CENTENE CORP – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations
should be read in conjunction with our consolidated financial statements and the
related notes included elsewhere in this filing. The discussion contains
forward-looking statements that involve known and unknown risks and
uncertainties.

                               EXECUTIVE OVERVIEW

General

We are a leading healthcare enterprise that is committed to helping people live
healthier lives. We take 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.

Results of operations depend on our ability to manage expenses associated with
health benefits (including estimated costs incurred) and selling, general and
administrative (SG&A) costs. We measure operating performance based upon two key
ratios. The health benefits ratio (HBR) represents medical costs as a percentage
of premium revenues, excluding premium tax revenues that are separately billed,
and reflects the direct relationship between the premiums received and the
medical services provided. The SG&A expense ratio represents SG&A costs as a
percentage of premium and service revenues, excluding premium taxes separately
billed.

Value Creation Plan

As introduced in June 2021, our Value Creation Plan is designed to drive margin
expansion by leveraging our scale and generating sustainable profitable growth.
In addition to creating shareholder value, this plan is an ongoing effort to
modernize and improve how we work in order to propel our organization to new
levels of success and elevate the member and provider experiences. The three
major pillars of the Value Creation Plan are: SG&A expense savings, gross margin
expansion, and strategic capital management. The first pillar, SG&A expense
savings, includes initiatives targeting improving productivity, driving
efficiencies, and reducing costs throughout the organization, including real
estate optimization. The second pillar, gross margin expansion, relates to
initiatives including bid discipline, clinical initiatives, quality improvement,
and pharmacy cost management. The third pillar, strategic capital management,
focuses on value-creating capital deployment activities such as stock
repurchases, portfolio optimization, and debt and investment management.
From an operational perspective, we continue to move forward with our Value
Creation Plan, including the streamlining of certain operations, such as key
call centers and utilization management, evaluating our real estate footprint,
and seeking opportunities for platform consolidation. We are assessing our
portfolio and are focused on making strategic decisions and investments to
create additional value in the short term and to seek opportunities that
position the organization for long-term strength, profitability, growth, and
innovation.

In the second quarter of 2022, following a strategic review of our real estate
portfolio and the adoption of a more modern, flexible work environment, we
initiated a reduction of our real estate footprint. As a result, in 2022 we have
incurred $1.6 billion related to the impairment of leased and owned real estate
and related fixed assets. We incurred impairments of $763 million related to
owned real estate, $574 million related to leased real estate, and $237 million
related to associated fixed assets. We anticipate additional future charges of
approximately $100 million related to real estate optimization. This represents
an approximate 70% decrease in domestic leased space and is expected to result
in annualized lease expense savings of approximately $200 million.

Additionally, as part of our ongoing portfolio review, during 2022 we completed
the divestiture of PANTHERx Rare (PANTHERx) and entered into definitive
agreements to sell Magellan Rx as well as our ownership stakes in our Spanish
and Central European businesses. In preparation for these transactions as well
as planning for the future, our Board of Directors authorized a $3.0 billion
increase to our stock repurchase program and a new $1.0 billion debt repurchase
program during the second quarter of 2022.

During the nine months ended September 30, 2022, we have repurchased $1.4
billion of Centene common stock through the stock repurchase program, exclusive
of the $200 million unsettled portion under the ASR, and $259 million of our
senior notes through the debt repurchase program. As of September 30, 2022, $2.2
billion was available under the stock repurchase program and $753 million was
available under the debt repurchase program.

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During the fourth quarter of 2022, we signed a multi-year contract with Express
Scripts, Inc. to provide our pharmacy benefit services, commencing in 2024. The
new pharmacy benefits management (PBM) contract is expected to drive significant
value in 2024 and beyond.

COVID-19 Trends and Uncertainties

The impact of COVID-19 on our business in both the short-term and long-term is
uncertain and difficult to predict. The outlook for the remainder of 2022
depends on future developments, including but not limited to: the length and
severity of the outbreak (including new variants, which may be more contagious,
more severe or less responsive to treatment or vaccines), the effectiveness of
containment actions, the timing and effectiveness of vaccinations and
achievement of herd immunity, and the timing and rate at which members return to
accessing healthcare. The pandemic and these future developments have impacted
and will continue to affect our membership and medical utilization. From the
onset of the pandemic in March 2020, our Medicaid membership has increased by
3.0 million members (excluding the new North Carolina and Missouri membership).
The public health emergency (PHE) extension for COVID-19 has been extended to
January 2023 with redeterminations eligible to begin in February 2023. However,
the PHE may be extended beyond January 2023. Our Ambetter Health product covers
the majority of our Medicaid states, and we believe we are among the best
positioned in the healthcare market to capture those transitioning coverage
through redeterminations. Our execution plan is well-thought out and we remain
agile in working with our state partners and are prepared to support our members
and promote continuity of coverage when redeterminations resume.

We continue to watch external trends closely, as COVID-19 costs could increase
based upon macro trends. New variants and additional waves of the pandemic could
create new dynamics and uncertainties around our expectations.

We are confident we have the team, systems, expertise, and financial strength to
continue to effectively navigate this challenging pandemic landscape.

Regulatory Trends and Uncertainties

The United States government, policymakers, and healthcare experts continue to
discuss and debate various elements of the United States healthcare model. We
remain focused on the promise of delivering access to high-quality, affordable
healthcare to all of our members and believe we are well positioned to meet the
needs of the changing healthcare landscape.

