[X]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
42-1406317
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
incorporation or organization)
|
Identification Number)
|
|
|
7700 Forsyth Boulevard
|
|
St. Louis, Missouri
|
63105
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer
x
|
Accelerated filer
|
o
|
Non-accelerated filer
o
|
Smaller reporting company
|
o
|
|
Emerging growth company
|
o
|
|
|
PAGE
|
|
|
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Part I
|
|
|
Financial Information
|
|
Item 1.
|
||
|
||
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
Part II
|
|
|
Other Information
|
|
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 6.
|
||
|
•
|
the risk that regulatory or other approvals required for the WellCare Transaction may be delayed or not obtained or are obtained subject to conditions that are not anticipated that could require the exertion of management's time and our resources or otherwise have an adverse effect on us;
|
•
|
the risk that our stockholders do not approve the issuance of shares of Centene common stock in the WellCare Transaction;
|
•
|
the risk that WellCare's stockholders do not adopt the merger agreement (the Merger Agreement);
|
•
|
the possibility that certain conditions to the consummation of the WellCare Transaction will not be satisfied or completed on a timely basis and, accordingly, the WellCare Transaction may not be consummated on a timely basis or at all;
|
•
|
uncertainty as to the expected financial performance of the combined company following completion of the WellCare Transaction;
|
•
|
the possibility that the expected synergies and value creation from the WellCare Transaction will not be realized, or will not be realized within the expected time period;
|
•
|
the exertion of management's time and the Company's resources, and other expenses incurred and business changes required, in connection with any regulatory, governmental or third party consents or approvals for the WellCare Transaction;
|
•
|
the risk that unexpected costs will be incurred in connection with the completion and/or integration of the WellCare Transaction or that the integration of WellCare will be more difficult or time consuming than expected;
|
•
|
the risk that potential litigation in connection with the WellCare Transaction may affect the timing of the WellCare Transaction, cause it not to close at all, or result in significant costs of defense, indemnification and liability;
|
•
|
unexpected costs, charges or expenses resulting from the WellCare Transaction;
|
•
|
the possibility that competing offers will be made to acquire WellCare;
|
•
|
the inability to retain key personnel;
|
•
|
disruption from the announcement, pendency and/or completion of the WellCare Transaction, including potential adverse reactions or changes to business relationships with customers, employees, suppliers or regulators, making it more difficult to maintain business and operational relationships;
|
•
|
the risk that, following the WellCare Transaction, the combined company may not be able to effectively manage its expanded operations;
|
•
|
our ability to accurately predict and effectively manage health benefits and other operating expenses and reserves;
|
•
|
competition;
|
•
|
membership and revenue declines or unexpected trends;
|
•
|
changes in healthcare practices, new technologies, and advances in medicine;
|
•
|
increased healthcare costs;
|
•
|
changes in economic, political or market conditions;
|
•
|
changes in federal or state laws or regulations, including changes with respect to income tax reform or government healthcare programs as well as changes with respect to the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act, collectively referred to as the Affordable Care Act (ACA) and any regulations enacted thereunder that may result from changing political conditions or judicial actions, including the ultimate outcome of the District Court decision in "Texas v. United States of America" regarding the constitutionality of the ACA;
|
•
|
rate cuts or other payment reductions or delays by governmental payors and other risks and uncertainties affecting our government businesses;
|
•
|
our ability to adequately price products on federally facilitated and state-based Health Insurance Marketplaces;
|
•
|
tax matters;
|
•
|
disasters or major epidemics;
|
•
|
the outcome of legal and regulatory proceedings;
|
•
|
changes in expected contract start dates;
|
•
|
provider, state, federal and other contract changes and timing of regulatory approval of contracts;
|
•
|
the expiration, suspension, or termination of our contracts with federal or state governments (including but not limited to Medicaid, Medicare, TRICARE or other customers);
|
•
|
the difficulty of predicting the timing or outcome of pending or future litigation or government investigations;
|
•
|
challenges to our contract awards;
|
•
|
cyber-attacks or other privacy or data security incidents;
|
•
|
the possibility that the expected synergies and value creation from acquired businesses, including, without limitation, the Fidelis Care Acquisition, will not be realized, or will not be realized within the expected time period;
|
•
|
the exertion of management’s time and our resources, and other expenses incurred and business changes required in connection with complying with the undertakings in connection with any regulatory, governmental or third party consents or approvals for acquisitions, including the Fidelis Care Acquisition;
|
•
|
disruption caused by significant completed and pending acquisitions, including, among others, the Fidelis Care Acquisition, making it more difficult to maintain business and operational relationships;
|
•
|
the risk that unexpected costs will be incurred in connection with the completion and/or integration of acquisition transactions, including among others, the Fidelis Care Acquisition;
|
•
|
changes in expected closing dates, estimated purchase price and accretion for acquisitions;
|
•
|
the risk that acquired businesses, including Fidelis Care, will not be integrated successfully;
|
•
|
the risk that, following the Fidelis Care Acquisition, we may not be able to effectively manage our expanded operations;
|
•
|
restrictions and limitations in connection with our indebtedness;
|
•
|
our ability to maintain the Centers for Medicare and Medicaid Services (CMS) Star ratings and maintain or achieve improvement in other quality scores in each case that can impact revenue and future growth;
|
•
|
availability of debt and equity financing, on terms that are favorable to us;
|
•
|
inflation;
and
|
•
|
foreign currency fluctuations
.
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
GAAP net earnings
|
$
|
522
|
|
|
$
|
340
|
|
Amortization of acquired intangible assets
|
65
|
|
|
39
|
|
||
Acquisition related expenses
|
18
|
|
|
21
|
|
||
Income tax effects of adjustments
(1)
|
(20
|
)
|
|
(14
|
)
|
||
Adjusted net earnings
|
$
|
585
|
|
|
$
|
386
|
|
|
|
|
|
||||
GAAP diluted earnings per share (EPS)
|
$
|
1.24
|
|
|
$
|
0.96
|
|
Amortization of acquired intangible assets
(2)
|
0.12
|
|
|
0.09
|
|
||
Acquisition related expenses
(3)
|
0.03
|
|
|
0.04
|
|
||
Adjusted Diluted EPS
|
$
|
1.39
|
|
|
$
|
1.09
|
|
(1)
|
The income tax effects of adjustments are based on the effective income tax rates applicable to adjusted (non-GAAP) results.
|
(2)
|
The amortization of acquired intangible assets per diluted share is net of an income tax benefit of
$0.04
and
$0.02
for the three months ended
March 31, 2019
and
2018
, respectively.
|
(3)
|
Acquisition related expenses per diluted share are net of an income tax benefit of
$0.01
and
$0.02
for the three months ended
March 31, 2019
and
2018
, respectively.
