Centene Corporation Reports 2017 Results And Increases 2018 Guidance
In summary, the 2017 fourth quarter and full year results were as follows:
2017 Results |
||||||||
Q4 |
Full Year |
|||||||
Total revenues (in millions) |
$ |
12,806 |
$ |
48,382 |
||||
Health benefits ratio |
87.3 |
% |
87.3 |
% |
||||
SG&A expense ratio |
10.9 |
% |
9.7 |
% |
||||
GAAP diluted EPS |
$ |
1.30 |
$ |
4.69 |
||||
Adjusted Diluted EPS (1) |
$ |
0.97 |
$ |
5.03 |
||||
Total cash flow provided by operations (in millions) |
$ |
450 |
$ |
1,489 |
||||
(1) A full reconciliation of Adjusted Diluted EPS is shown on page eight of this release. |
As a result of the Tax Cuts and Jobs Act of 2017 (Income Tax Reform), the Company's fourth quarter and full year results include a nonrecurring benefit associated with the revaluation of the Company's net deferred tax liabilities. The benefit of Income Tax Reform has been partially offset by a contribution to the Company's charitable foundation and additional expense due to the lack of cost sharing reduction (CSR) subsidy funding by the Federal Government in the fourth quarter and full year 2017. These items, among others, have been excluded from Adjusted Diluted EPS for the fourth quarter and full year results. A full reconciliation of Adjusted Diluted EPS is shown on page eight of this release.
The following discussions, with the exception of cash flow information, are in the context of continuing operations.
Fourth Quarter and Full Year Highlights
December 31, 2017 managed care membership of 12.2 million, an increase of 765,300 members, or 7% over 2016.- Total revenues for the fourth quarter of 2017 of
$12.8 billion , representing 8% growth, compared to the fourth quarter of 2016 and$48.4 billion for the full year 2017, representing 19% growth year-over-year. - Health benefits ratio (HBR) of 87.3% for the fourth quarter of 2017, compared to 84.8% in the fourth quarter of 2016 and 87.3% for the full year 2017, compared to 86.5% for the full year 2016.
- Selling, general and administrative (SG&A) expense ratio of 10.9% for the fourth quarter of 2017, compared to 10.0% for the fourth quarter of 2016. SG&A expense ratio of 9.7% for the full year 2017, compared to 9.8% for the full year 2016.
- Adjusted SG&A expense ratio of 10.5% for the fourth quarter of 2017, compared to 9.4% for the fourth quarter of 2016. Adjusted SG&A expense ratio of 9.5% for the full year 2017, compared to 9.0% for the full year 2016.
- Operating cash flow of
$450 million and$1.5 billion for the fourth quarter and full year 2017, respectively, representing 1.8x net earnings for the full year 2017. - Diluted EPS for the fourth quarter of 2017 of
$1.30 , compared to$1.45 for the fourth quarter of 2016. Diluted EPS for the full year 2017 of$4.69 , compared to$3.41 for the full year 2016. - Adjusted Diluted EPS for the fourth quarter of 2017 of
$0.97 , compared to$1.19 for the fourth quarter of 2016. Adjusted Diluted EPS for the full year 2017 of$5.03 , compared to$4.43 for the full year 2016.
Other Events
- In
February 2018 ,Jessica L. Blume was elected to serve on our Board of Directors.Ms. Blume was appointed to both the Audit Committee and the Technology Committee. Previously,Ms. Blume held the position of Vice Chairman for Deloitte, where she was a partner until retirement in 2015. - In
February 2018 , ourArkansas subsidiary, Arkansas Total Care began managing a Medicaid special needs population comprised of people with high behavioral health needs and individuals with developmental/intellectual disabilities. Arkansas Total Care will assume full-risk on this population beginning inJanuary 2019 . - In
January 2018 , ourNew Mexico subsidiary, Western Sky Community Care, was awarded a statewide contract inNew Mexico for the Centennial Care 2.0 Program. The new contract is expected to commence membership operations inJanuary 2019 . - In
January 2018 , ourIllinois subsidiary,IlliniCare Health , began operating under a state-wide contract for the Medicaid Managed Care Program including children who are in need through theDepartment of Children and Family Services (DCFS)/Youth in Care by theIllinois Department of Healthcare and Family Services (HFS). Implementation dates vary by region and will be fully implemented statewide byApril 2018 .Foster Care will be implemented byJuly 2018 . - In
January 2018 , we expanded our offerings in the 2018Health Insurance Marketplace . We enteredKansas ,Missouri andNevada , and expanded our footprint in the following six existing markets:Florida ,Georgia ,Indiana ,Ohio ,Texas , andWashington . - In
January 2018 , we expanded our offerings in Medicare. We enteredArkansas ,Indiana ,Kansas ,Louisiana, Missouri ,Pennsylvania ,South Carolina , andWashington and expanded our footprint inOhio . - In
January 2018 , our subsidiary,Health Net Federal Services , began operating under theTRICARE West Region contract to provide administrative services toMilitary Health System eligible beneficiaries. - In
January 2018 , ourWashington subsidiary, Coordinated Care ofWashington , began providing managed care services toApple Health's Fully Integrated Managed Care (FIMC) beneficiaries in theNorth Central Region . - In
January 2018 , ourPennsylvania subsidiary,Pennsylvania Health & Wellness , began serving enrollees in the Community HealthChoices program. Contract commencement dates vary by zone and will be fully implemented statewide byJanuary 2020 . - In
November 2017 ,The People's Healthcare Services Clinic , our full-service health center partnership withSchnuck Markets Inc. andBetty Jean Kerr People's Health Centers , had its grand opening inFerguson, Missouri . - In
November 2017 , we announced the appointment ofCynthia Brinkley to President and Chief Operating Officer,Jesse Hunter to Executive Vice President of Mergers & Acquisitions and Chief Strategy Officer,Mark Brooks to Executive Vice President and Chief Information Officer, andKevin Counihan to Senior Vice President of Products.