In contrast to previous executive and legislative efforts to restrict or limit
certain provisions of the Affordable Care Act (ACA), the American Rescue Act,
enacted on March 11, 2021, contained provisions aimed at leveraging Medicaid and
the Health Insurance Marketplace to expand health insurance coverage and
affordability to consumers. The American Rescue Act authorized an additional
$1.9 trillion in federal spending to address the COVID-19 PHE, and contained
several provisions designed to increase coverage of certain healthcare services,
expand eligibility and benefits, incentivize state Medicaid expansion, and
adjust federal financing for state Medicaid programs, the ultimate impact of
which remain uncertain. The American Rescue Act enhanced eligibility for the
advance premium tax credit for certain enrollees in the Health Insurance
Marketplace. The Inflation Reduction Act, enacted on August 16, 2022, extended
the enhanced eligibility for the advance premium tax credit for Marketplace
members through the 2025 tax year.

In October 2022, the Treasury Department issued a final rule to address the
family glitch in the ACA, which relates to determining who is eligible for
premium subsidies. We see this as a significant step in making Marketplace more
affordable for working families.

We have more than three decades of experience, spanning seven presidents from
both sides of the aisle, in delivering high-quality healthcare services on
behalf of states and the federal government to under-insured and uninsured
families, commercial organizations and military families. This expertise has
allowed us to deliver cost effective services to our government sponsors and our
members. While healthcare experts maintain focus on personalized healthcare
technology, we continue to make strategic decisions to accelerate development of
new software platforms and analytical capabilities. We continue to believe we
have both the capacity and capability to successfully navigate industry changes
to the benefit of our members, customers and shareholders.

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Third Quarter 2022 Highlights

Our financial performance for the third quarter of 2022 is summarized as
follows:

•Managed care membership of 26.8 million, an increase of 1.2 million members, or
5% year-over-year.

•Total revenues of $35.9 billion, representing 11% growth year-over-year.

•Premium and service revenues of $33.7 billion, representing 11% growth
year-over-year.

•HBR of 88.3%, compared to 88.1% for the third quarter of 2021.

•SG&A expense ratio of 8.4%, compared to 8.3% for the third quarter of 2021.

•Adjusted SG&A expense ratio of 8.3%, compared to 8.1% for the third quarter of
2021.

•Operating cash flows of $3.3 billion for the third quarter of 2022.

•Adjusted diluted earnings per share (EPS) of $1.30, compared to $1.26 for the
third quarter of 2021.

A reconciliation from GAAP diluted EPS to adjusted diluted EPS is highlighted
below, and additional detail is provided above under the heading "Non-GAAP
Financial Presentation":

                                                                 Three Months Ended September 30,
                                                                     2022                    2021
GAAP diluted EPS attributable to Centene                     $            1.27          $      0.99
Amortization of acquired intangible assets                                0.36                 0.34
Acquisition and divestiture related expenses                              0.05                 0.09
Other adjustments (1)                                                    (0.38)                0.01
Income tax effects of adjustments (2)                                        -                (0.17)
Adjusted diluted EPS                                         $            1.30          $      1.26

(1) Other adjustments include the following pre-tax items:

(a) for the three months ended September 30, 2022: PANTHERx divestiture gain of
$490 million, or $0.84 per share ($0.65 after-tax), the impairment of assets
associated with the pending divestiture of the Spanish and Central European
businesses of $165 million, or $0.28 per share ($0.23 after-tax), real estate
impairments of $127 million, or $0.22 per share ($0.16 after-tax), an increase
to the previously reported gain on the divestiture of U.S. Medical Management
(USMM) due to the finalization of working capital adjustments of $13 million, or
$0.02 per share ($0.01 after-tax), gain on debt extinguishment related to the
repurchases of senior notes of $10 million, or $0.02 per share ($0.01
after-tax), and an adjustment to the costs related to the PBM legal settlement
of $1 million, or $0.00 per share ($0.00 after-tax);

(b) for the three months ended September 30, 2021: non-cash gain related to the
acquisition of the remaining 60% interest of Circle Health of $309 million, or
$0.52 per share ($0.52 after-tax), non-cash impairment of our equity method
investment in RxAdvance of $229 million, or $0.38 per share ($0.35 after-tax),
debt extinguishment costs of $79 million, or $0.13 per share ($0.10 after-tax),
PBM legal settlement expense of $11 million, or $0.02 per share ($0.01
after-tax), and severance costs due to a restructuring of $1 million, or $0.00
per share ($0.00 after-tax).

(2) The income tax effects of adjustments are based on the effective income tax
rates applicable to each adjustment.

Current and Future Operating Drivers

The following items contributed to our results of operations in the current
year:

•Circle Health. In July 2021, we acquired the remaining interest in our equity
method investment in Circle Health, one of the U.K.'s largest independent
operators of hospitals.

•Commercial. In 2022, we introduced our Health Insurance Marketplace product,
Ambetter Health, into five new states, as well as expanded coverage to 274 new
counties across 13 existing states. We now serve members in 27 states across the
country in 1,480 counties. Additionally, we introduced three new Ambetter Health
product offerings to address growing needs of our members: Ambetter Value,
Ambetter Select, and Ambetter Virtual Access.
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•Eligibility Redeterminations. Revenue growth was driven by organic Medicaid
growth due to the ongoing suspension of eligibility redeterminations as well as
Medicare membership growth during the annual enrollment period.

•Hawaii. In July 2021, we began operating under two new statewide contracts in
Hawaii to continue administering covered services to eligible Medicaid and
Children's Health Insurance Program (CHIP) members for medically necessary
medical, behavioral health, and long-term services and support and to continue
administering services through the Community Care Services program in
partnership with the Hawaii Department of Human Services' Med-QUEST Division.

•Magellan Health, Inc. (Magellan). In January 2022, we acquired all of the
issued and outstanding shares of Magellan for approximately $2.5 billion.

•Medicare Advantage. We experienced strong Medicare membership growth during the
2022 annual enrollment period. In 2022, we introduced WellCare into three new
states, as well as expanded coverage to 327 new counties across existing states.
We now serve members in 36 states across the country in 1,575 counties.