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
GAAP selling, general and administrative expenses
|
$
|
1,609
|
|
|
$
|
1,316
|
|
Acquisition related expenses
|
17
|
|
|
21
|
|
||
Adjusted selling, general and administrative expenses
|
$
|
1,592
|
|
|
$
|
1,295
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Revenues:
|
|
|
|
||||
Premium
|
$
|
16,203
|
|
|
$
|
11,903
|
|
Service
|
635
|
|
|
653
|
|
||
Premium and service revenues
|
16,838
|
|
|
12,556
|
|
||
Premium tax and health insurer fee
|
1,606
|
|
|
638
|
|
||
Total revenues
|
18,444
|
|
|
13,194
|
|
||
Expenses:
|
|
|
|
||||
Medical costs
|
13,882
|
|
|
10,039
|
|
||
Cost of services
|
544
|
|
|
543
|
|
||
Selling, general and administrative expenses
|
1,609
|
|
|
1,316
|
|
||
Amortization of acquired intangible assets
|
65
|
|
|
39
|
|
||
Premium tax expense
|
1,659
|
|
|
546
|
|
||
Health insurer fee expense
|
—
|
|
|
171
|
|
||
Total operating expenses
|
17,759
|
|
|
12,654
|
|
||
Earnings from operations
|
685
|
|
|
540
|
|
||
Other income (expense):
|
|
|
|
||||
Investment and other income
|
99
|
|
|
41
|
|
||
Interest expense
|
(99
|
)
|
|
(68
|
)
|
||
Earnings from operations, before income tax expense
|
685
|
|
|
513
|
|
||
Income tax expense
|
166
|
|
|
175
|
|
||
Net earnings
|
519
|
|
|
338
|
|
||
Loss attributable to noncontrolling interests
|
3
|
|
|
2
|
|
||
Net earnings attributable to Centene Corporation
|
$
|
522
|
|
|
$
|
340
|
|
|
|
|
|
||||
Net earnings per common share attributable to Centene Corporation:
|
|||||||
Basic earnings per common share
|
$
|
1.26
|
|
|
$
|
0.98
|
|
Diluted earnings per common share
|
$
|
1.24
|
|
|
$
|
0.96
|
|
|
|
|
|
||||
Weighted average number of common shares outstanding:
|
|
|
|
||||
Basic
|
412,924
|
|
|
347,843
|
|
||
Diluted
|
419,752
|
|
|
355,380
|
|
||
|
|
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Net earnings
|
$
|
519
|
|
|
$
|
338
|
|
Change in unrealized gain (loss) on investments, net of tax
|
94
|
|
|
(52
|
)
|
||
Foreign currency translation adjustments
|
—
|
|
|
1
|
|
||
Other comprehensive earnings (loss)
|
94
|
|
|
(51
|
)
|
||
Comprehensive earnings
|
613
|
|
|
287
|
|
||
Comprehensive loss attributable to noncontrolling interests
|
3
|
|
|
2
|
|
||
Comprehensive earnings attributable to Centene Corporation
|
$
|
616
|
|
|
$
|
289
|
|
|
Centene Stockholders’ Equity
|
|
|
|
|
||||||||||||||||||||||||||||
|
Common Stock
|
|
|
|
|
|
|
|
Treasury Stock
|
|
|
|
|
||||||||||||||||||||
|
$0.001 Par
Value Shares |
|
Amt
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Earnings (Loss)
|
|
Retained
Earnings
|
|
$.001 Par
Value Shares |
|
Amt
|
|
Non-
controlling
Interest
|
|
Total
|
||||||||||||||||
Balance, December 31, 2018
|
417,695
|
|
|
$
|
—
|
|
|
$
|
7,449
|
|
|
$
|
(56
|
)
|
|
$
|
3,663
|
|
|
5,217
|
|
|
$
|
(139
|
)
|
|
$
|
96
|
|
|
$
|
11,013
|
|
Comprehensive Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net earnings (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
522
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
520
|
|
|||||||
Other comprehensive earnings, net of $30 tax
|
—
|
|
|
—
|
|
|
—
|
|
|
94
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
94
|
|
|||||||
Common stock issued for employee benefit plans
|
1,363
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|||||||
Common stock repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
536
|
|
|
(35
|
)
|
|
—
|
|
|
(35
|
)
|
|||||||
Stock compensation expense
|
—
|
|
|
—
|
|
|
38
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38
|
|
|||||||
Balance, March 31, 2019
|
419,058
|
|
|
$
|
—
|
|
|
$
|
7,491
|
|
|
$
|
38
|
|
|
$
|
4,185
|
|
|
5,753
|
|
|
$
|
(174
|
)
|
|
$
|
94
|
|
|
$
|
11,634
|
|
|
Centene Stockholders’ Equity
|
|
|
|
|
||||||||||||||||||||||||||||
|
Common Stock
|
|
|
|
|
|
|
|
Treasury Stock
|
|
|
|
|
||||||||||||||||||||
|
$0.001 Par
Value Shares |
|
Amt
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other Comprehensive Earnings (Loss) |
|
Retained
Earnings
|
|
$.001 Par
Value Shares |
|
Amt
|
|
Non-
controlling
Interest
|
|
Total
|
||||||||||||||||
Balance, December 31, 2017
|
360,758
|
|
|
$
|
—
|
|
|
$
|
4,349
|
|
|
$
|
(3
|
)
|
|
$
|
2,748
|
|
|
13,884
|
|
|
$
|
(244
|
)
|
|
$
|
14
|
|
|
$
|
6,864
|
|
Comprehensive Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
340
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
341
|
|
|||||||
Other comprehensive loss, net of ($16) tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(51
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(51
|
)
|
|||||||
Common stock issued for acquisitions
|
—
|
|
|
—
|
|
|
210
|
|
|
—
|
|
|
—
|
|
|
(6,351
|
)
|
|
114
|
|
|
—
|
|
|
324
|
|
|||||||
Common stock issued for employee benefit plans
|
529
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|||||||
Common stock repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
165
|
|
|
(9
|
)
|
|
—
|
|
|
(9
|
)
|
|||||||
Stock compensation expense
|
—
|
|
|
—
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33
|
|
|||||||
Cumulative-effect of accounting guidance
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|||||||
Purchase of noncontrolling interests
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|||||||
Acquisition resulting in noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
62
|
|
|
62
|
|
|||||||
Balance, March 31, 2018
|
361,287
|
|
|
$
|
—
|
|
|
$
|
4,592
|
|
|
$
|
(54
|
)
|
|
$
|
3,104
|
|
|
7,698
|
|
|
$
|
(139
|
)
|
|
$
|
77
|
|
|
$
|
7,580
|
|
Assets acquired and liabilities assumed
|
|
|
||
Cash and cash equivalents
|
|
$
|
2,001
|
|
Premium and related receivables
|
|
510
|
|
|
Other current assets
|
|
31
|
|
|
Restricted deposits
|
|
495
|
|
|
Property, software and equipment, net
|
|
48
|
|
|
Intangible assets
(a)
|
|
956
|
|
|
Other long-term assets
|
|
1
|
|
|
Total assets acquired
|
|
4,042
|
|
|
|
|
|
||
Medical claims liability
|
|
1,210
|
|
|
Accounts payable and accrued expenses
|
|
258
|
|
|
Return of premium payable
|
|
123
|
|
|
Unearned revenue
|
|
115
|
|
|
Other long-term liabilities
|
|
300
|
|
|
Total liabilities assumed
|
|
2,006
|
|
|
|
|
|
||
Total identifiable net assets
|
|
2,036
|
|
|
Goodwill
(b)
|
|
1,591
|
|
|
Total assets acquired and liabilities assumed
|
|
$
|
3,627
|
|
(a)
|
The identifiable intangible assets acquired are to be measured at fair value as of the completion of the acquisition. The preliminary fair value of intangible assets is determined primarily using variations of the "income approach," which is based on the present value of the future after tax cash flows attributable to each identified intangible asset. Other valuation methods, including the market approach and cost approach, were also considered in estimating the fair value. The Company has estimated the fair value of intangible assets to be
$956 million
with a weighted average life of
13
years. The identifiable intangible assets include customer relationships, trade names, provider contracts and developed technology.
