10-QPeriod: Q3 FY2002

CENTENE CORP Quarterly Report for Q3 Ended Sep 30, 2002

Filed October 28, 2002For Securities:CNC

Summary

Centene Corporation (CNC) reported significant growth in its third quarter and nine-month period ended September 30, 2002. Total revenues increased due to a substantial rise in membership across its Medicaid and SCHIP programs, driven by organic growth and strategic acquisitions. The company's financial performance benefited from a one-time dividend from an investment in a captive insurance company, which boosted other income significantly for both the quarter and the year-to-date period. While operational expenses, particularly medical services costs, also increased in line with membership growth, Centene demonstrated improved efficiency with a slight reduction in its general and administrative expense ratio. The company's balance sheet shows growth in long-term investments and a robust increase in stockholders' equity, largely due to a successful follow-on public offering in May 2002. Centene's liquidity remains sufficient, with substantial cash, cash equivalents, and investments on hand to fund operations and anticipated capital expenditures.

Key Highlights

  • 1Total revenues for the nine months ended September 30, 2002, increased by 35.4% to $319.4 million compared to the prior year, driven by membership growth and increased premium rates.
  • 2Net earnings attributable to common stockholders for the nine months ended September 30, 2002, were $18.8 million, a significant increase from $8.6 million in the same period of 2001.
  • 3Membership grew by 31.7% year-over-year, reaching 296,100 members, with notable increases in Wisconsin, Indiana, and Texas.
  • 4A one-time dividend of $5.1 million from a captive insurance investment substantially boosted 'Other Income,' contributing to the overall earnings increase.
  • 5The company successfully completed a follow-on public offering in May 2002, raising $10.3 million in net proceeds, which bolstered its capital position.
  • 6Centene is actively pursuing strategic acquisitions, including an agreement to acquire 80% of University Health Plans, Inc. (UHP) in New Jersey, which will expand its market reach.
  • 7The health benefits ratio remained stable at 82.2% for both the nine-month periods, indicating effective management of medical costs relative to premium revenues.

Frequently Asked Questions

Centene's revenue growth is primarily driven by an increase in membership across its Medicaid and SCHIP programs, fueled by both organic growth and strategic acquisitions. The company also benefits from increases in premium rates.

Centene acquired Bankers Reserve Life Insurance Company of Wisconsin for $3.5 million in March 2002. The company plans to use Bankers Reserve as a reinsurance company for its existing managed care Medicaid entities. While financial disclosures for its impact are excluded due to no significant continuing operations outside of run-off, it represents a strategic move to support core operations.

Centene's liquidity appears strong, with $65.9 million in cash, cash equivalents, and short-term investments at the end of the third quarter of 2002. The company also holds $77.0 million in long-term investments. Management expects these resources, along with cash from operations, to be sufficient to finance operations and capital expenditures for at least the next 12 months. The company also has a $25 million revolving credit facility in place.

Yes, Centene operates in a highly regulated environment. Key risks include potential reductions in Medicaid funding, termination or non-renewal of government contracts, changes in healthcare regulations that could increase costs or restrict growth, and the possibility of civil and criminal penalties for non-compliance with fraud and abuse laws, HIPAA, and other regulations. Compliance with new regulations may also require significant expenditures.