•Missouri. In July 2022, our subsidiary, Home State Health, commenced the MO
HealthNet Managed Care General Plan and Specialty Plan contracts. Under the
General Plan, Home State will continue serving multiple MO HealthNet programs
including Children's Health Insurance members and the state's newly implemented
Medicaid expansion population, across all regions of Missouri. Additionally, as
the sole provider of the newly awarded Specialty Plan, Home State now serves
approximately 51,000 foster children and children receiving adoption subsidy
assistance.

•North Carolina. In July 2021, WellCare of North Carolina commenced operations
under a new statewide contract in North Carolina providing Medicaid managed care
services. In addition, we also began operating under a new contract to provide
Medicaid managed care services in three regions in North Carolina through our
provider-led North Carolina joint venture, Carolina Complete Health.

•Ohio. In October 2022, Ohio pharmacy services were carved out in connection
with the state's transition of pharmacy services from managed care to a single
PBM.

•PANTHERx. In July 2022, we completed the previously announced sale of PANTHERx.
The divestiture illustrates our continued progress on the Value Creation Plan.

In addition, we have been negatively impacted by the previously disclosed carve
out of California pharmacy services effective January 2022, which occurred in
connection with the state's transition of pharmacy services from managed care to
fee for service, and the decrease in the number of our Medicare members in a 4.0
star or above plan for the 2021 rating year (2022 revenue year).

We expect the following items to impact to our future results of operations:

•We have continued to execute on key Value Creation Plan initiatives including
the award of the new PBM contract commencing in 2024, the portfolio review, real
estate optimization, stock and debt repurchases, along with ongoing focus on
quality improvement actions. We expect these actions will drive future margin
expansion, create shareholder value, and improve the experience for our members
and providers.

•In October 2022, we announced that our Health Insurance Marketplace product,
Ambetter Health, will expand into Alabama and extend its footprint by more than
60 counties across 12 existing states in 2023. We also announced our updated
brand name, Ambetter Health, reflecting our commitment to putting better health
at the forefront of our mission. In total, the Marketplace plan will be
available in more than 1,500 counties across 28 states in 2023.

•In October 2022, the Centers for Medicare and Medicaid Services (CMS) published
updated Medicare Star quality ratings for the 2023 rating year, which impacts
the 2024 revenue year. The decrease in Star quality ratings is driven by the
expiration of certain disaster relief provisions as well as deterioration in
select metrics. Over the past year, our leadership team launched a multi-year
plan to build and improve quality across the enterprise with a strong focus on
enhanced patient experience and access to care. We expect to begin to see the
results of these efforts with the 2024 rating year (2025 revenue year).

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•In September 2022, Centene's Nebraska subsidiary, Nebraska Total Care, was
awarded the Nebraska Department of Health and Human Services statewide Medicaid
managed care contract. Under the new contract, Nebraska Total Care will continue
serving the state's Medicaid Managed Care Program, known as Heritage Health. The
new contract term is five years and includes the option for two, one-year
renewals. The contract is anticipated to begin in January 2024, subject to the
resolution of third-party protests.

•In September 2022, Centene's Texas subsidiary, Superior HealthPlan (Superior),
was awarded a new, six-year contract by the Texas Health and Human Services
Commission to continue providing youth in foster care with healthcare coverage
through the STAR Health Medicaid program. Superior has been the sole provider of
STAR Health coverage since the program launched in 2008. The contract is
anticipated to begin in September 2023.

•In August 2022, we announced California Department of Health Care Services
awarded our subsidiary, Health Net of California, contracts to continue serving
members in nine counties across California. However, Health Net of California
was not awarded contracts in Los Angeles, Sacramento and Kern counties. We are
actively protesting the decision to protect our members and their access to
quality healthcare. The contracts are anticipated to begin in January 2024,
subject to the resolution of the protest process.

•In August 2022, Centene's Mississippi subsidiary, Magnolia Health Plan
(Magnolia), was awarded the Mississippi Division of Medicaid contract. Under the
new contract, Magnolia will continue serving the state's Coordinated Care
Organization Program, which will consist of the Mississippi Coordinated Access
Network and the Mississippi Children's Health Insurance Program. The contract is
anticipated to begin in July 2023, subject to the resolution of third-party
protests.

•In July 2022, as part of our previously announced review of strategic
alternatives for our international portfolio, we signed a definitive agreement
to sell our ownership stakes in our Spanish and Central European businesses,
including Ribera Salud, Torrejón Salud, and Pro Diagnostics Group. The
transaction is expected to close by the end of 2022.

•In July 2022, we announced our subsidiary, Delaware First Health, was awarded
contracts for the statewide Medicaid Managed Care programs. The new contracts
are anticipated to begin in January 2023.

•In May 2022, we signed a definitive agreement to sell Magellan Rx as part of
our ongoing portfolio review. The transaction is expected to close by the end of
2022, pending regulatory approvals.

•In March 2022, we announced our 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 in January 2023.

•In February 2022, our Louisiana subsidiary, Louisiana Healthcare Connections,
was awarded a Medicaid contract by the Louisiana Department of Health to
continue administering quality, integrated healthcare services to members across
the state. The contract is expected to commence in January 2023.

•In August 2021, we announced that our North Carolina subsidiaries, Carolina
Complete Health and WellCare of North Carolina, will coordinate physical and/or
other health services with Local Management Entities/Managed Care Organizations
under the state's new Tailored Plans. The Tailored Plans, which are expected to
launch in April 2023, are integrated health plans designed for individuals with
significant behavioral health needs and intellectual/developmental disabilities.

•In August 2021, our Ohio subsidiary, Buckeye Health Plan, was awarded a
Medicaid contract by the Ohio Department of Medicaid to continue servicing
members with quality healthcare, coordinated services, and benefits. The
contract is expected to commence in December 2022.

•We expect Medicaid eligibility redeterminations to begin in February 2023,
although it could be further extended.

•We may be negatively impacted by potential Medicaid state rate actions and risk
corridor mechanisms as a result of the COVID-19 pandemic.