Accreditations & Awards
- In
December 2017 ,Health Net Federal Services, LLC , earned the Health Utilization Management and Case Management Accreditations fromURAC . - In
November 2017 , FORTUNE magazine announcedMichael Neidorff's ranking of #17 on its "Businessperson of the Year" list. This list focuses on the largest public companies in the world, evaluating their increases in revenues and profits, as well as stock performance and return on capital. - In
October 2017 , Forbes announcedCentene's position of #36 on its "Global 2000: Growth Champions" list. The top 250 public companies are identified and awarded based on compound annual growth rates in revenues from 2013 through 2016.
Membership
The following table sets forth our membership by line of business:
|
|||||
2017 |
2016 |
||||
Medicaid: |
|||||
TANF, CHIP & |
5,807,300 |
5,630,000 |
|||
ABD & LTSS |
846,200 |
785,400 |
|||
|
463,700 |
466,600 |
|||
Total Medicaid |
7,117,200 |
6,882,000 |
|||
Commercial |
1,558,300 |
1,239,100 |
|||
Medicare & MMP (1) |
333,700 |
334,300 |
|||
Correctional |
157,500 |
139,400 |
|||
Total at-risk membership |
9,166,700 |
8,594,800 |
|||
TRICARE eligibles |
2,824,100 |
2,847,000 |
|||
Non-risk membership |
216,300 |
— |
|||
Total |
12,207,100 |
11,441,800 |
|||
(1) Membership includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and Medicare-Medicaid Plans (MMP). |
The following table sets forth additional membership statistics, which are included in the membership information above:
|
|||||
2017 |
2016 |
||||
Dual-eligible (2) |
474,500 |
441,400 |
|||
|
959,600 |
537,200 |
|||
Medicaid Expansion |
1,091,500 |
1,080,500 |
|||
(2) Membership includes dual-eligible ABD & LTSS and dual-eligible Medicare membership in the table above. |
Statement of Operations: Three Months Ended
- For the fourth quarter of 2017, total revenues increased 8% to
$12.8 billion from$11.9 billion in the comparable period in 2016. The increase over prior year was primarily a result of growth in theHealth Insurance Marketplace business in 2017 and expansions and new programs in many of our states in 2016 and 2017. This was partially offset by the fourth quarter of 2016 benefiting from$195 million of additional revenue associated with the minimum medical loss ratio (MLR) amendment inCalifornia , as well as the moratorium of the health insurer fee in 2017 and lower 2017 membership in the commercial business inCalifornia as a result of margin improvement actions taken in 2016. - Sequentially, total revenues increased 8% over the third quarter of 2017 mainly due to approximately
$700 million associated with pass through payments from theState of California being received in the fourth quarter that were recorded in premium tax revenue and premium tax expense. - HBR of 87.3% for the fourth quarter of 2017 represents an increase from 84.8% in the comparable period in 2016. The year-over-year increase was primarily a result of the
$195 million of revenue recognized in the fourth quarter of 2016, relating to the minimum MLR amendment inCalifornia , which reduced the fourth quarter of 2016 HBR by 170 basis points. In addition, the year-over-year increase was attributable to new or expanded health plans, which initially operate at a higher HBR, a premium rate reduction for California Medicaid Expansion effectiveJuly 1, 2017 , an increase in flu related costs over the fourth quarter of 2016, and the additional expense recognized in the fourth quarter of 2017 due to the lack of funding of CSR subsidy payments by the Federal Government. - HBR decreased sequentially from 88.0% in the third quarter of 2017. The decrease was primarily attributable to improved performance in Medicaid, including the impacts of rate adjustments, as well as performance in the
Health Insurance Marketplace business. These HBR improvements were partially offset by the increase in flu related costs over the third quarter of 2017 and additional expense recognized in the fourth quarter due to the lack of funding of CSR subsidy payments by the Federal Government. - The SG&A expense ratio was 10.9% for the fourth quarter of 2017, compared to 10.0% for the fourth quarter of 2016 and 9.0% for the third quarter of 2017. The year-over-year increase was primarily a result of increased business expansion costs over the fourth quarter of 2016, and revenue recognized in the fourth quarter of 2016, relating to the minimum MLR amendment in
