- Centene Corporation Reports 2013 Fourth Quarter And Full Year Results -

-- 2013 Diluted Earnings Per Share From Continuing Operations: --

- Fourth quarter - $0.84

- Full Year - $2.87 ($2.95 excluding $0.08 of AcariaHealth transaction costs)

Feb 04, 2014, 06:00 ET from Centene Corporation

ST. LOUIS, Feb. 4, 2014 /PRNewswire/ -- Centene Corporation (NYSE: CNC) today announced its financial results for the quarter and year ended December 31, 2013.  Our subsidiary, Kentucky Spirit Health Plan (KSHP), ceased serving Medicaid members in Kentucky as of July 6, 2013.  Accordingly, the results of operations for KSHP are classified as discontinued operations.  The following discussions, with the exception of cash flow information, are in the context of continuing operations.

2013 Results

Q4

Full Year

Premium and Service Revenues (in millions)

$

2,859

$

10,526

Consolidated Health Benefits Ratio

88.1%

88.6%

General & Administrative expense ratio

8.9%

8.8%

Diluted earnings per share (EPS)

$

0.84

$

2.87

Diluted EPS excluding AcariaHealth transaction costs

$

0.84

$

2.95

Total cash flow from operations (in millions)

$

170.9

$

382.5

Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "We are pleased with the strong financial performance and development of our organization and business in 2013.  This sets the stage for continued positive momentum in 2014 and beyond."

Fourth Quarter and Full Year Highlights

  • December 31, 2013 at-risk managed care membership of 2,723,200, an increase of 298,700 members, or 12% year over year.
  • Premium and service revenues for the fourth quarter of $2.9 billion, representing 31% growth compared to the fourth quarter of 2012 and $10.5 billion for 2013, representing 37% growth year over year.
  • Health Benefits Ratio of 88.1% for the fourth quarter 2013, compared to 90.7% in the fourth quarter of 2012 and 88.6% for the full year 2013 compared to 89.6% for 2012. 
  • General and Administrative expense ratio of 8.9% for the fourth quarter of 2013, compared to 8.4% in the fourth quarter of 2012 and 8.8% for both of the full years 2013 and 2012. 
  • Operating cash flow of $170.9 million and $382.5 million for the fourth quarter and full year of 2013, representing 3.1 and 2.3 times net earnings, respectively.
  • Diluted EPS for the fourth quarter of 2013 of $0.84, compared to $0.35 in 2012.

Other Events

  • In November 2013, our South Carolina subsidiary, Absolute Total Care, was selected by the South Carolina Department of Health and Human Services to serve dual-eligible members as part of the state's pilot program to provide integrated and coordinated care for individuals who are eligible for both Medicare and Medicaid.  Operations are expected to commence in the second half of 2014.
  • In December 2013, our California subsidiary, California Health and Wellness Plan (CHWP), began operating under a new contract with the California Department of Health Care Services to serve Medicaid beneficiaries in 18 rural counties under the state's Medi-Cal Managed Care Rural Expansion program.  Also in December 2013, CHWP began operating under a new contract to serve Medi-Cal beneficiaries in Imperial County.
  • In December 2013, we signed a definitive agreement to purchase a majority stake in Fidelis SecureCare of Michigan, Inc. (Fidelis), a subsidiary of Fidelis SeniorCare, Inc.  The transaction is expected to close in the fourth quarter of 2014, subject to certain closing conditions including regulatory approvals, and will involve cash purchase price payments contingent on the performance of the plan over the course of 2015.  Fidelis was recently selected by the Michigan Department of Community Health to provide integrated healthcare services to members who are dually eligible for Medicare and Medicaid in Macomb and Wayne counties.  Enrollment is expected to commence in the fourth quarter of 2014.
  • In December 2013, our subsidiary, New Hampshire Healthy Families, began operating under a new contract with the Department of Health and Human Services to serve Medicaid beneficiaries.
  • In January 2014, we acquired a majority interest in U.S. Medical Management, LLC, a management services organization and provider of in-home health services for high acuity populations, for approximately $200.0 million.  The transaction consideration was financed through a combination of cash on hand and 2,243,217 shares of Centene common stock.
  • In January 2014, we began serving members enrolled in Health Insurance Marketplaces in certain regions of 9 states: Arkansas, Florida, Georgia, Indiana, Massachusetts, Mississippi, Ohio, Texas and Washington.
  • In January 2014, our CeltiCare subsidiary began operating under a new contract with the Massachusetts Executive Office of Health and Human Services to participate in the MassHealth CarePlus program in all five regions.
  • In January 2014, Centurion began operating under a new agreement with the Minnesota Department of Corrections to provide managed healthcare services to offenders in the state's correctional facilities.
  • In February 2014, our Mississippi subsidiary, Magnolia Health Plan, was awarded a statewide managed care contract to continue serving members enrolled in the Mississippi Coordinated Access Network (MississippiCAN) program, as one of two contractors.  Under the new contract, Magnolia will continue providing outpatient, behavioral health, pharmacy, vision and dental services, and will also begin providing non-emergency transportation as of July 1, 2014. 

