01—Abstract
Summary
Summary of the 10-K filed February 22, 2021. Cited figures are marked; the original filing is the authoritative source.
Centene Corporation's (CNC) 2020 10-K filing highlights a year of significant growth and strategic acquisitions, most notably the acquisition of WellCare Health Plans, Inc. This move substantially expanded Centene's scale and market presence, particularly in the Medicare segment.
The company reported total revenues of $111.1 billiona, a 49% increase year-over-year, driven by strong membership growth across its government-sponsored programs, especially Medicaid, and the reinstatement of the health insurer fee. Despite facing operational adjustments due to the COVID-19 pandemic, Centene demonstrated resilience, with operating cash flows reaching $5.5 billion. The company also announced its intention to acquire Magellan Health in early 2021, further bolstering its capabilities in behavioral health, signaling a continued focus on strategic expansion and diversification.
Looking ahead, Centene is navigating a dynamic healthcare landscape marked by evolving regulations and market trends. The company's financial health remains robust, supported by strong operating cash flows and a diversified business model.
Key areas of focus include integrating recent acquisitions, managing medical costs effectively, and adapting to regulatory changes. The company's proactive approach to managing its business, coupled with strategic investments, positions it to continue its growth trajectory in serving government-sponsored and commercial healthcare programs.
02—Key points
Key Highlights
- Centene reported substantial growth in 2020, with total revenues reaching $111.1 billion, a 49% increase year-over-year, primarily driven by the acquisition of WellCare and strong membership growth.
- Managed care membership grew significantly to 25.5 million by year-end 2020, a 67% increase from the previous year, largely due to the WellCare acquisition and increased Medicaid enrollment driven by the COVID-19 pandemic.
- The company reported operating cash flows of $5.5 billion for 2020, indicating strong operational cash generation.
- Centene announced its definitive agreement to acquire Magellan Health for approximately $2.2 billion, aiming to enhance its behavioral health capabilities.
- Despite the COVID-19 pandemic, Centene maintained a focus on managing medical costs, with the Health Benefits Ratio (HBR) decreasing slightly to 86.2% in 2020 from 87.3% in 2019.
- Diluted Earnings Per Share (EPS) was $3.12 for 2020, while Adjusted Diluted EPS was $5.00, showing an improvement from $4.42 in 2019, excluding certain items.
- The company continued its share repurchase program, demonstrating a commitment to returning value to shareholders.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Centene Corp kept $0.02.
- Revenue$111.11B100.0%
- Cost of revenue−$3.30B3.0%
- Gross profit$107.81B97.0%
- Operating costs−$104.73B94.3%
- Operating income$3.08B2.8%
- Interest, other & tax−$1.27B1.1%
- Net income$1.81B1.6%
Where FY2020 revenue went
$111.11B- Other operating costs: $95.35B, 86% of revenue
- Net income: $1.81B, 1.6% of revenue
- Cost of revenue: $3.30B, 3.0% of revenue
- SG&A: $9.38B, 8.4% of revenue
- Interest, other & tax: $1.27B, 1.1% of revenue
Kept 1.6% as net incomeNet income $1.81B · 1.6%Interest, other & tax $1.27B · 1.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 22, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $111.11B$74.64B | +48.9% |
| Cost of Revenue | $3.30B$2.46B | +34.0% |
| Gross Profit | $107.81B$72.17B | +49.4% |
| SG&A Expenses | $9.38B$6.53B | +43.6% |
| Operating Expenses | $108.03B$72.86B | +48.3% |
| Operating Income | $3.08B$1.78B | +73.0% |
| Interest Expense | $728.00M$412.00M | +76.7% |
| Net Income | $1.81B$1.32B | +36.9% |
| EPS (Basic) | $3.17$3.19 | −0.6% |
| EPS (Diluted) | $3.12$3.14 | −0.6% |
| Shares Outstanding (Basic) | 570.72M413.49M | +38.0% |
| Shares Outstanding (Diluted) | 579.13M420.41M | +37.8% |
05—Questions
Frequently Asked Questions
What was Centene's financial performance like in 2020, especially regarding revenue and earnings?
In 2020, Centene experienced significant growth, with total revenues reaching $111.1 billion, a 49% increase year-over-year. This growth was primarily driven by the acquisition of WellCare and increased membership in Medicaid and the Health Insurance Marketplace. Diluted EPS was $3.12, and Adjusted Diluted EPS was $5.00, showing an increase from the previous year.
How did the WellCare acquisition impact Centene's business and financial results?
The acquisition of WellCare, completed in January 2020 for $19.6 billion, was a major driver of Centene's 2020 performance. It significantly expanded the company's Medicare platform and Medicaid offerings, contributing substantially to the 49% increase in total revenues and the 67% growth in managed care membership.
What is Centene's strategy for future growth?
Centene's growth strategy focuses on strategic acquisitions, expanding its presence in government-sponsored programs (Medicaid and Medicare), and enhancing its specialty services. The announced acquisition of Magellan Health further emphasizes this strategy, aiming to broaden its behavioral health capabilities. The company also continues to invest in technology and expand its market reach.
What are the key risks facing Centene according to the filing?
Key risks identified include potential adverse impacts from public health pandemics like COVID-19, risks associated with its Medicare programs (such as Star ratings), failure to accurately estimate and manage medical expenses, changes in government funding and regulations, increased competition, and integration challenges with acquisitions. The company also noted the potential impact of cybersecurity threats and regulatory changes related to data privacy.
How is Centene managing its debt and capital resources?
Centene reported total debt of $16.8 billion as of December 31, 2020. The company generated strong operating cash flows of $5.5 billion in 2020, which it uses to fund operations and strategic initiatives. It also maintains access to a revolving credit facility and has a stock repurchase program in place. The company indicated its intent to fund the Magellan Health acquisition primarily through debt financing.
06—Continue