California , which reduced the fourth quarter of 2016 SG&A expense ratio. Sequentially, the SG&A expense ratio increased primarily due to increased selling costs associated with open enrollment and the$40 million contribution to our charitable foundation in the fourth quarter of 2017. - The Adjusted SG&A expense ratio was 10.5% for the fourth quarter of 2017, compared to 9.4% for the fourth quarter of 2016 and 8.9% for the third quarter of 2017. The year-over-year increase was primarily a result of increased business expansion costs over the fourth quarter of 2016, and revenue recognized in the fourth quarter of 2016, relating to the minimum MLR amendment in
California , which reduced the fourth quarter of 2016 Adjusted SG&A expense ratio. Sequentially, the Adjusted SG&A expense ratio increased primarily due to increased selling costs associated with open enrollment in the fourth quarter of 2017.
Statement of Operations: Year Ended
- For the full year 2017, total revenues increased 19% to
$48.4 billion from$40.6 billion in the comparable period of 2016. The increase over prior year was primarily a result of a full year of Health Net's results, as well as the impact of growth in theHealth Insurance Marketplace business in 2017 and expansions and new programs in many of our states in 2016 and 2017. This was partially offset by the moratorium of the health insurer fee in 2017, lower membership in the commercial business inCalifornia as a result of margin improvement actions taken in 2016, and lower specialty pharmacy revenues. - HBR of 87.3% for the full year 2017 represents an increase from 86.5% in the comparable period in 2016. The increase compared to last year was primarily a result of the
$195 million of revenue recognized in 2016 relating to the minimum MLR change inCalifornia , which reduced the 2016 HBR by 50 basis points, a premium rate reduction for California Medicaid Expansion effectiveJuly 1, 2017 , an increase in flu related costs over 2016, and the impact of new or expanded health plans, which initially operate at a higher HBR. These increases were partially offset by growth in theHealth Insurance Marketplace business, which operates at a lower HBR. - The SG&A expense ratio was 9.7% for the full year 2017, compared to 9.8% for the full year 2016. The decrease in the SG&A expense ratio was primarily attributable to lower acquisition related expenses, partially offset by higher business expansion costs over 2016, the Penn Treaty assessment and our results including a full year of the Health Net business, which operates at a higher SG&A expense ratio due to a greater mix of commercial and Medicare business.
- The Adjusted SG&A expense ratio was 9.5% for the full year 2017, compared to 9.0% for the full year 2016. The increase in the Adjusted SG&A expense ratio was primarily attributable to higher business expansion costs over 2016 and a full year of the Health Net business in our 2017 results, which operates at a higher SG&A expense ratio due to a greater mix of commercial and Medicare business.
Balance Sheet and Cash Flow
At
Cash flow provided by operations for the three months ended
Outlook
The Company's annual guidance for 2018 has been updated for the following items:
- The benefit of Income Tax Reform that was signed into law in
December 2017 , partially offset by additional costs associated with the reinvestment of a portion of the tax reform benefit; - An increase in total revenues and earnings associated with higher membership expectations for the
Health Insurance Marketplace business; and - A change in the timing of the equity issuance from
February 1, 2018 toMarch 1, 2018 for the$2.3 billion of equity to finance the acquisition ofNew York State Catholic Health Plan, Inc. d/b/a Fidelis Care New York (Fidelis Care ) (Proposed Fidelis Acquisition), which reduces diluted shares outstanding. The ultimate timing will depend on market conditions.