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                                   MEMBERSHIP

From September 30, 2021 to September 30, 2022, we increased our managed care
membership by 1.2 million, or 5%. The following table sets forth our membership
by line of business:

                                                    September 30,                   December 31,                   September 30,
                                                        2022                            2021                           2021
Traditional Medicaid (1)                              14,000,100                      13,328,400                     13,202,500
High Acuity Medicaid (2)                               1,698,100                       1,686,100                      1,566,000
Total Medicaid                                        15,698,200                      15,014,500                     14,768,500
Commercial Marketplace                                 2,087,800                       2,140,500                      2,177,000
Commercial Group                                         439,800                         462,100                        468,500
Total Commercial                                       2,527,600                       2,602,600                      2,645,500
Medicare (3)                                           1,517,900                       1,252,200                      1,248,300
Medicare PDP                                           4,186,200                       4,070,500                      4,064,400
Total at-risk membership (4)                          23,929,900                      22,939,800                     22,726,700
TRICARE eligibles                                      2,832,300                       2,874,700                      2,874,700
Total                                                 26,762,200                      25,814,500                     25,601,400

(1) Membership includes Temporary Assistance for Needy Families (TANF), Medicaid Expansion, Children's Health Insurance Program
(CHIP), Foster Care, and Behavioral Health.
(2) Membership includes Aged, Blind, and Disabled (ABD), Intellectual and Developmental Disabilities (IDD), Long-Term Services and
Supports (LTSS), and Medicare-Medicaid Plans (MMP) Duals.
(3) Membership includes Medicare Advantage and Medicare Supplement.
(4) Membership includes 1,285,600, 1,178,000, and 1,168,400 dual-eligible beneficiaries for the periods ending September 30, 2022,
December 31, 2021, and September 30, 2021, respectively.

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                             RESULTS OF OPERATIONS

The following discussion and analysis is based on our Consolidated Statements of
Operations, which reflect our results of operations for the three and nine
months ended September 30, 2022 and 2021, prepared in accordance with generally
accepted accounting principles in the United States.

Summarized comparative financial data for the three and nine months ended
September 30, 2022 and 2021 is as follows ($ in millions, except per share data
in dollars):

                                                    Three Months Ended September 30,                           Nine Months Ended September 30,
                                              2022              2021              % Change               2022              2021              % Change
Premium                                   $  31,848          $ 28,876                    10  %       $  95,247          $ 83,436                    14  %
Service                                       1,878             1,638                    15  %           6,679             4,054                    65  %
Premium and service revenues                 33,726            30,514                    11  %         101,926            87,490                    17  %
Premium tax                                   2,139             1,892                    13  %           7,060             5,924                    19  %
Total revenues                               35,865            32,406                    11  %         108,986            93,414                    17  %
Medical costs                                28,111            25,430                    11  %          83,261            73,210                    14  %
Cost of services                              1,571             1,355                    16  %           5,658             3,510                    61  %
Selling, general and administrative
expenses                                      2,846             2,537                    12  %           8,391             6,910                    21  %
Depreciation expense                            150               147                     2  %             470               414                    14  %
Amortization of acquired intangible
assets                                          211               198                     7  %             609               581                     5  %
Premium tax expense                           2,211             1,965                    13  %           7,258             6,129                    18  %

Impairment                                      289               229                    26  %           1,739               229                     n.m.
Legal settlement                                  -                 -                     n.m.               -             1,250                     n.m.
Earnings from operations                        476               545                   (13) %           1,600             1,181                    35  %
Investment and other income                     692               424                    63  %             786               566                    39  %
Debt extinguishment                              10               (79)                    n.m.              26              (125)                    n.m.
Interest expense                               (169)             (170)                    1  %            (491)             (503)                    2  %

Earnings before income tax                    1,009               720                    40  %           1,921             1,119                    72  %
Income tax expense                              269               139                    94  %             500               376                    33  %
Net earnings                                    740               581                    27  %           1,421               743                    91  %
(Earnings) loss attributable to
noncontrolling interests                         (2)                3                     n.m.              (6)                5                     

n.m.

Net earnings attributable to Centene
Corporation                               $     738          $    584                    26  %       $   1,415          $    748                    89  %
Diluted earnings per common share
attributable to Centene Corporation       $    1.27          $   0.99                    28  %       $    2.41          $   1.27                    90  %
n.m.: not meaningful




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Three Months Ended September 30, 2022 Compared to Three Months Ended September
30, 2021

Total Revenues

The following table sets forth supplemental revenue information for the three
months ended September 30, ($ in millions):

                                          2022                         2021                       % Change
Medicaid                       $                23,293          $         21,624                               8  %
Commercial                                       4,292                     4,383                              (2) %
Medicare (1)                                     5,639                     4,322                              30  %
Other                                            2,641                     2,077                              27  %
Total Revenues                 $                35,865          $         32,406                              11  %

(1) Medicare includes Medicare Advantage, Medicare Supplement, and Medicare Prescription Drug Plan (PDP).

Total revenues increased 11% in the three months ended September 30, 2022 over
the corresponding period in 2021, driven by organic Medicaid growth, primarily
due to the ongoing suspension of eligibility redeterminations, 22% membership
growth in the Medicare business, and our acquisition of Magellan, partially
offset by the PANTHERx divestiture.

Operating Expenses

Medical Costs/HBR

The HBR for the three months ended September 30, 2022, was 88.3%, compared to
88.1% in the same period in 2021. The HBR for the third quarter of 2022 was
unfavorably impacted by a return to more normalized Medicaid utilization
compared to the third quarter of 2021. The increase is partially offset by the
impact of Marketplace and Medicare healthcare affordability initiatives as well
as disciplined Marketplace pricing.

