10-KPeriod: FY2018

CENTENE CORP Annual Report, Year Ended Dec 31, 2018

Filed February 19, 2019For Securities:CNC

Summary

Centene Corporation's (CNC) 2018 10-K filing details a year of significant growth, primarily driven by the acquisition of Fidelis Care, which expanded its presence into New York State and significantly increased its membership and revenue. The company reported total revenues of $60.1 billion and net earnings of $900 million for the year ended December 31, 2018. Membership grew by 15% to 14.0 million. Key financial metrics show a health benefits ratio (HBR) of 85.9%, an improvement from the previous year, indicating better cost management. However, the selling, general and administrative (SG&A) expense ratio increased to 10.7%, largely due to acquisition-related costs. Centene's business is heavily reliant on government-sponsored programs like Medicaid and Medicare. The company highlights its expertise in these areas, its localized approach to member services, and its focus on quality and innovation as key competitive strengths. Significant risk factors include reductions in government funding, changes in eligibility requirements, and the ongoing regulatory landscape surrounding healthcare reform. The company also noted the successful integration of acquisitions and continued investment in technology as strategic priorities.

Financial Highlights

54 data points
Beta

Revenue

$60.12B

96.0% Gross Margin

Net Income

$900.00M

1.5% Net Margin

EPS (Diluted)

$2.26

Total Assets

$30.90B

Cash & Equivalents

$5.35B

Free Cash Flow

$559.00M

Financial Statements
Beta
Revenue$60.12B
Cost of Revenue$2.39B
Gross Profit$57.73B
SG&A Expenses$6.04B
Operating Expenses$58.66B
Operating Income$1.46B
Interest Expense$343.00M
Net Income$900.00M
EPS (Basic)$2.31
EPS (Diluted)$2.26
Shares Outstanding (Basic)390.25M
Shares Outstanding (Diluted)398.51M

Key Highlights

  • 1Acquisition of Fidelis Care significantly expanded Centene's geographic footprint and membership base.
  • 2Total revenues reached $60.1 billion, a 24% increase year-over-year, driven by the Fidelis Care acquisition and growth in the Health Insurance Marketplace.
  • 3Year-end membership grew by 15% to 14.0 million.
  • 4Health Benefits Ratio (HBR) improved to 85.9% from 87.3% in 2017, indicating better medical cost management.
  • 5SG&A expense ratio increased to 10.7% from 9.7% in 2017, primarily due to acquisition-related expenses.
  • 6Diluted EPS was $2.26, a slight decrease from $2.34 in 2017, impacted by acquisition costs.
  • 7Centene generated $1.2 billion in operating cash flow, demonstrating strong operational cash generation.

Frequently Asked Questions

The primary driver of Centene's growth in 2018 was the acquisition of Fidelis Care, which significantly expanded its membership and revenue, particularly in New York State. Growth in the Health Insurance Marketplace and other state-specific expansions also contributed.

Centene's health benefits ratio (HBR) improved to 85.9% in 2018, down from 87.3% in 2017, indicating a more efficient management of medical costs relative to premium revenues. However, the SG&A expense ratio increased due to acquisition-related expenses.

Key risks include reductions in government funding for programs like Medicaid and Medicare, changes in eligibility requirements, potential legislative or regulatory changes impacting healthcare, and competition. The company's heavy reliance on government contracts makes it susceptible to shifts in government policy and funding.

Centene's strategy focuses on continued growth through acquisitions, expansion into new markets and products, technological innovation, and enhancing its diversified business lines, particularly in government-sponsored programs. They also aim to integrate specialty services to complement their core managed care business.