☒
|
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)
|
Title of Each Class
|
Trading Symbol(s)
|
Name of Each Exchange on Which Registered
|
Common Stock $0.001 Par Value
|
CNC
|
New York Stock Exchange
|
Large Accelerated Filer
|
☒
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☐
|
|
|
Emerging growth company
|
☐
|
|
|
PAGE
|
|
|
|
|
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 impact of COVID-19 on global markets, economic conditions, the healthcare industry and our results of operations, which is unknown, and the response by governments and other third parties;
|
•
|
uncertainty as to our expected financial performance during the period of integration of the WellCare Acquisition;
|
•
|
the possibility that the expected synergies and value creation from the WellCare Acquisition will not be realized, or will not be realized within the expected time period;
|
•
|
the risk that unexpected costs will be incurred in connection with the integration of the WellCare Acquisition or that the integration of WellCare will be more difficult or time consuming than expected;
|
•
|
unexpected costs, charges or expenses resulting from the WellCare Acquisition;
|
•
|
the inability to retain key personnel;
|
•
|
disruption from the integration of the WellCare Acquisition, 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 we may not be able to effectively manage our expanded operations;
|
•
|
our ability to accurately predict and effectively manage health benefits and other operating expenses and reserves, including fluctuations in medical utilization rates due to the impact of COVID-19;
|
•
|
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 (ACA) and the Health Care and Education Affordability Reconciliation Act, collectively referred to as the ACA and any regulations enacted thereunder that may result from changing political conditions or judicial actions, including the ultimate outcome 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 the Health Insurance Marketplaces and other commercial and Medicare products;
|
•
|
tax matters;
|
•
|
disasters or major epidemics;
|
•
|
the outcome of legal and regulatory proceedings;
|
•
|
changes in expected contract start dates;
|
•
|
provider, state, federal, foreign 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 businesses we may acquire in the future, 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;
|
•
|
disruption caused by significant completed and pending acquisitions, including, among others, the WellCare 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;
|
•
|
changes in expected closing dates, estimated purchase price and accretion for acquisitions;
|
•
|
the risk that acquired businesses will not be integrated successfully;
|
•
|
restrictions and limitations in connection with our indebtedness;
|
•
|
our ability to maintain or achieve improvement in 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 June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
|
|
|
|
|
|
|
||||||||
GAAP net earnings
|
$
|
1,206
|
|
|
$
|
495
|
|
|
$
|
1,252
|
|
|
$
|
1,017
|
|
Amortization of acquired intangible assets
|
197
|
|
|
64
|
|
|
363
|
|
|
129
|
|
||||
Acquisition related expenses
|
71
|
|
|
23
|
|
|
384
|
|
|
41
|
|
||||
Other adjustments (1)
|
(11
|
)
|
|
—
|
|
|
12
|
|
|
—
|
|
||||
Income tax effects of adjustments (2)
|
(53
|
)
|
|
(21
|
)
|
|
(125
|
)
|
|
(41
|
)
|
||||
Adjusted net earnings
|
$
|
1,410
|
|
|
$
|
561
|
|
|
$
|
1,886
|
|
|
$
|
1,146
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP diluted earnings per share (EPS)
|
$
|
2.05
|
|
|
$
|
1.18
|
|
|
$
|
2.20
|
|
|
$
|
2.42
|
|
Amortization of acquired intangible assets (3)
|
0.25
|
|
|
0.12
|
|
|
0.48
|
|
|
0.24
|
|
||||
Acquisition related expenses (4)
|
0.10
|
|
|
0.04
|
|
|
0.58
|
|
|
0.07
|
|
||||
Other adjustments (1)
|
—
|
|
|
—
|
|
|
0.05
|
|
|
—
|
|
||||
Adjusted Diluted EPS
|
$
|
2.40
|
|
|
$
|
1.34
|
|
|
$
|
3.31
|
|
|
$
|
2.73
|
|
(1)
|
Other adjustments for the three months ended June 30, 2020 include an adjustment to the gain related to the divestiture of certain products of our Illinois health plan of $11 million, or $0.00 per diluted share, net of an income tax expense of $0.02. Other adjustments include the following items for the six months ended June 30, 2020: (a) gain related to the divestiture of certain products of our Illinois health plan of $104 million, or $0.11 per diluted share, net of an income tax expense of $0.08; (b) non-cash impairment of our third-party care management software business of $72 million, or $0.10 per diluted share, net of an income tax benefit of $0.03; and (c) debt extinguishment costs of $44 million, or $0.06 per diluted share, net of an income tax benefit of $0.02.
|
(2)
|
The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment.
|
(3)
|
The amortization of acquired intangible assets per diluted share is net of an income tax benefit of $0.09 and $0.04 for the three months ended June 30, 2020, and 2019, respectively, and $0.16 and $0.07 for the six months ended June 30, 2020 and 2019, respectively.
