01—Abstract
Summary
Summary of the 10-K filed February 19, 2019. Cited figures are marked; the original filing is the authoritative source.
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 billiona 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%b, 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.
02—Key points
Key Highlights
- Acquisition of Fidelis Care significantly expanded Centene's geographic footprint and membership base.
- Total revenues reached $60.1 billion, a 24% increase year-over-year, driven by the Fidelis Care acquisition and growth in the Health Insurance Marketplace.
- Year-end membership grew by 15% to 14.0 million.
- Health Benefits Ratio (HBR) improved to 85.9% from 87.3% in 2017, indicating better medical cost management.
- SG&A expense ratio increased to 10.7% from 9.7% in 2017, primarily due to acquisition-related expenses.
- Diluted EPS was $2.26, a slight decrease from $2.34 in 2017, impacted by acquisition costs.
- Centene generated $1.2 billion in operating cash flow, demonstrating strong operational cash generation.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Centene Corp kept $0.01.
- Revenue$60.12B100.0%
- Cost of revenue−$2.39B4.0%
- Gross profit$57.73B96.0%
- Operating costs−$56.27B93.6%
- Operating income$1.46B2.4%
- Interest, other & tax−$558.0M0.9%
- Net income$900.0M1.5%
Where FY2018 revenue went
$60.12B- Other operating costs: $50.23B, 84% of revenue
- Net income: $900.0M, 1.5% of revenue
- Cost of revenue: $2.39B, 4.0% of revenue
- SG&A: $6.04B, 10% of revenue
- Interest, other & tax: $558.0M, 0.9% of revenue
Kept 1.5% as net incomeNet income $900.0M · 1.5%Interest, other & tax $558.0M · 0.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 19, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $60.12B$48.38B | +24.3% |
| Cost of Revenue | $2.39B$1.85B | +29.2% |
| Gross Profit | $57.73B$46.53B | +24.1% |
| SG&A Expenses | $6.04B$4.45B | +35.9% |
| Operating Expenses | $58.66B$47.18B | +24.3% |
| Operating Income | $1.46B$1.20B | +21.6% |
| Interest Expense | $343.00M$255.00M | +34.5% |
| Net Income | $900.00M$828.00M | +8.7% |
| EPS (Basic) | $2.31$2.40 | −3.7% |
| EPS (Diluted) | $2.26$2.34 | −3.4% |
| Shares Outstanding (Basic) | 390.25M344.85M | +13.2% |
| Shares Outstanding (Diluted) | 398.51M353.40M | +12.8% |
05—Questions
Frequently Asked Questions
What was the primary driver of Centene's growth in 2018?
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.
How did Centene manage its costs in 2018?
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.
What are the main risks facing Centene?
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.
What is Centene's strategy for future growth?
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.
06—Continue