receivables
|
16,169
|
|
12,238
|
Short-term investments
|
1,668
|
|
1,539
|
Other current assets
|
2,036
|
|
1,602
|
Total current assets
|
31,110
|
|
28,497
|
Long-term
investments
|
14,129
|
|
14,043
|
Restricted
deposits
|
1,210
|
|
1,068
|
Property, software and
equipment, net
|
3,583
|
|
3,391
|
Goodwill
|
20,903
|
|
19,771
|
Intangible assets,
net
|
8,138
|
|
7,824
|
Other long-term
assets
|
3,828
|
|
3,781
|
Total assets
|
$
82,901
|
|
$
78,375
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS
AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Medical claims liability
|
$
16,259
|
|
$
14,243
|
Accounts payable and accrued expenses
|
9,980
|
|
8,493
|
Return of premium payable
|
2,628
|
|
2,328
|
Unearned revenue
|
526
|
|
434
|
Current portion of long-term debt
|
292
|
|
267
|
Total current
liabilities
|
29,685
|
|
25,765
|
Long-term
debt
|
18,640
|
|
18,571
|
Deferred tax
liability
|
1,292
|
|
1,407
|
Other long-term
liabilities
|
5,854
|
|
5,610
|
Total liabilities
|
55,471
|
|
51,353
|
Commitments and
contingencies
|
|
|
|
Redeemable
noncontrolling interests
|
117
|
|
82
|
Stockholders'
equity:
|
|
|
|
Preferred stock, $0.001 par
value; authorized 10,000 shares; no shares issued or
outstanding at
March 31, 2022 and December 31, 2021
|
—
|
|
—
|
Common stock, $0.001 par value;
authorized 800,000 shares; 605,925 issued and
584,854
outstanding at March 31, 2022, and 602,704 issued and
582,479
outstanding at
December 31, 2021
|
1
|
|
1
|
Additional paid-in
capital
|
19,830
|
|
19,672
|
Accumulated other comprehensive
earnings
|
(485)
|
|
77
|
Retained earnings
|
8,988
|
|
8,139
|
Treasury stock, at cost (21,071
and 20,225 shares, respectively)
|
(1,165)
|
|
(1,094)
|
Total Centene stockholders'
equity
|
27,169
|
|
26,795
|
Noncontrolling
interest
|
144
|
|
145
|
Total stockholders' equity
|
27,313
|
|
26,940
|
Total liabilities, redeemable noncontrolling
interests and stockholders' equity
|
$
82,901
|
|
$
78,375
|
CENTENE CORPORATION AND
SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(In millions, except
shares in thousands and per share data in dollars)
|
(Unaudited)
|
|
|
Three Months Ended March 31,
|
|
2022
|
|
2021
|
Revenues:
|
|
|
|
Premium
|
$
31,889
|
|
$
26,933
|
Service
|
2,343
|
|
1,181
|
Premium and service
revenues
|
34,232
|
|
28,114
|
Premium tax
|
2,953
|
|
1,869
|
Total revenues
|
37,185
|
|
29,983
|
Expenses:
|
|
|
|
Medical costs
|
27,838
|
|
23,391
|
Cost of services
|
1,988
|
|
1,048
|
Selling, general and administrative expenses
|
2,745
|
|
2,234
|
Depreciation expense
|
156
|
|
133
|
Amortization of acquired intangible assets
|
199
|
|
195
|
Premium tax expense
|
3,006
|
|
1,928
|
Total operating
expenses
|
35,932
|
|
28,929
|
Earnings from
operations
|
1,253
|
|
1,054
|
Other income (expense):
|
|
|
|
Investment and other income
|
52
|
|
103
|
Debt extinguishment
|
3
|
|
(46)
|
Interest expense
|
(160)
|
|
(170)
|
Earnings before income tax
expense
|
1,148
|
|
941
|
Income tax expense
|
296
|
|
244
|
Net earnings
|
852
|
|
697
|
(Earnings) loss attributable to noncontrolling
interests
|
(3)
|
|
2
|
Net
earnings attributable to Centene Corporation
|
$
849
|
|
$
699
|
|
|
|
|
Net earnings per common share attributable to Centene
Corporation:
|
Basic earnings per common share
|
$
1.46
|
|
$
1.20
|
Diluted earnings per common share
|
$
1.44
|
|
$
1.19
|
|
|
|
|
Weighted average number of common shares
outstanding:
|
|
|
Basic
|
583,230
|
|
581,869
|
Diluted
|
590,658
|
|
589,343
|
CENTENE CORPORATION AND
SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(In millions,
unaudited)
|
|
|
Three Months Ended March 31,
|
|
2022
|
|
2021
|
Cash flows from operating
