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CENTENE CORP 8-K Report, Financial Results (Feb 6, 2024)

Reports
Earnings & Results·Exhibits & Filings
Filing Date
Filed February 6, 2024
Period End
February 6, 2024
Security
CNC
In the record · 2016–202610-K1110-Q328-K217

CNC filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 217 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Jul ’18Jul ’18
  2. Material agreement8-K · Oct ’20Oct ’20
  3. Leadership change8-K · Nov ’22Nov ’22
  4. Leadership change8-K · Aug ’26Aug ’26

01—Abstract

Summary

Summary of the 8-K filed February 6, 2024. Cited figures are marked; the original filing is the authoritative source.

Centene Corporation (NYSE: CNC) reported fourth-quarter and full-year 2023 results on February 6, 2024.

Full-year GAAP diluted EPS was $4.95a and adjusted diluted EPS was $6.68, up more than 15% from $5.78 in 2022. Fourth-quarter adjusted diluted EPS was $0.45, versus GAAP diluted EPS of $0.08. Full-year premium and service revenues rose 3% to $140.1 billion, driven by 88% growth in the Marketplace business, while the health benefits ratio held flat at 87.7%.

The fourth quarter was weaker, with the HBR rising to 89.5% due largely to a $250 millionb premium deficiency reserve tied to the 2024 Medicare Advantage business, and the SG&A ratio increasing to 9.9% on Marketplace mix and restructuring costs. Cash flow from operations was strong at $8.1 billion for the year, or 3.0x net earnings. The company repurchased $1.6 billion of stock in 2023 and had $5.2 billion remaining under its authorization as of February 6, 2024.

Total debt was $17.8 billionc, and days in claims payable was stable at 54. Management completed the divestitures of Circle Health and Operose Health, which concluded the international portfolio review, and raised 2024 premium and service revenue guidance by $2.5 billion to $134.5–$137.5 billion on stronger Marketplace enrollment. The company reiterated a 2024 adjusted diluted EPS floor of greater than $6.70.

The main investor takeaway is that the 2023 adjusted earnings beat and the reiterated 2024 EPS floor support the outlook, but the quarterly margin pressure from Medicare Advantage pricing and the higher-SG&A Marketplace mix are the key risks to monitor. Investors should also note that the company's GAAP results include significant impairments and divestiture-related items that are excluded from adjusted measures.

02—Key points

Key Highlights

  1. Full-year 2023 adjusted diluted EPS of $6.68, up over 15% from $5.78 in 2022; GAAP diluted EPS was $4.95.
  2. Q4 2023 adjusted diluted EPS of $0.45 versus $0.86 in Q4 2022; GAAP diluted EPS was $0.08.
  3. Premium and service revenues grew 3% to $140.1 billion for 2023, led by 88% Marketplace membership growth; total Marketplace membership reached 3.9 million at year-end.
  4. Q4 health benefits ratio rose to 89.5% (from 88.7%) on a $250 million premium deficiency reserve for 2024 Medicare Advantage; full-year HBR was flat at 87.7%.
  5. Operating cash flow of $8.1 billion for 2023, and $1.6 billion in share repurchases with $5.2 billion remaining authorization.
  6. 2024 premium and service revenue guidance raised by $2.5 billion to $134.5–$137.5 billion; adjusted EPS floor of greater than $6.70 reiterated.
  7. Completed the divestitures of Circle Health (January 2024) and Operose Health (December 2023), concluding the international portfolio review.

03—Questions

Frequently Asked Questions

  1. How did Centene perform in 2023 on an adjusted basis?

    Centene reported 2023 adjusted diluted EPS of $6.68, up from $5.78 in 2022, and GAAP diluted EPS of $4.95. Adjusted results exclude amortization of acquired intangibles, acquisition and divestiture costs, and other items such as impairments and restructuring charges.

  2. Why did fourth-quarter margins weaken?

    The Q4 HBR increased to 89.5% from 88.7%, primarily because of a $250 million premium deficiency reserve recorded for the 2024 Medicare Advantage business. The SG&A ratio also rose to 9.9%, reflecting Marketplace growth, which carries a higher SG&A ratio than Medicaid, and Medicare distribution costs.

  3. What is the 2024 outlook?

    Centene raised its 2024 premium and service revenue guidance by $2.5 billion to a range of $134.5–$137.5 billion, reflecting stronger-than-expected Marketplace open enrollment. It reiterated a 2024 adjusted diluted EPS floor of greater than $6.70.

  4. How strong is the company's cash generation and capital return?

    Operating cash flow was $8.1 billion for 2023, about 3.0 times GAAP net earnings. The company repurchased 22.9 million shares for $1.6 billion during the year and had $5.2 billion remaining under its repurchase program as of February 6, 2024.

  5. What balance sheet and portfolio changes should investors note?

    Total debt was $17.8 billion at year-end, and the debt-to-capitalization ratio was 40.7%. Centene completed the Circle Health and Operose Health divestitures, which were tied to large 2023 impairments (Circle Health $292 million and Operose Health $140 million for the full year).

04—Continue

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