|
(4)
|
Acquisition related expenses per diluted share are net of an income tax benefit of $0.02 and $0.01 for the three months ended June 30, 2020 and 2019, respectively, and $0.09 and $0.03 for the six months ended June 30, 2020 and 2019, respectively.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
|
|
|
|
|
|
|
||||||||
GAAP selling, general and administrative expenses
|
$
|
2,255
|
|
|
$
|
1,574
|
|
|
$
|
4,639
|
|
|
$
|
3,183
|
|
Acquisition related expenses
|
70
|
|
|
21
|
|
|
365
|
|
|
38
|
|
||||
Adjusted selling, general and administrative expenses
|
$
|
2,185
|
|
|
$
|
1,553
|
|
|
$
|
4,274
|
|
|
$
|
3,145
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Premium
|
$
|
24,745
|
|
|
$
|
16,554
|
|
|
$
|
47,959
|
|
|
$
|
32,757
|
|
Service
|
979
|
|
|
745
|
|
|
1,937
|
|
|
1,380
|
|
||||
Premium and service revenues
|
25,724
|
|
|
17,299
|
|
|
49,896
|
|
|
34,137
|
|
||||
Premium tax and health insurer fee
|
1,988
|
|
|
1,057
|
|
|
3,841
|
|
|
2,663
|
|
||||
Total revenues
|
27,712
|
|
|
18,356
|
|
|
53,737
|
|
|
36,800
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
||||||||
Medical costs
|
20,307
|
|
|
14,354
|
|
|
40,727
|
|
|
28,236
|
|
||||
Cost of services
|
833
|
|
|
615
|
|
|
1,658
|
|
|
1,159
|
|
||||
Selling, general and administrative expenses
|
2,255
|
|
|
1,574
|
|
|
4,639
|
|
|
3,183
|
|
||||
Amortization of acquired intangible assets
|
197
|
|
|
64
|
|
|
363
|
|
|
129
|
|
||||
Premium tax expense
|
1,723
|
|
|
1,106
|
|
|
3,348
|
|
|
2,765
|
|
||||
Health insurer fee expense
|
379
|
|
|
—
|
|
|
724
|
|
|
—
|
|
||||
Impairment
|
—
|
|
|
—
|
|
|
72
|
|
|
—
|
|
||||
Total operating expenses
|
25,694
|
|
|
17,713
|
|
|
51,531
|
|
|
35,472
|
|
||||
Earnings from operations
|
2,018
|
|
|
643
|
|
|
2,206
|
|
|
1,328
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Investment and other income
|
113
|
|
|
120
|
|
|
280
|
|
|
219
|
|
||||
Debt extinguishment costs
|
—
|
|
|
—
|
|
|
(44
|
)
|
|
—
|
|
||||
Interest expense
|
(187
|
)
|
|
(101
|
)
|
|
(367
|
)
|
|
(200
|
)
|
||||
Earnings from operations, before income tax expense
|
1,944
|
|
|
662
|
|
|
2,075
|
|
|
1,347
|
|
||||
Income tax expense
|
742
|
|
|
170
|
|
|
827
|
|
|
336
|
|
||||
Net earnings
|
1,202
|
|
|
492
|
|
|
1,248
|
|
|
1,011
|
|
||||
Loss attributable to noncontrolling interests
|
4
|
|
|
3
|
|
|
4
|
|
|
6
|
|
||||
Net earnings attributable to Centene Corporation
|
$
|
1,206
|
|
|
$
|
495
|
|
|
$
|
1,252
|
|
|
$
|
1,017
|
|
|
|
|
|
|
|
|
|
||||||||
Net earnings per common share attributable to Centene Corporation:
|
|
|
|
|
|||||||||||
Basic earnings per common share
|
$
|
2.08
|
|
|
$
|
1.20
|
|
|
$
|
2.23
|
|
|
$
|
2.46
|
|
Diluted earnings per common share
|
$
|
2.05
|
|
|
$
|
1.18
|
|
|
$
|
2.20
|
|
|
$
|
2.42
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|||||||||
Basic
|
579,189
|
|
|
413,370
|
|
|
561,623
|
|
|
413,144
|
|
||||
Diluted
|
587,498
|
|
|
419,671
|
|
|
569,559
|
|
|
419,707
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net earnings
|
$
|
1,202
|
|
|
$
|
492
|
|
|
$
|
1,248
|
|
|
$
|
1,011
|
|
Reclassification adjustment, net of tax
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||
Change in unrealized gain on investments, net of tax
|
248
|
|
|
80
|
|
|
114
|
|
|
174
|
|
||||
Defined benefit pension plan net gain, net of tax
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Foreign currency translation adjustments
|
1
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
||||
Other comprehensive earnings
|
250
|
|
|
81
|
|
|
111
|
|
|
175
|
|
||||
Comprehensive earnings
|
1,452
|
|
|
573
|
|
|
1,359
|
|
|
1,186
|
|
||||
Comprehensive loss attributable to noncontrolling interests
|
4
|
|
|
3
|
|
|
4
|
|
|
6
|
|
||||
Comprehensive earnings attributable to Centene Corporation
|
$
|
1,456
|
|
|
$
|
576
|
|
|
$
|
1,363
|
|
|
$
|
1,192
|
|
|
Centene Stockholders’ Equity
|
|
|
|
|
||||||||||||||||||||||||||||
|
Common Stock
|
|
|
|
|
|
|
|
Treasury Stock
|
|
|
|
|
||||||||||||||||||||
|
$0.001 Par
Value Shares |
|
Amt
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other Comprehensive Income (Loss) |
|
Retained
Earnings
|
|
$.001 Par
Value Shares |
|
Amt
|
|
Non-redeemable
Non-
controlling
Interest
|
|
Total
|
||||||||||||||||
Balance, December 31, 2019
|
421,508
|
|
|
$
|
—
|
|
|
$
|
7,647
|
|
|
$
|
134
|
|
|
$
|
4,984
|
|
|
6,460
|
|
|
$
|
(214
|
)
|
|
$
|
108
|
|
|
$
|
12,659
|
|
Comprehensive Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net earnings (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
43
|
|
|||||||
Other comprehensive loss, net of ($40) tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(139
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(139
|
)
|
|||||||
Common stock issued for acquisitions
|
171,225
|
|
|
—
|
|
|
11,526
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,526
|
|
|||||||
Common stock issued for employee benefit plans
|
2,448
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|||||||
Common stock repurchases
|
(291
|
)
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
9,308
|
|
|
(541
|
)
|
|
—
|
|
|
(558
|
)
|
|||||||
Stock compensation expense
|
—
|
|
|
—
|
|
|
117
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
117
|
|
|||||||
Contribution from noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|||||||
Other
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||||
Balance, March 31, 2020
|
594,890
|
|
|
$
|
—
|
|
|
$
|
19,279
|
|
|
$
|
(5
|
)
|
|
$
|
5,030
|
|
|
15,768
|
|
|
$
|
(755
|
)
|
|
$
|
107
|
|
|
$
|
23,656
|
|
