Centene Corporation Reports $0.44 Earnings Per Diluted Share for the Third Quarter 2010; $0.48 From Operations Excluding a $0.04 Charge for Net Investment Writedowns
ST. LOUIS, Oct. 26 /PRNewswire-FirstCall/ -- Centene Corporation (NYSE: CNC) today announced net earnings from continuing operations for the quarter ended September 30, 2010, of $22.4 million, or $0.44 per diluted share; $0.48 from operations excluding a $0.04 charge for net investment writedowns. The discussions below, with the exception of cash flow information, are in the context of continuing operations and all financial ratios exclude premium taxes.
Third Quarter Highlights
- Quarter-end managed care at-risk membership of 1,470,800, an increase of 84,400 members, or 6.1% year over year.
- Premium and Service Revenues of $1.082 billion, representing 9.5% year over year growth.
- Health Benefits Ratio (HBR) of 84.2%, compared to 83.7% in the prior year.
- General and Administrative (G&A) expense ratio of 12.2%, compared to 13.2% in the prior year.
- Earnings from operations of $40.2 million, compared to $38.0 million in the prior year.
- Earnings from continuing operations, net of income tax expense, of $22.4 million.
- Diluted earnings per share from continuing operations of $0.44, including a $0.07 charge per diluted share related to an impairment of an investment in a software company and realized security gains of $0.03 per diluted share recognized during the third quarter of 2010.
- Cash flows from operations of $72.6 million, which is 3.2 times net earnings from continuing operations.
- Days in claims payable of 47.1, including pharmacy claims payable.
Other Events
- In April 2010, we began offering an individual insurance product, under the names of Commonwealth Choice and CeltiCare Direct, for residents of Boston and surrounding cities who do not qualify for other state funded insurance programs.
- In July 2010, we closed on the acquisition of certain assets of NovaSys Health, LLC, a leading third party administrator in Arkansas that complements our existing Celtic business.
- In August 2010, we announced the acquisition in Florida of certain assets in non-reform counties of Citrus Health Care, Inc., a Medicaid and long-term care health plan. We expect the transaction to close at year end.
- In September 2010, Celtic Insurance Company, Inc. was awarded a contract with the Texas Department of Insurance to provide affordable health insurance plans for Texas small businesses under the new Healthy Texas initiative. We expect operations to commence during the fourth quarter of 2010.
- In September 2010, our new subsidiary, IlliniCare Health Plan, was selected as one of two vendors to provide managed care services to older adults and adults with disabilities under the Integrated Care Program in six counties of Illinois. We expect operations to commence in the first half of 2011.
- In October 2010, one of our highly regarded health programs, Start Smart for Your Baby®, won the Platinum Award for Consumer Empowerment at the URAC Quality Summit. Also in October, Absolute Total Care, our South Carolina health plan, received the prestigious New Health Plan accreditation from the National Committee for Quality Assurance (NCQA), a private, not-for-profit organization that sets standards for monitoring and improving healthcare quality.
Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "A strong operational quarter and exceptional new business activity set the stage for meaningful 2011 performance."
The following table depicts membership in Centene's managed care organizations, by state:
September 30, | |||||
2010 | 2009 | ||||
Arizona | 19,300 | 17,400 | |||
Florida | 116,300 | 84,400 | |||
Georgia | 300,900 | 303,400 | |||
Indiana | 213,300 | 200,700 | |||
Massachusetts | 34,400 | 500 | |||
Ohio | 161,800 | 151,200 | |||
South Carolina | 90,600 | 46,100 | |||
Texas | 428,100 | 450,200 | |||
Wisconsin | 106,100 | 132,500 | |||
Total at-risk membership | 1,470,800 | 1,386,400 | |||
Non-risk membership | 35,900 | 63,200 | |||
Total | 1,506,700 | 1,449,600 | |||
The following table depicts membership in Centene's managed care organizations, by member category:
September 30, | |||||
2010 | 2009 | ||||
Medicaid | 1,122,800 | 1,040,000 | |||
CHIP & Foster Care | 219,100 | 263,400 | |||
ABD & Medicare | 94,500 | 82,500 | |||
Other State programs | 34,400 | 500 | |||
Total at-risk membership | 1,470,800 | 1,386,400 | |||
Non-risk membership | 35,900 | 63,200 | |||
Total | 1,506,700 | 1,449,600 | |||
Statement of Operations
- Premium and service revenues increased 9.5% for the three months ended September 30, 2010 over 2009 as a result of membership growth and net premium rate increases. This increase was moderated by the removal of pharmacy services in two states in 2010. These pharmacy carve outs had the effect of reducing 2010 third quarter revenue by approximately $48 million.