A rollforward of certain captions of the Company's current 2018 guidance from its previous guidance is as follows (Total Revenues in billions, per share data in dollars):
Total Revenues |
GAAP diluted EPS |
Adjusted Diluted EPS |
|||||
|
|
|
|
||||
Income Tax Reform |
(0.1) |
1.38 |
1.58 |
||||
|
— |
(0.30) |
(0.30) |
||||
Marketplace Membership |
0.7 |
0.14 |
0.14 |
||||
Timing of Fidelis Care Equity |
— |
0.06 |
0.06 |
||||
|
|
|
|
||||
The Company's full updated annual guidance for 2018 is as follows:
Full Year 2018 |
|||||||||
Low |
High |
||||||||
Total revenues (in billions) |
$ |
60.6 |
$ |
61.4 |
|||||
GAAP diluted EPS |
$ |
5.91 |
$ |
6.25 |
|||||
Adjusted Diluted EPS (1) |
$ |
6.95 |
$ |
7.35 |
|||||
HBR |
86.2 |
% |
86.7 |
% |
|||||
SG&A expense ratio |
9.3 |
% |
9.8 |
% |
|||||
Adjusted SG&A expense ratio (2) |
9.2 |
% |
9.7 |
% |
|||||
Effective tax rate |
31.0 |
% |
33.0 |
% |
|||||
Diluted shares outstanding (in millions) |
199.1 |
200.1 |
|||||||
(1) |
Adjusted Diluted EPS excludes amortization of acquired intangible assets of |
(2) |
Adjusted SG&A expense ratio excludes acquisition related expenses of |
Conference Call
As previously announced, the Company will host a conference call
Investors and other interested parties are invited to listen to the conference call by dialing 1-877-883-0383 in the
A webcast replay will be available for on-demand listening shortly after the completion of the call for the next twelve months or until
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, 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 in dollars):
Three Months Ended |
Twelve Months Ended |
||||||||||||||
2017 |
2016 |
2017 |
2016 |
||||||||||||
GAAP net earnings from continuing operations |
$ |
230 |
$ |
255 |
$ |
828 |
$ |
559 |
|||||||
Amortization of acquired intangible assets |
39 |
52 |
156 |
147 |
|||||||||||
Acquisition related expenses |
7 |
10 |
20 |
234 |
|||||||||||
Penn Treaty assessment expense (1) |
— |
— |
56 |
— |
|||||||||||
Cost sharing reductions (2) |
22 |
— |
22 |
— |
|||||||||||
Income Tax Reform (3) |
(125) |
— |
(125) |
— |
|||||||||||
Charitable contribution (4) |
40 |
50 |
40 |
50 |
|||||||||||
|
— |
(195) |
— |
(195) |
|||||||||||
Debt extinguishment (6) |
— |
11 |
— |
11 |
|||||||||||
Income tax effects of adjustments (7) |
(40) |
27 |
(108) |
(79) |
|||||||||||
Adjusted net earnings from continuing operations |
$ |
173 |
$ |
210 |
$ |
889 |
$ |
727 |
(1) |
Additional expense for the Company's estimated share of guaranty association assessment resulting from the liquidation of Penn Treaty for the year ended |
(2) |
As a result of the lack of funding by the Federal Government of CSR subsidy payments, the Company recorded additional expense for the fourth quarter and year ended |
(3) |
As a result of Income Tax Reform passed in late 2017, the Company recognized lower income tax expense, primarily from the revaluation of the Company's net deferred tax liability for the fourth quarter and year ended |
(4) |
In connection with the favorable impact of Income Tax Reform in 2017 and the additional revenue associated with the |
(5) |
A favorable impact to the fourth quarter and full year 2016 associated with the retroactive change in the minimum MLR calculation under |
(6) |
Additional expense associated with the early redemption of the 5.75% Senior Notes due 2017 and the Health Net 6.375% Senior Notes due 2017 in the fourth quarter and full year 2016. |
(7) |
The income tax effects of adjustments are based on the effective income tax rates applicable to adjusted (non-GAAP) results. There is no additional income tax effect from Income Tax Reform. |
Three Months Ended |
Twelve Months Ended |
Annual December 31, |
|||||||||||||||
