10-KPeriod: FY2019

CENTENE CORP Annual Report, Year Ended Dec 31, 2019

Filed February 18, 2020For Securities:CNC

Summary

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 billion, 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% 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.

Financial Highlights

54 data points
Beta

Revenue

$74.64B

96.7% Gross Margin

Net Income

$1.32B

1.8% Net Margin

EPS (Diluted)

$3.14

Total Assets

$40.99B

Cash & Equivalents

$12.13B

Free Cash Flow

$753.00M

Financial Statements
Beta
Revenue$74.64B
Cost of Revenue$2.46B
Gross Profit$72.17B
SG&A Expenses$6.53B
Operating Expenses$72.86B
Operating Income$1.78B
Interest Expense$412.00M
Net Income$1.32B
EPS (Basic)$3.19
EPS (Diluted)$3.14
Shares Outstanding (Basic)413.49M
Shares Outstanding (Diluted)420.41M

Key Highlights

  • 1Total revenues grew by 24% to $74.6 billion in 2019, driven by a 8% increase in managed care membership to 15.2 million.
  • 2Net earnings attributable to Centene Corporation increased by 47% to $1.3 billion, with diluted EPS reaching $3.14.
  • 3The 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.
  • 4Health benefits ratio (HBR) was 87.3%, up from 85.9% in 2018, influenced by normalized margins in the Health Insurance Marketplace business.
  • 5Selling, general and administrative (SG&A) expense ratio improved to 9.3% from 10.7% in 2018, partly due to lower acquisition-related expenses.
  • 6Operating cash flows were strong at $1.5 billion, supporting the company's growth initiatives and strategic investments.
  • 7Centene made significant investments in its growth strategy, including expanding Health Insurance Marketplace offerings and acquisitions in various states and international markets.

Frequently Asked Questions

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.

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.

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.

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.