01—Abstract
Summary
Summary of the 10-K filed February 19, 2013. Cited figures are marked; the original filing is the authoritative source.
Centene Corporation, a diversified healthcare enterprise, reported significant membership growth in 2012, increasing its at-risk managed care membership by 41%a to 2.56 million.
This expansion was driven by new contracts and geographic expansions in states like Texas, Louisiana, and Washington. Despite a substantial revenue increase of 59% to $8.2 billionb, the company reported a net loss of $11.3 million for the year, largely due to increased medical costs, particularly in its Kentucky health plan which incurred a premium deficiency reserve of $41.5 million.
The company also recorded a $28 millionc impairment loss related to its individual health insurance business (Celtic). While growth was strong, the high health benefits ratio (91.6%) and operational challenges in specific markets present areas of concern for investors.
02—Key points
Key Highlights
- Centene Corporation experienced substantial membership growth in 2012, with a 41% increase in at-risk managed care membership, reaching 2.56 million.
- Premium and service revenues grew significantly by 59% to $8.2 billion in 2012, reflecting expansion in key states and new contracts.
- The company reported a net loss of $11.3 million for the year ended December 31, 2012, a significant decrease from the $111.2 million net earning in 2011.
- A substantial increase in the Health Benefits Ratio (HBR) to 91.6% from 85.2% in 2011 was driven by higher medical costs, including a premium deficiency reserve in Kentucky and increased flu costs.
- The company incurred a $28 million impairment loss related to goodwill and intangible assets in its Specialty Services segment, specifically within its individual health insurance business (Celtic).
- Centene's strategy focuses on expanding its Medicaid Managed Care business and diversifying with Specialty Services, including acquisitions like AcariaHealth.
- The company operates in a highly regulated environment, with a substantial portion of its revenue derived from state contracts for Medicaid, CHIP, and ABD programs.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 19, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $8.11B$5.21B | +55.6% |
| Operating Expenses | $8.00B$5.01B | +59.8% |
| Operating Income | $108.00M$203.80M | −47.0% |
| Interest Expense | $20.00M$20.32M | −1.6% |
| Net Income | $2.00M$111.22M | −98.2% |
| EPS (Basic) | $0.01$0.56 | −98.2% |
| EPS (Diluted) | $0.01$0.53 | −98.1% |
| Shares Outstanding (Basic) | 206.04M200.80M | +2.6% |
| Shares Outstanding (Diluted) | 214.86M209.90M | +2.4% |
05—Questions
Frequently Asked Questions
What is Centene Corporation's primary business and target market?
Centene Corporation is a diversified, multi-line healthcare enterprise that provides programs and services primarily to under-insured and uninsured individuals. Its core business segments are Medicaid Managed Care and Specialty Services, focusing on serving individuals through government-subsidized programs like Medicaid, CHIP, and ABD.
What were the key financial results for Centene Corporation in 2012?
For the year ended December 31, 2012, Centene reported premium and service revenues of $8.2 billion, a 59% increase from the prior year. However, the company incurred a net loss of $11.3 million, a significant shift from the $111.2 million net earning in 2011. This was largely due to a higher health benefits ratio (91.6%) driven by increased medical costs and a $28 million impairment loss.
What factors contributed to Centene's significant membership and revenue growth in 2012?
Centene's growth was fueled by new contract awards and geographic expansions in several states, including Kentucky, Louisiana, Mississippi, Missouri, Texas, and Washington. The company also benefited from organic membership growth within its existing markets, leading to a 41% increase in its at-risk managed care membership.
What are the main risks highlighted by Centene in this filing?
Key risks include potential reductions in government funding for Medicaid, CHIP, and ABD programs, changes in government regulations, the possibility of state contract terminations or non-renewals, increased competition, and the inability to accurately predict and manage medical expenses. The company also notes risks related to its investment portfolio and the effectiveness of its acquisition strategy.
06—Continue