2017 |
2016 |
2017 |
2016 |
||||||||||||||
GAAP diluted EPS from continuing operations |
$ |
1.30 |
$ |
1.45 |
$ |
4.69 |
$ |
3.41 |
|
||||||||
Amortization of acquired intangible assets (1) |
0.14 |
0.20 |
0.56 |
0.57 |
|
||||||||||||
Acquisition related expenses (2) |
0.02 |
0.03 |
0.07 |
0.98 |
|
||||||||||||
Penn Treaty assessment expense (3) |
— |
— |
0.20 |
— |
— |
||||||||||||
Cost sharing reductions (4) |
0.08 |
— |
0.08 |
— |
— |
||||||||||||
Income Tax Reform |
(0.71) |
— |
(0.71) |
— |
— |
||||||||||||
Charitable contribution (5) |
0.14 |
0.18 |
0.14 |
0.19 |
— |
||||||||||||
|
— |
(0.71) |
— |
(0.76) |
— |
||||||||||||
Debt extinguishment (7) |
— |
0.04 |
— |
0.04 |
— |
||||||||||||
Adjusted Diluted EPS from continuing operations |
$ |
0.97 |
$ |
1.19 |
$ |
5.03 |
$ |
4.43 |
|
(1) |
The amortization of acquired intangible assets per diluted share presented above is net of an income tax benefit of |
(2) |
The acquisition related expenses per diluted share presented above are net of an income tax benefit of |
(3) |
The Penn Treaty assessment expense per diluted share presented above is net of an income tax benefit of |
(4) |
Cost sharing reductions per diluted share presented above are net of an income tax benefit of |
(5) |
The charitable contributions per diluted share presented above are net of an income tax benefit of |
(6) |
The impact associated with the retroactive change in the minimum MLR calculation per diluted share presented above is net of an income tax expense of |
(7) |
The debt extinguishment cost per diluted share presented above is net of an income tax benefit of |
Three Months Ended |
Twelve Months Ended |
Three Months Ended |
|||||||||||||||||
2017 |
2016 |
2017 |
2016 |
2017 |
|||||||||||||||
GAAP SG&A expenses |
$ |
1,260 |
$ |
1,065 |
$ |
4,446 |
$ |
3,676 |
$ |
1,030 |
|||||||||
Acquisition related expenses |
7 |
10 |
20 |
234 |
7 |
||||||||||||||
Penn Treaty assessment expense |
— |
— |
56 |
— |
9 |
||||||||||||||
Charitable contribution |
40 |
50 |
40 |
50 |
— |
||||||||||||||
Adjusted SG&A expenses |
$ |
1,213 |
$ |
1,005 |
$ |
4,330 |
$ |
3,392 |
$ |
1,014 |
About
Forward-Looking Statements
The company and its representatives may from time to time make written and oral forward-looking statements within the meaning of the Private Securities Litigation Reform Act ("PSLRA") of 1995, including statements in this and other press releases, in presentations, filings with the
[Tables Follow]
CENTENE CORPORATION AND SUBSIDIARIES |
|||||||
CONSOLIDATED BALANCE SHEETS |
|||||||
(In millions, except shares in thousands and per share data in dollars) |
|||||||
|
|
||||||
ASSETS |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
4,072 |
$ |
3,930 |
|||
Premium and trade receivables |
3,413 |
3,215 |
|||||
Short-term investments |
531 |
505 |
|||||
Other current assets |
687 |
715 |
|||||
Total current assets |
8,703 |
8,365 |
|||||
Long-term investments |
5,312 |
4,545 |
|||||
Restricted deposits |
135 |
138 |
|||||
Property, software and equipment, net |
1,104 |
797 |
|||||
|
4,749 |
4,712 |
|||||
Intangible assets, net |
1,398 |
1,545 |
|||||
Other long-term assets |
454 |
95 |
|||||
Total assets |
$ |
21,855 |
$ |
20,197 |
|||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY |
|||||||
Current liabilities: |
|||||||
Medical claims liability |
$ |
4,286 |
$ |
3,929 |
|||
Accounts payable and accrued expenses |
4,165 |
3,763 |
|||||
Return of premium payable |
549 |
614 |
|||||
Unearned revenue |
328 |
313 |
|||||
Current portion of long-term debt |
4 |
4 |
|||||
Total current liabilities |
9,332 |
8,623 |
|||||
Long-term debt |
4,695 |
4,651 |
|||||
Other long-term liabilities |
952 |
869 |
|||||
Total liabilities |
14,979 |
