ST. LOUIS, July 27, 2021 /PRNewswire/ -- Centene Corporation
(NYSE: CNC) announced today its financial results for the second
quarter ended June 30, 2021, reporting diluted loss per share
of $(0.92) and adjusted diluted
earnings per share (EPS) of $1.25.
In summary, the 2021 second quarter results were as follows:
Total revenues (in
millions)
|
$
|
31,025
|
|
Health benefits
ratio
|
88.3
|
%
|
SG&A expense
ratio
|
7.9
|
%
|
Adjusted SG&A
expense ratio (1)
|
7.7
|
%
|
GAAP diluted loss per
share
|
$
|
(0.92)
|
|
Adjusted diluted EPS
(1)
|
$
|
1.25
|
|
Total cash flow
provided by operations (in millions)
|
$
|
1,685
|
|
|
|
(1) A full
reconciliation of the adjusted SG&A expense ratio and adjusted
diluted EPS is shown on page 6 of this release.
|
"Centene delivered solid second-quarter results as we continued
to support our members with high quality service and deliver value
to state and local partners. We have seen near-term pressures in
our Marketplace business where utilization continues to trend above
baseline, and we are monitoring COVID variants closely as the
pandemic continues to evolve. Our scale and diversification provide
a solid foundation to execute through this environment as we focus
on implementing various initiatives to deliver on our stated margin
goals," said Michael F. Neidorff,
Chairman, President and Chief Executive Officer of Centene.
Second Quarter Highlights
- June 30, 2021 managed care membership of 25.4 million, an
increase of 0.8 million members, or 3%, compared to June 30,
2020.
- Total revenues of $31.0 billion
for the second quarter of 2021, representing 12% growth compared to
the second quarter of 2020.
- Health benefits ratio (HBR) of 88.3% for the second quarter of
2021, compared to 82.1% in the second quarter of 2020.
- Selling, general and administrative (SG&A) expense ratio of
7.9% for the second quarter of 2021, compared to 8.8% for the
second quarter of 2020.
- Adjusted SG&A expense ratio of 7.7% for the second quarter
of 2021, compared to 8.5% for the second quarter of 2020.
- Diluted loss per share for the second quarter of 2021 of
$(0.92), compared to diluted EPS of
$2.05 for the second quarter of 2020.
During the second quarter of 2021, Centene recorded a legal
settlement reserve estimate of $1.25
billion (inclusive of the Ohio and Mississippi settlements), or $1.78 per diluted share.
- Adjusted diluted EPS for the second quarter of 2021 of
$1.25, compared to $2.40 for the second quarter of 2020.
- Operating cash flow of $1.7
billion for the second quarter 2021.
Other Events
- In July 2021, Centene issued
$1.8 billion 2.45% Senior Notes due
2028. The Company intends to use the net proceeds from the offering
of the Notes to finance a portion of the cash consideration payable
in connection with its previously announced acquisition of Magellan
Health Inc. (Magellan) and to pay related fees and expenses.
- In July 2021, Centene commenced
operations under a new statewide contract in North Carolina providing Medicaid managed care
services and began operating under a new contract to provide
Medicaid managed care services in three regions in North Carolina through its North Carolina joint venture, Carolina
Complete Health.
- In July 2021, Centene began
operating under a statewide contract in Hawaii to continue administering covered
services to eligible Medicaid and Children's Health Insurance
Program (CHIP) members and a statewide contract to continue
administering services through the Community Care Services
program.
- In July 2021, Centene acquired
the remaining interest in our equity method investment in Circle
Health, the U.K.'s largest independent operator of hospitals.
- In June 2021, Centene reached
no-fault agreements with the Attorney General of Ohio and with the Attorney General and State
Auditor of Mississippi to resolve
claims and/or allegations made by the states related to services
provided by Envolve Pharmacy Solutions, Inc. (Envolve), as
Centene's pharmacy benefits manager subsidiary. Under the terms of
these agreements, Centene will pay $88
million to Ohio and
$55 million to Mississippi. The practices described in the
settlements focus on the structure and processes of Envolve,
essentially during 2017 and 2018. In the settlements, the Company
denied any liability for these practices. As a result of the
settlement, the Ohio Attorney
General's litigation against the Company was dismissed. The Company
also recorded a reserve estimate of $1.1
billion to bring final resolution to these concerns in other
affected states, exclusive of the aforementioned settlements.
Accreditations & Awards
- In July 2021, for the fourth
consecutive year, Centene was recognized with a 100 percent score
on the Disability Equality Index as one of the Best Places to Work
for People with Disabilities.
- In June 2021, FORTUNE announced
Centene's position of #24 in its annual ranking of America's
largest companies based on 2020 revenues. In addition, Centene
ranked #2 on the Fortune 500 list for the Measure Up Initiative,
which aims to make diversity, equity and inclusion disclosure and
performance a critical metric for successful businesses.