- The consolidated HBR for the three months ended September 30, 2010 of 84.2% was an increase of 0.5% over the comparable period in 2009. A reconciliation of the change in HBR from the prior year is presented below:
Third Quarter 2009 | 83.7 | % | |||
Florida health plan performance | 0.9 | ||||
Net changes in other markets | (0.4) | ||||
Third Quarter 2010 | 84.2 | % | |||
- Consolidated G&A expense as a percent of premium and service revenues was 12.2% in the third quarter of 2010, a decrease from 13.2% in the third quarter of 2009. The decrease in G&A ratio is primarily a result of leveraging our expenses over higher revenues and decreased variable compensation expense during the quarter ended September 30, 2010.
- Earnings per diluted share from continuing operations were $0.44, compared to $0.51 in the third quarter of 2009, including a $0.07 charge per diluted share related to an impairment of an investment in a software company and realized security gains of $0.03 per diluted share recognized during the third quarter of 2010. Earnings per diluted share also reflect an increase in diluted shares outstanding resulting from the first quarter 2010 stock offering.
Balance Sheet and Cash Flow
At September 30, 2010, we had cash and investments of $928.1 million, including $895.4 million held by our regulated entities and $32.7 million held by our unregulated entities. Medical claims liabilities totaled $457.1 million, representing 47.1 days in claims payable, a decrease of 1.1 days from June 30, 2010. Total debt was $264.2 million and debt to capitalization was 24.7%.
Cash flow from operations for the quarter ended September 30, 2010 was $72.6 million. Cash flow from operations for the nine months ended September 30, 2010 was $(25.7) million and was impacted by 1) $38.7 million decrease in unearned revenue due to advance payments received in December 2009 for January 2010 premium payments and 2) $68.1 million increase in premium and related receivables primarily for September premium payments deferred by one state until October 2010.
A reconciliation of the change in days in claims payable from the immediately preceding quarter-end is presented below:
Days in claims payable, June 30, 2010 | 48.2 | ||
Timing of claims payments | (0.9) | ||
Impact of decrease in membership | (0.3) | ||
Pharmacy payment timing | 0.1 | ||
Days in claims payable, September 30, 2010 | 47.1 | ||
Outlook
The table below depicts our guidance from continuing operations for 2010:
Full Year 2010 | ||||||
Low | High | |||||
Premium and Service revenues (in millions) | $ 4,250 | $ 4,350 | ||||
Earnings per diluted share (EPS) | $ 1.76 | $ 1.80 | ||||
HBR % | 83.5% | 84.5% | ||||
G&A % | 12.4% | 12.9% | ||||
Diluted Shares Outstanding (in thousands) | 50,500 | |||||
Based upon known rate adjustments and discussions with our states that finalize rates in the second half of the year, we estimate our 2010 composite premium rate increase to be between 1.5% and 2.5%.
Conference Call
As previously announced, we will host a conference call Tuesday, October 26, 2010, at 8:30 A.M. (Eastern Time) to review the financial results for the third quarter ended September 30, 2010, and to discuss our business outlook. Michael F. Neidorff and William N. Scheffel will host the conference call.