The following table sets forth the Company's membership by state for its managed care organizations:

December 31,

2013

2012

Arizona

7,100

23,500

California

97,200

Florida

222,000

214,000

Georgia

318,700

313,700

Illinois

22,300

18,000

Indiana

195,500

204,000

Kansas

139,900

Louisiana

152,300

165,600

Massachusetts

22,600

21,500

Mississippi

78,300

77,200

Missouri

59,200

59,600

New Hampshire

33,600

Ohio

173,200

157,800

South Carolina

91,900

90,100

Tennessee

20,700

Texas

935,100

949,900

Washington

82,100

57,200

Wisconsin

71,500

72,400

Total

2,723,200

2,424,500

Membership by line of business:

December 31,

2013

2012

Medicaid

2,054,700

1,877,100

CHIP & Foster Care

275,100

235,200

ABD & Medicare

305,300

274,600

Hybrid Programs

19,000

29,100

LTC

37,800

8,500

Correctional Services

31,300

Total

2,723,200

2,424,500

Dual eligible membership (included in tables above):

December 31,

2013

2012

ABD

71,700

62,600

LTC

28,800

7,700

Medicare

6,500

5,100

Total

107,000

75,400

At December 31, 2013, the Company also served 156,600 members under its behavioral health contract in Arizona, compared to 157,900 members in 2012.

Statement of Operations: Three Months Ended December 31, 2013

  • For the fourth quarter of 2013, Premium and Service Revenues increased 31% to $2.9 billion from $2.2 billion in the fourth quarter of 2012.  The increase was primarily driven as a result of the addition of the Kansas, California and New Hampshire contracts, increased premium rates in Texas, expansions in Mississippi, Ohio and Florida, the acquisition of AcariaHealth and the commencement of the correctional health care contracts in Massachusetts and Tennessee.
  • Consolidated HBR of 88.1% for the fourth quarter of 2013 represents a decrease from 90.7% in the comparable period in 2012 and an increase from 87.8% in the third quarter of 2013.  The HBR improvement compared to 2012 reflects the rate increase in Texas and ongoing medical management initiatives.  The increase from the prior quarter is due to normal seasonality.
  • The following table compares the results for new business and existing business for the quarters ended December 31:

2013

2012

Premium and Service Revenue

New business

17%

31%

Existing business

83%

69%

HBR

New business

95.4%

95.3%

Existing business

86.6%

88.7%

  • Consolidated G&A expense ratio for the fourth quarter of 2013 was 8.9%, compared to 8.4% in the prior year.   The year over year increase reflects an increase in performance based compensation expense in 2013 and higher start-up costs, partially offset by the benefits of leveraging of expenses over higher revenue in 2013 and our efforts to control costs.  
  • Earnings from operations were $85.1 million in the fourth quarter of 2013 compared to $25.9 million in the fourth quarter of 2012.  Net earnings attributable to Centene Corporation were $53.2 million in the fourth quarter of 2013, compared to $9.1 million in the fourth quarter of 2012. 
  • Diluted EPS of $0.84 in the fourth quarter of 2013, compared to $0.35 in 2012.