Comprehensive Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net earnings (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,206
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
1,200
|
|
|||||||
Other comprehensive earnings, net of $76 tax
|
—
|
|
|
—
|
|
|
—
|
|
|
250
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
250
|
|
|||||||
Common stock issued for employee benefit plans
|
269
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|||||||
Common stock repurchases
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
47
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|||||||
Stock compensation expense
|
—
|
|
|
—
|
|
|
47
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
47
|
|
|||||||
Contribution from noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
15
|
|
|||||||
Balance, June 30, 2020
|
595,160
|
|
|
$
|
—
|
|
|
$
|
19,333
|
|
|
$
|
245
|
|
|
$
|
6,236
|
|
|
15,815
|
|
|
$
|
(758
|
)
|
|
$
|
116
|
|
|
$
|
25,172
|
|
|
Centene Stockholders’ Equity
|
|
|
|
|
||||||||||||||||||||||||||||
|
Common Stock
|
|
|
|
|
|
|
|
Treasury Stock
|
|
|
|
|
||||||||||||||||||||
|
$0.001 Par
Value Shares |
|
Amt
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other Comprehensive Income (Loss) |
|
Retained
Earnings
|
|
$.001 Par
Value Shares |
|
Amt
|
|
Non-redeemable
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
|
|
Comprehensive Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
495
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
495
|
|
|||||||
Other comprehensive earnings, net of $25 tax
|
—
|
|
|
—
|
|
|
—
|
|
|
81
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
81
|
|
|||||||
Common stock issued for employee benefit plans
|
261
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|||||||
Common stock repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|||||||
Stock compensation expense
|
—
|
|
|
—
|
|
|
34
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
|||||||
Balance, June 30, 2019
|
419,319
|
|
|
$
|
—
|
|
|
$
|
7,531
|
|
|
$
|
119
|
|
|
$
|
4,680
|
|
|
5,792
|
|
|
$
|
(176
|
)
|
|
$
|
94
|
|
|
$
|
12,248
|
|
Assets acquired and liabilities assumed
|
|
|
||
Cash and cash equivalents
|
|
$
|
2,947
|
|
Premium and related receivables
|
|
3,437
|
|
|
Short-term investments
|
|
355
|
|
|
Other current assets
|
|
1,116
|
|
|
Long-term investments
|
|
2,716
|
|
|
Restricted deposits
|
|
320
|
|
|
Property, software and equipment
|
|
259
|
|
|
Intangible assets (a)
|
|
7,000
|
|
|
Other long-term assets
|
|
313
|
|
|
Total assets acquired
|
|
18,463
|
|
|
|
|
|
||
Medical claims liability
|
|
4,073
|
|
|
Accounts payable and accrued expenses
|
|
3,100
|
|
|
Return of premium payable
|
|
238
|
|
|
Unearned revenue
|
|
183
|
|
|
Long-term debt (b)
|
|
2,055
|
|
|
Deferred tax liabilities (c)
|
|
1,534
|
|
|
Other long-term liabilities
|
|
312
|
|
|
Total liabilities assumed
|
|
11,495
|
|
|
|
|
|
||
Total identifiable net assets
|
|
6,968
|
|
|
Goodwill (d)
|
|
10,637
|
|
|
Total assets acquired and liabilities assumed
|
|
$
|
17,605
|
|
(a)
|
The identifiable intangible assets acquired are to be measured at fair value as of the completion of the acquisition. The fair value of intangible assets will be 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, will be considered in estimating the fair value. The identifiable intangible assets include purchased contract rights, trade names, provider contracts and developed technologies. The Company has estimated the preliminary fair value of intangible assets to be $7,000 million with a weighted average life of 13 years.
|
|
|
Fair Value
|
|
Weighted Average Useful Life (in years)
|
||
Purchased contract rights
|
|
$
|
5,200
|
|
|
|
Trade names
|
|
800
|
|
|
|
|
Provider contracts
|
|
700
|
|
|
|
|
Developed technologies
|
|
300
|
|
|
|
|
Total intangible assets acquired
|
|
$
|
7,000
|
|
|
13
|
(b)
|
Debt is required to be measured at fair value under the acquisition method of accounting. The fair value of WellCare's aggregate principle of $1,950 million Senior Notes assumed in the acquisition was $2,055 million. The $105 million increase will be amortized as a reduction to interest expense over the remaining life of the debt.
|
(c)
|
The preliminary deferred tax liabilities are presented net of $348 million of deferred tax assets.
|
(d)
|
The acquisition resulted in $10,637 million of goodwill related primarily to synergies expected from the acquisition and the assembled workforce of WellCare. The assignment of goodwill to the Company’s respective segments has not been completed at this time, but the majority of goodwill is expected to be allocated to the Managed Care segment. The majority of the goodwill is not deductible for income tax purposes.
|
|
|
Three Months Ended
June 30, 2019 |
|
Six Months Ended
June 30, 2019 |
||||
Total revenues
|
|
$
|
25,325
|
|
|
$
|
50,494
|
|
Net earnings attributable to common stockholders
|
|
$
|
559
|
|
|
$
|
1,111
|
|
Diluted earnings per share
|
|
$
|
0.94
|
|
|
$
|
1.88
|
|
•
|
Interest expense associated with debt incurred to finance the transaction.
|
•
|
Elimination of historical WellCare intangible asset amortization expense and addition of amortization expense based on the preliminary estimated values of identifiable intangible assets of approximately $7,000 million.
|
•
|
Issuance of 171 million shares of Centene common stock in connection with the per share common stock consideration.
|
•
|
Elimination of acquisition related costs.
|
•
|
Adjustments to income tax expense related to pro forma adjustments and increased income tax expense related to IRS Regulation 162(m)(6).
