10-KPeriod: FY2006

CENTENE CORP Annual Report, Year Ended Dec 31, 2006

Filed February 23, 2007For Securities:CNC

Summary

Centene Corporation's (CNC) 2006 10-K filing reveals a company experiencing significant growth in its Medicaid Managed Care segment, driven by a 45% increase in membership to 1.3 million. This expansion was fueled by new state contracts and strategic acquisitions, contributing to total revenues of $2.3 billion. Despite this growth, the company reported a net loss for the year, largely due to a substantial $81.1 million goodwill impairment charge related to the exit from Kansas and Missouri markets, along with associated exit costs. The company's strategy centers on increasing penetration in existing state markets, diversifying its business lines through acquisitions like US Script (a pharmacy benefits manager) and OptiCare (managed vision), and addressing emerging state needs. Centene emphasizes a localized approach to member services supported by a centralized infrastructure, aiming for efficient operations and quality care delivery within government-subsidized healthcare programs.

Key Highlights

  • 1Total revenues reached $2.3 billion in 2006, marking a 51.3% increase from the previous year, driven by strong membership growth in the Medicaid Managed Care segment.
  • 2Medicaid Managed Care membership grew by 45% to approximately 1.3 million as of December 31, 2006, indicating successful expansion into new and existing state markets.
  • 3The company reported a net loss of $43.6 million for 2006, primarily due to an $81.1 million goodwill impairment charge related to exiting the Kansas and Missouri markets.
  • 4Centene actively pursued diversification by acquiring specialty service businesses, including US Script (pharmacy benefits management) and OptiCare (managed vision) in 2006.
  • 5The company's strategy focuses on expanding its presence in current states, diversifying services, and leveraging its localized approach with centralized support for operational efficiency.
  • 6Despite the net loss, operating cash flow remained robust at $195.0 million, demonstrating the company's ability to generate cash from its core operations.

Frequently Asked Questions

Centene Corporation operates primarily in two segments: Medicaid Managed Care, providing health plan coverage through government-subsidized programs like Medicaid, SCHIP, and SSI, and Specialty Services, offering services such as behavioral health, disease management, and pharmacy benefits management.

Revenue growth was primarily driven by an increase in membership within the Medicaid Managed Care segment, supported by premium rate increases and the expansion of services through acquisitions and new state contracts. The Specialty Services segment also contributed significantly, boosted by the acquisition of US Script.

The net loss was primarily attributable to a significant non-cash goodwill impairment charge of $81.1 million, recognized due to the decision to exit the Kansas and Missouri markets. Additional exit costs also contributed to the loss.

Centene's strategy includes diversifying its business lines to reduce reliance on any single government program, maintaining strong relationships with state regulators, and focusing on operational efficiency. The company also closely monitors legislative and regulatory changes impacting Medicaid and SCHIP programs.