Statement of Operations: Year Ended December 31, 2013

  • Premium and service revenues increased 37.0% in the year ended December 31, 2013 over the corresponding period in 2012 as a result of the Texas, Mississippi, Louisiana and Florida expansions, pharmacy carve-ins in Texas and Louisiana, the additions of the Kansas, Missouri, Washington, California and New Hampshire contracts, commencement of the correctional service contracts in Massachusetts and Tennessee, rate increases in several of our markets and the acquisition of AcariaHealth.
  • The consolidated HBR for the year ended December 31, 2013, of 88.6% was a decrease of 100 basis points over the comparable period in 2012.  The 2013 HBR reflects performance improvement in Texas and our individual insurance business from 2012.
  • The consolidated G&A expense ratio for the years ended December 31, 2013 and 2012 was 8.8%.  The G&A expense ratio reflects an increase in performance based compensation expense in 2013 as well as AcariaHealth transaction costs, offset by the benefits of leveraging of expenses over higher revenue in 2013 and our efforts to control costs.
  • Diluted net earnings per share for 2013 of $2.87 including AcariaHealth transaction costs of $0.08 per diluted share, compared to $1.65 in 2012.

Balance Sheet and Cash Flow

At December 31, 2013, the Company had cash, investments and restricted deposits of $1,915.3 million, including $44.7 million held by its unregulated entities.  Medical claims liabilities totaled $1,111.7 million, representing 42.4 days in claims payable.  Total debt was $668.8 million which includes $150.0 million of borrowings on the $500 million revolving credit facility at quarter end.  Debt to capitalization was 32.4% at December 31, 2013, excluding the $72.8 million non-recourse mortgage note.  Cash flow from operations for the three months ended December 31, 2013, was $170.9 million, or 3.1 times net earnings.

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

Days in claims payable, September 30, 2013

40.6

Timing of claim payments

1.1

ACA provider parity payments in process

0.7

Days in claims payable, December 31, 2013

42.4

Outlook

The table below depicts the Company's annual guidance for 2014.

Full Year 2014

Low

High 

Premium and Service Revenues (in millions)

$

13,800

$

14,300

Diluted EPS

$

3.50

$

3.80

Consolidated Health Benefits Ratio

88.7%

89.2%

General & Administrative expense ratio

8.5%

9.0%

Effective Tax Rate

50.0%

51.0%

Diluted Shares Outstanding (in thousands)

59,700

60,200

The guidance in the table above includes the impact of the acquisition of U.S. Medical Management and related transaction costs as well as the ACA health insurer fee.

Conference Call

As previously announced, the Company will host a conference call Tuesday, February 4, 2014, at 8:30 A.M. (Eastern Time) to review the financial results for the fourth quarter and year ended December 31, 2013, and to discuss its business outlook.  Michael F. Neidorff and William N. Scheffel will host the conference call. 

Investors and other interested parties are invited to listen to the conference call by dialing 1-877-270-2148 in the U.S. and Canada; +1-412-902-6510 from abroad; or via a live, audio webcast on the Company's website at www.centene.com, under the Investors section.  Or, participants can register for the conference call in advance by navigating to

http://dpregister.com/10039178, which includes a calendar entry and PIN code to be activated one hour before the call.  A webcast replay will be available for on-demand listening shortly after the completion of the call for the next twelve months or until 11:59 PM (Eastern Time) on Tuesday, February 3, 2015, at the aforementioned URL. In addition, a digital audio playback will be available until 9:00 AM Eastern Time on Wednesday, February 12, 2014, by dialing 1-877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad, and entering access code 10039178.

Other Information

The discussion in the third bullet under the heading "Statement of Operations: Three Months Ended December 31, 2013" contains financial information for new and existing businesses.  Existing businesses are primarily state markets or significant geographic expansion in an existing state or product that we have managed for four complete quarters.  New businesses are primarily new state markets or significant geographic expansion in an existing state or product that conversely, we have not managed for four complete quarters.

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 individuals to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently. The Company uses the presented non-GAAP financial measures such as 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.

About Centene Corporation

Centene Corporation, a Fortune 500 company, is a leading multi-line healthcare enterprise that provides programs and services to government sponsored healthcare programs, focusing on under-insured and uninsured individuals.  Many receive benefits provided under Medicaid, including the State Children's Health Insurance Program (CHIP), as well as Aged, Blind or Disabled (ABD), Foster Care and Long Term Care (LTC), in addition to other state-sponsored/hybrid programs, and Medicare (Special Needs Plans).  The Company operates local health plans and offers a range of health insurance solutions.  It also contracts with other healthcare and commercial organizations to provide specialty services including behavioral health, care management software, correctional systems healthcare, in-home health services, life and health management, managed vision, pharmacy benefits management, specialty pharmacy and telehealth services.

