Why did operating cash flow decline so sharply in 2024?

Full-year 2024 operating cash flow was $154 million, versus $8.05 billion in 2023. The company cited timing of Part D receivables, higher state premium receivables tied to recent rate increases, pharmacy rebate remittance timing from its January 2024 transition to a new PBM, and a decrease in net risk adjustment payables. Management attributed the decline to working capital timing rather than earnings weakness, since net earnings were $3.3 billion.

Is the 2025 guidance raise driven by underlying improvement or by one-time items?

The $4.0 billion revenue increase reflects $1.5 billion from PDP annual enrollment outperformance, $1.0 billion from Medicare Advantage enrollment outperformance, and $1.5 billion of Medicaid premium from a behavioral health coverage change in one state contract. Revenue growth does not by itself improve margins. The EPS guidance floor of greater than $7.25 was reiterated rather than raised, so investors should focus on whether the added revenue carries comparable margins.

What is driving the rising health benefits ratio?

Medicaid acuity increased as states redetermined eligibility and members with higher needs remained enrolled, while rates lagged. Medicare Star rating impacts also pressured 2024 HBR. Partial offsets came from Marketplace margin improvement, lower Medicare Advantage premium deficiency reserve expenses, and a prior-year Marketplace CSR settlement. Q4 Medicaid HBR of 93.4% was a key pressure point.

How strong is Centene's balance sheet and capital return capacity?

At year-end 2024, the company had $35.5 billion of cash, investments and restricted deposits, of which $1.07 billion sat in unregulated entities, plus $14.1 billion of cash and equivalents. Total debt was $18.5 billion, and debt-to-capitalization was 41.2%, up from 40.7% a year earlier. With $2.2 billion remaining under the buyback authorization, capital return capacity remains, but the leverage ratio and weak operating cash flow may limit how aggressively it can be used.

Are there non-GAAP items investors should scrutinize?

Yes. Adjusted EPS excludes amortization of acquired intangibles (about $1.32 per share in 2024), acquisition and divestiture expenses, and other items such as divestiture gains, asset impairments and restructuring costs. Adjusted EPS of $7.17 was $0.29 higher than it would otherwise have been because of a prior-year CSR settlement. Investors should compare GAAP EPS of $6.31 alongside adjusted EPS and note that the 2025 GAAP guidance floor of greater than $6.19 sits meaningfully below the adjusted floor of greater than $7.25.

CNC 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed February 4, 2025. Cited figures are marked; the original filing is the authoritative source.

Centene Corporation (NYSE: CNC) reported fourth-quarter and full-year 2024 results on February 4, 2025.

Full-year GAAP diluted EPS was $6.31^a and adjusted diluted EPS was $7.17, up 7% from $6.68 in 2023. Q4 adjusted diluted EPS was $0.80, up from $0.45 a year earlier. Premium and service revenues grew 4% to $145.5 billion for the year, driven by Marketplace membership growth and Medicaid rate increases, partially offset by Medicaid redeterminations-related membership declines.

However, the health benefits ratio (HBR) rose to 88.3% from 87.7%, reflecting higher Medicaid acuity from the redetermination process. Full-year operating cash flow fell sharply to $154 million^b from $8.05 billion in 2023, largely due to Part D receivable timing, higher state premium receivables, and pharmacy rebate timing tied to the PBM transition. Capital deployment was significant: Centene repurchased $3.0 billion of stock in 2024 (42.0 million shares), with $2.2 billion remaining authorization as of February 4, 2025.

Total debt stood at $18.5 billion^c, including $950 million drawn on the $2.0 billion revolver, and debt-to-capitalization was 41.2% at year-end. Membership grew in Marketplace (12% year over year in Q4) and Medicare PDP (50%), while Traditional Medicaid declined by about 10%. Management raised 2025 premium and service revenue guidance by $4.0 billion to $158.0-$160.0 billion, citing PDP and Medicare Advantage annual enrollment outperformance and $1.5 billion of additional Medicaid revenue from a behavioral health program change.