14,143 |
|||||
Commitments and contingencies |
|||||||
Redeemable noncontrolling interests |
12 |
145 |
|||||
Stockholders' equity: |
|||||||
Preferred stock, |
— |
— |
|||||
Common stock, |
— |
— |
|||||
Additional paid-in capital |
4,349 |
4,190 |
|||||
Accumulated other comprehensive loss |
(3) |
(36) |
|||||
Retained earnings |
2,748 |
1,920 |
|||||
|
(244) |
(179) |
|||||
Total |
6,850 |
5,895 |
|||||
Noncontrolling interest |
14 |
14 |
|||||
Total stockholders' equity |
6,864 |
5,909 |
|||||
Total liabilities, redeemable noncontrolling interests and stockholders' equity |
$ |
21,855 |
$ |
20,197 |
CENTENE CORPORATION AND SUBSIDIARIES |
|||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||||
(In millions, except per share data in dollars) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
Three Months Ended |
Twelve Months Ended |
||||||||||||||
2017 |
2016 |
2017 |
2016 |
||||||||||||
Revenues: |
|||||||||||||||
Premium |
$ |
10,960 |
$ |
10,100 |
$ |
43,353 |
$ |
35,399 |
|||||||
Service |
633 |
577 |
2,267 |
2,180 |
|||||||||||
Premium and service revenues |
11,593 |
10,677 |
45,620 |
37,579 |
|||||||||||
Premium tax and health insurer fee |
1,213 |
1,234 |
2,762 |
3,028 |
|||||||||||
Total revenues |
12,806 |
11,911 |
48,382 |
40,607 |
|||||||||||
Expenses: |
|||||||||||||||
Medical costs |
9,573 |
8,564 |
37,851 |
30,636 |
|||||||||||
Cost of services |
513 |
478 |
1,847 |
1,864 |
|||||||||||
Selling, general and administrative expenses |
1,260 |
1,065 |
4,446 |
3,676 |
|||||||||||
Amortization of acquired intangible assets |
39 |
52 |
156 |
147 |
|||||||||||
Premium tax expense |
1,240 |
1,103 |
2,883 |
2,563 |
|||||||||||
Health insurer fee expense |
— |
128 |
— |
461 |
|||||||||||
Total operating expenses |
12,625 |
11,390 |
47,183 |
39,347 |
|||||||||||
Earnings from operations |
181 |
521 |
1,199 |
1,260 |
|||||||||||
Other income (expense): |
|||||||||||||||
Investment and other income |
53 |
34 |
190 |
114 |
|||||||||||
Interest expense |
(66) |
(75) |
(255) |
(217) |
|||||||||||
Earnings from continuing operations, before income tax expense |
168 |
480 |
1,134 |
1,157 |
|||||||||||
Income tax (benefit) expense |
(55) |
227 |
326 |
599 |
|||||||||||
Earnings from continuing operations, net of income tax expense |
223 |
253 |
808 |
558 |
|||||||||||
Discontinued operations, net of income tax expense |
— |
6 |
— |
3 |
|||||||||||
Net earnings |
223 |
259 |
808 |
561 |
|||||||||||
Earnings attributable to noncontrolling interests |
7 |
2 |
20 |
1 |
|||||||||||
Net earnings attributable to |
$ |
230 |
$ |
261 |
$ |
828 |
$ |
562 |
|||||||
Amounts attributable to |
|||||||||||||||
Earnings from continuing operations, net of income tax expense |
$ |
230 |
$ |
255 |
$ |
828 |
$ |
559 |
|||||||
Discontinued operations, net of income tax expense |
— |
6 |
— |
3 |
|||||||||||
Net earnings |
$ |
230 |
$ |
261 |
$ |
828 |
$ |
562 |
|||||||
Net earnings per common share attributable to |
|||||||||||||||
Basic: |
|||||||||||||||
Continuing operations |
$ |
1.33 |
$ |
1.49 |
$ |
4.80 |
$ |
3.50 |
|||||||
Discontinued operations |
— |
0.04 |
— |
0.02 |
|||||||||||
Basic earnings per common share |
$ |
1.33 |
$ |
1.53 |
$ |
4.80 |
$ |
3.52 |
|||||||
Diluted: |
|||||||||||||||
Continuing operations |
$ |
1.30 |
$ |
1.45 |
$ |
4.69 |
$ |
3.41 |
|||||||
Discontinued operations |
— |
0.04 |
— |
0.02 |
|||||||||||
Diluted earnings per common share |
$ |
1.30 |
$ |
1.49 |
$ |
4.69 |
$ |
3.43 |
|||||||
CENTENE CORPORATION AND SUBSIDIARIES |
|||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
(In millions) |
|||||||
(Unaudited) |
|||||||
Year Ended |
|||||||
2017 |
2016 |
||||||
Cash flows from operating activities: |
|||||||
Net earnings |
$ |
808 |
$ |
561 |
|||