The information provided in this press release contains forward-looking statements that relate to future events and future financial performance of Centene.  Subsequent events and developments may cause the Company's estimates to change.  The Company disclaims any obligation to update this forward-looking financial information in the future.  Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, regulatory, competitive and other factors that may cause Centene's or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Actual results may differ from projections or estimates due to a variety of important factors, including Centene's ability to accurately predict and effectively manage health benefits and other operating expenses and reserves, competition, membership and revenue projections, timing of regulatory contract approval, changes in healthcare practices, changes in federal or state laws or regulations, changes in expected contract start dates, inflation, provider and state contract changes, new technologies, reduction in provider payments by governmental payors, major epidemics, disasters and numerous other factors affecting the delivery and cost of healthcare, as well as those factors disclosed in the Company's publicly filed documents.  The expiration, cancellation or suspension of Centene's Medicaid Managed Care contracts, or the loss of any appeal of or protest to any such expiration, cancellation or suspension, by state governments would also negatively affect Centene.

[Tables Follow]

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

December 31, 2013

December 31, 2012

ASSETS

Current assets:

Cash and cash equivalents of continuing operations

$

974,304

$

745,933

Cash and cash equivalents of discontinued operations

63,769

98,019

   Total cash and cash equivalents

1,038,073

843,952

Premium and related receivables

428,570

251,473

Short term investments

102,126

138,101

Other current assets

217,661

93,322

Other current assets of discontinued operations

13,743

78,977

Total current assets

1,800,173

1,405,825

Long term investments

791,900

554,770

Restricted deposits

46,946

34,286

Property, software and equipment, net

395,407

375,893

Goodwill

348,432

256,288

Intangible assets, net

48,780

20,268

Other long term assets

59,357

64,278

Long term assets of discontinued operations

38,305

62,297

Total assets

$

3,529,300

$

2,773,905

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Medical claims liability

$

1,111,709

$

815,161

Accounts payable and accrued expenses

375,862

219,066

Unearned revenue

38,191

34,597

Current portion of long-term debt

3,065

3,373

Current liabilities of discontinued operations

30,294

157,116

Total current liabilities

1,559,121

1,229,313

Long term debt

665,697

535,481

Other long term liabilities

60,015

54,987

Long term liabilities of discontinued operations

1,028

357

Total liabilities

2,285,861

1,820,138

Commitments and contingencies

Stockholders' equity:

Common stock, $.001 par value; authorized 100,000,000 shares; 58,673,215 issued and 55,319,239 outstanding at December 31, 2013, and 55,339,160 issued and 52,329,248 outstanding at December 31, 2012

59

55

Additional paid-in capital

594,326

450,856

Accumulated other comprehensive income:

Unrealized (loss) gain on investments, net of tax

(2,620)

5,189

Retained earnings

731,919

566,820

Treasury stock, at cost (3,353,976 and 3,009,912 shares, respectively)

(89,643)

(69,864)

Total Centene stockholders' equity

1,234,041

953,056

Noncontrolling interest

9,398

711

Total stockholders' equity

1,243,439

953,767

Total liabilities and stockholders' equity

$

3,529,300

$

2,773,905

 

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

(Unaudited)

Three Months Ended December 31,

Year Ended

December 31,

2013

2012

2013

2012

Revenues:

Premium

$

2,737,942

$

2,148,189

$

10,153,460

$

7,568,889

Service

121,290

28,680

372,580

112,742

Premium and service revenues

2,859,232

2,176,869

10,526,040

7,681,631

Premium tax

72,508

95,181

337,289

428,665

Total revenues

2,931,740

2,272,050

10,863,329

8,110,296

Expenses:

Medical costs

2,412,195

1,948,304

8,994,641

6,781,081

Cost of services

108,080

20,808

326,924

87,705

General and administrative expenses

255,355

182,519

931,137

677,157

Premium tax expense

71,022

94,482

333,210

428,354

Impairment loss

28,033

Total operating expenses

2,846,652

2,246,113

10,585,912

8,002,330

Earnings from operations

85,088

25,937

277,417

107,966

Other income (expense):

Investment and other income

5,358

3,172

18,457

35,285

Interest expense

(6,696)

(6,067)

(26,957)

(20,460)

Earnings from continuing operations, before income tax expense

83,750

23,042

268,917

122,791

Income tax expense

34,143

8,785

107,080

47,412

Earnings from continuing operations, net of income tax expense

49,607

14,257

161,837

75,379

Discontinued operations, net of income tax expense (benefit) of $3,254, $(3,046), $2,284, and $(47,741), respectively