|
|
|
Fair Value
|
|
Weighted Average Useful Life (in years)
|
||
Customer relationships
|
|
$
|
711
|
|
|
11
|
Trade name
|
|
196
|
|
|
20
|
|
Provider contracts
|
|
33
|
|
|
15
|
|
Developed technologies
|
|
16
|
|
|
2
|
|
Total intangible assets acquired
|
|
$
|
956
|
|
|
13
|
(b)
|
The acquisition resulted in
$1.6 billion
of goodwill related primarily to synergies expected from the acquisition and the assembled workforce of Fidelis Care. All of the goodwill has been assigned to the Managed Care segment. The goodwill is deductible for income tax purposes.
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized Losses |
|
Fair
Value
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
251
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
251
|
|
|
$
|
362
|
|
|
$
|
1
|
|
|
$
|
(2
|
)
|
|
$
|
361
|
|
Corporate securities
|
3,318
|
|
|
40
|
|
|
(16
|
)
|
|
3,342
|
|
|
3,190
|
|
|
8
|
|
|
(52
|
)
|
|
3,146
|
|
||||||||
Restricted certificates of deposit
|
474
|
|
|
—
|
|
|
—
|
|
|
474
|
|
|
433
|
|
|
—
|
|
|
—
|
|
|
433
|
|
||||||||
Restricted cash equivalents
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||||||
Municipal securities
|
2,260
|
|
|
33
|
|
|
(3
|
)
|
|
2,290
|
|
|
2,196
|
|
|
9
|
|
|
(18
|
)
|
|
2,187
|
|
||||||||
Asset-backed securities
|
728
|
|
|
3
|
|
|
(3
|
)
|
|
728
|
|
|
686
|
|
|
1
|
|
|
(4
|
)
|
|
683
|
|
||||||||
Residential mortgage-backed securities
|
457
|
|
|
4
|
|
|
(6
|
)
|
|
455
|
|
|
452
|
|
|
1
|
|
|
(9
|
)
|
|
444
|
|
||||||||
Commercial mortgage-backed securities
|
378
|
|
|
4
|
|
|
(2
|
)
|
|
380
|
|
|
366
|
|
|
1
|
|
|
(6
|
)
|
|
361
|
|
||||||||
Private equity investments
|
402
|
|
|
—
|
|
|
—
|
|
|
402
|
|
|
387
|
|
|
—
|
|
|
—
|
|
|
387
|
|
||||||||
Life insurance contracts
|
137
|
|
|
—
|
|
|
—
|
|
|
137
|
|
|
128
|
|
|
—
|
|
|
—
|
|
|
128
|
|
||||||||
Total
|
$
|
8,411
|
|
|
$
|
85
|
|
|
$
|
(31
|
)
|
|
$
|
8,465
|
|
|
$
|
8,208
|
|
|
$
|
21
|
|
|
$
|
(91
|
)
|
|
$
|
8,138
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||||||||||
|
Less Than 12 Months
|
|
12 Months or More
|
|
Less Than 12 Months
|
|
12 Months or More
|
||||||||||||||||||||||||
|
Unrealized Losses
|
|
Fair
Value
|
|
Unrealized Losses
|
|
Fair
Value
|
|
Unrealized Losses
|
|
Fair
Value
|
|
Unrealized Losses
|
|
Fair
Value
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
172
|
|
|
$
|
—
|
|
|
$
|
59
|
|
|
$
|
(2
|
)
|
|
$
|
202
|
|
Corporate securities
|
(4
|
)
|
|
392
|
|
|
(12
|
)
|
|
1,010
|
|
|
(27
|
)
|
|
1,389
|
|
|
(25
|
)
|
|
871
|
|
||||||||
Municipal securities
|
—
|
|
|
74
|
|
|
(3
|
)
|
|
496
|
|
|
(4
|
)
|
|
591
|
|
|
(14
|
)
|
|
806
|
|
||||||||
Asset-backed securities
|
(2
|
)
|
|
221
|
|
|
(1
|
)
|
|
196
|
|
|
(2
|
)
|
|
318
|
|
|
(2
|
)
|
|
168
|
|
||||||||
Residential mortgage-backed securities
|
—
|
|
|
12
|
|
|
(6
|
)
|
|
241
|
|
|
(1
|
)
|
|
61
|
|
|
(8
|
)
|
|
233
|
|
||||||||
Commercial mortgage-backed securities
|
—
|
|
|
72
|
|
|
(2
|
)
|
|
129
|
|
|
(2
|
)
|
|
137
|
|
|
(4
|
)
|
|
140
|
|
||||||||
Total
|
$
|
(6
|
)
|
|
$
|
772
|
|
|
$
|
(25
|
)
|
|
$
|
2,244
|
|
|
$
|
(36
|
)
|
|
$
|
2,555
|
|
|
$
|
(55
|
)
|
|
$
|
2,420
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||||||||||
|
Investments
|
|
Restricted Deposits
|
|
Investments
|
|
Restricted Deposits
|
||||||||||||||||||||||||
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
||||||||||||||||
One year or less
|
$
|
610
|
|
|
$
|
609
|
|
|
$
|
515
|
|
|
$
|
515
|
|
|
$
|
647
|
|
|
$
|
646
|
|
|
$
|
205
|
|
|
$
|
205
|
|
One year through five years
|
3,112
|
|
|
3,130
|
|
|
67
|
|
|
67
|
|
|
3,026
|
|
|
2,998
|
|
|
351
|
|
|
350
|
|
||||||||
Five years through ten years
|
2,477
|
|
|
2,512
|
|
|
—
|
|
|
—
|
|
|
2,387
|
|
|
2,362
|
|
|
—
|
|
|
—
|
|
||||||||
Greater than ten years
|
67
|
|
|
69
|
|
|
—
|
|
|
—
|
|
|
88
|
|
|
89
|
|
|
—
|
|
|
—
|
|
||||||||
Asset-backed securities
|
1,563
|
|
|
1,563
|
|
|
—
|
|
|
—
|
|
|
1,504
|
|
|
1,488
|
|
|
—
|
|
|
—
|
|
||||||||
Total
|
$
|
7,829
|
|
|
$
|
7,883
|
|
|
$
|
582
|
|
|
$
|
582
|
|
|
$
|
7,652
|
|
|
$
|
7,583
|
|
|
$
|
556
|
|
|
$
|
555
|
|
Level Input:
|
|
Input Definition:
|
Level I
|
|
Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
|
|
|
|
Level II
|
|
Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date.