Adjustments to reconcile net earnings to net cash provided by operating activities |
|||||||
Depreciation and amortization |
361 |
278 |
|||||
Stock compensation expense |
135 |
148 |
|||||
Debt extinguishment costs |
— |
(7) |
|||||
Deferred income taxes |
(108) |
92 |
|||||
Gain on contingent consideration |
(1) |
(5) |
|||||
Changes in assets and liabilities |
|||||||
Premium and trade receivables |
(50) |
74 |
|||||
Other assets |
(146) |
167 |
|||||
Medical claims liabilities |
359 |
145 |
|||||
Unearned revenue |
19 |
43 |
|||||
Accounts payable and accrued expenses |
53 |
402 |
|||||
Other long-term liabilities |
68 |
(61) |
|||||
Other operating activities, net |
(9) |
14 |
|||||
Net cash provided by operating activities |
1,489 |
1,851 |
|||||
Cash flows from investing activities: |
|||||||
Capital expenditures |
(422) |
(306) |
|||||
Purchases of investments |
(2,704) |
(2,450) |
|||||
Sales and maturities of investments |
1,899 |
1,656 |
|||||
Investments in acquisitions, net of cash acquired |
(50) |
(1,297) |
|||||
Other investing activities, net |
12 |
— |
|||||
Net cash used in investing activities |
(1,265) |
(2,397) |
|||||
Cash flows from financing activities: |
|||||||
Proceeds from borrowings |
1,400 |
8,946 |
|||||
Payment of long-term debt |
(1,353) |
(6,076) |
|||||
Common stock repurchases |
(65) |
(63) |
|||||
Purchase of noncontrolling interest |
(66) |
(14) |
|||||
Debt issuance costs |
(3) |
(76) |
|||||
Other financing activities, net |
5 |
— |
|||||
Net cash (used in) provided by financing activities |
(82) |
2,717 |
|||||
Effect of exchange rate changes on cash and cash equivalents |
— |
(1) |
|||||
Net increase in cash and cash equivalents |
142 |
2,170 |
|||||
Cash and cash equivalents, beginning of period |
3,930 |
1,760 |
|||||
Cash and cash equivalents, end of period |
$ |
4,072 |
$ |
3,930 |
|||
Supplemental disclosures of cash flow information: |
|||||||
Interest paid |
$ |
237 |
$ |
165 |
|||
Income taxes paid |
$ |
496 |
$ |
556 |
|||
Equity issued in connection with acquisitions |
$ |
— |
$ |
3,105 |
|
|||||||||||||||
SUPPLEMENTAL FINANCIAL DATA FROM CONTINUING OPERATIONS |
|||||||||||||||
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
|||||||||||
2017 |
2017 |
2017 |
2017 |
2016 |
|||||||||||
MANAGED CARE MEMBERSHIP BY STATE |
|||||||||||||||
|
640,500 |
659,500 |
669,500 |
684,300 |
598,300 |
||||||||||
|
85,700 |
89,900 |
91,900 |
98,100 |
58,600 |
||||||||||
|
2,877,800 |
2,928,600 |
2,925,800 |
2,980,100 |
2,973,500 |
||||||||||
|
848,800 |
852,600 |
871,100 |
872,000 |
716,100 |
||||||||||
|
483,600 |
476,400 |
540,400 |
568,300 |
488,000 |
||||||||||
|
239,500 |
251,000 |
254,600 |
253,800 |
237,700 |
||||||||||
|
304,500 |
322,900 |
340,000 |
335,800 |
285,800 |
||||||||||
|
129,100 |
127,300 |
130,000 |
133,100 |
139,700 |
||||||||||
|
485,500 |
483,300 |
484,600 |
484,100 |
472,800 |
||||||||||
|
43,000 |
48,300 |
54,100 |
44,200 |
48,300 |
||||||||||
|
2,500 |
2,400 |
2,300 |
2,100 |
2,000 |
||||||||||
|
9,400 |
9,500 |
9,500 |
9,500 |
9,400 |
||||||||||
|
329,900 |
335,600 |
343,600 |
349,500 |
310,200 |
||||||||||
|
269,400 |
272,100 |
278,300 |
106,100 |
105,700 |
||||||||||
|
79,700 |
79,200 |
78,800 |
79,200 |
— |
||||||||||
|
34,900 |
16,800 |
— |
— |
— |
||||||||||
|
74,800 |
76,400 |
77,100 |
77,800 |
77,400 |
||||||||||
|
7,100 |
7,100 |
7,100 |
7,100 |
7,100 |
||||||||||
|
332,700 |
336,500 |
332,700 |
328,900 |
316,000 |
||||||||||
|
205,200 |
209,700 |
213,600 |
211,900 |
217,800 |
||||||||||
|
117,800 |
118,600 |
121,000 |
121,900 |
122,500 |
||||||||||
|
22,200 |
22,100 |
22,200 |
21,900 |
21,700 |
||||||||||
|
1,233,500 |
1,236,700 |
1,226,800 |
1,243,900 |
1,072,400 |
||||||||||
|
1,600 |