- In May 2021, Forbes announced
Centene's position of #207 in its annual Global 2000 list of the
world's largest public companies in terms of four areas: assets,
market value, sales, and profits.
- In May 2021, Centene was named a
Top 50 Company for Diversity by DiversityInc for the second
consecutive year. Centene advanced 13 spots to #36 on the list.
Centene was also recognized on two specialty lists this year,
ranking #18 for Top LGBT Companies and #21 for Top Companies for
Executive Diversity Councils.
Membership
The following table sets forth our membership by line of
business:
|
June
30,
|
|
2021
|
|
2020
|
Traditional Medicaid
(1)
|
12,492,600
|
|
|
11,124,800
|
|
High Acuity Medicaid
(2)
|
1,531,000
|
|
|
1,498,900
|
|
Total
Medicaid
|
14,023,600
|
|
|
12,623,700
|
|
Commercial
|
2,520,400
|
|
|
2,763,300
|
|
Medicare
(3)
|
1,182,900
|
|
|
936,500
|
|
Medicare
PDP
|
4,064,500
|
|
|
4,443,100
|
|
International
|
600,600
|
|
|
600,400
|
|
Correctional
|
145,300
|
|
|
166,000
|
|
Total at-risk
membership
|
22,537,300
|
|
|
21,533,000
|
|
TRICARE
eligibles
|
2,881,400
|
|
|
2,864,700
|
|
Non-risk
membership
|
4,300
|
|
|
223,300
|
|
Total
|
25,423,000
|
|
|
24,621,000
|
|
|
|
|
|
(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.
|
The following table sets forth additional membership statistics,
which are included in the membership information above:
|
June
30,
|
|
2021
|
|
2020
|
Dual-eligible
(4)
|
1,131,900
|
|
|
969,700
|
|
Health Insurance
Marketplace
|
2,040,900
|
|
|
2,245,600
|
|
Medicaid
Expansion
|
2,322,800
|
|
|
1,931,600
|
|
|
|
|
|
(4)
Membership that is eligible for both Medicaid and Medicare
benefits.
|
Revenues
The following table sets forth supplemental revenue information
($ in millions):
|
Three Months Ended
June 30,
|
|
2021
|
|
2020
|
|
%
Change
|
Medicaid
|
$
|
20,797
|
|
|
$
|
18,568
|
|
|
12
|
%
|
Commercial
|
4,110
|
|
|
4,136
|
|
|
(1)
|
%
|
Medicare
(5)
|
3,953
|
|
|
3,099
|
|
|
28
|
%
|
Medicare
PDP
|
511
|
|
|
674
|
|
|
(24)
|
%
|
Other
|
1,654
|
|
|
1,235
|
|
|
34
|
%
|
Total
Revenues
|
$
|
31,025
|
|
|
$
|
27,712
|
|
|
12
|
%
|
(5) Membership includes Medicare
Advantage and Medicare Supplement.
|
|
|
|
|
|
|
Statement of Operations: Three Months Ended June 30,
2021
- For the second quarter of 2021, total revenues increased 12% to
$31.0 billion from $27.7 billion in the comparable period of 2020.
The increase over the prior year was due to Medicaid membership
growth resulting from the ongoing suspension of eligibility
redeterminations, membership growth in the Medicare business and
our recent acquisition of PANTHERx, partially offset by the repeal
of the health insurer fee.
- HBR of 88.3% for the second quarter of 2021 represents an
increase from 82.1% in the comparable period in 2020. The
year-over-year increase was attributable to overall lower
utilization in the second quarter of 2020 due to the COVID-19
pandemic, higher utilization in the Marketplace business in the
second quarter of 2021, and an unfavorable 2020 risk adjustment in
2021. Marketplace utilization in the second quarter of
2021 included pent-up demand resulting from previously
deferred services during the pandemic.
- The SG&A expense ratio was 7.9% for the second quarter of
2021, compared to 8.8% in the second quarter of 2020. The adjusted
SG&A expense ratio was 7.7% for the second quarter of 2021,
compared to 8.5% in the second quarter of 2020. The decreases were
due to lower short-term variable compensation costs and the
leveraging of expenses over higher revenues as a result of
increased Medicaid membership and recent acquisitions. These were
partially offset by increased sales and marketing costs as a result
of the Marketplace special enrollment period and membership growth
in the Medicare business. The SG&A expense ratio also benefited
from lower acquisition related costs.
- Diluted loss per share was $(0.92) for the second quarter of 2021, compared
to diluted EPS of $2.05 for the
second quarter of 2020. During the second quarter of 2021, Centene
recorded a legal settlement reserve estimate of $1.25 billion (inclusive of the Ohio and Mississippi settlements), or $1.78 per diluted share, as discussed above.