|
|
June 30, 2020
|
|
December 31, 2019
|
||||||||||||||||||||||||||||
|
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
|
||||||||||||||||
Corporate securities
|
$
|
(29
|
)
|
|
$
|
627
|
|
|
$
|
(3
|
)
|
|
$
|
21
|
|
|
$
|
(2
|
)
|
|
$
|
192
|
|
|
$
|
(2
|
)
|
|
$
|
48
|
|
Municipal securities
|
(5
|
)
|
|
162
|
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
185
|
|
|
—
|
|
|
11
|
|
||||||||
Asset-backed securities
|
(10
|
)
|
|
334
|
|
|
(3
|
)
|
|
105
|
|
|
(1
|
)
|
|
153
|
|
|
(1
|
)
|
|
151
|
|
||||||||
Residential mortgage-backed securities
|
—
|
|
|
27
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
44
|
|
|
(1
|
)
|
|
81
|
|
||||||||
Commercial mortgage-backed securities
|
(7
|
)
|
|
147
|
|
|
(1
|
)
|
|
9
|
|
|
(1
|
)
|
|
118
|
|
|
—
|
|
|
21
|
|
||||||||
Total
|
$
|
(51
|
)
|
|
$
|
1,297
|
|
|
$
|
(7
|
)
|
|
$
|
140
|
|
|
$
|
(5
|
)
|
|
$
|
692
|
|
|
$
|
(4
|
)
|
|
$
|
312
|
|
|
June 30, 2020
|
|
December 31, 2019
|
||||||||||||||||||||||||||||
|
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
|
$
|
1,406
|
|
|
$
|
1,414
|
|
|
$
|
881
|
|
|
$
|
882
|
|
|
$
|
750
|
|
|
$
|
752
|
|
|
$
|
550
|
|
|
$
|
550
|
|
One year through five years
|
3,847
|
|
|
3,986
|
|
|
151
|
|
|
154
|
|
|
3,034
|
|
|
3,106
|
|
|
106
|
|
|
108
|
|
||||||||
Five years through ten years
|
2,200
|
|
|
2,346
|
|
|
13
|
|
|
14
|
|
|
2,162
|
|
|
2,257
|
|
|
—
|
|
|
—
|
|
||||||||
Greater than ten years
|
64
|
|
|
68
|
|
|
—
|
|
|
—
|
|
|
48
|
|
|
50
|
|
|
—
|
|
|
—
|
|
||||||||
Asset-backed securities
|
2,446
|
|
|
2,490
|
|
|
—
|
|
|
—
|
|
|
1,585
|
|
|
1,603
|
|
|
—
|
|
|
—
|
|
||||||||
Total
|
$
|
9,963
|
|
|
$
|
10,304
|
|
|
$
|
1,045
|
|
|
$
|
1,050
|
|
|
$
|
7,579
|
|
|
$
|
7,768
|
|
|
$
|
656
|
|
|
$
|
658
|
|
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
|
$
|
12,798
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,798
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
238
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
238
|
|
Corporate securities
|
—
|
|
|
5,013
|
|
|
—
|
|
|
5,013
|
|
||||
Municipal securities
|
—
|
|
|
2,507
|
|
|
—
|
|
|
2,507
|
|
||||
Short-term time deposits
|
—
|
|
|
56
|
|
|
—
|
|
|
56
|
|
||||
Asset-backed securities
|
—
|
|
|
971
|
|
|
—
|
|
|
971
|
|
||||
Residential mortgage-backed securities
|
—
|
|
|
920
|
|
|
—
|
|
|
920
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
599
|
|
|
—
|
|
|
599
|
|
||||
Equity securities
|
559
|
|
|
2
|
|
|
—
|
|
|
561
|
|
||||
Total investments
|
$
|
797
|
|
|
$
|
10,068
|
|
|
$
|
—
|
|
|
$
|
10,865
|
|
Restricted deposits:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
$
|
157
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
157
|
|
Certificates of deposit
|
—
|
|
|
104
|
|
|
—
|
|
|
104
|
|
||||
Corporate securities
|
—
|
|
|
18
|
|
|
—
|
|
|
18
|
|
||||
Municipal securities
|
—
|
|
|
28
|
|
|
—
|
|
|
28
|
|
||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
743
|
|
|
—
|
|
|
—
|
|
|
743
|
|
||||
Total restricted deposits
|
$
|
900
|
|
|
$
|
150
|
|
|
$
|
—
|
|
|
$
|
1,050
|
|
Total assets at fair value
|
$
|
14,495
|
|
|
$
|
10,218
|
|
|
$
|
—
|
|
|
$
|
24,713
|
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
12,123
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,123
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
73
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
73
|
|
Corporate securities
|
—
|
|
|
3,713
|
|
|
—
|
|
|
3,713
|
|
||||
Municipal securities
|
—
|
|
|
2,379
|
|
|
—
|
|
|
2,379
|
|
||||
Asset-backed securities
|
—
|
|
|
744
|
|
|
—
|
|
|
744
|
|
||||
Residential mortgage-backed securities
|
—
|
|
|
471
|
|
|
—
|
|
|
471
|
|
||||
Commercial mortgage-backed securities
|
—
|
|
|
388
|
|
|
—
|
|
|
388
|
|
||||
Total investments
|
$
|
73
|
|
|
$
|
7,695
|
|
|
$
|
—
|
|
|
$
|
7,768
|
|
Restricted deposits:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
Certificates of deposit
|
—
|
|
|
482
|
|
|
—
|
|
|
482
|
|
||||
Corporate securities
|
—
|
|
|
20
|
|
|
—
|
|
|
20
|
|
||||
Municipal securities
|
—
|
|
|
9
|
|
|
—
|
|
|
9
|
|
||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
139
|
|
|
—
|
|
|
—
|
|
|
139
|
|
||||
Total restricted deposits
|
$
|
147
|
|
|
$
|
511
|
|
|
$
|
—
|
|
|
$
|
658
|
|
Other long-term assets:
|
|
|
|
|
|
|
|
||||||||
Interest rate swap agreements
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
10
|
|
Total assets at fair value
|
$
|
12,343
|
|
|
$
|
8,216
|
|
|
$
|
—
|
|
|
$
|
20,559
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Other long-term liabilities:
|
|
|
|
|
|
|
|
||||||||
Interest rate swap agreements
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
11
|
|
Total liabilities at fair value
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2020
|
|
2019
|
||||
Balance, January 1
|
|
$
|
7,473
|
|
|
$
|
6,831
|
|
Less: Reinsurance recoverable
|
|
20
|
|
|
27
|
|
||
Balance, January 1, net
|
|
7,453
|
|
|
6,804
|
|
||
Acquisitions and divestitures
|
|
3,746
|
|
|
61
|
|
||
Incurred related to:
|
|
|
|
|
||||
Current year
|
|
41,149
|
|
|
28,791
|
|
||
Prior years
|
|
(422
|
)
|
|
(555
|
)
|
||
Total incurred
|
|
40,727
|
|
|
28,236
|
|
||
Paid related to:
|
|
|
|
|
||||
Current year
|
|
34,783
|
|
|
22,384
|
|
||
Prior years
|
|
5,742
|
|
|
5,289
|
|
||
Total paid
|
|
40,525
|
|
|
27,673
