10-KPeriod: FY2007

CENTENE CORP Annual Report, Year Ended Dec 31, 2007

Filed February 25, 2008For Securities:CNC

Summary

Centene Corporation, a multi-line healthcare enterprise, reported significant growth in its 2007 fiscal year, with total revenues reaching $2.9 billion, a 48.8% increase over the prior year. This growth was primarily driven by strong performance in its Medicaid Managed Care segment, which experienced a 58.7% membership increase between December 31, 2005, and December 31, 2007, fueled by new contracts and strategic acquisitions in states like Georgia, Ohio, and Texas. The company also expanded its Specialty Services segment, contributing to revenue diversification. Financially, Centene demonstrated improved profitability from continuing operations, with net earnings rising 97.1% to $41.3 million in 2007. This was supported by disciplined expense management, with a focus on controlling the health benefits ratio (HBR) which stood at 83.2% for Medicaid and SCHIP. The company maintained a healthy operational cash flow of $202.2 million, underscoring its ability to fund growth and operations. Key strategic initiatives include further market penetration, business line diversification, and leveraging its established infrastructure for efficiency. Despite its growth, the company remains subject to significant regulatory oversight and faces ongoing risks associated with government funding, program changes, and competition.

Key Highlights

  • 1Centene Corporation reported a 48.8% year-over-year increase in total revenues to $2.9 billion for the fiscal year ended December 31, 2007.
  • 2Medicaid Managed Care membership grew by 58.7% between the end of 2005 and 2007, driven by expansion into new states and acquisitions.
  • 3Net earnings from continuing operations increased significantly by 97.1% to $41.3 million in 2007, indicating improved profitability.
  • 4The company generated substantial operating cash flow of $202.2 million in 2007, demonstrating strong cash generation capabilities.
  • 5Centene's strategy focuses on increasing penetration in existing markets, diversifying its business lines, and developing new state markets where Medicaid enrollment is mandated.
  • 6The company is subject to extensive regulation from state and federal governments, with significant risks related to changes in funding, program designs, and compliance requirements.
  • 7Acquisitions played a key role in growth, with notable additions in Specialty Services like US Script (PBM) and OptiCare (managed vision).

Frequently Asked Questions

Centene Corporation operates in two primary segments: Medicaid Managed Care, which provides health plan coverage through government-subsidized programs like Medicaid, SCHIP, and SSI, and Specialty Services, which offers services such as behavioral health, life and health management, and pharmacy benefits management to various organizations and state programs.

In 2007, Centene achieved total revenues of $2.9 billion, a nearly 49% increase from the prior year. Net earnings from continuing operations saw a significant rise of 97.1% to $41.3 million. The company also generated robust operating cash flow of $202.2 million.

Centene's growth strategies include increasing membership within existing state markets through various initiatives, diversifying its business lines by expanding specialty services, developing and acquiring operations in new states (particularly those with mandated Medicaid managed care), and leveraging its existing infrastructure to improve operational efficiencies.

Centene faces significant risks related to its heavily regulated environment, including potential reductions in government funding (Medicaid, SCHIP, SSI), changes in program designs, contract terminations or non-renewals by states, increased competition, difficulties in managing medical costs, and the need for effective integration of acquired businesses. Failure to comply with government regulations could also lead to penalties.