- The effective tax rate was 1.3% for the second quarter of 2021,
compared to 38.2% in the second quarter of 2020. The effective tax
rate for the second quarter of 2021 reflects the pre-tax loss,
partial non-deductibility of the legal settlement reserve and the
repeal of the health insurer fee beginning in 2021. For the second
quarter of 2021, our effective tax rate on adjusted earnings was
26.3%.
Balance Sheet
At June 30, 2021, the Company had cash, investments and
restricted deposits of $27.2 billion
and maintained $1.1 billion of cash
and cash equivalents in our unregulated entities. Medical claims
liabilities totaled $12.8 billion.
The Company's days in claims payable was 48 days, which is a
decrease of one day over the first quarter of 2021 due to the
timing of state directed payments. Total debt was $16.8 billion, which included $154 million of borrowings on our $2.0 billion revolving credit facility at quarter
end. The debt to capitalization ratio was 38.9% at June 30,
2021, excluding $187 million of
non-recourse debt. Our debt to capital ratio would have been 37.3%
at June 30, 2021, when netting unregulated cash and cash
equivalents with debt, and excluding non-recourse debt.
Outlook
The Company's updated guidance is below and will be discussed on
the conference call.
|
Full Year
2021
|
|
Low
|
|
High
|
Total revenues (in
billions)
|
$
|
123.3
|
|
|
$
|
125.3
|
|
GAAP diluted
EPS
|
$
|
1.82
|
|
|
$
|
2.06
|
|
Adjusted diluted EPS
(1)
|
$
|
5.05
|
|
|
$
|
5.35
|
|
HBR
|
87.5
|
%
|
|
88.1
|
%
|
SG&A expense
ratio
|
8.3
|
%
|
|
8.7
|
%
|
Adjusted SG&A
expense ratio (2)
|
8.0
|
%
|
|
8.4
|
%
|
Effective tax
rate
|
32.5
|
%
|
|
34.5
|
%
|
Adjusted effective tax
rate (3)
|
24.3
|
%
|
|
26.3
|
%
|
Diluted shares
outstanding (in millions)
|
589.0
|
|
|
592.0
|
|
|
|
|
|
|
(1)
|
A full reconciliation
of adjusted diluted EPS is shown on page 6 of this
release.
|
(2)
|
Adjusted SG&A
expense ratio excludes acquisition related expenses of $184 million
to $215 million and
severance costs due to a restructuring of approximately $70
million.
|
(3)
|
Adjusted effective
tax rate excludes income tax effects of adjustments of $470 million
to $480 million.
|
We have not included the pending Magellan acquisition, recently
completed related financing, or the recent acquisition of the
remaining interest of Circle Health, in our current guidance.
Conference Call
As previously announced, the Company will host a conference call
Tuesday, July 27, 2021, at approximately 8:30 AM (Eastern Time) to review the financial
results for the second quarter ended June 30,
2021. Michael Neidorff and Drew
Asher will host the 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
Canada; +1-412-902-6506 from
abroad, including the following Elite Entry Number: 6975030 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, July 26, 2022, at the aforementioned URL. In
addition, a digital audio playback will be available until
9:00 AM (Eastern Time) on Tuesday,
August 3, 2021, by dialing 1-877-344-7529 in the U.S. and
Canada, or +1-412-317-0088 from
abroad, and entering access code 10157941.
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
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
GAAP net earnings
(loss) attributable to Centene
|
$
|
(535)
|
|
|
$
|
1,206
|
|
|
$
|
164
|
|
|
$
|
1,252
|
|
Amortization of
acquired intangible assets
|
188
|
|
|
197
|
|
|
383
|
|
|
363
|
|
Acquisition related
expenses
|
40
|
|
|
71
|
|
|
87
|
|
|
384
|
|
Other adjustments
(1)
|
1,314
|
|
|
(11)
|
|
|
1,416
|
|
|
12
|
|
Income tax effects of
adjustments (2)
|
(270)
|
|
|
(53)
|
|
|
(353)
|
|
|
(125)
|
|
Adjusted net
earnings
|
$
|
737
|
|
|
$
|
1,410
|
|
|
$
|
1,697
|
|
|
$
|
1,886
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Other adjustments
include the following items:
|
|
2021
-
|
(a)
|
legal
settlement expense of $1.25 billion for the three and six months
ended June 30, 2021;
|
|
|
(b)
|
debt extinguishment
costs of $46 million for the six months ended June 30,
2021;
|
|
|
(c)
|
severance costs due
to a restructuring of $2 million and $58 million, for the three and
six months ended June 30,
2021, respectively; and
|
|
|
(d)
|
a reduction to the
previously reported gain due to the finalization of the working
capital adjustment related to the
divestiture of certain products of our Illinois health plan of $62
million for the three and six months ended June 30,
2021.
|
|
2020 -
|
(a)
|
debt extinguishment
costs of $44 million for the six months ended June 30
2020;
|
|
|
(b)
|
gain related to the
divestiture of certain products of our Illinois health plan of $11
million and $104 million for
the three and six months ended June 30, 2020, respectively;
and
|
|
|
(c)
|
non-cash impairment
of $72 million for the six months ended June 30, 2020.
|
(2)
|
The income tax
effects of adjustments are based on the effective income tax rates
applicable to each adjustment.