|
|
|
|
Level III
|
|
Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
6,345
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,345
|
|
Investments available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
149
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
149
|
|
Corporate securities
|
—
|
|
|
3,342
|
|
|
—
|
|
|
3,342
|
|
||||
Municipal securities
|
—
|
|
|
2,290
|
|
|
—
|
|
|
2,290
|
|
||||
Asset-backed securities
|
—
|
|
|
728
|
|
|
—
|
|
|
728
|
|
||||
Residential mortgage-backed securities
|
—
|
|
|
455
|
|
|
—
|
|
|
455
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
380
|
|
|
—
|
|
|
380
|
|
||||
Total investments
|
$
|
149
|
|
|
$
|
7,195
|
|
|
$
|
—
|
|
|
$
|
7,344
|
|
Restricted deposits available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6
|
|
Certificates of deposit
|
—
|
|
|
474
|
|
|
—
|
|
|
474
|
|
||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
102
|
|
|
—
|
|
|
—
|
|
|
102
|
|
||||
Total restricted deposits
|
$
|
108
|
|
|
$
|
474
|
|
|
$
|
—
|
|
|
$
|
582
|
|
|
|
|
|
|
|
|
|
||||||||
Total assets at fair value
|
$
|
6,602
|
|
|
$
|
7,669
|
|
|
$
|
—
|
|
|
$
|
14,271
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Other long-term liabilities:
|
|
|
|
|
|
|
|
||||||||
Interest rate swap agreements
|
$
|
—
|
|
|
$
|
61
|
|
|
$
|
—
|
|
|
$
|
61
|
|
Total liabilities at fair value
|
$
|
—
|
|
|
$
|
61
|
|
|
$
|
—
|
|
|
$
|
61
|
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
5,342
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,342
|
|
Investments available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
247
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
247
|
|
Corporate securities
|
—
|
|
|
3,146
|
|
|
—
|
|
|
3,146
|
|
||||
Municipal securities
|
—
|
|
|
2,187
|
|
|
—
|
|
|
2,187
|
|
||||
Asset-backed securities
|
—
|
|
|
683
|
|
|
—
|
|
|
683
|
|
||||
Residential mortgage-backed securities
|
—
|
|
|
444
|
|
|
—
|
|
|
444
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
361
|
|
|
—
|
|
|
361
|
|
||||
Total investments
|
$
|
247
|
|
|
$
|
6,821
|
|
|
$
|
—
|
|
|
$
|
7,068
|
|
Restricted deposits available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
Certificates of deposit
|
—
|
|
|
433
|
|
|
—
|
|
|
433
|
|
||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
114
|
|
|
—
|
|
|
—
|
|
|
114
|
|
||||
Total restricted deposits
|
$
|
122
|
|
|
$
|
433
|
|
|
$
|
—
|
|
|
$
|
555
|
|
|
|
|
|
|
|
|
|
||||||||
Total assets at fair value
|
$
|
5,711
|
|
|
$
|
7,254
|
|
|
$
|
—
|
|
|
$
|
12,965
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Other long-term liabilities:
|
|
|
|
|
|
|
|
||||||||
Interest rate swap agreements
|
$
|
—
|
|
|
$
|
95
|
|
|
$
|
—
|
|
|
$
|
95
|
|
Total liabilities at fair value
|
$
|
—
|
|
|
$
|
95
|
|
|
$
|
—
|
|
|
$
|
95
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Balance, January 1
|
|
$
|
6,831
|
|
|
$
|
4,286
|
|
Less: Reinsurance recoverable
|
|
27
|
|
|
18
|
|
||
Balance, January 1, net
|
|
6,804
|
|
|
4,268
|
|
||
Acquisitions and purchase accounting adjustments
|
|
6
|
|
|
—
|
|
||
Incurred related to:
|
|
|
|
|
||||
Current year
|
|
14,376
|
|
|
10,302
|
|
||
Prior years
|
|
(494
|
)
|
|
(263
|
)
|
||
Total incurred
|
|
13,882
|
|
|
10,039
|
|
||
Paid related to:
|
|
|
|
|
||||
Current year
|
|
8,771
|
|
|
6,579
|
|
||
Prior years
|
|
4,560
|
|
|
2,970
|
|
||
Total paid
|
|
13,331
|
|
|
9,549
|
|
||
Balance at March 31, net
|
|
7,361
|
|
|
4,758
|
|
||
Plus: Reinsurance recoverable
|
|
20
|
|
|
13
|
|
||
Balance, March 31
|
|
$
|
7,381
|
|
|
$
|
4,771
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Risk adjustment
|
$
|
(1,313
|
)
|
|
$
|
(928
|
)
|
Minimum MLR
|
(341
|
)
|
|
(265
|
)
|
||
Cost sharing reductions
|
45
|
|
|
(50
|
)
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
$1,400 million 5.625% Senior notes, due February 15, 2021
|
$
|
1,400
|
|
|
$
|
1,400
|
|
$1,000 million 4.75% Senior notes, due May 15, 2022
|
1,005
|
|
|
1,005
|
|
||
$1,000 million 6.125% Senior notes, due February 15, 2024
|
1,000
|
|
|
1,000
|
|
||
$1,200 million 4.75% Senior notes, due January 15, 2025
|
1,200
|
|
|
1,200
|
|
||
$1,800 million 5.375% Senior notes, due June 1,
2026
|
1,800
|
|
|
1,800
|
|
||
Fair value of interest rate swap agreements
|
(61
|
)
|
|
(95
|
)
|
||
Total senior notes
|
6,344
|
|
|
6,310
|
|
||
Revolving credit agreement
|
357
|
|
|
284
|
|
||
Mortgage notes payable
|
57
|
|
|
57
|
|
||
Construction loan payable
|
78
|
|
|
63
|
|
||
Finance leases and other
|
49
|
|
|
47
|
|
||
Debt issuance costs
|
(70
|
)
|
|
(75
|
)
|
||
Total debt
|
6,815
|
|
|