Investors and other interested parties are invited to listen to the conference call by dialing 877-887-1134 in the U.S. and Canada; +1-412-317-0794 from abroad; or via a live, audio webcast on our website at www.centene.com, under the Investors section.
A replay will be available for on-demand listening shortly after the completion of the call for the next twelve months or until 11:59 PM (Eastern Time) on Tuesday, October 25, 2011, at the aforementioned URL, or by dialing 877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad and entering the playback conference number 444970.
About Centene Corporation
Centene Corporation, a Fortune 500 company, is a leading multi-line healthcare enterprise that provides programs and related services to the rising number of under-insured and uninsured individuals. Many receive benefits provided under Medicaid, including the State Children's Health Insurance Program (CHIP), as well as Aged, Blind or Disabled (ABD), Foster Care and long-term care, in addition to other state-sponsored programs, and Medicare (Special Needs Plans). Centene's CeltiCare subsidiary offers states unique, "exchange based" and other cost-effective coverage solutions for low-income populations. The Company operates local health plans and offers a range of health insurance solutions. It also contracts with other healthcare and commercial organizations to provide specialty services including behavioral health, life and health management, managed vision, telehealth services, and pharmacy benefits management.
The information provided in this press release contains forward-looking statements that relate to future events and future financial performance of Centene. Subsequent events and developments may cause the Company's estimates to change. The Company disclaims any obligation to update this forward-looking financial information in the future. Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, regulatory, competitive and other factors that may cause Centene's or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Actual results may differ from projections or estimates due to a variety of important factors, including Centene's ability to accurately predict and effectively manage health benefits and other operating expenses, competition, changes in healthcare practices, changes in federal or state laws or regulations, inflation, provider contract changes, new technologies, reduction in provider payments by governmental payors, major epidemics, disasters and numerous other factors affecting the delivery and cost of healthcare. The expiration, cancellation or suspension of Centene's Medicaid Managed Care contracts by state governments would also negatively affect Centene.
This release includes earnings per diluted share excluding certain charges for net investment writedowns, which is a non-GAAP financial measure. Management believes that this non-GAAP financial measure provides information that is useful to investors in understanding period-over-period operating results and enhances the ability of investors to analyze Centene's business trends and to understand Centene's performance. This non-GAAP financial measure should not be considered in isolation, or as a substitute for the corresponding GAAP financial measure and may not be comparable to similar measures used by other companies.
[Tables Follow] CENTENE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) | |||||||
September 30, 2010 | December 31, 2009 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents of continuing operations, including $5,389 and $8,667, respectively, from consolidated variable interest entities | $ | 397,519 | $ | 400,951 | |||