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
Annual
Guidance
December 31, 2021
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
GAAP diluted earnings
(loss) per
share attributable to Centene
|
$
|
(0.92)
|
|
|
$
|
2.05
|
|
|
$
|
0.28
|
|
|
$
|
2.20
|
|
|
$1.82 -
$2.06
|
Amortization of
acquired intangible assets (3)
|
0.25
|
|
|
0.25
|
|
|
0.50
|
|
|
0.48
|
|
|
$0.99 -
$1.01
|
Acquisition related
expenses (4)
|
0.05
|
|
|
0.10
|
|
|
0.11
|
|
|
0.58
|
|
|
$0.24 -
$0.28
|
Other adjustments
(5)
|
1.87
|
|
|
—
|
|
|
1.99
|
|
|
0.05
|
|
|
$2.00 -
$2.00
|
Adjusted diluted
EPS
|
$
|
1.25
|
|
|
$
|
2.40
|
|
|
$
|
2.88
|
|
|
$
|
3.31
|
|
|
$5.05 -
$5.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
The amortization of
acquired intangible assets per diluted share presented above is net
of an income tax benefit of $0.08 and
$0.09 for the three months ended June 30, 2021 and 2020,
respectively, and $0.15 and $0.16 for the six months ended
June 30,
2021 and 2020, respectively, and an estimated $0.31 for the year
ended December 31, 2021.
|
|
|
(4)
|
The acquisition
related expenses per diluted share presented above are net of an
income tax benefit of $0.02 and $0.02 for the
three months ended June 30, 2021 and 2020, respectively, and
$0.04 and $0.09 for the six months ended June 30, 2021 and
2020, respectively, and an estimated $0.08 to $0.09 for the year
ended December 31, 2021.
|
|
|
(5)
|
Other adjustments
include the following items:
|
|
2021 -
|
(a)
|
legal settlement
expense of $1.78 per diluted share, net of an income tax benefit
of $0.34, for the three and six
months ended June 30, 2021, and an estimated $1.78 per diluted
share, net of an estimated income tax benefit of
$0.34 for the year ended December 31, 2021;
|
|
|
(b)
|
debt extinguishment
costs of $0.06 per diluted share, net of an income tax benefit
of $0.02 for the six months
ended June 30, 2021, and an estimated $0.06 per diluted share,
net of an estimated income tax benefit of $0.02
for the year ended December 31, 2021;
|
|
|
(c)
|
severance costs due
to a restructuring of $0.07 per diluted share, net of an income tax
benefit of $0.03, for the six
months ended June 30, 2021, and an estimated $0.08 per diluted
share, net of an estimated income tax benefit of
$0.03 for the year ended December 31, 2021;
|
|
|
(d)
|
a reduction to the
previously reported gain due to the finalization of the working
capital adjustment related to the
divestiture of certain products of our Illinois health plan of
$0.08 per diluted share, net of an income tax benefit
of $0.02, for the three and six months ended June 30, 2021,
and an estimated $0.08 per diluted share, net of an
estimated income tax benefit of $0.02 for the year ended
December 31, 2021; and
|
|
|
(e)
|
the $0.01 impact of
including an additional 8 million shares in the calculation of
adjusted diluted EPS which were
excluded from the calculation of the GAAP net loss per share due to
their anti-dilutive effect for the three months
ended June 30, 2021.
|
|
2020 -
|
(a)
|
debt extinguishment
costs of $44 million, or $0.06 per diluted share, net of an income
tax benefit of $0.02, for the
six months ended June 30 2020;
|
|
|
(b)
|
gain related to the
divestiture of certain products of our Illinois health plan of $11
million, or $0.00 per diluted
share, net of an income tax expense of $0.02, and $104 million, or
$0.11 per diluted share, net of an income tax
expense of $0.08, for the three and six months ended June 30, 2020,
respectively; and
|
|
|
(c)
|
non-cash impairment
of $72 million, or $0.10 per diluted share, net of an income tax
benefit of $0.03, for the six
months ended June 30, 2020.