Cost of Services

Cost of services increased by $216 million in the three months ended September
30, 2022, compared to the corresponding period in 2021, driven by the Magellan
business, partially offset by the PANTHERx divestiture. The cost of service
ratio for the three months ended September 30, 2022, was 83.7%, compared to
82.7% in the same period in 2021. The increase in the cost of service ratio was
driven by recent acquisitions and divestitures.

Selling, General & Administrative Expenses

The SG&A expense ratio was 8.4% for the third quarter of 2022, compared to 8.3%
in the third quarter of 2021. The adjusted SG&A expense ratio was 8.3% for the
third quarter of 2022, compared to 8.1% in the third quarter of 2021. The
increases were due to the addition of Magellan, which operates at a higher SG&A
expense ratio due to the nature of its business, and the PANTHERx divestiture.
Increases were also driven by costs associated with Medicare marketing and value
creation investment spending, partially offset by savings due to real estate
optimization efforts and the leveraging of expenses over higher revenues as a
result of increased membership.

Impairment

During the third quarter of 2022, we recorded impairment charges of $289
million, including a $165 million charge related to assets associated with the
pending divestiture of the Spanish and Central European businesses and $124
million of additional impairments related to our ongoing real estate
optimization initiatives, consisting of leased and owned real estate assets and
related fixed assets.

During the third quarter of 2021, we recorded a $229 million non-cash impairment
of our equity method investment in RxAdvance, a pharmacy benefit manager. The
impairment was the result of our focus on simplification of our pharmacy
operations.
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Other Income (Expense)

The following table summarizes the components of other income (expense) for the
three months ended September 30, ($ in millions):

                                                    2022       2021
                     Investment and other income   $ 692      $ 424
                     Debt extinguishment              10        (79)
                     Interest expense               (169)      (170)
                     Other income (expense), net   $ 533      $ 175



Investment and other income. Investment and other income increased by $268
million in the three months ended September 30, 2022 compared to the
corresponding period in 2021, driven by the $490 million PANTHERx divestiture
gain and higher interest rates. 2021 included a $309 million gain related to the
acquisition of the remaining 60% interest of Circle Health.

Debt extinguishment. In the third quarter of 2022, we repurchased $83 million of
our 4.25% Senior Notes due 2027 and $176 million of our 4.625% Senior Notes due
2029 through our debt repurchase program, resulting in a pre-tax gain on
extinguishment of $10 million.

In August 2021, we redeemed all of our outstanding 5.375% Senior Notes due 2026
and all of WellCare Health Plans, Inc.'s outstanding 5.375% Senior Notes due
2026, including all premiums and accrued interest. We recognized a pre-tax loss
on extinguishment of $79 million, including the call premium, the write-off of
the unamortized premium and debt issuance costs, and expenses related to the
redemptions.

Interest expense. Interest expense decreased by $1 million in the three months
ended September 30, 2022, compared to the corresponding period in 2021.

Income Tax Expense

For the three months ended September 30, 2022, we recorded income tax expense of
$269 million on pre-tax earnings of $1.0 billion, or an effective tax rate of
26.6%. For the third quarter of 2022, our effective tax rate on adjusted
earnings was 26.3%. For the three months ended September 30, 2021, we recorded
an income tax expense of $139 million on a pre-tax earnings of $720 million, or
an effective tax rate of 19.3%. The effective tax rate for the third quarter of
2021 reflects the non-taxable gain related to the acquisition of the remaining
60% interest of Circle Health. For the third quarter of 2021, our effective tax
rate on adjusted earnings was 24.5%.

Segment Results

The following table summarizes our consolidated operating results by segment for
the three months ended September 30, ($ in millions):

                              2022          2021        % Change
Total Revenues
Managed Care               $ 33,724      $ 30,889            9  %
Specialty Services            5,407         4,727           14  %
Eliminations                 (3,266)       (3,210)          (2) %
Consolidated Total         $ 35,865      $ 32,406           11  %
Earnings from Operations
Managed Care               $    527      $    699          (25) %
Specialty Services              (51)         (154)          67  %

Consolidated Total         $    476      $    545          (13) %



Managed Care

Total revenues increased 9% in the three months ended September 30, 2022,
compared to the corresponding period in 2021. The increase was due to organic
Medicaid growth, partially due to the ongoing suspension of eligibility
redeterminations and

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membership growth in the Medicare business. Earnings from operations decreased
$172 million between years primarily as a result of the previously discussed
asset impairments and a return to more normalized Medicaid utilization compared
to the third quarter of 2021.

Specialty Services

Total revenues increased 14% in the three months ended September 30, 2022,
compared to the corresponding period in 2021, primarily due to our acquisition
of Magellan, partially offset by the divestiture of PANTHERx. Earnings from
operations increased $103 million in the three months ended September 30, 2022,
compared to the corresponding period in 2021, primarily due to the prior year
impairment of our equity method investment in RxAdvance, a pharmacy benefit
manager, in addition to favorable Magellan operations.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30,
2021

Total Revenues

The following table sets forth supplemental revenue information for the nine
months ended September 30, ($ in millions):

                                             2022                        2021                       % Change
Medicaid                            $             69,827          $         62,612                              12  %
Commercial                                        12,980                    12,391                               5  %
Medicare (1)                                      17,035                    13,125                              30  %

Other                                              9,144                     5,286                              73  %
Total Revenues                      $            108,986          $         93,414                              17  %

(1) Medicare includes Medicare Advantage, Medicare Supplement, and Medicare PDP.

Total revenues increased 17% in the nine months ended September 30, 2022, over
the corresponding period in 2021 primarily due to Medicaid membership growth
resulting from the ongoing suspension of eligibility redeterminations,
membership growth in the Medicare business, our acquisitions of Magellan and
Circle Health, the commencement of our contracts in North Carolina, additional
premium tax revenue and retroactive state directed payments, partially offset by
the PANTHERx divestiture.