|
|
||
Balance at June 30, net
|
|
11,401
|
|
|
7,428
|
|
||
Plus: Reinsurance recoverable
|
|
17
|
|
|
19
|
|
||
Balance, June 30
|
|
$
|
11,418
|
|
|
$
|
7,447
|
|
|
June 30, 2020
|
|
December 31, 2019
|
||||
Risk adjustment receivable
|
$
|
410
|
|
|
$
|
245
|
|
Risk adjustment payable
|
(1,918
|
)
|
|
(1,239
|
)
|
||
Minimum medical loss ratio
|
(488
|
)
|
|
(367
|
)
|
||
Cost sharing reduction receivable
|
99
|
|
|
73
|
|
||
Cost sharing reduction payable
|
(1
|
)
|
|
(1
|
)
|
|
June 30, 2020
|
|
December 31, 2019
|
||||
$1,000 million 4.75% Senior Notes, due May 15, 2022
|
$
|
1,005
|
|
|
$
|
1,004
|
|
$1,000 million 6.125% Senior Notes, due February 15, 2024
|
—
|
|
|
1,000
|
|
||
$2,200 million 4.75% Senior Notes, due January 15, 2025
|
2,234
|
|
|
2,228
|
|
||
$1,200 million 5.250% Senior Notes due April 1, 2025
|
1,248
|
|
|
—
|
|
||
$1,800 million 5.375% Senior Notes, due June 1, 2026
|
1,800
|
|
|
1,800
|
|
||
$750 million 5.375% Senior Notes due August 15, 2026
|
798
|
|
|
—
|
|
||
$2,500 million 4.25% Senior Notes due December 15, 2027
|
2,481
|
|
|
2,479
|
|
||
$3,500 million 4.625% Senior Notes due December 15, 2029
|
3,500
|
|
|
3,500
|
|
||
$2,000 million 3.375% Senior Notes due February 15, 2030
|
2,000
|
|
|
—
|
|
||
Fair value of interest rate swap agreements
|
—
|
|
|
(1
|
)
|
||
Total senior notes
|
15,066
|
|
|
12,010
|
|
||
Term loan credit facility
|
1,450
|
|
|
1,450
|
|
||
Revolving credit agreement
|
89
|
|
|
93
|
|
||
Mortgage notes payable
|
52
|
|
|
54
|
|
||
Construction loan payable
|
165
|
|
|
140
|
|
||
Finance leases and other
|
139
|
|
|
122
|
|
||
Debt issuance costs
|
(147
|
)
|
|
(143
|
)
|
||
Total debt
|
16,814
|
|
|
13,726
|
|
||
Less current portion
|
(106
|
)
|
|
(88
|
)
|
||
Long-term debt
|
$
|
16,708
|
|
|
$
|
13,638
|
|
|
June 30, 2020
|
||
Assets
|
|
||
ROU assets (recorded within other long-term assets)
|
$
|
910
|
|
|
|
||
Liabilities
|
|
||
Short-term (recorded within accounts payable and accrued expenses)
|
$
|
204
|
|
Long-term (recorded within other long-term liabilities)
|
829
|
|
|
Total lease liabilities
|
$
|
1,033
|
|
|
June 30, 2020
|
||
2020
|
$
|
114
|
|
2021
|
233
|
|
|
2022
|
183
|
|
|
2023
|
149
|
|
|
2024
|
125
|
|
|
2025
|
89
|
|
|
Thereafter
|
286
|
|
|
Total lease payments
|
1,179
|
|
|
Less: imputed interest
|
(146
|
)
|
|
Total lease liabilities
|
$
|
1,033
|
|
|
Managed Care
|
|
Specialty
Services
|
|
Eliminations
|
|
Consolidated
Total
|
||||||||
Total revenues from external customers
|
$
|
26,623
|
|
|
$
|
1,089
|
|
|
$
|
—
|
|
|
$
|
27,712
|
|
Total revenues from internal customers
|
117
|
|
|
3,003
|
|
|
(3,120
|
)
|
|
—
|
|
||||
Total revenues
|
$
|
26,740
|
|
|
$
|
4,092
|
|
|
$
|
(3,120
|
)
|
|
$
|
27,712
|
|
Earnings from operations
|
$
|
1,909
|
|
|
$
|
109
|
|
|
$
|
—
|
|
|
$
|
2,018
|
|
|
Managed Care
|
|
Specialty
Services
|
|
Eliminations
|
|
Consolidated
Total
|
||||||||
Total revenues from external customers
|
$
|
17,509
|
|
|
$
|
847
|
|
|
$
|
—
|
|
|
$
|
18,356
|
|
Total revenues from internal customers
|
37
|
|
|
2,556
|
|
|
(2,593
|
)
|
|
—
|
|
||||
Total revenues
|
$
|
17,546
|
|
|
$
|
3,403
|
|
|
$
|
(2,593
|
)
|
|
$
|
18,356
|
|
Earnings from operations
|
$
|
587
|
|
|
$
|
56
|
|
|
$
|
—
|
|
|
$
|
643
|
|
|
Managed Care
|
|
Specialty
Services
|
|
Eliminations
|
|
Consolidated
Total
|
||||||||
Total revenues from external customers
|
$
|
51,559
|
|
|
$
|
2,178
|
|
|
$
|
—
|
|
|
$
|
53,737
|
|
Total revenues from internal customers
|
217
|
|
|
5,817
|
|
|
(6,034
|
)
|
|
—
|
|
||||
Total revenues
|
$
|
51,776
|
|
|
$
|
7,995
|
|
|
$
|
(6,034
|
)
|
|
$
|
53,737
|
|
Earnings from operations
|
$
|
2,126
|
|
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
2,206
|
|
|
Managed Care
|
|
Specialty
Services
|
|
Eliminations
|
|
Consolidated
Total
|
||||||||
Total revenues from external customers
|
$
|
35,196
|
|
|
$
|
1,604
|
|
|
$
|
—
|
|
|
$
|
36,800
|
|
Total revenues from internal customers
|
72
|
|
|
5,006
|
|
|
(5,078
|
)
|
|
—
|
|
||||
Total revenues
|
$
|
35,268
|
|
|
$
|
6,610
|
|
|
$
|
(5,078
|
)
|
|
$
|
36,800
|
|
Earnings from operations
|
$
|
1,202
|
|
|
$
|
126
|
|
|
$
|
—
|
|
|
$
|
1,328
|
|
•
|
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, submissions to state agencies related to payments or state false claims acts, 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 and other federal and state fraud, waste and abuse laws;
|
•
|
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 24.6 million, an increase of 9.6 million members, or 64% year-over-year.
|
•
|
Total revenues of $27.7 billion, representing 51% growth year-over-year.
|
•
|
HBR of 82.1%, compared to 86.7% for the second quarter of 2019.
|
•
|
SG&A expense ratio of 8.8%, compared to 9.1% for the second quarter of 2019.
|
•
|
Adjusted SG&A expense ratio of 8.5%, compared to 9.0% for the second quarter of 2019.
|
•
|
Operating cash flows of $3.7 billion, representing 3.1x net earnings.
|
•
|
Diluted earnings per share (EPS) of $2.05, compared to $1.18 for the second quarter of 2019.
|
•
|
Adjusted Diluted EPS of $2.40, compared to $1.34 for the second quarter of 2019. Both diluted EPS and Adjusted Diluted EPS for the second quarter of 2020 benefited from lower medical utilization as a result of the COVID-19 pandemic.