Cash and cash equivalents of discontinued operations | 147 | 2,801 | |||||
Total cash and cash equivalents | 397,666 | 403,752 | |||||
Premium and related receivables, net of allowance for uncollectible accounts of $1,336 and $1,338, respectively, including $3,208 and $11,313, respectively, from consolidated variable interest entities | 182,379 | 103,456 | |||||
Short-term investments, at fair value (amortized cost $30,667 and $39,230, respectively) | 30,857 | 39,554 | |||||
Other current assets, including $2,023 and $4,507, respectively, from consolidated variable interest entities | 63,408 | 64,866 | |||||
Current assets of discontinued operations other than cash | 1,678 | 4,506 | |||||
Total current assets | 675,988 | 616,134 | |||||
Long-term investments, at fair value (amortized cost $463,877 and $514,256, respectively) | 479,164 | 525,497 | |||||
Restricted deposits, at fair value (amortized cost $20,527 and $20,048, respectively) | 20,589 | 20,132 | |||||
Property, software and equipment, net of accumulated depreciation of $127,969 and $103,883, respectively, including $138,008 and $89,219, respectively, from consolidated variable interest entities | 311,195 | 230,421 | |||||
Goodwill | 247,757 | 224,587 | |||||
Intangible assets, net | 24,608 | 22,479 | |||||
Other long-term assets, including $2,806 and $30, respectively, from consolidated variable interest entities | 28,398 | 36,829 | |||||
Long-term assets of discontinued operations | 7,478 | 26,285 | |||||
Total assets | $ | 1,795,177 | $ | 1,702,364 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Medical claims liability | $ | 457,085 | $ | 470,932 | |||
Accounts payable and accrued expenses, including $20,926 and $14,020, respectively, from consolidated variable interest entities | 145,877 | 132,001 | |||||
Unearned revenue | 52,936 | 91,644 | |||||
Current portion of long-term debt | 663 | 646 | |||||
Current liabilities of discontinued operations | 4,531 | 20,685 | |||||
Total current liabilities | 661,092 | 715,908 | |||||
Long-term debt | 263,513 | 307,085 | |||||
Other long-term liabilities | 66,355 | 59,561 | |||||
Long-term liabilities of discontinued operations | 285 | 383 | |||||
Total liabilities | 991,245 | 1,082,937 | |||||
Commitments and contingencies | |||||||
Stockholders' equity: | |||||||
Common stock, $.001 par value; authorized 100,000,000 shares; 51,716,723 issued and 49,265,875 outstanding at September 30, 2010, and 45,593,383 shares issued and 43,179,373 shares outstanding at December 31, 2009 | 52 | 46 | |||||
Additional paid-in capital | 400,213 | 281,806 | |||||
Accumulated other comprehensive income: | |||||||
Net unrealized gain on investments, net of tax | 9,661 | 7,348 | |||||
Retained earnings | 428,344 | 358,907 | |||||
Treasury stock, at cost (2,450,848 and 2,414,010 shares, respectively) | (47,976) | (47,262) | |||||
Total Centene Corporation stockholders' equity | 790,294 | 600,845 | |||||
Noncontrolling interest | 13,638 | 18,582 | |||||
Total stockholders' equity | 803,932 | 619,427 | |||||
Total liabilities and stockholders' equity | $ | 1,795,177 | $ | 1,702,364 | |||
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share data) (Unaudited) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||||
Revenues: | |||||||||||||||
Premium | $ | 1,060,559 | $ | 960,009 | $ | 3,085,802 | $ | 2,754,713 | |||||||
Service | 20,954 | 27,300 | 68,543 | 72,740 | |||||||||||
Premium and service revenues | 1,081,513 | 987,309 | 3,154,345 | 2,827,453 | |||||||||||