Operating Expenses

Medical Costs/HBR

The HBR for the nine months ended September 30, 2022 was 87.4%, compared to
87.7% in the same period in 2021. The HBR for 2022 was positively impacted by
Marketplace and Medicare healthcare affordability initiatives as well as
disciplined Marketplace pricing. These impacts were partially offset by a return
to more normalized Medicaid utilization compared to 2021.

Cost of Services

Cost of services increased by $2.1 billion in the nine months ended September
30, 2022, compared to the corresponding period in 2021, driven by the Magellan
business, partially offset by the PANTHERx divestiture. The cost of service
ratio for the nine months ended September 30, 2022, was 84.7%, compared to 86.6%
in the same period in 2021. The decrease in the cost of service ratio was driven
by recent acquisitions and divestitures.

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Selling, General & Administrative Expenses

The SG&A expense ratio for the nine months ended September 30, 2022 was 8.2%,
compared to 7.9% for the corresponding period in 2021. The adjusted SG&A expense
ratio for the nine months ended September 30, 2022 was 8.1%, compared to 7.7%
for the nine months ended September 30, 2021. The increases were due to the
additions of the Magellan and Circle Health businesses, which operate at higher
SG&A ratios due to the nature of their respective businesses. Increases were
also driven by costs associated with Medicare marketing, value creation
investment spending, and variable compensation. These impacts were partially
offset by the leveraging of expenses over higher revenues as a result of
increased membership and reduced restructuring charges compared to 2021.

Impairment

During the nine months ended September 30, 2022, we recorded total impairment
charges of $1.7 billion primarily driven by $1.6 billion associated with our
ongoing real estate optimization initiative, consisting of leased and owned real
estate assets and related fixed assets, along with a $165 million charge related
to assets associated with the pending divestiture of the Spanish and Central
European businesses.

During the third quarter of 2021, we recorded a $229 million non-cash impairment
of our equity method investment in RxAdvance, a pharmacy benefit manager.

Legal Settlement

During the second quarter of 2021, we recorded a legal settlement reserve
estimate of $1.25 billion (inclusive of the 13 states with which we have reached
no-fault agreements) related to services provided by Envolve Pharmacy Solutions,
Inc. (Envolve), our PBM subsidiary, essentially during 2017 and 2018.

Other Income (Expense)

The following table summarizes the components of other income (expense) for the
nine months ended September 30, ($ in millions):

                                                    2022       2021
                     Investment and other income   $ 786      $ 566
                     Debt extinguishment              26       (125)
                     Interest expense               (491)      (503)
                     Other income (expense), net   $ 321      $ (62)



Investment and other income. Investment and other income increased by $220
million in the nine months ended September 30, 2022, compared to the
corresponding period in 2021, driven by the $490 million PANTHERx divestiture
gain and higher interest rates on larger investment balances, partially offset
by decreases in the performance of our deferred compensation investment fund
portfolio, which fluctuate with their underlying investments. The losses from
our deferred compensation portfolio were substantially offset by decreases in
deferred compensation expense, recorded in SG&A expense.

Debt extinguishment. In the third quarter of 2022, we repurchased $83 million of
our 4.25% Senior Notes due 2027 and $176 million of our 4.625% Senior Notes due
2029 through our debt repurchase program, resulting in a pre-tax gain on
extinguishment of $10 million. In May 2022, we recognized a $13 million pre-tax
gain on the extinguishment of debt related to the refinancing of debt for our of
Circle Health subsidiary. The 2022 debt extinguishment also includes an
immaterial gain related to the redemption of Magellan's outstanding Senior Notes
in January 2022.

In August 2021, we redeemed all of our outstanding 5.375% Senior Notes due 2026
and all of WellCare Health Plans, Inc.'s outstanding 5.375% Senior Notes due
2026, including all premiums and accrued interest. We recognized a pre-tax loss
on extinguishment of $79 million, including the call premium, the write-off of
the unamortized premium and debt issuance costs, and expenses related to the
redemptions. In February 2021, we tendered or redeemed all of our outstanding
$2.2 billion 4.75% Senior Notes, due 2025 and recognized a pre-tax loss on
extinguishment of approximately $46 million. The loss includes the call premium
and the write-off of unamortized premium and debt issuance costs.

Interest expense. Interest expense decreased by $12 million in the nine months
ended September 30, 2022, compared to the corresponding period in 2021, driven
by our 2022 and 2021 refinancing actions.
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Income Tax Expense

For the nine months ended September 30, 2022, we recorded income tax expense of
$500 million on pre-tax earnings of $1.9 billion, or an effective tax rate of
26.0%. For the nine months ended September 30, 2022, our effective tax rate on
adjusted earnings was 26.2%. For the nine months ended September 30, 2021, we
recorded income tax expense of $376 million on pre-tax earnings of $1.1 billion,
or an effective tax rate of 33.6%, which reflects the partial non-deductibility
of the legal settlement reserve.

Segment Results

The following table summarizes our consolidated operating results by segment for
the nine months ended September 30, ($ in millions):

                              2022           2021        % Change
Total Revenues
Managed Care               $ 101,434      $ 89,082           14  %
Specialty Services            17,497        13,553           29  %
Eliminations                  (9,945)       (9,221)          (8) %
Consolidated Total         $ 108,986      $ 93,414           17  %
Earnings from Operations
Managed Care               $   1,634      $  1,240           32  %
Specialty Services               (34)          (59)          42  %
Consolidated Total         $   1,600      $  1,181           35  %



Managed Care

Total revenues increased 14% in the nine months ended September 30, 2022,
compared to the corresponding period in 2021, driven by organic Medicaid growth,
partially due to the ongoing suspension of eligibility redeterminations,
membership growth in the Medicare business, our recent acquisition of Circle
Health, the commencement of our contracts in North Carolina, along with premium
tax revenue and retroactive state directed payments. Earnings from operations
increased $394 million between years primarily as a result of Medicaid and
Medicare membership growth, 2021 risk adjustment in 2022, lower traditional
utilization in the Marketplace business, profitability growth in the PDP
business, and the acquisition of Circle Health, partially offset by the $1.7
billion pre-tax real estate impairment. 2021 was negatively impacted by the
legal settlement reserve estimate of $1.25 billion related to services provided
by Envolve and higher utilization in the Marketplace business in 2021.