6,686
|
|
||
Less current portion
|
(40
|
)
|
|
(38
|
)
|
||
Long-term debt
|
$
|
6,775
|
|
|
$
|
6,648
|
|
|
March 31, 2019
|
||
Assets
|
|
||
ROU assets (recorded within other long-term assets)
|
$
|
624
|
|
|
|
||
Liabilities
|
|
||
Short-term (recorded within accounts payable and accrued expenses)
|
$
|
156
|
|
Long-term (recorded within other long-term liabilities)
|
583
|
|
|
Total ROU liabilities
|
$
|
739
|
|
|
March 31, 2019
|
||
2019
|
$
|
133
|
|
2020
|
181
|
|
|
2021
|
144
|
|
|
2022
|
102
|
|
|
2023
|
76
|
|
|
2024
|
57
|
|
|
Thereafter
|
148
|
|
|
Total lease payments
|
841
|
|
|
Less: imputed interest
|
(102
|
)
|
|
Total ROU liabilities
|
$
|
739
|
|
|
Managed Care
|
|
Specialty
Services
|
|
Eliminations
|
|
Consolidated
Total
|
||||||||
Total revenues from external customers
|
$
|
17,687
|
|
|
$
|
757
|
|
|
$
|
—
|
|
|
$
|
18,444
|
|
Total revenues from internal customers
|
35
|
|
|
2,449
|
|
|
(2,484
|
)
|
|
—
|
|
||||
Total revenues
|
$
|
17,722
|
|
|
$
|
3,206
|
|
|
$
|
(2,484
|
)
|
|
$
|
18,444
|
|
Earnings from operations
|
$
|
615
|
|
|
$
|
70
|
|
|
$
|
—
|
|
|
$
|
685
|
|
|
Managed Care
|
|
Specialty
Services
|
|
Eliminations
|
|
Consolidated
Total
|
||||||||
Total revenues from external customers
|
$
|
12,449
|
|
|
$
|
745
|
|
|
$
|
—
|
|
|
$
|
13,194
|
|
Total revenues from internal customers
|
25
|
|
|
2,231
|
|
|
(2,256
|
)
|
|
—
|
|
||||
Total revenues
|
$
|
12,474
|
|
|
$
|
2,976
|
|
|
$
|
(2,256
|
)
|
|
$
|
13,194
|
|
Earnings from operations
|
$
|
470
|
|
|
$
|
70
|
|
|
$
|
—
|
|
|
$
|
540
|
|
•
|
periodic compliance and other reviews and investigations by various federal and state regulatory agencies with respect to requirements applicable to the Company's business, including, without limitation, those related to payment of out-of-network claims, submissions to CMS for risk adjustment payments or the False Claims Act, pre-authorization penalties, timely review of grievances and appeals, timely and accurate payment of claims, and the Health Insurance Portability and Accountability Act of 1996;
|
•
|
litigation arising out of general business activities, such as tax matters, disputes related to healthcare benefits coverage or reimbursement, putative securities class actions and medical malpractice, privacy, real estate, intellectual property and employment-related claims;
|
•
|
disputes regarding reinsurance arrangements, claims arising out of the acquisition or divestiture of various assets, class actions and claims relating to the performance of contractual and non-contractual obligations to providers, members, employer groups and others, including, but not limited to, the alleged failure to properly pay claims and challenges to the manner in which the Company processes claims and claims alleging that the Company has engaged in unfair business practices.
|
•
|
Managed care membership of
14.7 million
, an increase of
1.8 million
members, or
14%
year-over-year.
|
•
|
Total revenues of
$18.4 billion
, representing
40%
growth year-over-year.
|
•
|
Health benefits ratio of
85.7%
, compared to
84.3%
for the
first
quarter of
2018
.
|
•
|
SG&A expense ratio of
9.6%
, compared to
10.5%
for the
first
quarter of
2018
.
|
•
|
Adjusted SG&A expense ratio of
9.5%
, compared to
10.3%
for the
first
quarter of
2018
.
|
•
|
Operating cash flows of
$1.3 billion
.
|
•
|
Diluted earnings per share (EPS) for the
first
quarter of
2019
of
$1.24
, compared to
$0.96
for the
first
quarter of
2018
.
|
•
|
Adjusted Diluted EPS for the
first quarter
of
2019
of
$1.39
, compared to
$1.09
for the
first quarter
of
2018
.
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
GAAP diluted EPS
|
$
|
1.24
|
|
|
$
|
0.96
|
|
Amortization of acquired intangible assets
|
0.12
|
|
|
0.09
|
|
||
Acquisition related expenses
|
0.03
|
|
|
0.04
|
|
||
Adjusted Diluted EPS
|
$
|
1.39
|
|
|
$
|
1.09
|
|
•
|
Arizona.
In October 2018, our Arizona subsidiary, Health Net Access, began providing physical and behavioral healthcare services under a new integrated contract through the Arizona Health Care Cost Containment System Complete Care program in the Central region and the Southern region.
|
•
|
Arkansas.
In February 2018, our Arkansas 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 assumed full-risk on this population in March 2019.
|
•
|
CMG.
In March 2018, we completed the acquisition of Community Medical Holdings Corp., d/b/a Community Medical Group (CMG), an at-risk primary care provider serving Medicaid, Medicare Advantage, and Health Insurance Marketplace patients in Miami-Dade County, Florida.
|
•
|
Correctional.