Premium tax | 40,348 | 50,925 | 113,009 | 182,685 | |||||||||||
Total revenues | 1,121,861 | 1,038,234 | 3,267,354 | 3,010,138 | |||||||||||
Expenses: | |||||||||||||||
Medical costs | 893,281 | 803,062 | 2,592,324 | 2,298,108 | |||||||||||
Cost of services | 14,646 | 15,843 | 47,505 | 46,364 | |||||||||||
General and administrative expenses | 132,095 | 130,024 | 401,072 | 381,524 | |||||||||||
Premium tax | 41,591 | 51,295 | 114,885 | 183,785 | |||||||||||
Total operating expenses | 1,081,613 | 1,000,224 | 3,155,786 | 2,909,781 | |||||||||||
Earnings from operations | 40,248 | 38,010 | 111,568 | 100,357 | |||||||||||
Other income (expense): | |||||||||||||||
Investment and other income | 713 | 3,750 | 11,912 | 11,781 | |||||||||||
Interest expense | (4,858) | (4,064) | (12,540) | (12,210) | |||||||||||
Earnings from continuing operations, before income tax expense | 36,103 | 37,696 | 110,940 | 99,928 | |||||||||||
Income tax expense | 13,163 | 12,426 | 42,942 | 35,060 | |||||||||||
Earnings from continuing operations, net of income tax expense | 22,940 | 25,270 | 67,998 | 64,868 | |||||||||||
Discontinued operations, net of income tax expense (benefit) of $26, $(792), $4,376 and $(1,148), respectively | 260 | (1,460) | 3,954 | (2,394) | |||||||||||
Net earnings | 23,200 | 23,810 | 71,952 | 62,474 | |||||||||||
Noncontrolling interest | 538 | 2,542 | 2,515 | 2,518 | |||||||||||
Net earnings attributable to Centene Corporation | $ | 22,662 | $ | 21,268 | $ | 69,437 | $ | 59,956 | |||||||
Amounts attributable to Centene Corporation common stockholders: | |||||||||||||||
Earnings from continuing operations, net of income tax expense | $ | 22,402 | $ | 22,728 | $ | 65,483 | $ | 62,350 | |||||||
Discontinued operations, net of income tax expense (benefit) | 260 | (1,460) | 3,954 | (2,394) | |||||||||||
Net earnings | $ | 22,662 | $ | 21,268 | $ | 69,437 | $ | 59,956 | |||||||
Net earnings (loss) per common share attributable to Centene Corporation: | |||||||||||||||
Basic: | |||||||||||||||
Continuing operations | $ | 0.46 | $ | 0.53 | $ | 1.35 | $ | 1.45 | |||||||
Discontinued operations | — | (0.04) | 0.08 | (0.06) | |||||||||||
Earnings per common share | $ | 0.46 | $ | 0.49 | $ | 1.43 | $ | 1.39 | |||||||
Diluted: | |||||||||||||||
Continuing operations | $ | 0.44 | $ | 0.51 | $ | 1.30 | $ | 1.41 | |||||||
Discontinued operations | — | (0.03) | 0.08 | (0.05) | |||||||||||
Earnings per common share | $ | 0.44 | $ | 0.48 | $ | 1.38 | $ | 1.36 | |||||||
Weighted average number of shares outstanding: | |||||||||||||||
Basic | 49,238,406 | 43,001,870 | 48,552,135 | 43,023,431 | |||||||||||
Diluted | 50,938,357 | 44,291,604 | 50,192,190 | 44,247,153 | |||||||||||
CENTENE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) | |||||||
Nine Months Ended September 30, | |||||||
2010 | 2009 | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 71,952 | $ | 62,474 | |||
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: | |||||||
Depreciation and amortization | 38,620 | 30,800 | |||||
Stock compensation expense | 10,224 | 11,428 | |||||
(Gain) loss on sale of investments, net | (6,331) | 261 | |||||
(Gain) on sale of UHP | (8,201) | - | |||||
Impairment of investment | 5,531 | - | |||||
Deferred income taxes | 7,012 | 4,516 | |||||
Changes in assets and liabilities: | |||||||
Premium and related receivables | (68,125) | (381) | |||||
Other current assets | (2,932) | (2,595) | |||||
Other assets | (990) | (593) | |||||
Medical claims liabilities | (29,304) | 31,612 | |||||
Unearned revenue | (38,708) | 54,725 | |||||