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
GAAP SG&A
expenses
|
$
|
2,273
|
|
|
$
|
2,255
|
|
|
$
|
4,640
|
|
|
$
|
4,639
|
|
Acquisition related
expenses
|
39
|
|
|
70
|
|
|
85
|
|
|
365
|
|
Restructuring
costs
|
2
|
|
|
—
|
|
|
58
|
|
|
—
|
|
Adjusted SG&A
expenses
|
$
|
2,232
|
|
|
$
|
2,185
|
|
|
$
|
4,497
|
|
|
$
|
4,274
|
|
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 and restructuring costs.
- 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
multi-national 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 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, growth strategy, competition,
expected activities in completed and future acquisitions, including
statements about the impact of our proposed acquisition of Magellan
Health (the Magellan Acquisition), our completed acquisition of
WellCare Health Plans, Inc. (WellCare and such acquisition, the
WellCare Acquisition), other recent and future acquisitions,
investments, the adequacy of our available cash resources and our
settlements with Ohio and
Mississippi to resolve claims
and/or allegations made by those states with regard to past
practices at Envolve Pharmacy Solutions, Inc. (Envolve), as our
pharmacy benefits manager (PBM) subsidiary, and other possible
future claims and settlements related to the past practices at
Envolve and our ability to settle claims with other states within
the reserve estimate we have recorded and on other acceptable
terms, or at all. 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: the impact of COVID-19 on global markets, economic
conditions, the healthcare industry and our results of operations
and the response by governments and other third
parties; the risk that regulatory or other approvals
required for the Magellan Acquisition may be delayed or not
obtained or are subject to unanticipated conditions that could
require the exertion of management's time and our resources or
otherwise have an adverse effect on us; the possibility that
certain conditions to the consummation of the Magellan Acquisition
will not be satisfied or completed on a timely basis and
accordingly, the Magellan Acquisition may not be consummated on a
timely basis or at all; uncertainty as to the expected financial
performance of the combined company following completion of the
Magellan Acquisition; the possibility that the expected
synergies and value creation from the Magellan Acquisition or the
WellCare Acquisition (or other acquired businesses) will not be
realized, or will not be realized within the respective expected
time periods; the risk that unexpected costs will be incurred in
connection with the completion and/or integration of the Magellan
Acquisition or that the integration of Magellan Health will be more
difficult or time consuming than expected; the risk that potential
litigation in connection with the Magellan Acquisition may affect
the timing or occurrence of the Magellan Acquisition or result in
significant costs of defense, indemnification and liability; a
downgrade of the credit rating of our indebtedness; the
inability to retain key personnel; disruption from the
announcement, pendency, completion and/or integration of the
Magellan Acquisition or from the integration of the WellCare
Acquisition, 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; 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;
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
claims against our PBM business 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; 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,
including the Magellan Acquisition; disruption caused by
significant completed and pending acquisitions making it more
difficult to maintain business and operational relationships; the