5,275

(9,618)

3,881

(86,674)

Net earnings

54,882

4,639

165,718

(11,295)

Noncontrolling interest

1,642

(4,422)

619

(13,154)

Net earnings attributable to Centene Corporation

$

53,240

$

9,061

$

165,099

$

1,859

Amounts attributable to Centene Corporation common shareholders:

Earnings from continuing operations, net of income tax expense

$

47,965

$

18,679

$

161,218

$

88,533

Discontinued operations, net of income tax expense (benefit)

5,275

(9,618)

3,881

(86,674)

Net earnings

$

53,240

$

9,061

$

165,099

$

1,859

Net earnings (loss) per common share attributable to Centene Corporation:

Basic:

Continuing operations

$

0.87

$

0.36

$

2.98

$

1.72

Discontinued operations

0.10

(0.19)

0.07

(1.68)

Basic earnings per common share

$

0.97

$

0.17

$

3.05

$

0.04

Diluted:

Continuing operations

$

0.84

$

0.35

$

2.87

$

1.65

Discontinued operations

0.09

(0.18)

0.07

(1.62)

Diluted earnings per common share

$

0.93

$

0.17

$

2.94

$

0.03

Weighted average number of common shares outstanding:

Basic

54,906,274

51,817,066

54,126,545

51,509,366

Diluted

57,078,257

54,055,209

56,247,173

53,714,375

 

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Year Ended December 31,

2013

2012

Cash flows from operating activities:

Net earnings (loss)

$

165,718

$

(11,295)

Adjustments to reconcile net earnings to net cash provided by operating activities

Depreciation and amortization

67,420

65,866

Stock compensation expense

36,656

25,332

Impairment loss

28,033

Gain on sale of investment in convertible note

(17,880)

Deferred income taxes

(2,293)

(14,438)

Changes in assets and liabilities

Premium and related receivables

(142,977)

(116,558)

Other current assets

(79,588)

(36,818)

Other assets

(736)

2,825

Medical claims liabilities

171,569

359,792

Unearned revenue

2,724

24,707

Accounts payable and accrued expenses

151,712

(21,474)

Other operating activities

12,321

(9,401)

Net cash provided by operating activities

382,526

278,691

Cash flows from investing activities:

Capital expenditures

(67,835)

(82,144)

Purchases of investments

(790,653)

(695,687)

Sales and maturities of investments

579,161

589,921

Investments in acquisitions, net of cash acquired

(62,773)

Net cash used in investing activities

(342,100)

(187,910)

Cash flows from financing activities:

Proceeds from exercise of stock options

8,983

15,912

Proceeds from borrowings

180,000

400,500

Proceeds from stock offering

15,225

Payment of long term debt

(41,593)

(218,234)

Excess tax benefits from stock compensation

6,380

10,996

Common stock repurchases

(19,779)

(12,741)

Contribution from noncontrolling interest

8,068

1,092

Purchase of noncontrolling interest

(14,429)

Debt issue costs

(3,589)

(3,623)

Net cash provided by financing activities

153,695

179,473

Net increase in cash and cash equivalents

194,121

270,254

Cash and cash equivalents, beginning of period

843,952

573,698

Cash and cash equivalents, end of period

$

1,038,073

$

843,952

Supplemental disclosures of cash flow information:

Interest paid

$

30,009

$

21,605

Income taxes paid

$

84,681

$

42,877

Equity issued in connection with acquisition

$

75,425

$

 

CENTENE CORPORATION

SUPPLEMENTAL FINANCIAL DATA FROM CONTINUING OPERATIONS

Q4

Q3

Q2

Q1

Q4

2013

2013

2013

2013

2012

AT-RISK MEMBERSHIP

Managed Care:

