10-KPeriod: FY2020

CENTENE CORP Annual Report, Year Ended Dec 31, 2020

Filed February 22, 2021For Securities:CNC

Summary

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 billion, 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.

Financial Highlights

54 data points
Beta

Revenue

$111.11B

97.0% Gross Margin

Net Income

$1.81B

1.6% Net Margin

EPS (Diluted)

$3.12

Total Assets

$68.72B

Cash & Equivalents

$10.96B

Free Cash Flow

$4.63B

Financial Statements
Beta
Revenue$111.11B
Cost of Revenue$3.30B
Gross Profit$107.81B
SG&A Expenses$9.38B
Operating Expenses$108.03B
Operating Income$3.08B
Interest Expense$728.00M
Net Income$1.81B
EPS (Basic)$3.17
EPS (Diluted)$3.12
Shares Outstanding (Basic)570.72M
Shares Outstanding (Diluted)579.13M

Key Highlights

  • 1Centene 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.
  • 2Managed 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.
  • 3The company reported operating cash flows of $5.5 billion for 2020, indicating strong operational cash generation.
  • 4Centene announced its definitive agreement to acquire Magellan Health for approximately $2.2 billion, aiming to enhance its behavioral health capabilities.
  • 5Despite 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.
  • 6Diluted 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.
  • 7The company continued its share repurchase program, demonstrating a commitment to returning value to shareholders.

Frequently Asked Questions

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.

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.

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.

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.

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.