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
GAAP Diluted EPS, attributable to Centene
|
$
|
2.05
|
|
|
$
|
1.18
|
|
Amortization of acquired intangible assets
|
0.25
|
|
|
0.12
|
|
||
Acquisition related expenses
|
0.10
|
|
|
0.04
|
|
||
Adjusted Diluted EPS
|
$
|
2.40
|
|
|
$
|
1.34
|
|
•
|
Arkansas. In March 2019, our Arkansas subsidiary, Arkansas Total Care, assumed full-risk on a Medicaid special needs population comprised of people with high behavioral health needs and individuals with developmental/intellectual disabilities.
|
•
|
Correctional. In April 2020, Centurion began providing medical services, behavioral healthcare, and substance abuse treatment within four prisons and six community corrections centers across the state of Delaware. In July 2019, Centurion began operating under a contract to provide comprehensive healthcare services to inmates housed in Arizona’s state prison system. In July 2019, Centurion began operating under a re-awarded contract to continue the provision of mental and dental health services to the Georgia Department of Correction’s state prison facilities.
|
•
|
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.
|
•
|
Health Insurance Marketplace. In January 2020, we expanded our offerings in the 2020 Health Insurance Marketplace in ten existing markets: Arizona, Florida, Georgia, Kansas, North Carolina, Ohio, South Carolina, Tennessee, Texas, and Washington.
|
•
|
HealthSmart. In May 2019, we acquired HealthSmart, a third party administrator providing customizable and scalable health plan solutions for self-funded employers, universities and colleges, and Native American Tribal Enterprises. Services include plan administration, care management and wellness programs, network, casualty claim, and pharmacy benefit solutions.
|
•
|
Illinois. In February 2020, we began operating in Illinois under the first phase of an expanded contract for the Medicaid Managed Care Program. The expanded contract includes children who are in need through the Department of Children and Family Services/Youth Care by Illinois Department of Healthcare and Family Services and Foster Care.
|
•
|
Iowa. In July 2019, our Iowa subsidiary, Iowa Total Care, Inc., began operating under a new statewide contract for the IA Health Link Program.
|
•
|
Louisiana. In January 2020, our Louisiana subsidiary, Louisiana HealthCare Connections, began operating under a one-year emergency contract extension in response to protested contract awards. Louisiana’s state procurement officer overturned the Louisiana Department of Health’s plan to award Medicaid contracts to four health plans, excluding our Louisiana subsidiary. According to the chief procurement officer, the state health department failed to follow state law or its own evaluation and bid guidelines in its award.
|
•
|
Medicare. In January 2020, we expanded our Medicare offerings. We entered Nevada and expanded our footprint in twelve existing markets: Arizona, Arkansas, California, Georgia, Kansas, Louisiana, Missouri, New Mexico, New York, Ohio, Pennsylvania, and Texas.
|
•
|
New Hampshire. In September 2019, our New Hampshire subsidiary, NH Healthy Families, began operating under a new five-year contract to continue to provide service to Medicaid enrollees statewide.
|
•
|
Pennsylvania. In January 2018, 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 was fully implemented statewide by January 2020.
|
•
|
QualChoice. 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.
|
•
|
Spain. In December 2019, our Spanish subsidiary, Ribera Salud, acquired 93% of Hospital Povisa, S.A., a private hospital in the Vigo region of Spain. In June 2019, our Spanish subsidiary, Primero Salud, acquired additional ownership in Ribera Salud, increasing our ownership in the Spanish healthcare company from 50% to 90%.
|
•
|
Washington. In January 2019, our Washington State subsidiary, Coordinated Care of Washington, began providing managed care services to Apple Health’s Fully Integrated Managed Care beneficiaries in the Greater Columbia, King and Pierce Regions. This integration continued with the addition of the North Sound Region in July 2019.
|
•
|
WellCare. On January 23, 2020, we completed the WellCare Acquisition. The WellCare Acquisition brings a high-quality Medicare platform and further extends our robust Medicaid offerings. The WellCare Acquisition is a key part of our growth as we become one of the nation’s largest sponsors of government health coverage. The transaction is valued at approximately $19.6 billion, including the assumption of $1.95 billion of outstanding debt.
|
•
|
In January 2020, in connection with the WellCare Acquisition, we completed the divestiture of certain products in our Illinois health plan, including the Medicaid and Medicare Advantage lines of business.
|
•
|
Effective December 2019, we no longer serve members under the state-wide correctional contract in New Mexico.
|
•
|
Beginning in January 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 is no longer provided to any group policyholders and/or members as of December 31, 2019.
|
•
|
We expect to realize the benefit in 2020 of acquisitions, investments, and business commenced during 2019 and 2020, as discussed above.
|
•
|
In July 2020, Meridian Health Plan of Illinois, Inc. (Meridian), began serving Medicaid members in Cook County, Illinois, as a result of a Member Transfer Agreement under which Meridian was assigned 100% of NextLevel Health Partners, Inc.’s approximately 54,000 members who access benefits from the Illinois Department of Healthcare and Family Services’ HealthChoice Illinois Program.
|
•
|
In July 2020, Centurion commenced a two-year contract with the Kansas Department of Administration to provide healthcare services in the Department of Corrections’ facilities.
|
•
|
In October 2019, our North Carolina joint venture, Carolina Complete Health, was awarded an additional service area to provide Medicaid managed care services in Region 4. With the addition of this new Region, Carolina Complete Health will provide Medicaid managed care services in three contiguous regions: Region 3, 4 and 5. In February 2019, WellCare was awarded a statewide contract to administer the state’s Medicaid Prepaid Health Plans. The new contracts are expected to commence in mid-2021.
|
•
|
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.
|
•
|
Effective July 2020, we no longer serve members under the state-wide correctional contract in Vermont.
|
•
|
In October 2019, CMS published updated Medicare Star quality ratings for the 2020 rating year. Approximately 46% of our Medicare members are in a 4 star or above plan for the 2021 bonus year, compared to 86% for the 2020 bonus year. Our quality bonus and rebates may be negatively impacted in 2021.
|
•
|
In July 2019, our Oregon subsidiary, Trillium Community Health Plan, was notified by the Oregon Health Authority (OHA) of its intent to award Trillium Community Health Plan an expanded contract to serve as a coordinated care organization for six counties in the state; however, an additional competitor was added to Lane County. As a result, our membership is expected to decrease. Pending successful completion of OHA’s readiness review and additional contract negotiations, the contract is expected to begin October 2020.