Arizona

7,100

23,700

23,200

23,300

23,500

California

97,200

Florida

222,000

217,800

216,200

214,600

214,000

Georgia

318,700

314,100

316,600

314,000

313,700

Illinois

22,300

22,800

18,000

18,000

18,000

Indiana

195,500

198,400

200,000

202,400

204,000

Kansas

139,900

137,700

137,500

133,700

Louisiana

152,300

152,600

153,700

162,900

165,600

Massachusetts

22,600

23,200

15,200

17,300

21,500

Mississippi

78,300

76,900

77,300

77,000

77,200

Missouri

59,200

58,200

58,800

57,900

59,600

New Hampshire

33,600

Ohio

173,200

170,900

156,700

157,700

157,800

South Carolina

91,900

89,400

88,800

90,100

90,100

Tennessee

20,700

20,400

Texas

935,100

957,300

960,400

948,400

949,900

Washington

82,100

77,100

67,600

63,500

57,200

Wisconsin

71,500

72,000

73,400

72,600

72,400

TOTAL

2,723,200

2,612,500

2,563,400

2,553,400

2,424,500

Medicaid

2,054,700

1,953,300

1,953,600

1,951,300

1,877,100

CHIP & Foster Care

275,100

274,900

273,200

265,400

235,200

ABD & Medicare

305,300

302,000

289,800

288,400

274,600

Hybrid Programs

19,000

19,600

22,400

24,600

29,100

Long-term Care

37,800

31,600

24,400

23,700

8,500

Correctional Services

31,300

31,100

TOTAL

2,723,200

2,612,500

2,563,400

2,553,400

2,424,500

Specialty Services(a):

Cenpatico Behavioral Health

Arizona

156,600

160,700

157,100

156,200

157,900

Kansas

49,800

TOTAL

156,600

160,700

157,100

156,200

207,700

(a) Includes external membership only.

REVENUE PER MEMBER PER MONTH(b)

$

335

$

328

$

306

$

304

$

291

CLAIMS(b)

Period-end inventory

622,200

698,900

703,400

940,200

619,200

Average inventory

511,700

505,800

510,000

555,800

515,600

Period-end inventory per member

0.23

0.27

0.27

0.37

0.26

(b) Revenue per member and claims information are presented for the Managed Care at-risk members.

NUMBER OF EMPLOYEES

8,800

8,200

7,900

7,100

6,800

Q4

Q3

Q2

Q1

Q4

2013

2013

2013

2013

2012

DAYS IN CLAIMS PAYABLE (c)

42.4

40.6

41.5

39.7

38.5

(c) 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 AND INVESTMENTS (in millions)

Regulated

$

1,870.6

$

1,612.9

$

1,502.9

$

1,494.0

$

1,435.8

Unregulated

44.7

37.6

33.8

45.5

37.3

TOTAL

$

1,915.3

$

1,650.5

$

1,536.7

$

1,539.5

$

1,473.1

DEBT TO CAPITALIZATION

35.0%

30.5%

32.9%

35.2%

36.1%

DEBT TO CAPITALIZATION EXCLUDING NON-RECOURSE DEBT(d)

32.4%

27.4%

29.8%

31.9%

32.7%

Debt to Capitalization is calculated as follows: total debt divided by (total debt + total equity).

(d) The non-recourse debt represents the Company's mortgage note payable ($72.8 million at December 31, 2013).

Operating Ratios:

Three Months Ended December 31,

Year Ended December 31,

2013

2012

2013

2012

Health Benefits Ratios:

Medicaid and CHIP

86.5%

91.5%

87.5%

88.8%

ABD and Medicare

90.4

89.3

90.4

90.7

Specialty Services

87.7

91.3

85.4

92.0

Total

88.1

90.7

88.6

89.6

Total General & Administrative Expense Ratio

8.9%

8.4%

8.8%

8.8%

MEDICAL CLAIMS LIABILITY (In thousands)

     The changes in medical claims liability are summarized as follows:

Balance, December 31, 2012

$

815,161

Incurred related to:

Current period

9,072,867

Prior period

(78,226)

Total incurred

8,994,641

Paid related to:

Current period

7,975,367

Prior period

722,726

Total paid

8,698,093

Balance, December 31, 2013

$

1,111,709

Centene's claims reserving process utilizes a consistent actuarial methodology to estimate Centene's ultimate liability.  Any reduction in the "Incurred related to: Prior period" amount may be offset as Centene actuarially determines "Incurred related to: Current period."  As such, only in the absence of a consistent reserving methodology would favorable development of prior period claims liability estimates reduce medical costs.  Centene believes it has consistently applied its claims reserving methodology in each of the periods presented.

The amount of the "Incurred related to: Prior period" above 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 prior to December 31, 2012. 

SOURCE Centene Corporation



RELATED LINKS

http://www.centene.com