risk that unexpected costs will be incurred in connection with the
completion and/or integration of acquisition transactions; changes
in expected closing dates, estimated purchase price and accretion
for acquisitions; the risk that acquired businesses will not be
integrated successfully; 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)
|
|
|
|
|
|
June 30,
2021
|
|
December
31,
2020
|
ASSETS
|
(Unaudited)
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
11,018
|
|
|
$
|
10,800
|
|
Premium and trade
receivables
|
11,202
|
|
|
9,696
|
|
Short-term
investments
|
1,566
|
|
|
1,580
|
|
Other current
assets
|
1,678
|
|
|
1,317
|
|
Total current
assets
|
25,464
|
|
|
23,393
|
|
Long-term
investments
|
13,472
|
|
|
12,853
|
|
Restricted
deposits
|
1,112
|
|
|
1,060
|
|
Property, software
and equipment, net
|
2,912
|
|
|
2,774
|
|
Goodwill
|
18,805
|
|
|
18,652
|
|
Intangible assets,
net
|
8,069
|
|
|
8,388
|
|
Other long-term
assets
|
1,705
|
|
|
1,599
|
|
Total
assets
|
$
|
71,539
|
|
|
$
|
68,719
|
|
LIABILITIES,
REDEEMABLE NONCONTROLLING INTERESTS AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Medical claims
liability
|
$
|
12,763
|
|
|
$
|
12,438
|
|
Accounts payable and
accrued expenses
|
8,053
|
|
|
7,069
|
|
Return of premium
payable
|
2,127
|
|
|
1,458
|
|
Unearned
revenue
|
446
|
|
|
523
|
|
Current portion of
long-term debt
|
253
|
|
|
97
|
|
Total current
liabilities
|
23,642
|
|
|
21,585
|
|
Long-term
debt
|
16,536
|
|
|
16,682
|
|
Deferred tax
liability
|
1,438
|
|
|
1,534
|
|
Other long-term
liabilities
|
3,795
|
|
|
2,956
|
|
Total
liabilities
|
45,411
|
|
|
42,757
|
|
Commitments and
contingencies
|
|
|
|
Redeemable
noncontrolling interests
|
83
|
|
|
77
|
|
Stockholders'
equity:
|
|
|
|
Preferred stock,
$0.001 par value; authorized 10,000 shares; no shares issued or
outstanding at June 30, 2021 and December 31,
2020
|
—
|
|
|
—
|
|
Common stock, $0.001
par value; authorized 800,000 shares; 599,988 issued and
583,002 outstanding at June 30, 2021, and 598,249 issued and
581,479 outstanding
at December 31, 2020
|
1
|
|
|
1
|
|
Additional paid-in
capital
|
19,545
|
|
|
19,459
|
|
Accumulated other
comprehensive earnings
|
239
|
|
|
337
|
|
Retained
earnings
|
6,956
|
|
|
6,792
|
|
Treasury stock, at
cost (16,986 and 16,770 shares, respectively)
|
(830)
|
|
|
(816)
|
|
Total Centene
stockholders' equity
|
25,911
|
|
|
25,773
|
|
Noncontrolling
interest
|
134
|
|
|
112
|
|
Total stockholders'
equity
|
26,045
|
|
|
25,885
|
|
Total liabilities,
redeemable noncontrolling interests and stockholders'
equity
|
$
|
71,539
|
|
|
$
|
68,719
|
|
CENTENE
CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(In millions,
except shares in thousands and per share data in
dollars)
|
(Unaudited)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenues:
|
|
|
|
|
|
|
|
Premium
|
$
|
27,627
|
|
|
$
|
24,745
|
|
|
$
|
54,560
|
|
|
$
|
47,959
|
|
Service
|
1,235
|
|
|
979
|
|
|
2,416
|
|
|
1,937
|
|
Premium and service
revenues
|
28,862
|
|
|
25,724
|
|
|
56,976
|
|
|
49,896
|
|
Premium tax and health
insurer fee
|
2,163
|
|
|
1,988
|
|
|
4,032
|
|
|
3,841
|
|
Total
revenues
|
31,025
|
|
|
27,712
|
|
|
61,008
|
|
|
53,737
|
|
Expenses:
|
|
|
|
|
|
|
|
Medical
costs
|
24,389
|
|
|
20,307
|
|
|
47,780
|
|
|
40,727
|
|
Cost of
services
|
1,107
|
|
|
833
|
|
|
2,155
|
|
|
1,658
|
|
Selling, general and
administrative expenses
|
2,273
|
|
|
2,255
|
|
|
4,640
|
|
|
4,639
|
|
Amortization of
acquired intangible assets
|
188
|
|
|
197
|
|
|
383
|
|
|
363
|
|
Premium tax
expense
|
2,236
|
|
|
1,723
|
|
|
4,164
|
|
|
3,348
|
|
Health insurer fee
expense
|
—
|
|
|
379
|
|
|
—
|
|
|
724
|
|
Impairment
|
—
|
|
|
—
|
|
|
—
|
|
|
72
|
|
Legal
settlement
|
1,250
|
|
|
—
|
|
|
1,250
|
|
|
—
|
|
Total operating