In February 2019, Centurion began operating under a new contract to provide comprehensive healthcare services to detainees of the Metropolitan Detention Center located in Albuquerque, New Mexico. In December 2018, Centurion began operating under a new contract to provide comprehensive healthcare services to detainees of Volusia County detention facilities located near Daytona, Florida. In April 2018, we completed the acquisition of MHM Services Inc. (MHM), a national provider of healthcare and staffing services to correctional systems and other government agencies. Under the terms of the agreement, Centene also acquired the remaining 49% ownership of Centurion, the correctional healthcare services joint venture between Centene and MHM.
|
•
|
Fidelis Care.
In July 2018, we completed the acquisition of substantially all of the assets of Fidelis Care for
$3.6 billion
of cash consideration, making Fidelis Care Centene's health plan in New York State.
|
•
|
Florida.
In December 2018, our Florida subsidiary, Sunshine Health, began providing physical and behavioral healthcare services through Florida's Statewide Medicaid Managed Care Program under its new five year contract which was implemented for all 11 regions by February 2019.
|
•
|
Illinois.
In January 2018, our Illinois subsidiary, IlliniCare Health, began operating under a state-wide contract for the Medicaid Managed Care Program. Implementation dates varied by region and the contract was fully implemented statewide in April 2018.
|
•
|
Interpreta.
In March 2018, we acquired an additional
61%
ownership in Interpreta Holdings, Inc. (Interpreta), a clinical and genomics data analytics business, bringing our total ownership to
80%
.
|
•
|
Health Insurance Marketplace.
In January 2019, we expanded our offerings in the 2019 Health Insurance Marketplace. We entered Pennsylvania, North Carolina, South Carolina and Tennessee, and expanded our footprint in six existing markets: Florida, Georgia, Indiana, Kansas, Missouri and Texas.
|
•
|
Kansas.
In January 2019, our Kansas subsidiary, Sunflower Health Plan, continued providing managed care services to KanCare beneficiaries statewide under a new contract.
|
•
|
New Mexico.
In January 2019, our New Mexico subsidiary, Western Sky Community Care, began operating under a new statewide contract in New Mexico for the Centennial Care 2.0 Program.
|
•
|
Pennsylvania.
In January 2019, our Pennsylvania subsidiary, Pennsylvania Health & Wellness, began serving enrollees in the Community HealthChoices program in the Southeast region as part of the statewide contract that is expected to be fully implemented statewide by January 2020.
|
•
|
Primero Salud.
In December 2018, our Spanish subsidiary, Primero Salud, acquired 89% of Torrejón Salud, a public-private partnership in the Community of Madrid.
|
•
|
RxAdvance.
In March 2018, we made a 25% equity method investment in RxAdvance (RxA), a full-service pharmacy benefit manager (PBM), and expect to use its platform to improve health outcomes and reduce avoidable drug-impacted medical and administrative costs. This partnership includes both a customer relationship and a strategic investment in RxAdvance. As part of the initial transaction, Centene has certain rights to expand its equity investment in the future. In May 2018, we made an additional investment in RxAdvance, bringing the total ownership to 28%. In September 2018, we made an additional investment in convertible preferred stock. In 2018, we began moving our health plans onto the RxAdvance pharmacy platform, beginning with the transition of our Mississippi health plan in November 2018.
|
•
|
Beginning January 1, 2019, Health Net of Arizona, Inc. began discontinuing and non-renewing all of its Employer Group plans for small and large business groups in Arizona. The effective date of coverage termination for existing groups is dependent on remaining renewals; however, coverage will no longer be provided to any group policyholders and/or members after December 31, 2019.
|
•
|
Beginning in July 2018, we no longer serve correctional healthcare members in Massachusetts.
|
•
|
Effective October 2018, we no longer provide healthcare coordination services to veterans under the Patient-Centered Community Care and Veterans Choice Programs.
|
•
|
We expect to realize the full year benefit in 2019 of acquisitions, investments, and business commenced during 2018 and 2019, as discussed above.
|
•
|
In April 2019, we completed the acquisition of QCA Health Plan, Inc. and QualChoice Life and Health Insurance Company, Inc. The acquisition expands our footprint in Arkansas by adding additional members primarily through Commercial products.
|
•
|
In March 2019, we signed a definitive Merger Agreement to acquire all of the issued and outstanding shares of WellCare Health Plans, Inc. The transaction is valued at approximately $17.3 billion (based on the Centene closing stock price on March 25, 2019) and is expected to close in the first half of 2020. The transaction is subject to approval by Centene and WellCare stockholders and is also conditioned on clearance under the Hart-Scott Rodino Act, receipt of state regulatory approvals and other customary closing conditions.
|
•
|
In March 2019, our New Hampshire subsidiary, NH Healthy Families, was awarded a contract to continue providing Medicaid services to enrollees statewide under a new five-year contract, which is expected to commence September 1, 2019.
|
•
|
In February 2019, our North Carolina joint venture, Carolina Complete Health, was awarded a contract for the Medicaid Managed Care program. Under the agreement, Carolina Complete Health will provide Medicaid managed care services in Regions 3 and 5. Pending regulatory approval, the new three-year contract is effective February 1, 2020.
|
•
|
In January 2019, Centurion was notified by Arizona’s Department of Corrections of the state’s intent to award a contract to provide comprehensive healthcare services to inmates housed in Arizona’s state prison system. The contract is expected to commence July 1, 2019, subject to customary contract negotiation.
|
•
|
In October 2018, CMS published updated Medicare Star quality ratings for the 2019 rating year. Our Star ratings returned to a 4.0 Star parent rating. The 2019 rating year will positively affect quality bonus payments for Medicare Advantage plans in 2020.
|
•
|
In July 2018, we announced a joint venture with Ascension to establish a Medicare Advantage plan. The plan is expected to be implemented in multiple geographic markets beginning in 2020.
|
•
|
In July 2018, our subsidiary, Health Net Federal Services, was awarded the next generation Military & Family Life Counseling Program contract. The awarded contract is up to ten years, including multiple one-year option periods.
|
•
|
In May 2018, our Iowa subsidiary, Iowa Total Care, Inc., was selected to negotiate a new statewide contract for the IA Health Link Program. The contract is expected to commence on July 1, 2019.
|
•
|
In January 2018, our Illinois subsidiary, IlliniCare Health, began operating under a state-wide contract for the Medicaid Managed Care Program. Implementation dates varied by region and the contract was fully implemented statewide in April 2018. The new contract will also include children who are in need through the Department of Children and Family Services/Youth in Care by the Illinois Department of Healthcare and Family Services and Foster Care. These additional products are expected to be implemented in 2019 or 2020.
