10-QPeriod: Q1 FY2002

CENTENE CORP Quarterly Report for Q1 Ended Mar 31, 2002

Filed April 29, 2002For Securities:CNC

Summary

Centene Corporation's Q1 2002 report indicates robust revenue growth driven by a 21.6% increase in membership across its key states (Wisconsin, Indiana, and Texas). This expansion has led to a significant rise in premium revenues, which more than offset the increase in medical services costs, resulting in improved operating income and net earnings. The company's focus on managing its health benefits ratio, which saw a slight improvement, and its general and administrative expenses ratio, which also improved, demonstrates effective cost control amidst growth. Financially, Centene ended the quarter with a healthy increase in cash and cash equivalents and a positive working capital position. The company also highlighted a commitment for a $25 million revolving line of credit, which is expected to be finalized in Q2 2002, providing additional financial flexibility. While the company is navigating a lower interest rate environment impacting investment income, its core managed care operations are showing strong performance and expansion, positioning it for continued growth.

Key Highlights

  • 1Revenue increased by 36.2% to $95.7 million in Q1 2002 compared to Q1 2001, primarily driven by a 21.6% increase in membership.
  • 2Net earnings grew to $4.3 million in Q1 2002 from $2.18 million in Q1 2001, demonstrating significant profitability improvement.
  • 3The health benefits ratio improved slightly to 82.5% in Q1 2002 from 83.4% in Q1 2001, indicating better management of medical costs relative to premiums.
  • 4The general and administrative expenses ratio improved to 11.0% in Q1 2002 from 12.6% in Q1 2001, showing improved operational efficiency and economies of scale.
  • 5Cash and cash equivalents increased to $91.7 million as of March 31, 2002, up from $88.9 million at the end of 2001, reflecting positive cash flow generation.
  • 6Centene acquired Bankers Reserve Life Insurance Company of Wisconsin for $3.4 million, expanding its operational footprint.
  • 7The company secured a commitment for a $25 million revolving line of credit, expected to close in Q2 2002, to enhance liquidity and financial flexibility.

Frequently Asked Questions

The primary driver of Centene's revenue growth is a significant increase in membership, which rose by 21.6% from March 31, 2001, to March 31, 2002. This membership growth, across states like Wisconsin, Indiana, and Texas, has led to higher premium revenues.

Centene is effectively managing its medical costs, as evidenced by a slight improvement in its health benefits ratio to 82.5% in Q1 2002 from 83.4% in Q1 2001. This suggests that the increase in premium revenues is outpacing the rise in medical services costs.

Centene's liquidity position is solid, with cash and cash equivalents increasing to $91.7 million as of March 31, 2002. Furthermore, the company has secured a commitment for a $25 million revolving line of credit, which is expected to be finalized in the second quarter of 2002, to provide additional financial flexibility.

Centene is involved in a legal proceeding in Indiana related to the insolvency of Maxicare, its former subcontractor. The company is seeking approximately $4.7 million it believes is owed, while Maxicare has filed a counterclaim seeking to recover $2.0 million previously paid to Centene. A trial is scheduled for June 19, 2002, and Centene plans to vigorously pursue its claims.