Specialty Services

Total revenues increased 29% in the nine months ended September 30, 2022,
compared to the corresponding period in 2021, resulting primarily from our
acquisition of Magellan, increased services associated with membership growth in
the Managed Care segment, and new contracts in our correctional business.
Earnings from operations increased $25 million in the nine months ended
September 30, 2022, compared to the corresponding period in 2021, primarily due
to favorable Magellan operations and the prior year impairment of our equity
method investment in RxAdvance, a pharmacy benefit manager, partially offset by
declining operations in our PBM business and a non-recurring item in our federal
services business.

                        LIQUIDITY AND CAPITAL RESOURCES

Shown below is a condensed schedule of cash flows used in the discussion of
liquidity and capital resources ($ in millions).

                                                                       Nine 

Months Ended September 30,

                                                                          2022                    2021
Net cash provided by operating activities                         $           7,837          $     3,530
Net cash used in investing activities                                        (3,142)              (2,442)
Net cash (used in) provided by financing activities                          (2,465)               1,597
Effect of exchange rate changes on cash and cash equivalents                    (37)                  (8)
Net increase in cash, cash equivalents, and restricted cash and
cash equivalents                                                  $           2,193          $     2,677



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Cash Flows Provided by Operating Activities

Normal operations are funded primarily through operating cash flows and
borrowings under our revolving credit facility. Operating activities provided
cash of $7.8 billion in the nine months ended September 30, 2022, compared to
providing cash of $3.5 billion in the comparable period in 2021. Cash flows
provided by operations in 2022 were driven by net earnings before the non-cash
real estate impairment charge, an increase in medical claims liabilities, and
increases in unearned revenue and accounts payable due to the early receipt of
payments from CMS.

Cash flows provided by operations in 2021 were due to net earnings before the
legal settlement reserve, an increase in state risk sharing mechanism payables,
partially offset by risk adjustment and minimum medical loss ratio (MLR)
payments for the Health Insurance Marketplace 2020 plan year.

Cash Flows Used in Investing Activities

Investing activities used cash of $3.1 billion in the nine months ended
September 30, 2022, and $2.4 billion in the comparable period in 2021. Cash
flows used in investing activities in 2022 primarily consisted of net additions
to the investment portfolio of our regulated subsidiaries (including transfers
from cash and cash equivalents to long-term investments) and our acquisition of
Magellan, partially offset by our PANTHERx divestiture proceeds.

Cash flows used in investing activities in 2021 primarily consisted of the net
additions to the investment portfolio of our regulated subsidiaries (including
transfers from cash and cash equivalents to long-term investments), acquisition
and divestiture activity primarily related to the acquisition of the remaining
60% interest of Circle Health, and capital expenditures.

We spent $771 million and $662 million in the nine months ended September 30,
2022 and 2021, respectively, on capital expenditures for system enhancements,
market growth, and our corporate and regional buildings.

As of September 30, 2022, our investment portfolio consisted primarily of
fixed-income securities with an average duration of 3.4 years. We had
unregulated cash and cash equivalents of $436 million at September 30, 2022,
including $49 million in our international subsidiaries, compared to $2.7
billion at December 31, 2021, including $430 million in our international
subsidiaries. Unregulated cash was substantially reduced in January 2022 upon
the closing of the Magellan Acquisition for the purchase price payment and
corresponding closing costs.

Cash Flows Used in Financing Activities

Financing activities used cash of $2.5 billion in the nine months ended
September 30, 2022, compared to providing cash of $1.6 billion in the comparable
period in 2021. Financing activities in 2022 were driven by stock repurchases of
$1.6 billion through our stock repurchase program, the redemption of Magellan's
outstanding debt of $535 million assumed in the transaction using Magellan's
cash on hand, and senior note debt repurchases of $259 million. In 2021, net
financing activities were driven by costs associated with our debt refinancing,
offset by increased borrowings.

Liquidity Metrics

In June 2022, our Board of Directors approved an increase to the existing stock
repurchase program for Centene's common stock by $3.0 billion, for a total
$4.0 billion. We have approximately $2.2 billion remaining under the program for
repurchases as of September 30, 2022.

In July 2022, we remitted $1.0 billion upon entering into an accelerated share
repurchase (ASR) agreement to repurchase our common stock under our stock
repurchase program using a portion of the proceeds from the PANTHERx
divestiture. At inception, we received an initial delivery of approximately 8.6
million shares representing 80% of the $1.0 billion notional amount. In October
2022, an additional 3.0 million shares were delivered upon settlement of the ASR
based upon the volume-weighted average price (VWAP) over the term of the
agreement, less a discount. In total, 11.6 million shares were purchased through
the $1.0 billion ASR.

During the quarter, we also repurchased an additional 2.9 million shares of
common stock for $240 million under the stock repurchase program and repurchased
$259 million of our par value senior notes, for $247 million, under the debt
repurchase program.

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From time to time, we raise capital through the issuance of debt in the form of
senior notes or make decisions to repurchase shares or reduce debt as part of
our capital allocation strategy. As of September 30, 2022, we had an aggregate
principal amount of $15.7 billion of senior notes issued and outstanding. The
indentures governing our various maturities of senior notes contain restrictive
covenants. As of September 30, 2022, we were in compliance with all covenants.
Refer to Note 8. Debt for further information regarding the issuance and
redemption of senior notes and Note 10. Stockholders' Equity for information on
stock repurchases.