|
|
March 31,
2019 |
|
December 31,
2018 |
|
March 31,
2018 |
|||
Medicaid:
|
|
|
|
|
|
|||
TANF, CHIP & Foster Care
|
7,491,100
|
|
|
7,356,200
|
|
|
5,776,600
|
|
ABD & LTSS
|
1,036,200
|
|
|
1,002,100
|
|
|
866,000
|
|
Behavioral Health
|
56,000
|
|
|
36,500
|
|
|
454,500
|
|
Total Medicaid
|
8,583,300
|
|
|
8,394,800
|
|
|
7,097,100
|
|
Commercial
|
2,472,700
|
|
|
1,978,000
|
|
|
2,161,200
|
|
Medicare
(1)
|
393,900
|
|
|
416,900
|
|
|
343,400
|
|
Correctional
|
153,200
|
|
|
151,300
|
|
|
157,300
|
|
Total at-risk membership
|
11,603,100
|
|
|
10,941,000
|
|
|
9,759,000
|
|
TRICARE eligibles
|
2,855,800
|
|
|
2,858,900
|
|
|
2,851,500
|
|
Non-risk membership
|
211,900
|
|
|
219,700
|
|
|
218,900
|
|
Total
|
14,670,800
|
|
|
14,019,600
|
|
|
12,829,400
|
|
|
|
|
|
|
|
|||
(1) Membership includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and Medicare-Medicaid Plans (MMP).
|
|
Three Months Ended March 31,
|
|||||||||
|
2019
|
|
2018
|
|
% Change 2018-2019
|
|||||
Premium
|
$
|
16,203
|
|
|
$
|
11,903
|
|
|
36
|
%
|
Service
|
635
|
|
|
653
|
|
|
(3
|
)%
|
||
Premium and service revenues
|
16,838
|
|
|
12,556
|
|
|
34
|
%
|
||
Premium tax and health insurer fee
|
1,606
|
|
|
638
|
|
|
152
|
%
|
||
Total revenues
|
18,444
|
|
|
13,194
|
|
|
40
|
%
|
||
Medical costs
|
13,882
|
|
|
10,039
|
|
|
38
|
%
|
||
Cost of services
|
544
|
|
|
543
|
|
|
—
|
%
|
||
Selling, general and administrative expenses
|
1,609
|
|
|
1,316
|
|
|
22
|
%
|
||
Amortization of acquired intangible assets
|
65
|
|
|
39
|
|
|
67
|
%
|
||
Premium tax expense
|
1,659
|
|
|
546
|
|
|
204
|
%
|
||
Health insurer fee expense
|
—
|
|
|
171
|
|
|
n.m.
|
|
||
Earnings from operations
|
685
|
|
|
540
|
|
|
27
|
%
|
||
Investment and other income (expense), net
|
—
|
|
|
(27
|
)
|
|
n.m.
|
|
||
Earnings from operations, before income tax expense
|
685
|
|
|
513
|
|
|
34
|
%
|
||
Income tax expense
|
166
|
|
|
175
|
|
|
(5
|
)%
|
||
Net earnings
|
519
|
|
|
338
|
|
|
54
|
%
|
||
Loss attributable to noncontrolling interests
|
3
|
|
|
2
|
|
|
50
|
%
|
||
Net earnings attributable to Centene Corporation
|
$
|
522
|
|
|
$
|
340
|
|
|
54
|
%
|
Diluted earnings per common share attributable to Centene Corporation
|
$
|
1.24
|
|
|
$
|
0.96
|
|
|
29
|
%
|
|
2019
|
|
2018
|
|
% Change 2018-2019
|
|||||
Medicaid
|
$
|
12,608
|
|
|
$
|
8,205
|
|
|
54
|
%
|
Commercial
|
3,645
|
|
|
3,063
|
|
|
19
|
%
|
||
Medicare
(1)
|
1,382
|
|
|
1,162
|
|
|
19
|
%
|
||
Other
|
809
|
|
|
764
|
|
|
6
|
%
|
||
Total Revenues
|
$
|
18,444
|
|
|
$
|
13,194
|
|
|
40
|
%
|
|
|
|
|
|
|
|
|
|||
(1) Medicare includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and MMP.
|
|
2019
|
|
2018
|
||||
Investment and other income
|
$
|
99
|
|
|
$
|
41
|
|
Interest expense
|
(99
|
)
|
|
(68
|
)
|
||
Other income (expense), net
|
$
|
—
|
|
|
$
|
(27
|
)
|
|
2019
|
|
2018
|
|
% Change 2018-2019
|
|||||
Total Revenues
|
|
|
|
|
|
|||||
Managed Care
|
$
|
17,722
|
|
|
$
|
12,474
|
|
|
42
|
%
|
Specialty Services
|
3,206
|
|
|
2,976
|
|
|
8
|
%
|
||
Eliminations
|
(2,484
|
)
|
|
(2,256
|
)
|
|
(10
|
)%
|
||
Consolidated Total
|
$
|
18,444
|
|
|
$
|
13,194
|
|
|
40
|
%
|
Earnings from Operations
|
|
|
|
|
|
|
|
|||
Managed Care
|
$
|
615
|
|
|
$
|
470
|
|
|
31
|
%
|
Specialty Services
|
70
|
|
|
70
|
|
|
—
|
%
|
||
Consolidated Total
|
$
|
685
|
|
|
$
|
540
|
|
|
27
|
%
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Net cash provided by operating activities
|
$
|
1,316
|
|
|
$
|
1,846
|
|
Net cash used in investing activities
|
(373
|
)
|
|
(764
|
)
|
||
Net cash provided by financing activities
|
58
|
|
|
513
|
|
||
Net increase in cash, cash equivalents, and restricted cash and cash equivalents
|
$
|
1,001
|
|
|
$
|
1,595
|
|
•
|
the diversion of management’s attention from ongoing business concerns and performance shortfalls as a result of the devotion of management’s attention to the integration;
|
•
|
managing a larger combined company;
|
•
|
maintaining employee morale and retaining key management and other employees;
|
•
|
the possibility of faulty assumptions underlying expectations regarding the integration process;
|
•
|
retaining existing business and operational relationships and attracting new business and operational relationships;
|
•
|
consolidating corporate and administrative infrastructures and eliminating duplicative operations;
|
•
|
coordinating geographically separate organizations;
|
•
|
unanticipated issues in integrating information technology, communications and other systems;
|
•
|
unanticipated changes in federal or state laws or regulations, including the ACA and any regulations enacted thereunder;
|
•
|
unforeseen expenses or delays associated with the acquisition and/or integration; and
|
•
|
decreases in premiums paid under government sponsored healthcare programs by any state in which we operate.