activities:
|
|
|
|
Net
earnings
|
$
852
|
|
$
697
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities
|
Depreciation and
amortization
|
390
|
|
361
|
Stock compensation
expense
|
70
|
|
51
|
(Gain) loss on debt
extinguishment
|
(3)
|
|
46
|
Deferred income
taxes
|
12
|
|
156
|
Other adjustments,
net
|
22
|
|
2
|
Changes in
assets and liabilities
|
|
|
|
Premium and trade
receivables
|
(3,099)
|
|
(1,891)
|
Other assets
|
(299)
|
|
(287)
|
Medical claims
liabilities
|
1,767
|
|
405
|
Unearned revenue
|
81
|
|
48
|
Accounts payable and accrued
expenses
|
957
|
|
32
|
Other long-term
liabilities
|
401
|
|
423
|
Net cash provided by
operating activities
|
1,151
|
|
43
|
Cash flows from investing
activities:
|
|
|
|
Capital expenditures
|
(242)
|
|
(187)
|
Purchases of investments
|
(1,700)
|
|
(1,653)
|
Sales and maturities of investments
|
1,047
|
|
1,391
|
Acquisitions, net of cash acquired
|
(1,504)
|
|
(158)
|
Other investing activities, net
|
(2)
|
|
—
|
Net cash used in investing
activities
|
(2,401)
|
|
(607)
|
Cash flows from financing
activities:
|
|
|
|
Proceeds from long-term
debt
|
100
|
|
2,317
|
Payments of long-term
debt
|
(526)
|
|
(2,295)
|
Common stock
repurchases
|
(71)
|
|
(29)
|
Payments for debt
extinguishment
|
(27)
|
|
(54)
|
Debt issuance costs
|
—
|
|
(27)
|
Other financing activities,
net
|
26
|
|
15
|
Net cash used in
financing activities
|
(498)
|
|
(73)
|
Effect of exchange rate changes
on cash, cash equivalents, and restricted cash
|
33
|
|
(16)
|
Net decrease in cash, cash equivalents
and restricted cash and cash equivalents
|
(1,715)
|
|
(653)
|
Cash, cash equivalents, and restricted cash and cash
equivalents, beginning of period
|
13,214
|
|
10,957
|
Cash, cash equivalents, and restricted cash and cash
equivalents, end of period
|
$
11,499
|
|
$
10,304
|
Supplemental
disclosures of cash flow information:
|
|
|
|
Interest paid
|
$
139
|
|
$
130
|
Income taxes paid
|
$
11
|
|
$
20
|
|
|
|
|
The following table
provides a reconciliation of cash, cash equivalents, and restricted
cash and cash equivalents reported within the Consolidated
Balance Sheets to the totals above:
|
|
2022
|
|
2021
|
Cash and cash
equivalents
|
$
11,237
|
|
$
9,627
|
Restricted cash
and cash equivalents, included in restricted deposits
|
262
|
|
677
|
Total cash, cash
equivalents, and restricted cash and cash equivalents
|
$
11,499
|
|
$
10,304
|
CENTENE CORPORATION
|
SUPPLEMENTAL FINANCIAL DATA
|
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
2022
|
|
2021
|
|
2021
|
|
2021
|
|
2021
|
MEMBERSHIP
|
|
|
|
|
|
|
|
|
|
Traditional Medicaid
(1)
|
13,590,100
|
|
13,328,400
|
|
13,202,500
|
|
12,492,600
|
|
12,307,400
|
High Acuity Medicaid
(2)
|
1,682,800
|
|
1,686,100
|
|
1,566,000
|
|
1,531,000
|
|
1,529,000
|
Total Medicaid
|
15,272,900
|
|
15,014,500
|
|
14,768,500
|
|
14,023,600
|
|
13,836,400
|
Commercial
Marketplace
|
2,031,000
|
|
2,140,500
|
|
2,177,000
|
|
2,040,900
|
|
1,900,900
|
Commercial
Group
|
449,700
|
|
462,100
|
|
468,500
|
|
479,500
|
|
483,400
|
Total Commercial
|
2,480,700
|
|
2,602,600
|
|
2,645,500
|
|
2,520,400
|
|
2,384,300
|
Medicare
(3)
|
1,452,500
|
|
1,252,200
|
|
1,248,300
|
|
1,182,900
|
|
1,138,500
|
Medicare PDP
|
4,169,700
|
|
4,070,500
|
|
4,064,400
|
|
4,064,500
|
|
4,109,700
|
Total at-risk membership (4)
|
23,375,800
|
|
22,939,800
|
|
22,726,700
|
|
21,791,400
|
|
21,468,900
|
TRICARE
eligibles
|
2,862,400
|
|
2,874,700
|
|
2,874,700
|
|
2,881,400
|
|
2,881,400
|
Total
|
26,238,200
|
|
25,814,500
|
|
25,601,400
|
|
24,672,800
|
|
24,350,300
|
|
|
|
|
|
|
|
|
|
|
(1) Membership includes TANF, Medicaid
Expansion, CHIP, Foster Care and Behavioral Health.