It reiterated 2025 adjusted diluted EPS guidance of greater than $7.25^d and GAAP diluted EPS guidance of greater than $6.19. Investors should weigh the revenue upgrade and strong EPS against the weak cash flow, elevated Medicaid acuity, and the lower HBR trend. Note that the guidance is only effective as of the release date.

02—Key points

Key Highlights

FY2024 GAAP diluted EPS of $6.31 and adjusted diluted EPS of $7.17 (up 7% from $6.68); Q4 adjusted EPS of $0.80 vs. $0.45 in Q4 2023, which included a $0.29 net benefit from a prior-year Marketplace CSR settlement for the full year.
Premium and service revenues rose 4% to $145.5 billion for FY2024, with Commercial up 36% on Marketplace growth, while Medicaid declined 3% on redeterminations.
Health benefits ratio rose to 88.3% for FY2024 (from 87.7%), driven by higher Medicaid acuity; Q4 HBR was 89.6%, and Medicaid Q4 HBR reached 93.4%.
Operating cash flow collapsed to $154 million for FY2024 from $8.05 billion in 2023, driven by premium receivable growth, pharmacy rebate timing, and lower risk adjustment payables.
2025 premium and service revenue guidance raised by $4.0 billion to $158.0-$160.0 billion; adjusted diluted EPS guidance floor of greater than $7.25 reiterated.
Repurchased $3.0 billion of shares in 2024 with $2.2 billion remaining under the program; year-end debt-to-capitalization of 41.2%.
Medicare Advantage Star ratings improved: about 55% of MA membership is now in plans rated 3.5 stars or higher, versus about 23% a year earlier.

03—Questions

Frequently Asked Questions

Why did operating cash flow decline so sharply in 2024?
Full-year 2024 operating cash flow was $154 million, versus $8.05 billion in 2023. The company cited timing of Part D receivables, higher state premium receivables tied to recent rate increases, pharmacy rebate remittance timing from its January 2024 transition to a new PBM, and a decrease in net risk adjustment payables. Management attributed the decline to working capital timing rather than earnings weakness, since net earnings were $3.3 billion.
Is the 2025 guidance raise driven by underlying improvement or by one-time items?
The $4.0 billion revenue increase reflects $1.5 billion from PDP annual enrollment outperformance, $1.0 billion from Medicare Advantage enrollment outperformance, and $1.5 billion of Medicaid premium from a behavioral health coverage change in one state contract. Revenue growth does not by itself improve margins. The EPS guidance floor of greater than $7.25 was reiterated rather than raised, so investors should focus on whether the added revenue carries comparable margins.
What is driving the rising health benefits ratio?
Medicaid acuity increased as states redetermined eligibility and members with higher needs remained enrolled, while rates lagged. Medicare Star rating impacts also pressured 2024 HBR. Partial offsets came from Marketplace margin improvement, lower Medicare Advantage premium deficiency reserve expenses, and a prior-year Marketplace CSR settlement. Q4 Medicaid HBR of 93.4% was a key pressure point.
How strong is Centene's balance sheet and capital return capacity?
At year-end 2024, the company had $35.5 billion of cash, investments and restricted deposits, of which $1.07 billion sat in unregulated entities, plus $14.1 billion of cash and equivalents. Total debt was $18.5 billion, and debt-to-capitalization was 41.2%, up from 40.7% a year earlier. With $2.2 billion remaining under the buyback authorization, capital return capacity remains, but the leverage ratio and weak operating cash flow may limit how aggressively it can be used.
Are there non-GAAP items investors should scrutinize?
Yes. Adjusted EPS excludes amortization of acquired intangibles (about $1.32 per share in 2024), acquisition and divestiture expenses, and other items such as divestiture gains, asset impairments and restructuring costs. Adjusted EPS of $7.17 was $0.29 higher than it would otherwise have been because of a prior-year CSR settlement. Investors should compare GAAP EPS of $6.31 alongside adjusted EPS and note that the 2025 GAAP guidance floor of greater than $6.19 sits meaningfully below the adjusted floor of greater than $7.25.

04—Continue

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