|
|
June 30,
2020 |
|
December 31,
2019 |
|
June 30,
2019 |
|||
Medicaid:
|
|
|
|
|
|
|||
TANF, CHIP & Foster Care
|
10,894,200
|
|
|
7,528,700
|
|
|
7,388,700
|
|
ABD & LTSS
|
1,496,000
|
|
|
1,043,500
|
|
|
997,900
|
|
Behavioral Health
|
173,900
|
|
|
66,500
|
|
|
68,800
|
|
Total Medicaid
|
12,564,100
|
|
|
8,638,700
|
|
|
8,455,400
|
|
Medicare Prescription Drug Plan (PDP)
|
4,443,100
|
|
|
—
|
|
|
—
|
|
Commercial
|
2,763,300
|
|
|
2,331,100
|
|
|
2,449,400
|
|
Medicare (1)
|
996,100
|
|
|
404,500
|
|
|
398,500
|
|
International
|
600,400
|
|
|
599,800
|
|
|
463,100
|
|
Correctional
|
166,000
|
|
|
180,000
|
|
|
153,900
|
|
Total at-risk membership
|
21,533,000
|
|
|
12,154,100
|
|
|
11,920,300
|
|
TRICARE eligibles
|
2,864,700
|
|
|
2,860,700
|
|
|
2,855,800
|
|
Non-risk membership
|
223,300
|
|
|
227,000
|
|
|
228,100
|
|
Total
|
24,621,000
|
|
|
15,241,800
|
|
|
15,004,200
|
|
|
|
|
|
|
|
|||
(1) Membership includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and Medicare-Medicaid Plans (MMP).
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
|
2020
|
|
2019
|
|
% Change
|
|
2020
|
|
2019
|
|
% Change
|
||||||||||
Premium
|
$
|
24,745
|
|
|
$
|
16,554
|
|
|
49
|
%
|
|
$
|
47,959
|
|
|
$
|
32,757
|
|
|
46
|
%
|
Service
|
979
|
|
|
745
|
|
|
31
|
%
|
|
1,937
|
|
|
1,380
|
|
|
40
|
%
|
||||
Premium and service revenues
|
25,724
|
|
|
17,299
|
|
|
49
|
%
|
|
49,896
|
|
|
34,137
|
|
|
46
|
%
|
||||
Premium tax and health insurer fee
|
1,988
|
|
|
1,057
|
|
|
88
|
%
|
|
3,841
|
|
|
2,663
|
|
|
44
|
%
|
||||
Total revenues
|
27,712
|
|
|
18,356
|
|
|
51
|
%
|
|
53,737
|
|
|
36,800
|
|
|
46
|
%
|
||||
Medical costs
|
20,307
|
|
|
14,354
|
|
|
41
|
%
|
|
40,727
|
|
|
28,236
|
|
|
44
|
%
|
||||
Cost of services
|
833
|
|
|
615
|
|
|
35
|
%
|
|
1,658
|
|
|
1,159
|
|
|
43
|
%
|
||||
Selling, general and administrative expenses
|
2,255
|
|
|
1,574
|
|
|
43
|
%
|
|
4,639
|
|
|
3,183
|
|
|
46
|
%
|
||||
Amortization of acquired intangible assets
|
197
|
|
|
64
|
|
|
208
|
%
|
|
363
|
|
|
129
|
|
|
181
|
%
|
||||
Premium tax expense
|
1,723
|
|
|
1,106
|
|
|
56
|
%
|
|
3,348
|
|
|
2,765
|
|
|
21
|
%
|
||||
Health insurer fee expense
|
379
|
|
|
—
|
|
|
n.m.
|
|
|
724
|
|
|
—
|
|
|
n.m.
|
|
||||
Impairment
|
—
|
|
|
—
|
|
|
n.m.
|
|
|
72
|
|
|
—
|
|
|
n.m.
|
|
||||
Earnings from operations
|
2,018
|
|
|
643
|
|
|
214
|
%
|
|
2,206
|
|
|
1,328
|
|
|
66
|
%
|
||||
Investment and other income
|
113
|
|
|
120
|
|
|
(6
|
)%
|
|
280
|
|
|
219
|
|
|
28
|
%
|
||||
Debt extinguishment costs
|
—
|
|
|
—
|
|
|
n.m
|
|
|
(44
|
)
|
|
—
|
|
|
n.m.
|
|
||||
Interest expense
|
(187
|
)
|
|
(101
|
)
|
|
85
|
%
|
|
(367
|
)
|
|
(200
|
)
|
|
84
|
%
|
||||
Earnings from operations, before income tax expense
|
1,944
|
|
|
662
|
|
|
194
|
%
|
|
2,075
|
|
|
1,347
|
|
|
54
|
%
|
||||
Income tax expense
|
742
|
|
|
170
|
|
|
336
|
%
|
|
827
|
|
|
336
|
|
|
146
|
%
|
||||
Net earnings
|
1,202
|
|
|
492
|
|
|
144
|
%
|
|
1,248
|
|
|
1,011
|
|
|
23
|
%
|
||||
Loss attributable to noncontrolling interests
|
4
|
|
|
3
|
|
|
33
|
%
|
|
4
|
|
|
6
|
|
|
(33
|
)%
|
||||
Net earnings attributable to Centene Corporation
|
$
|
1,206
|
|
|
$
|
495
|
|
|
144
|
%
|
|
$
|
1,252
|
|
|
$
|
1,017
|
|
|
23
|
%
|
Diluted earnings per common share attributable to Centene Corporation
|
$
|
2.05
|
|
|
$
|
1.18
|
|
|
74
|
%
|
|
$
|
2.20
|
|
|
$
|
2.42
|
|
|
(9
|
)%
|
|
2020
|
|
2019
|
|
% Change
|
|||||
Medicaid
|
$
|
18,129
|
|
|
$
|
12,119
|
|
|
50
|
%
|
Commercial
|
4,136
|
|
|
3,872
|
|
|
7
|
%
|
||
Medicare (1)
|
3,538
|
|
|
1,465
|
|
|
142
|
%
|
||
Medicare PDP
|
674
|
|
|
—
|
|
|
n.m.
|
|
||
Other
|
1,235
|
|
|
900
|
|
|
37
|
%
|
||
Total Revenues
|
$
|
27,712
|
|
|
$
|
18,356
|
|
|
51
|
%
|
|
|
|
|
|
|
|
|
|||
(1) Medicare includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and MMP.