Accounts payable and accrued expenses | (3,174) | (17,656) | |||||
Other operating activities | (1,267) | 2,386 | |||||
Net cash (used in) provided by operating activities | (25,693) | 176,977 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (91,960) | (42,696) | |||||
Purchases of investments | (382,730) | (647,086) | |||||
Proceeds from asset sales | 13,420 | - | |||||
Sales and maturities of investments | 452,128 | 546,640 | |||||
Investments in acquisitions, net of cash acquired | (26,847) | (31,533) | |||||
Net cash used in investing activities | (35,989) | (174,675) | |||||
Cash flows from financing activities: | |||||||
Proceeds from exercise of stock options | 2,394 | 1,717 | |||||
Proceeds from borrowings | 53,812 | 468,500 | |||||
Proceeds from stock offering | 104,534 | - | |||||
Payment of long-term debt | (97,467) | (456,059) | |||||
Distributions (to) from noncontrolling interest | (7,387) | 4,324 | |||||
Excess tax benefits from stock compensation | 424 | 43 | |||||
Common stock repurchases | (714) | (5,539) | |||||
Debt issuance costs | - | (405) | |||||
Net cash provided by financing activities | 55,596 | 12,581 | |||||
Net (decrease) increase in cash and cash equivalents | (6,086) | 14,883 | |||||
Cash and cash equivalents, beginning of period | 403,752 | 379,099 | |||||
Cash and cash equivalents, end of period | $ | 397,666 | $ | 393,982 | |||
Supplemental disclosures of cash flow information: | |||||||
Interest paid | $ | 9,501 | $ | 8,556 | |||
Income taxes paid | $ | 44,407 | $ | 43,308 | |||
Supplemental disclosure of non-cash investing and financing activities: | |||||||
Contribution from noncontrolling interest | $ | 306 | $ | 5,491 | |||
Capital expenditures | $ | 15,291 | $ | 10,106 | |||
CENTENE CORPORATION CONTINUING OPERATIONS SUPPLEMENTAL FINANCIAL DATA | |||||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | |||||||||||
2010 | 2010 | 2010 | 2009 | 2009 | |||||||||||
MEMBERSHIP | |||||||||||||||
Managed Care: | |||||||||||||||
Arizona | 19,300 | 19,300 | 19,000 | 18,100 | 17,400 | ||||||||||
Florida | 116,300 | 113,100 | 105,900 | 102,600 | 84,400 | ||||||||||
Georgia | 300,900 | 295,600 | 301,000 | 309,700 | 303,400 | ||||||||||
Indiana | 213,300 | 212,700 | 211,400 | 208,100 | 200,700 | ||||||||||
Massachusetts | 34,400 | 30,100 | 26,900 | 27,800 | 500 | ||||||||||
Ohio | 161,800 | 159,300 | 156,000 | 150,800 | 151,200 | ||||||||||
South Carolina | 90,600 | 92,600 | 53,900 | 48,600 | 46,100 | ||||||||||
Texas | 428,100 | 475,500 | 459,600 | 455,100 | 450,200 | ||||||||||
Wisconsin | 106,100 | 133,600 | 134,900 | 134,800 | 132,500 | ||||||||||
Total at-risk membership | 1,470,800 | 1,531,800 | 1,468,600 | 1,455,600 | 1,386,400 | ||||||||||
Non-risk membership | 35,900 | 50,900 | 62,200 | 63,700 | 63,200 | ||||||||||
TOTAL | 1,506,700 | 1,582,700 | 1,530,800 | 1,519,300 | 1,449,600 | ||||||||||
Medicaid | 1,122,800 | 1,135,500 | 1,088,300 | 1,081,400 | 1,040,000 | ||||||||||
CHIP & Foster Care | 219,100 | 272,400 | 266,300 | 263,600 | 263,400 | ||||||||||
ABD & Medicare | 94,500 | 93,800 | 87,100 | 82,800 | 82,500 | ||||||||||
Other State programs | 34,400 | 30,100 | 26,900 | 27,800 | 500 | ||||||||||
Total at-risk membership | 1,470,800 | 1,531,800 | 1,468,600 | 1,455,600 | 1,386,400 | ||||||||||
Non-risk membership | 35,900 | 50,900 | 62,200 | 63,700 | 63,200 | ||||||||||
TOTAL | 1,506,700 | 1,582,700 | 1,530,800 | 1,519,300 | 1,449,600 | ||||||||||
Specialty Services(a): | |||||||||||||||
Cenpatico Behavioral Health | |||||||||||||||
Arizona | 121,300 | 119,700 | 119,300 | 120,100 | 117,300 | ||||||||||