The credit agreement underlying our Revolving Credit Facility and Term Loan
Facility contains customary covenants as well as financial covenants including a
minimum fixed charge coverage ratio and a maximum debt-to-EBITDA ratio. Our
maximum debt-to-EBITDA ratio under the credit agreement may not exceed 4.0 to
1.0. As of September 30, 2022, we had $120 million of borrowings outstanding
under our Revolving Credit Facility, $2.2 billion of borrowings under our Term
Loan Facility, and we were in compliance with all covenants. As of September 30,
2022, there were no limitations on the availability of our Revolving Credit
Facility as a result of the debt-to-EBITDA ratio.

We had outstanding letters of credit of $211 million as of September 30, 2022,
which were not part of our revolving credit facility. The letters of credit bore
weighted interest of 0.6% as of September 30, 2022. In addition, we had
outstanding surety bonds of $1.4 billion as of September 30, 2022.

At September 30, 2022, we had working capital, defined as current assets less
current liabilities, of $1.9 billion, compared to $2.7 billion at December 31,
2021. Working capital was substantially reduced in January 2022 upon the closing
of the Magellan Acquisition for the purchase price payment and corresponding
closing costs. We manage our short-term and long-term investments with the goal
of ensuring that a sufficient portion is held in investments that are highly
liquid and can be sold to fund short-term requirements as needed.

At September 30, 2022, our debt to capital ratio, defined as total debt divided
by the sum of total debt and total equity, was 41.8%, compared to 41.2% at
December 31, 2021. Excluding $181 million of non-recourse debt, our debt to
capital ratio was 41.6% as of September 30, 2022, compared to $184 million and
40.9% at December 31, 2021. The debt to capital ratio increase was driven by
stock repurchases in the quarter. We utilize the debt to capital ratio as a
measure, among others, of our leverage and financial flexibility.

2022 Expectations

During the remainder of 2022, we expect to receive net dividends from our
insurance subsidiaries of approximately $511 million and spend approximately
$300 million in additional capital expenditures. In October 2022, we made
additional purchases of $66 million through our stock repurchase program and $58
million of our par value senior notes for $53 million through our debt
repurchase program.

If the previously announced divestiture of Magellan Rx closes in 2022, we would
have additional proceeds to utilize for additional stock repurchases and debt
reduction.

Based on our operating plan, we expect that our available cash, cash equivalents
and investments, cash from our operations and cash available under our Revolving
Credit Facility will be sufficient to finance our general operations and capital
expenditures for at least 12 months from the date of this filing. While we are
currently in a strong liquidity position and believe we have adequate access to
capital, we may elect to increase borrowings on our Revolving Credit Facility.
From time to time we may elect to raise additional funds for these and other
purposes, either through issuance of debt or equity, the sale of investment
securities or otherwise, as appropriate. In addition, we may strategically
pursue refinancing or redemption opportunities to extend maturities and/or
improve terms of our indebtedness if we believe such opportunities are favorable
to us.

We intend to continue to evaluate strategic actions in connection with our Value
Creation Plan, targeting initiatives to improve productivity, efficiencies and
reduced organizational costs, as well as capital deployment activities,
including stock repurchases, portfolio optimization and the evaluation of
refinancing opportunities. In addition to creating shareholder value, this plan
encompasses a larger organizational mission to enhance our member and provider
experience, improve outcomes for our members, and to initiate new ways of doing
business that make Centene a great partner in all aspects of our operations.
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                  REGULATORY CAPITAL AND DIVIDEND RESTRICTIONS

Our operations are conducted through our subsidiaries. As managed care
organizations, most of our subsidiaries are subject to state regulations and
other requirements that, among other things, require the maintenance of minimum
levels of statutory capital, as defined by each state, and restrict the timing,
payment and amount of dividends and other distributions that may be paid to us.
Generally, the amount of dividend distributions that may be paid by a regulated
subsidiary without prior approval by state regulatory authorities is limited
based on the entity's level of statutory net income and statutory capital and
surplus.

Our regulated subsidiaries are required to maintain minimum capital requirements
prescribed by various regulatory authorities in each of the states in which we
operate. During the nine months ended September 30, 2022, we received dividends
of $773 million from and made $627 million of capital contributions to our
regulated subsidiaries. For our subsidiaries that file with the National
Association of Insurance Commissioners (NAIC), the aggregate risk-based capital
(RBC) level as of December 31, 2021, which was the most recent date for which
reporting was required, was in excess of 350% of the Authorized Control Level.
We intend to continue to maintain an aggregate RBC level in excess of 350% of
the Authorized Control Level during 2022.

Under the California Knox-Keene Health Care Service Plan Act of 1975, as amended
(Knox-Keene), certain of our California subsidiaries must comply with tangible
net equity (TNE) requirements. Under these Knox-Keene TNE requirements, actual
net worth less certain unsecured receivables and intangible assets must be more
than the greater of (i) a fixed minimum amount, (ii) a minimum amount based on
premiums or (iii) a minimum amount based on healthcare expenditures, excluding
capitated amounts.

Under the New York State Department of Health Codes, Rules and Regulations Title
10, Part 98, our New York subsidiary must comply with contingent reserve
requirements. Under these requirements, net worth based upon admitted assets
must equal or exceed a minimum amount based on annual net premium income.

The NAIC has adopted rules which set minimum RBC requirements for insurance
companies, managed care organizations and other entities bearing risk for
healthcare coverage. As of September 30, 2022, each of our health plans was in
compliance with the RBC requirements enacted in those states.

As a result of the above requirements and other regulatory requirements, certain
of our subsidiaries are subject to restrictions on their ability to make
dividend payments, loans or other transfers of cash to their parent companies.
Such restrictions, unless amended or waived or unless regulatory approval is
granted, limit the use of any cash generated by these subsidiaries to pay our
obligations. The maximum amount of dividends that can be paid by our insurance
company subsidiaries without prior approval of the applicable state insurance
departments is subject to restrictions relating to statutory surplus, statutory
income and unassigned surplus.
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