1,600 |
1,600 |
1,600 |
1,600 |
||||||||||
|
237,800 |
239,600 |
248,500 |
254,400 |
238,400 |
||||||||||
|
70,200 |
70,200 |
70,800 |
71,700 |
73,800 |
||||||||||
Total at-risk membership |
9,166,700 |
9,273,900 |
9,395,900 |
9,341,300 |
8,594,800 |
||||||||||
TRICARE eligibles |
2,824,100 |
2,823,200 |
2,823,200 |
2,804,100 |
2,847,000 |
||||||||||
Non-risk membership |
216,300 |
213,900 |
— |
— |
— |
||||||||||
Total |
12,207,100 |
12,311,000 |
12,219,100 |
12,145,400 |
11,441,800 |
||||||||||
Medicaid: |
|||||||||||||||
TANF, CHIP & |
5,807,300 |
5,809,400 |
5,854,400 |
5,714,100 |
5,630,000 |
||||||||||
ABD & LTSS |
846,200 |
850,300 |
843,500 |
825,600 |
785,400 |
||||||||||
|
463,700 |
467,400 |
466,500 |
466,900 |
466,600 |
||||||||||
Total Medicaid |
7,117,200 |
7,127,100 |
7,164,400 |
7,006,600 |
6,882,000 |
||||||||||
Commercial |
1,558,300 |
1,657,800 |
1,743,600 |
1,864,700 |
1,239,100 |
||||||||||
Medicare & MMP (1) |
333,700 |
331,000 |
327,500 |
328,100 |
334,300 |
||||||||||
Correctional |
157,500 |
158,000 |
160,400 |
141,900 |
139,400 |
||||||||||
Total at-risk membership |
9,166,700 |
9,273,900 |
9,395,900 |
9,341,300 |
8,594,800 |
||||||||||
TRICARE eligibles |
2,824,100 |
2,823,200 |
2,823,200 |
2,804,100 |
2,847,000 |
||||||||||
Non-risk membership |
216,300 |
213,900 |
— |
— |
— |
||||||||||
Total |
12,207,100 |
12,311,000 |
12,219,100 |
12,145,400 |
11,441,800 |
||||||||||
(1) Membership includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and MMP. |
|||||||||||||||
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
|||||||||||||||
2017 |
2017 |
2017 |
2017 |
2016 |
|||||||||||||||
NUMBER OF EMPLOYEES |
33,700 |
32,400 |
31,500 |
30,900 |
30,500 |
||||||||||||||
DAYS IN CLAIMS PAYABLE (a) |
41 |
42 |
40 |
41 |
42 |
||||||||||||||
(a) Days in claims payable is a calculation of medical claims liabilities at the end of the period divided by average claims expense per calendar day for such period. |
|||||||||||||||||||
CASH, INVESTMENTS AND RESTRICTED DEPOSITS (in millions) |
|||||||||||||||||||
Regulated |
$ |
9,740 |
$ |
9,633 |
$ |
9,673 |
$ |
10,034 |
$ |
8,854 |
|||||||||
Unregulated |
310 |
308 |
291 |
306 |
264 |
||||||||||||||
Total |
$ |
10,050 |
$ |
9,941 |
$ |
9,964 |
$ |
10,340 |
$ |
9,118 |
|||||||||
DEBT TO CAPITALIZATION |
40.6 |
% |
41.5 |
% |
42.5 |
% |
43.3 |
% |
44.1 |
% |
|||||||||
DEBT TO CAPITALIZATION EXCLUDING NON-RECOURSE DEBT (b) |
40.3 |
% |
41.2 |
% |
42.1 |
% |
43.0 |
% |
43.7 |
% |
|||||||||
(b) The non-recourse debt represents the Company's mortgage note payable ( |
|||||||||||||||||||
Debt to capitalization is calculated as follows: total debt divided by (total debt + total equity). |
OPERATING RATIOS
Three Months Ended |
Year Ended |
||||||||||
2017 |
2016 |
2017 |
2016 |
||||||||
HBR |
87.3 |
% |
84.8 |
% |
87.3 |
% |
86.5 |
% |
|||
SG&A expense ratio |
10.9 |
% |
10.0 |
% |
9.7 |
% |
9.8 |
% |
|||
Adjusted SG&A expense ratio |
10.5 |
% |
9.4 |
% |
9.5 |
% |
9.0 |
% |
MEDICAL CLAIMS LIABILITY
The changes in medical claims liability are summarized as follows (in millions):
Balance, |
$ |
3,929 |
||
Reinsurance recoverable |
5 |
|||
Balance, |
3,924 |
|||
Incurred related to: |
||||
Current period |
38,225 |
|||
Prior period |
(374) |
|||
Total incurred |
37,851 |
|||
Paid related to: |
||||
Current period |
34,196 |
|||
Prior period |
3,311 |
|||
Total paid |
37,507 |
|||
Balance, |
4,268 |
|||
Plus: Reinsurance recoverable |
18 |
|||
Balance, |
$ |
4,286 |
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
View original content:http://www.prnewswire.com/news-releases/centene-corporation-reports-2017-results-and-increases-2018-guidance-300593868.html
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