Kansas | 39,800 | 39,100 | 39,800 | 41,400 | 41,000 | ||||||||||
Bridgeway Health Solutions | |||||||||||||||
Long-term Care | 3,000 | 2,800 | 2,700 | 2,600 | 2,500 | ||||||||||
TOTAL | 164,100 | 161,600 | 161,800 | 164,100 | 160,800 | ||||||||||
(a) Includes external membership only. | |||||||||||||||
REVENUE PER MEMBER PER MONTH(b) | $ | 216.96 | $ | 208.58 | $ | 215.95(c) | $ | 226.42 | $ | 222.77 | |||||
CLAIMS(b) | |||||||||||||||
Period-end inventory | 469,000 | 480,400 | 341,400 | 423,400 | 414,900 | ||||||||||
Average inventory | 307,500 | 306,900 | 283,900 | 279,000 | 227,100 | ||||||||||
Period-end inventory per member | 0.32 | 0.31 | 0.23 | 0.29 | 0.30 | ||||||||||
(b) Revenue per member and claims information are presented for the Managed Care at-risk members. | |||||||||||||||
(c) Reduction in revenue per member per month is a result of the pharmacy carve-outs in 2010. | |||||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | |||||||||||
2010 | 2010 | 2010 | 2009 | 2009 | |||||||||||
DAYS IN CLAIMS PAYABLE | |||||||||||||||
Medical | 46.0 | 47.2 | 46.6 | 48.1 | 47.1 | ||||||||||
Pharmacy | 1.1 | 1.0 | 1.1 | 2.0 | 1.8 | ||||||||||
TOTAL | 47.1 | 48.2 | 47.7 | 50.1 | 48.9 | ||||||||||
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 | $ | 895.4 | $ | 813.0 | $ | 917.9 | $ | 949.9 | $ | 911.4 | |||||
Unregulated | 32.7 | 39.4 | 51.3 | 36.2 | 27.6 | ||||||||||
TOTAL | $ | 928.1 | $ | 852.4 | $ | 969.2 | $ | 986.1 | $ | 939.0 | |||||
DEBT TO CAPITALIZATION | 24.7% | 24.5% | 23.7% | 33.2% | 31.9% | ||||||||||
Debt to Capitalization is calculated as follows: total debt divided by (total debt + total equity). | |||||||||||||||
OPERATING RATIOS: | ||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||
Health Benefits Ratios: | ||||||||||||||
Medicaid and CHIP | 83.2% | 84.7% | 84.0% | 84.4% | ||||||||||
ABD and Medicare | 85.9 | 81.1 | 84.3 | 81.7 | ||||||||||
Specialty Services | 87.9 | 80.5 | 83.4 | 79.6 | ||||||||||
Total | 84.2 | 83.7 | 84.0 | 83.4 | ||||||||||
Total General & Administrative Expense Ratio | 12.2% | 13.2% | 12.7% | 13.5% | ||||||||||
MEDICAL CLAIMS LIABILITY (In thousands) The changes in medical claims liability are summarized as follows: | ||||
Balance, September 30, 2009 | $ | 426,700 | ||
Incurred related to: | ||||
Current period | 3,518,220 | |||
Prior period | (60,481) | |||
Total incurred | 3,457,739 | |||
Paid related to: | ||||
Current period | 3,069,850 | |||
Prior period | 357,504 | |||
Total paid | 3,427,354 | |||
Balance, September 30, 2010 | $ | 457,085 | ||
Centene's claims reserving process utilizes a consistent actuarial methodology to estimate Centene's ultimate liability. Any reduction in the "Incurred related to: Prior period" amount may be offset as Centene actuarially determines "Incurred related to: Current period." As such, only in the absence of a consistent reserving methodology would favorable development of prior period claims liability estimates reduce medical costs. Centene believes it has consistently applied its claims reserving methodology in each of the periods presented.
The amount of the "Incurred related to: Prior period" above includes the effects of reserving under moderately adverse conditions, new markets where we use a conservative approach in setting reserves during the initial periods of operations, increased receipts from other third party payors related to coordination of benefits and lower medical utilization and cost trends for dates of service prior to September 30, 2009.
SOURCE Centene Corporation
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