CNC Centene Corp

ST. LOUIS, Feb. 8, 2011 /PRNewswire/ -- Centene Corporation (NYSE: CNC) today announced its financial results for the quarter and year ended December 31, 2010.  The discussions below, with the exception of cash flow information, are in the context of continuing operations and all financial ratios exclude premium taxes.

Fourth Quarter Highlights

• Quarter-end managed care at-risk membership of 1,533,500, an increase of 75,300 members, or 5.2% year over year.
• Premium and Service Revenues of $1,129.5 million, representing 7.5% year over year growth.
• Health Benefits Ratio of 83.3%, compared to 83.9% in the prior year.  
• General and Administrative expense ratio of 13.0%, compared to 12.7% in the prior year.
• Cash flow from operations of $194.6 million.
• Days in claims payable of 45.6.
• Diluted earnings per share from continuing operations of $0.50 (which includes the dilution from the stock offering in early 2010), compared to $0.53 in the prior year.
• Debt to capitalization of 29.3%, or 23.9% excluding the $80.0 million non-recourse mortgage note.

Other Events

• During the fourth quarter of 2010, we completed the conversion of approximately 22,500 Florida members from Access Health Solutions LLC to our subsidiary, Sunshine State Health Plan, on an at-risk basis.  Additionally, in December 2010, we completed the acquisition of Citrus Health Care, Inc., a Florida Medicaid and Long-term Care health plan.  We served 194,900 at-risk members in Florida as of December 31, 2010.
• In December 2010, we refinanced the construction loan related to our corporate headquarters development with an $80 million non-recourse mortgage loan. In January 2011, we refinanced our $300 million Revolving Credit Facility with a new $350 million unsecured Revolving Credit Facility.
• In December 2010, Cenpatico Behavioral Health of Arizona began operating under an expanded contract to manage behavioral healthcare services in an additional four counties.  
• In December 2010, one of our highly regarded health programs, Start Smart for Your Baby, was the recipient of the URAC/GKEN International Health Promotion Award for Community Health.   Start Smart for Your Baby also received a gold award at the 2010 Web Health Awards for its audio book and a merit award for its podcasts.
• In January 2011, Magnolia Health Plan began operating under a new contract in Mississippi to provide managed care services to Medicaid recipients through the Mississippi Coordinated Access Network (MississippiCAN) Program.  
• In January 2011, we entered into an agreement with Pima Health Systems in Arizona to administer their long-term care program on a non-risk basis.
• In February 2011, Superior HealthPlan began operating under an additional STAR+PLUS ABD contract in Texas in the Dallas service area.

Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "Our team's coordinated and consistent efforts produced solid financial and operational performance in 2010, setting the stage for continued success in 2011."

The following table depicts membership in Centene's managed care organizations, by state, at December 31, 2010 and 2009:

The following table depicts membership in Centene's managed care organizations, by member category, at December 31, 2010 and 2009:

Statement of Operations: Three Months Ended December 31, 2010

• For the fourth quarter of 2010, Premium and Service Revenues increased 7.5% to $1,129.5 million from $1,050.8 million in the fourth quarter of 2009.  The increase was primarily driven by membership growth resulting from acquisitions in Florida and South Carolina, conversion of membership in Florida from Access to at-risk under Sunshine State Health Plan, as well as premium rate increases in 2010.  This increase was moderated by the removal of pharmacy service in two states in 2010.  These pharmacy carve outs had the effect of reducing 2010 fourth quarter revenue by approximately $52 million.
• Consolidated HBR of 83.3% for the fourth quarter of 2010 represents a decrease of 0.6% from the comparable period in 2009.  The year over year improvement in HBR is due to rate increases, decreased costs associated with the flu and better performance in our Florida health plan.  Consolidated HBR decreased 0.9% sequentially from the third quarter of 2010.  The improvement in HBR was due to the impact of rate increases in several markets and improvements in our Florida health plan.
• Consolidated G&A expense as a percent of premium and service revenues was 13.0% in the fourth quarter of 2010, an increase from 12.7% in the fourth quarter of 2009.  The increase in the G&A ratio between years reflects increased business expansion costs, including Mississippi, Dallas STAR+PLUS and Illinois.  
• Earnings from continuing operations increased to $45.5 million in 2010 from $37.8 million in 2009, or 20.4% year over year.  Net earnings from continuing operations were $25.5 million, or $0.50 per diluted share in 2010 (which includes the dilution from the stock offering in early 2010), compared to $23.7 million, or $0.53 per diluted share in the fourth quarter of 2009.  

