Centene Corporation Reports 2010 Second Quarter Earnings
Second Quarter Highlights
Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "Our team continues to focus on fundamentals and driving Centene to be a low-cost producer. These are key factors in producing another solid quarterly report and for the long-term success of our enterprise."
The following table depicts membership in Centene's managed care organizations, by state, at June 30, 2010 and 2009:
The following table depicts membership in Centene's managed care organizations, by member category, at June 30, 2010 and 2009:
Statement of Operations
Balance Sheet and Cash Flow
At June 30, 2010, we had cash and investments of $852.4 million, including $813.0 million held by our regulated entities and $39.4 million held by our unregulated entities. Medical claims liabilities totaled $455.4 million, representing 48.2 days in claims payable, an increase of 0.5 days from March 31, 2010. Total debt was $252.8 million and debt to capitalization was 24.5%.
Cash flow from operations through June 30, 2010 was $(98.3) million and was impacted by 1) $86.0 million decrease in unearned revenue due to advance payments received in December 2009 for January 2010 premium payments and 2) $57.7 million increase in premium and related receivables for June premium payments deferred by several states until July 2010. During the second half of 2010, we expect cash flow from operations to return to historical levels, although the timing of premium payments from each state can vary from period to period.
A reconciliation of the change in days in claims payable from the immediately preceding quarter-end is presented below:
The table below depicts our guidance from continuing operations for 2010:
Based upon known rate adjustments and preliminary discussions with our states that finalize rates in the second half of the year, we currently estimate our 2010 composite premium rate increase to be between 1% and 3%.
As previously announced, we will host a conference call Tuesday, July 27, 2010, at 8:30 A.M. (Eastern Time) to review the financial results for the second quarter ended June 30, 2010, and to discuss our business outlook. Michael F. Neidorff and William N. Scheffel will host the conference call.
Investors and other interested parties are invited to listen to the conference call by dialing 800-860-2442 in the U.S. and Canada; +1-412-858-4600 from abroad; or via a live, audio webcast on our website at www.centene.com, under the Investors section.
A replay will be available for on-demand listening shortly after the completion of the call for the next twelve months or until 11:59 PM (Eastern Time) on Tuesday, July 26, 2011, at the aforementioned URL, or by dialing 877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad and entering the playback conference number 442132.
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 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.
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 in each of the periods presented.
The amount of the "Incurred related to: Prior period" above 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, increased receipts from other third party payors related to coordination of benefits and lower medical utilization and cost trends for dates of service prior to June 30, 2009.
-- Quarter-end managed care at-risk membership of 1,531,800, an increase of 242,800 members, or 18.8% year over year. -- Premium and Service Revenues of $1.051 billion, representing 12.8% year over year growth. -- Health Benefits Ratio (HBR) of 83.8%, compared to 83.1% in the prior year. -- General and Administrative (G&A) expense ratio of 12.7%, compared to 13.9% in the prior year. -- Earnings from operations of $41.7 million, compared to $31.4 million in the prior year. -- Earnings from continuing operations, net of income tax expense, increased 11.0% year over year to $23.0 million. Within the quarter, we incurred a $0.03 charge per diluted share to write off a deferred tax asset associated with our Georgia health plan and benefited by $0.03 per diluted share from a shift in start up costs for Mississippi from the second to the third quarter. -- Diluted earnings per share from continuing operations of $0.45. -- Days in claims payable of 48.2, including pharmacy claims payable. -- Estimated 2010 composite premium rate increase between 1% and 3%.
SOURCE Centene Corporation
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