|
•
|
the market price of our common stock could decline;
|
•
|
we could owe substantial termination fees to WellCare under certain circumstances;
|
•
|
if the Merger Agreement is terminated and our board of directors (Board) seeks another business combination, our stockholders cannot be certain that we will be able to find a party willing to enter into any transaction on terms equivalent to or more attractive than the terms that we and WellCare have agreed to in the Merger Agreement;
|
•
|
time and resources committed by our management to matters relating to the WellCare Transaction could otherwise have been devoted to pursuing other beneficial opportunities;
|
•
|
we may experience negative reactions from the financial markets or from our customers or employees; and
|
•
|
we will be required to pay our costs relating to the WellCare Transaction, such as legal, accounting, financial advisory and printing fees, whether or not the WellCare Transaction is completed.
|
•
|
the diversion of management’s attention from ongoing business concerns and performance shortfalls at one or both of the companies as a result of the devotion of management’s attention to the WellCare Transaction;
|
•
|
managing a larger combined company;
|
•
|
maintaining employee morale and attracting, motivating and retaining management personnel and other key employees;
|
•
|
the possibility of faulty assumptions underlying expectations regarding the integration process;
|
•
|
retaining existing business and operational relationships and attracting new business and operational relationships;
|
•
|
consolidating corporate and administrative infrastructures and eliminating duplicative operations;
|
•
|
coordinating geographically separate organizations;
|
•
|
unanticipated issues in integrating information technology, communications and other systems;
|
•
|
unanticipated changes in federal or state laws or regulations, including the ACA and any regulations enacted thereunder;
|
•
|
decreases in premiums paid under government sponsored healthcare programs by any state in which the combined company operates; and
|
•
|
unforeseen expenses or delays associated with the WellCare Transaction.
|
•
|
affecting our ability to pay or refinance debts as they become due during adverse economic, financial market and industry conditions;
|
•
|
requiring us to use a larger portion of cash flow for debt service, reducing funds available for other purposes;
|
•
|
causing us to be less able to take advantage of business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions;
|
•
|
increasing our vulnerability to adverse economic, industry or competitive developments;
|
•
|
affecting our ability to obtain additional financing;
|
•
|
decreasing our profitability and/or cash flow;
|
•
|
causing us to be disadvantaged compared to competitors with less leverage;
|
•
|
resulting in a downgrade in our credit rating or any of our indebtedness or our subsidiaries which could increase the cost of further borrowings; and
|
•
|
limiting our ability to borrow additional funds in the future to fund working capital, capital expenditures and other general corporate purposes.
|
•
|
payments in respect of, or redemptions or acquisitions of, debt or equity issued by the combined company or its subsidiaries, including the payment of dividends on our common stock;
|
•
|
incurring additional indebtedness;
|
•
|
incurring guarantee obligations;
|
•
|
paying dividends;
|
•
|
creating liens on assets;
|
•
|
entering into sale and leaseback transactions;
|
•
|
making investments, loans or advances;
|
•
|
entering into hedging transactions;
|
•
|
engaging in mergers, consolidations or sales of all or substantially all of their respective assets; and
|
•
|
engaging in certain transactions with affiliates.
|
Issuer Purchases of Equity Securities
First Quarter 2019
(shares in thousands)
|
|||||||||||
Period
|
|
Total Number of
Shares
Purchased
(1)
|
|
Average Price
Paid per
Share
|
|
Total Number
of Shares
Purchased as
Part of Publicly
Announced Plans
or Programs
|
|
Maximum
Number of Shares
that May Yet Be
Purchased Under
the Plans or
Programs
(2)
|
|||
January 1 - January 31, 2019
|
|
18
|
|
$
|
59.83
|
|
|
—
|
|
|
6,671
|
February 1 - February 28, 2019
|
|
490
|
|
64.84
|
|
|
—
|
|
|
6,671
|
|
March 1 - March 31, 2019
|
|
28
|
|
57.53
|
|
|
—
|
|
|
6,671
|
|
Total
|
|
536
|
|
$
|
64.29
|
|
|
—
|
|
|
6,671
|
(1)
Shares acquired represent shares relinquished to the Company by certain employees for payment of taxes or option cost upon vesting of restricted stock units or option exercise.
(2)
Our Board of Directors adopted a stock repurchase program which allows for repurchases of up to a remaining amount of 7 million shares. No duration has been placed on the repurchase program.
|
EXHIBIT
NUMBER
|
|
DESCRIPTION
|
|
|
|
|
|
2.1
|
|
|
|
|
|
|
|
31.1
|
|
|
|
|
|
|
|
31.2
|
|
|
|
|
|
|
|
32.1
|
|
|
|
|
|
|
|
32.2
|
|
|
|
|
|
|
|
101.1
|
|
|
XBRL Taxonomy Instance Document.
|
|
|
|
|
101.2
|
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
|
101.3
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
101.4
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
|
101.5
|
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
|
101.6
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
|
|
CENTENE CORPORATION
|
|
|
|
|
|
By:
|
/s/ MICHAEL F. NEIDORFF
|
|
Chairman and Chief Executive Officer
(principal executive officer)
|
|
By:
|
/s/ JEFFREY A. SCHWANEKE
|
|
Executive Vice President and Chief Financial Officer
(principal financial officer)
|
|
By:
|
/s/ CHRISTOPHER R. ISAAK
|
|
Senior Vice President, Corporate Controller and Chief Accounting Officer
(principal accounting officer)
|
1.
|
I have reviewed this
Quarterly Report on Form 10-Q
of Centene Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Dated:
|
April 23, 2019
|
|
/s/ MICHAEL F. NEIDORFF
|
|
|
Chairman and Chief Executive Officer
(principal executive officer)
|
1.
|
I have reviewed this
Quarterly Report on Form 10-Q
of Centene Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Dated:
|
April 23, 2019
|
|
/s/ JEFFREY A. SCHWANEKE
|
|
|
Executive Vice President and Chief Financial Officer
(principal financial officer)
|
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated:
|
April 23, 2019
|
|
/s/ MICHAEL F. NEIDORFF
|
|
|
Chairman and Chief Executive Officer
(principal executive officer)
|
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated:
|
April 23, 2019
|
|
/s/ JEFFREY A. SCHWANEKE
|
|
|
Executive Vice President and Chief Financial Officer
(principal financial officer)
|