10-QPeriod: Q3 FY2008

CENTENE CORP Quarterly Report for Q3 Ended Sep 30, 2008

Filed October 28, 2008For Securities:CNC

Summary

Centene Corporation (CNC) reported its third-quarter and nine-month results for the period ending September 30, 2008. The company demonstrated revenue growth, driven by increased membership in its Medicaid Managed Care segment and contributions from its Specialty Services segment, bolstered by the acquisition of Celtic Insurance Company. Despite revenue increases, net earnings for the nine-month period showed a decline compared to the previous year, largely due to a significant impact from discontinued operations in the prior year. However, earnings from continuing operations showed a strong increase. Financially, the company saw an increase in total assets and total liabilities. Operating cash flows remained robust, although slightly down year-over-year due to the timing of certain state revenue receipts. The company also continued its share repurchase program. Management highlighted membership growth in key states like Texas and Indiana and strategic initiatives to improve profitability, while also acknowledging the ongoing challenges and risks associated with regulatory changes, healthcare cost inflation, and competition within the managed care industry.

Key Highlights

  • 1Total revenues increased by 19.6% for the three months ended September 30, 2008, and 20.2% for the nine months ended September 30, 2008, compared to the prior year periods.
  • 2Net earnings from continuing operations showed substantial growth, up 10.9% for the quarter and 54.2% for the nine months.
  • 3Medicaid Managed Care membership grew by 8.1% year-over-year, with significant increases in Texas and Indiana.
  • 4The acquisition of Celtic Insurance Company on July 1, 2008, contributed to the growth in the Specialty Services segment.
  • 5A $5.2 million loss on investments related to the Reserve Primary money market fund impacted third-quarter results, although the company expects to recover 95% of these investments.
  • 6The company maintained compliance with regulatory capital requirements, with aggregate statutory capital and surplus exceeding minimum requirements.
  • 7The United States Court of Appeals for the Eight Circuit upheld the dismissal of the class action lawsuits filed against the company.

Frequently Asked Questions

Centene's revenue growth was primarily driven by an increase in membership within its Medicaid Managed Care segment, particularly in states like Texas and Indiana. Additionally, the Specialty Services segment contributed significantly, boosted by the recent acquisition of Celtic Insurance Company and growth in behavioral health and long-term care services.

The acquisition of Celtic Insurance Company, effective July 1, 2008, was integrated into the Specialty Services segment. It contributed to the growth of this segment and influenced the overall financial results, including impacting the General and Administrative expense ratio and the Health Benefits Ratio.

Centene experienced a $5.2 million loss related to its investment in the Reserve Primary money market fund due to its holdings of securities from Lehman Brothers. However, the company expects to recover 95% of its investment in this fund, indicating a partial mitigation of the loss.

Centene finances its operations through operating cash flows and borrowings under its revolving credit facility. The company reported positive operating cash flows, although slightly decreased year-over-year due to timing of state revenue receipts. The company also has a $300 million Revolving Credit Agreement with significant availability and is in compliance with its covenants.