expenses
|
31,443
|
|
|
25,694
|
|
|
60,372
|
|
|
51,531
|
|
Earnings (loss) from
operations
|
(418)
|
|
|
2,018
|
|
|
636
|
|
|
2,206
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Investment and other
income
|
39
|
|
|
113
|
|
|
142
|
|
|
280
|
|
Debt extinguishment
costs
|
—
|
|
|
—
|
|
|
(46)
|
|
|
(44)
|
|
Interest
expense
|
(163)
|
|
|
(187)
|
|
|
(333)
|
|
|
(367)
|
|
Earnings (loss) before
income tax expense
|
(542)
|
|
|
1,944
|
|
|
399
|
|
|
2,075
|
|
Income tax (benefit)
expense
|
(7)
|
|
|
742
|
|
|
237
|
|
|
827
|
|
Net earnings
(loss)
|
(535)
|
|
|
1,202
|
|
|
162
|
|
|
1,248
|
|
Loss attributable
to noncontrolling interests
|
—
|
|
|
4
|
|
|
2
|
|
|
4
|
|
Net earnings (loss)
attributable to Centene Corporation
|
$
|
(535)
|
|
|
$
|
1,206
|
|
|
$
|
164
|
|
|
$
|
1,252
|
|
|
|
|
|
|
|
|
|
Net earnings
(loss) per common share attributable to Centene
Corporation:
|
Basic earnings (loss)
per common share
|
$
|
(0.92)
|
|
|
$
|
2.08
|
|
|
$
|
0.28
|
|
|
$
|
2.23
|
|
Diluted earnings
(loss) per common share
|
$
|
(0.92)
|
|
|
$
|
2.05
|
|
|
$
|
0.28
|
|
|
$
|
2.20
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
Basic
|
582,804
|
|
|
579,189
|
|
|
582,331
|
|
|
561,623
|
|
Diluted
|
582,804
|
|
|
587,498
|
|
|
589,799
|
|
|
569,559
|
|
CENTENE
CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(In millions,
unaudited)
|
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
Cash flows from
operating activities:
|
|
|
|
Net
earnings
|
$
|
162
|
|
|
$
|
1,248
|
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities
|
Depreciation and
amortization
|
717
|
|
|
618
|
|
Stock compensation
expense
|
87
|
|
|
164
|
|
Impairment
|
—
|
|
|
72
|
|
Loss on debt
extinguishment
|
46
|
|
|
44
|
|
Deferred income
taxes
|
(76)
|
|
|
17
|
|
Gain on
divestiture
|
62
|
|
|
(104)
|
|
Other adjustments,
net
|
14
|
|
|
2
|
|
Changes in assets and
liabilities
|
|
|
|
Premium and trade
receivables
|
(1,514)
|
|
|
(1,159)
|
|
Other
assets
|
(458)
|
|
|
202
|
|
Medical claims
liabilities
|
325
|
|
|
146
|
|
Unearned
revenue
|
(83)
|
|
|
(127)
|
|
Accounts payable and
accrued expenses
|
1,285
|
|
|
1,309
|
|
Other long-term
liabilities
|
1,161
|
|
|
1,028
|
|
Other operating
activities, net
|
—
|
|
|
14
|
|
Net cash provided by
operating activities
|
1,728
|
|
|
3,474
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(437)
|
|
|
(412)
|
|
Purchases of
investments
|
(3,590)
|
|
|
(1,849)
|
|
Sales and maturities
of investments
|
2,809
|
|
|
1,768
|
|
Acquisitions, net of
cash acquired
|
(140)
|
|
|
(3,000)
|
|
Divestiture proceeds,
net of divested cash
|
(62)
|
|
|
466
|
|
Other investing
activities, net
|
—
|
|
|
(5)
|
|
Net cash used in
investing activities
|
(1,420)
|
|
|
(3,032)
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from
long-term debt
|
2,398
|
|
|
2,630
|
|
Payments of long-term
debt
|
(2,353)
|
|
|
(1,598)
|
|
Common stock
repurchases
|
(33)
|
|
|
(561)
|
|
Payments for debt
extinguishment
|
(54)
|
|
|
(21)
|
|
Debt issuance
costs
|
(28)
|
|
|
(93)
|
|
Other financing
activities, net
|
24
|
|
|
22
|
|
Net cash provided by
(used in) financing activities
|
(46)
|
|
|
379
|
|
Effect of exchange
rate changes on cash, cash equivalents, and restricted
cash
|
(24)
|
|
|
3
|
|
Net increase in cash,
cash equivalents and restricted cash and cash
equivalents
|
238
|
|
|
824
|
|
Cash, cash
equivalents, and restricted cash and cash
equivalents, beginning of period
|
10,957
|
|
|
12,131
|
|
Cash, cash
equivalents, and restricted cash and cash equivalents, end
of period
|
$
|
11,195
|
|
|
$
|
12,955
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
Interest
paid
|
$
|
355
|
|
|
$
|
360
|
|
Income taxes
paid
|
$
|
406
|
|
|
$
|
75
|
|
Equity issued in
connection with acquisitions
|
$
|
—
|
