01—Abstract
Summary
Summary of the 10-K filed February 18, 2020. Cited figures are marked; the original filing is the authoritative source.
Centene Corporation's 2019 10-K filing highlights a year of significant growth and strategic expansion, culminating in the transformative acquisition of WellCare Health Plans in January 2020.
The company demonstrated robust top-line growth, with total revenues increasing by 24% to $74.6 billiona, driven by membership gains across its Medicaid, Medicare, and Health Insurance Marketplace offerings, as well as strategic acquisitions like Fidelis Care. Centene's focus on serving government-sponsored healthcare programs and its localized, yet centralized, operational approach have proven effective in expanding its market reach and member base to 15.2 million by year-end 2019. The company's financial performance showed a 47% increase in net earnings attributable to Centene, reaching $1.3 billion, with diluted EPS rising to $3.14.
Despite an increase in the health benefits ratio (HBR) to 87.3%b primarily due to normalized margins in the Health Insurance Marketplace business, the SG&A expense ratio improved to 9.3%, reflecting operational efficiencies. The significant debt incurred for the WellCare acquisition indicates a strategic shift towards a larger, more integrated healthcare enterprise poised to capture a greater share of the government-sponsored healthcare market.
02—Key points
Key Highlights
- Total revenues grew by 24% to $74.6 billion in 2019, driven by a 8% increase in managed care membership to 15.2 million.
- Net earnings attributable to Centene Corporation increased by 47% to $1.3 billion, with diluted EPS reaching $3.14.
- The company completed the acquisition of WellCare Health Plans for approximately $19.6 billion in January 2020, significantly expanding its scale and capabilities, particularly in the Medicare market.
- Health benefits ratio (HBR) was 87.3%, up from 85.9% in 2018, influenced by normalized margins in the Health Insurance Marketplace business.
- Selling, general and administrative (SG&A) expense ratio improved to 9.3% from 10.7% in 2018, partly due to lower acquisition-related expenses.
- Operating cash flows were strong at $1.5 billion, supporting the company's growth initiatives and strategic investments.
- Centene made significant investments in its growth strategy, including expanding Health Insurance Marketplace offerings and acquisitions in various states and international markets.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Centene Corp kept $0.02.
- Revenue$74.64B100.0%
- Cost of revenue−$2.46B3.3%
- Gross profit$72.17B96.7%
- Operating costs−$70.39B94.3%
- Operating income$1.78B2.4%
- Interest, other & tax−$460.0M0.6%
- Net income$1.32B1.8%
Where FY2019 revenue went
$74.64B- Other operating costs: $63.86B, 86% of revenue
- Net income: $1.32B, 1.8% of revenue
- Cost of revenue: $2.46B, 3.3% of revenue
- SG&A: $6.53B, 8.8% of revenue
- Interest, other & tax: $460.0M, 0.6% of revenue
Kept 1.8% as net incomeNet income $1.32B · 1.8%Interest, other & tax $460.0M · 0.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 18, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $74.64B$60.12B | +24.2% |
| Cost of Revenue | $2.46B$2.39B | +3.3% |
| Gross Profit | $72.17B$57.73B | +25.0% |
| SG&A Expenses | $6.53B$6.04B | +8.1% |
| Operating Expenses | $72.86B$58.66B | +24.2% |
| Operating Income | $1.78B$1.46B | +22.2% |
| Interest Expense | $412.00M$343.00M | +20.1% |
| Net Income | $1.32B$900.00M | +46.8% |
| EPS (Basic) | $3.19$2.31 | +38.1% |
| EPS (Diluted) | $3.14$2.26 | +38.9% |
| Shares Outstanding (Basic) | 413.49M390.25M | +6.0% |
| Shares Outstanding (Diluted) | 420.41M398.51M | +5.5% |
05—Questions
Frequently Asked Questions
What was Centene's financial performance in 2019?
In 2019, Centene reported total revenues of $74.6 billion, a 24% increase from 2018. Net earnings attributable to Centene Corporation rose by 47% to $1.3 billion, and diluted earnings per share were $3.14. The company also saw a robust increase in its managed care membership, growing by 8% to 15.2 million members.
What is the significance of the WellCare acquisition?
The acquisition of WellCare Health Plans, Inc., valued at approximately $19.6 billion and completed in January 2020, is a major strategic move for Centene. It significantly enhances Centene's Medicare platform and further strengthens its Medicaid offerings, positioning the company as a leading provider of government-sponsored healthcare across a broader range of markets and product solutions.
How did Centene's operating expenses perform in 2019?
Centene's health benefits ratio (HBR) increased slightly to 87.3% in 2019, compared to 85.9% in 2018. This increase was primarily attributed to the normalization of margins in the Health Insurance Marketplace business and the suspension of the health insurer fee. However, the selling, general, and administrative (SG&A) expense ratio improved to 9.3% from 10.7% in 2018, largely due to a reduction in acquisition-related expenses and operational efficiencies.
What are the key risks and uncertainties facing Centene?
Centene's primary risks include reductions in government funding for healthcare programs like Medicaid and Medicare, changes in eligibility requirements, increased competition, potential regulatory changes (including those related to the Affordable Care Act), the ability to accurately estimate and manage medical costs, and the successful integration of acquired businesses like WellCare. The company also faces risks associated with data security and compliance with healthcare regulations.
06—Continue