(2) Membership includes ABD, IDD, LTSS
and MMP Duals.
(3) Membership includes Medicare
Advantage and Medicare Supplement.
(4) Membership includes 1,231,500,
1,178,000, 1,168,400, 1,131,900, and 1,086,300 dual-eligible
beneficiaries for the periods ending March 31, 2022, December 31,
2021, September 30, 2021, June 30, 2021, and March 31, 2021,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
NUMBER OF EMPLOYEES
|
80,100
|
|
72,500
|
|
75,900
|
|
68,500
|
|
69,100
|
|
|
|
|
|
|
|
|
|
|
DAYS IN CLAIMS PAYABLE
|
53
|
|
52
|
|
51
|
|
48
|
|
49
|
|
|
|
|
|
|
|
|
|
|
CASH, INVESTMENTS AND RESTRICTED DEPOSITS (in
millions)
|
Regulated
|
$ 26,982
|
|
$ 26,416
|
|
$ 26,392
|
|
$ 25,113
|
|
$ 24,361
|
Unregulated
|
1,262
|
|
3,352
|
|
3,223
|
|
2,055
|
|
1,286
|
Total
|
$ 28,244
|
|
$ 29,768
|
|
$ 29,615
|
|
$ 27,168
|
|
$ 25,647
|
|
|
|
|
|
|
|
|
|
|
DEBT TO CAPITALIZATION
|
40.9 %
|
|
41.2 %
|
|
41.5 %
|
|
39.2 %
|
|
38.8 %
|
DEBT TO CAPITALIZATION EXCLUDING
NON-RECOURSE DEBT
|
40.7 %
|
|
40.9 %
|
|
41.2 %
|
|
38.9 %
|
|
38.5 %
|
NON-RECOURSE DEBT (in millions)
|
$
182
|
|
$
184
|
|
$
188
|
|
$
187
|
|
$
184
|
OPERATING RATIOS
|
Three Months Ended March 31,
|
|
2022
|
|
2021
|
HBR
|
87.3 %
|
|
86.8 %
|
SG&A expense
ratio
|
8.0 %
|
|
7.9 %
|
Adjusted SG&A
expense ratio
|
7.7 %
|
|
7.6 %
|
Note: Prior period
SG&A and adjusted SG&A expense ratios have been restated to
conform to current
presentation, which excludes depreciation expense.
|
HBR BY PRODUCT
|
Three Months Ended March 31,
|
|
2022
|
|
2021
|
Medicaid
|
88.9 %
|
|
87.1 %
|
Commercial
|
79.2 %
|
|
83.4 %
|
Medicare
(1)
|
87.7 %
|
|
88.9 %
|
|
|
|
|
(1) Medicare includes Medicare
Advantage, Medicare Supplement and Medicare PDP.
|
MEDICAL CLAIMS LIABILITY
The changes in medical claims liability are summarized as
follows (in millions):
Balance, March 31, 2021
|
|
$
12,842
|
Less:
Reinsurance recoverable
|
|
25
|
Balance, March 31,
2021, net
|
|
12,817
|
Acquisitions and
divestitures
|
|
249
|
Incurred related
to:
|
|
|
Current period
|
|
104,760
|
Prior period
|
|
(1,711)
|
Total incurred
|
|
103,049
|
Paid related
to:
|
|
|
Current period
|
|
90,003
|
Prior period
|
|
9,865
|
Total paid
|
|
99,868
|
Balance, March 31,
2022, net
|
|
16,247
|
Plus:
Reinsurance recoverable
|
|
12
|
Balance, March 31, 2022
|
|
$
16,259
|
|
|
|
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.
Additionally, approximately $368
million was recorded as a reduction from premium revenues
resulting from development within "Incurred related to: Prior
period" due to minimum HBR and other return of premium
programs.
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 March 31, 2021, and
prior.
View original
content:https://www.prnewswire.com/news-releases/centene-corporation-reports-first-quarter-2022-results-and-increases-2022-guidance-301532614.html
SOURCE Centene Corporation