|
||||||||||
n.m.: not meaningful
|
|
|
|
|
|
2020
|
|
2019
|
||||
Investment and other income
|
$
|
113
|
|
|
$
|
120
|
|
Interest expense
|
(187
|
)
|
|
(101
|
)
|
||
Other income (expense), net
|
$
|
(74
|
)
|
|
$
|
19
|
|
|
2020
|
|
2019
|
|
% Change
|
|||||
Total Revenues
|
|
|
|
|
|
|||||
Managed Care
|
$
|
26,740
|
|
|
$
|
17,546
|
|
|
52
|
%
|
Specialty Services
|
4,092
|
|
|
3,403
|
|
|
20
|
%
|
||
Eliminations
|
(3,120
|
)
|
|
(2,593
|
)
|
|
(20
|
)%
|
||
Consolidated Total
|
$
|
27,712
|
|
|
$
|
18,356
|
|
|
51
|
%
|
Earnings from Operations
|
|
|
|
|
|
|
|
|||
Managed Care
|
$
|
1,909
|
|
|
$
|
587
|
|
|
225
|
%
|
Specialty Services
|
109
|
|
|
56
|
|
|
95
|
%
|
||
Consolidated Total
|
$
|
2,018
|
|
|
$
|
643
|
|
|
214
|
%
|
|
2020
|
|
2019
|
|
% Change
|
|||||
Medicaid
|
$
|
35,170
|
|
|
$
|
24,727
|
|
|
42
|
%
|
Commercial
|
8,255
|
|
|
7,517
|
|
|
10
|
%
|
||
Medicare (1)
|
6,554
|
|
|
2,848
|
|
|
130
|
%
|
||
Medicare PDP
|
1,274
|
|
|
—
|
|
|
n.m.
|
|
||
Other
|
2,484
|
|
|
1,708
|
|
|
45
|
%
|
||
Total Revenues
|
$
|
53,737
|
|
|
$
|
36,800
|
|
|
46
|
%
|
|
|
|
|
|
|
|||||
(1) Medicare includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and MMP.
|
||||||||||
n.m.: not meaningful
|
|
|
|
|
|
2020
|
|
2019
|
||||
Investment and other income
|
$
|
280
|
|
|
$
|
219
|
|
Debt extinguishment costs
|
(44
|
)
|
|
—
|
|
||
Interest expense
|
(367
|
)
|
|
(200
|
)
|
||
Other income (expense), net
|
$
|
(131
|
)
|
|
$
|
19
|
|
|
2020
|
|
2019
|
|
% Change
|
|||||
Total Revenues
|
|
|
|
|
|
|||||
Managed Care
|
$
|
51,776
|
|
|
$
|
35,268
|
|
|
47
|
%
|
Specialty Services
|
7,995
|
|
|
6,610
|
|
|
21
|
%
|
||
Eliminations
|
(6,034
|
)
|
|
(5,078
|
)
|
|
(19
|
)%
|
||
Consolidated Total
|
$
|
53,737
|
|
|
$
|
36,800
|
|
|
46
|
%
|
Earnings from Operations
|
|
|
|
|
|
|
|
|||
Managed Care
|
$
|
2,126
|
|
|
$
|
1,202
|
|
|
77
|
%
|
Specialty Services
|
80
|
|
|
126
|
|
|
(37
|
)%
|
||
Consolidated Total
|
$
|
2,206
|
|
|
$
|
1,328
|
|
|
66
|
%
|
|
Six Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Net cash provided by operating activities
|
$
|
3,474
|
|
|
$
|
2,233
|
|
Net cash used in investing activities
|
(3,032
|
)
|
|
(929
|
)
|
||
Net cash provided by financing activities
|
379
|
|
|
236
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
3
|
|
|
2
|
|
||
Net increase in cash, cash equivalents, and restricted cash and cash equivalents
|
$
|
824
|
|
|
$
|
1,542
|
|
•
|
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 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 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 Acquisition;
|
•
|
managing a larger company;
|
•
|
maintaining employee morale and attracting and 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;
|
•
|
unforeseen expenses or delays associated with the WellCare Acquisition; and
|
•
|
achieving actual cost savings of the WellCare Acquisition at the anticipated levels.
|
•
|
payments in respect of, or redemptions or acquisitions of, debt or equity issued by the 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
Second Quarter 2020
(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)
|
|||
April 1 - April 30, 2020
|
|
13
|
|
$
|
66.41
|
|
|
—
|
|
|
5,488
|
May 1 - May 31, 2020
|
|
14
|
|
62.92
|
|
|
—
|
|
|
5,488
|
|
June 1 - June 30, 2020
|
|
21
|
|
64.00
|
|
|
—
|
|
|
5,488
|
|
Total
|
|
48
|
|
$
|
64.32
|
|
|
—
|
|
|
5,488
|
(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 14,160 thousand shares. A remaining amount of 5,488 thousand shares are available under the program. No duration has been placed on the repurchase program.
|
EXHIBIT
NUMBER
|
|
DESCRIPTION
|
|
|
|
|
|
10.1
|
|
|
|
|
|
|
|
31.1
|
|
|
|
|
|
|
|
31.2
|
|
|
|
|
|
|
|
32.1
|
|
|
|
|
|
|
|
32.2
|
|
|
|
|
|
|
|
101
|
|
|
The following materials from the Centene Corporation Quarterly Report on Form 10-Q for the quarter June 30, 2020, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) our Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019; (ii) our Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019; (iii) our Consolidated Statements of Comprehensive Earnings for the three and six months ended June 30, 2020 and 2019; (iv) our Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019; (v) our Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019; and (vi) the notes to our Consolidated Financial Statements.
|
|
|
|
|
104
|
|
|
Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.
|
|
CENTENE CORPORATION
|
|
|
|
|
|
By:
|
/s/ MICHAEL F. NEIDORFF
|
|
Chairman, President 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:
|
July 28, 2020
|
|
/s/ MICHAEL F. NEIDORFF
|
|
|
Chairman, President 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:
|
July 28, 2020
|
|
/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:
|
July 28, 2020
|
|
/s/ MICHAEL F. NEIDORFF
|
|
|
Chairman, President 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:
|
July 28, 2020
|
|
/s/ JEFFREY A. SCHWANEKE
|
|
|
Executive Vice President and Chief Financial Officer
(principal financial officer)
|