|
|
$
|
11,526
|
|
|
|
|
|
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:
|
|
2021
|
|
2020
|
Cash and cash
equivalents
|
$
|
11,018
|
|
|
$
|
12,798
|
|
Restricted cash and
cash equivalents, included in restricted deposits
|
177
|
|
|
157
|
|
Total cash, cash
equivalents, and restricted cash and cash equivalents
|
$
|
11,195
|
|
|
$
|
12,955
|
|
CENTENE
CORPORATION
|
SUPPLEMENTAL
FINANCIAL DATA
|
|
|
Q2
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
2021
|
|
2021
|
|
2020
|
|
2020
|
|
2020
|
MEMBERSHIP
|
|
|
|
|
|
|
|
|
|
Traditional Medicaid
(1)
|
12,492,600
|
|
|
12,307,400
|
|
|
12,055,400
|
|
|
11,662,100
|
|
|
11,124,800
|
|
High Acuity Medicaid
(2)
|
1,531,000
|
|
|
1,529,000
|
|
|
1,554,700
|
|
|
1,521,700
|
|
|
1,498,900
|
|
Total
Medicaid
|
14,023,600
|
|
|
13,836,400
|
|
|
13,610,100
|
|
|
13,183,800
|
|
|
12,623,700
|
|
Commercial
|
2,520,400
|
|
|
2,384,300
|
|
|
2,633,600
|
|
|
2,719,500
|
|
|
2,763,300
|
|
Medicare
(3)
|
1,182,900
|
|
|
1,138,500
|
|
|
955,400
|
|
|
953,800
|
|
|
936,500
|
|
Medicare
PDP
|
4,064,500
|
|
|
4,109,700
|
|
|
4,469,400
|
|
|
4,436,400
|
|
|
4,443,100
|
|
International
|
600,600
|
|
|
597,400
|
|
|
597,700
|
|
|
599,900
|
|
|
600,400
|
|
Correctional
|
145,300
|
|
|
144,900
|
|
|
147,200
|
|
|
167,200
|
|
|
166,000
|
|
Total at-risk
membership
|
22,537,300
|
|
|
22,211,200
|
|
|
22,413,400
|
|
|
22,060,600
|
|
|
21,533,000
|
|
TRICARE
eligibles
|
2,881,400
|
|
|
2,881,400
|
|
|
2,877,900
|
|
|
2,877,900
|
|
|
2,864,700
|
|
Non-risk
membership
|
4,300
|
|
|
4,400
|
|
|
231,600
|
|
|
227,200
|
|
|
223,300
|
|
Total
|
25,423,000
|
|
|
25,097,000
|
|
|
25,522,900
|
|
|
25,165,700
|
|
|
24,621,000
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
|
|
|
|
|
|
|
|
|
|
NUMBER OF
EMPLOYEES
|
68,500
|
|
|
69,100
|
|
|
71,300
|
|
|
71,100
|
|
|
71,800
|
|
|
|
|
|
|
|
|
|
|
|
DAYS IN CLAIMS
PAYABLE
|
48
|
|
|
49
|
|
|
51
|
|
|
52
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH, INVESTMENTS
AND RESTRICTED DEPOSITS (in millions)
|
Regulated
|
$
|
25,113
|
|
|
$
|
24,361
|
|
|
$
|
24,361
|
|
|
$
|
22,623
|
|
|
$
|
23,655
|
|
Unregulated
|
2,055
|
|
|
1,286
|
|
|
1,932
|
|
|
1,986
|
|
|
1,982
|
|
Total
|
$
|
27,168
|
|
|
$
|
25,647
|
|
|
$
|
26,293
|
|
|
$
|
24,609
|
|
|
$
|
25,637
|
|
|
|
|
|
|
|
|
|
|
|
DEBT TO
CAPITALIZATION
|
39.2
|
%
|
|
38.8
|
%
|
|
39.3
|
%
|
|
39.4
|
%
|
|
40.0
|
%
|
DEBT TO
CAPITALIZATION EXCLUDING NON-RECOURSE DEBT
(4)
|
38.9
|
%
|
|
38.5
|
%
|
|
39.0
|
%
|
|
39.1
|
%
|
|
39.7
|
%
|
(4)
Excluding non-recourse debt of $187 million and $230 million at
June 30, 2021 and December 31, 2020,
respectively.
|
OPERATING
RATIOS
|
|
|
Three Months Ended
June 30,
|
|
2021
|
|
2020
|
HBR
|
88.3
|
%
|
|
82.1
|
%
|
SG&A expense
ratio
|
7.9
|
%
|
|
8.8
|
%
|
Adjusted SG&A
expense ratio
|
7.7
|
%
|
|
8.5
|
%
|
MEDICAL CLAIMS
LIABILITY
|
|
The changes in
medical claims liability are summarized as follows (in
millions):
|
|
|
|
|
|
Balance,
June 30, 2020
|
|
$
|
11,418
|
|
Less: Reinsurance
recoverable
|
|
17
|
|
Balance,
June 30, 2020, net
|
|
11,401
|
|
Acquisitions and
divestitures
|
|
49
|
|
Incurred related
to:
|
|
|
Current
period
|
|
94,679
|
|
Prior
period
|
|
(1,362)
|
|
Total
incurred
|
|
93,317
|
|
Paid related
to:
|
|
|
Current
period
|
|
83,036
|
|
Prior
period
|
|
8,991
|
|
Total paid
|
|
92,027
|
|
Balance,
June 30, 2021, net
|
|
12,740
|
|
Plus: Reinsurance
recoverable
|
|
23
|
|
Balance,
June 30, 2021
|
|
$
|
12,763
|
|
|
|
|
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 $159
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 June 30, 2020, and
prior.
View original
content:https://www.prnewswire.com/news-releases/centene-corporation-reports-second-quarter-2021-results-301341745.html
SOURCE Centene Corporation