Statement of Operations: Year Ended December 31, 2010

• For the year ended December 31, 2010, Premium and Service Revenues increased 10.5% to $4.3 billion in 2010 from $3.9 billion in 2009.  This reflects a 13.6% increase in member months, offset by reduced revenue of $185 million as a result of pharmacy carve outs in 2010.  The increase was primarily driven by membership growth resulting from acquisitions in Florida and South Carolina, conversion of membership in Florida from Access to at-risk under Sunshine State Health Plan, as well as premium rate increases in 2010.  
• The consolidated HBR of 83.8% for 2010 represented a 0.3% increase from the 2009 consolidated HBR of 83.5%.  The increase is primarily due to the growth in our Florida health plan where we have experienced a higher HBR.  
• G&A expenses as a percent of Premium and Service Revenues decreased to 12.8% in 2010, compared to 13.3% in 2009.  The decrease primarily reflects the leveraging of our expenses over higher revenues, partially offset by increased business expansion costs.
• Earnings from continuing operations increased to $157.1 million in 2010 from $138.1 million in 2009, or 13.7% year over year.  Net earnings from continuing operations were $90.9 million, or $1.80 per diluted share in 2010 (which includes the dilution from the stock offering in early 2010), compared to $86.1 million, or $1.94 per diluted share in 2009.  

Balance Sheet and Cash Flow

At December 31, 2010, the Company had cash and investments of $1,073.9 million, including $1,043.0 million held by its regulated entities and $30.9 million held by its unregulated entities.  Medical claims liabilities totaled $456.8 million, representing 45.6 days in claims payable.  Total debt was $330.6 million and debt to capitalization was 29.3%.  Excluding the $80.0 million non-recourse mortgage note, our debt to capital ratio is 23.9%.  Full year 2010 cash flow from operations was $168.9 million, or 1.7 times net earnings.

A reconciliation of the Company's change in days in claims payable from the immediately preceding quarter-end is presented below:

During the fourth quarter of 2010, we experienced increased electronic claims submissions and auto-adjudication of claims which reduced the average time from claims incurred to claims paid by 1.4 days, which is reflected in the decrease in period end claims inventory from the third quarter as presented in Supplemental Financial Data included in this release.  We expect our days in claims payable to be within our targeted range of 43 to 48 days in 2011.  This may be higher from time to time as we have new plans begin operations.  

Outlook

The table below depicts the Company's annual guidance from continuing operations for 2011:

Conference Call

As previously announced, the Company will host a conference call Tuesday, February 8, 2011, at 8:30 A.M. (Eastern Time) to review the financial results for the fourth quarter ended December 31, 2010, and to discuss its business outlook.  Michael F. Neidorff and William N. Scheffel will host the conference call.  Investors and other interested parties are invited to listen to the conference call by dialing 1-877-887-1134 in the U.S. and Canada; 1-412-317-0794 from abroad, or via a live, audio webcast on the Company's website at www.centene.com, under the Investors section.  A webcast replay will be available for on-demand listening shortly after the completion of the call for the next twelve months until 11:59 PM (Eastern Time) on Tuesday, February 7, 2012, at the aforementioned URL. In addition, a digital audio playback will be available until 9:00 AM Eastern Time on Wednesday, February 16, 2011, by dialing 1-877-344-7529 the U.S. and Canada, or 1-412-317-0088 from abroad, and entering access code 447292.

About Centene Corporation

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

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