Centene Corporation Reports 2010 Fourth Quarter and Full Year Earnings

ST. LOUIS, Feb. 8, 2011 /PRNewswire/ -- Centene Corporation (NYSE: CNC) today announced its financial results for the quarter and year ended December 31, 2010. The discussions below, with the exception of cash flow information, are in the context of continuing operations and all financial ratios exclude premium taxes.

Fourth Quarter Highlights

• Quarter-end managed care at-risk membership of 1,533,500, an increase of 75,300 members, or 5.2% year over year.
• Premium and Service Revenues of $1,129.5 million, representing 7.5% year over year growth.
• Health Benefits Ratio of 83.3%, compared to 83.9% in the prior year.
• General and Administrative expense ratio of 13.0%, compared to 12.7% in the prior year.
• Cash flow from operations of $194.6 million.
• Days in claims payable of 45.6.
• Diluted earnings per share from continuing operations of $0.50 (which includes the dilution from the stock offering in early 2010), compared to $0.53 in the prior year.
• Debt to capitalization of 29.3%, or 23.9% excluding the $80.0 million non-recourse mortgage note.

Other Events

• During the fourth quarter of 2010, we completed the conversion of approximately 22,500 Florida members from Access Health Solutions LLC to our subsidiary, Sunshine State Health Plan, on an at-risk basis. Additionally, in December 2010, we completed the acquisition of Citrus Health Care, Inc., a Florida Medicaid and Long-term Care health plan. We served 194,900 at-risk members in Florida as of December 31, 2010.
• In December 2010, we refinanced the construction loan related to our corporate headquarters development with an $80 million non-recourse mortgage loan. In January 2011, we refinanced our $300 million Revolving Credit Facility with a new $350 million unsecured Revolving Credit Facility.
• In December 2010, Cenpatico Behavioral Health of Arizona began operating under an expanded contract to manage behavioral healthcare services in an additional four counties.
• In December 2010, one of our highly regarded health programs, Start Smart for Your Baby, was the recipient of the URAC/GKEN International Health Promotion Award for Community Health. Start Smart for Your Baby also received a gold award at the 2010 Web Health Awards for its audio book and a merit award for its podcasts.
• In January 2011, Magnolia Health Plan began operating under a new contract in Mississippi to provide managed care services to Medicaid recipients through the Mississippi Coordinated Access Network (MississippiCAN) Program.
• In January 2011, we entered into an agreement with Pima Health Systems in Arizona to administer their long-term care program on a non-risk basis.
• In February 2011, Superior HealthPlan began operating under an additional STAR+PLUS ABD contract in Texas in the Dallas service area.

Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "Our team's coordinated and consistent efforts produced solid financial and operational performance in 2010, setting the stage for continued success in 2011."

The following table depicts membership in Centene's managed care organizations, by state, at December 31, 2010 and 2009:

The following table depicts membership in Centene's managed care organizations, by member category, at December 31, 2010 and 2009:

Statement of Operations: Three Months Ended December 31, 2010

• For the fourth quarter of 2010, Premium and Service Revenues increased 7.5% to $1,129.5 million from $1,050.8 million in the fourth quarter of 2009. The increase was primarily driven by membership growth resulting from acquisitions in Florida and South Carolina, conversion of membership in Florida from Access to at-risk under Sunshine State Health Plan, as well as premium rate increases in 2010. This increase was moderated by the removal of pharmacy service in two states in 2010. These pharmacy carve outs had the effect of reducing 2010 fourth quarter revenue by approximately $52 million.
• Consolidated HBR of 83.3% for the fourth quarter of 2010 represents a decrease of 0.6% from the comparable period in 2009. The year over year improvement in HBR is due to rate increases, decreased costs associated with the flu and better performance in our Florida health plan. Consolidated HBR decreased 0.9% sequentially from the third quarter of 2010. The improvement in HBR was due to the impact of rate increases in several markets and improvements in our Florida health plan.
• Consolidated G&A expense as a percent of premium and service revenues was 13.0% in the fourth quarter of 2010, an increase from 12.7% in the fourth quarter of 2009. The increase in the G&A ratio between years reflects increased business expansion costs, including Mississippi, Dallas STAR+PLUS and Illinois.
• Earnings from continuing operations increased to $45.5 million in 2010 from $37.8 million in 2009, or 20.4% year over year. Net earnings from continuing operations were $25.5 million, or $0.50 per diluted share in 2010 (which includes the dilution from the stock offering in early 2010), compared to $23.7 million, or $0.53 per diluted share in the fourth quarter of 2009.

Statement of Operations: Year Ended December 31, 2010

• For the year ended December 31, 2010, Premium and Service Revenues increased 10.5% to $4.3 billion in 2010 from $3.9 billion in 2009. This reflects a 13.6% increase in member months, offset by reduced revenue