ST. LOUIS, Feb. 7, 2017 /PRNewswire/ -- Centene Corporation (NYSE: CNC) announced today its financial results for the fourth quarter and year ended December 31, 2016. The following discussions, with the exception of cash flow information, are in the context of continuing operations.
For the fourth quarter and year ended December 31, 2016, the Company reported diluted earnings per share (EPS) of $1.45 and $3.41, respectively, and Adjusted Diluted EPS of $1.19 and $4.43, respectively. A summary of diluted EPS is highlighted below:
Q4 | Full Year | ||||||
GAAP diluted EPS | $ | 1.45 | $ | 3.41 | |||
Health Net acquisition related expenses | 0.03 | 0.98 | |||||
Amortization of acquired intangible assets | 0.20 | 0.57 | |||||
California minimum medical loss ratio change (1) | (0.71) | (0.76) | |||||
Charitable contribution (2) | 0.18 | 0.19 | |||||
Debt extinguishment (3) | 0.04 | 0.04 | |||||
Adjusted Diluted EPS | $ | 1.19 | $ | 4.43 | |||
(1) | A favorable impact associated with the retroactive change in the minimum medical loss ratio (MLR) calculation under California’s Medicaid expansion program, $195 million of which relates to periods prior to 2016 for the legacy Centene business and prior to the acquisition date for the legacy Health Net business. |
(2) | In connection with the additional revenue associated with the California minimum MLR change, the Company committed to a charitable contribution to its foundation of $50 million in the fourth quarter of 2016. |
(3) | Additional expense of $11 million associated with the early redemption of the 5.75% Senior Notes due 2017 and the Health Net Inc. 6.375% Senior Notes due 2017. |
Included in diluted EPS and Adjusted Diluted EPS for the fourth quarter and year ended December 31, 2016 are $0.03 and $0.05 diluted EPS benefits, respectively, related to the early adoption of the stock-based compensation accounting standard, as well as the incorporation of retirement provisions in our stock-based compensation agreements.
In summary, the 2016 fourth quarter and full year results were as follows:
2016 Results | |||||||
Q4 | Full Year | ||||||
Total revenues (in millions) | $ | 11,911 | $ | 40,607 | |||
Health benefits ratio | 84.8 | % | 86.5 | % | |||
Selling, general & administrative expense ratio | 10.0 | % | 9.8 | % | |||
Selling, general & administrative expense ratio, excluding Health Net acquisition related expenses | 9.9 | % | 9.2 | % | |||
GAAP diluted EPS | $ | 1.45 | $ | 3.41 | |||
Adjusted Diluted EPS | $ | 1.19 | $ | 4.43 | |||
Total cash flow provided by operations (in millions) | $ | 1,596 | $ | 1,851 | |||
Michael F. Neidorff, Centene’s Chairman and Chief Executive Officer, stated, “Our strong fourth quarter results give us favorable operating momentum heading into 2017, and the successful integration of Health Net bolsters this with greater scale and product diversity.”
Fourth Quarter and Full Year Highlights
- December 31, 2016 managed care membership of 11.4 million, an increase of 6.3 million members, or 124% over 2015.
- Total revenues for the fourth quarter of 2016 of $11.9 billion, representing 89% growth compared to the fourth quarter of 2015 and $40.6 billion for the full year 2016, representing 78% growth year over year.
- Health benefits ratio (HBR) of 84.8% for the fourth quarter of 2016 compared to 88.0% in the fourth quarter of 2015 and 86.5% for the full year 2016 compared to 88.9% for the full year 2015.
- Selling, general and administrative (SG&A) expense ratio of 10.0% for the fourth quarter of 2016 compared to 8.7% for the fourth quarter of 2015. SG&A expense ratio of 9.8% for the full year 2016 compared to 8.5% for the full year 2015.
- SG&A expense ratio excluding Health Net acquisition related expenses of 9.9% for the fourth quarter of 2016 compared to 8.6% for the fourth quarter of 2015. SG&A expense ratio excluding Health Net acquisition related expenses of 9.2% for the full year 2016 compared to 8.3% for the full year 2015.
- Operating cash flow of $1.6 billion and $1.9 billion for the fourth quarter and full year of 2016, respectively, representing 3.3x net earnings for the full year of 2016.
- Diluted EPS for the fourth quarter of 2016 of $1.45 compared to $0.91 for the fourth quarter of 2015. Diluted EPS for the full year of 2016 of $3.41 compared to $2.89 for the full year of 2015.
- Adjusted Diluted EPS for the fourth quarter of 2016 of $1.19 compared to $0.97 for the fourth quarter of 2015. Adjusted Diluted EPS for the full year of 2016 of $4.43 compared to $3.14 for the full year of 2015.
Other Events
- In January 2017, we signed a joint venture agreement with the North Carolina Medical Society, working in conjunction with the North Carolina Community Health Center, to collaborate on a patient-focused approach to Medicaid under the reform plan enacted in the State of North Carolina. The newly created health plan, Carolina Complete Health, was created to establish, organize and operate a physician-led health plan to provide Medicaid managed care services in North Carolina.
- In January 2017, our Pennsylvania subsidiary, Pennsylvania Health & Wellness, was selected by the Pennsylvania Department of Human Services to serve Medicaid recipients enrolled in the HealthChoices program in three zones. Pending regulatory approval and successful completion of a readiness review, the three-year agreement is expected to commence June 1, 2017.
- In January 2017, our Indiana subsidiary, Managed Health Services, began operating under a contract with the Indiana Family & Social Services Administration to provide risk-based managed care services for enrollees in the Healthy Indiana Plan and Hoosier Healthwise programs.
- In January 2017, our Nebraska subsidiary, Nebraska Total Care, began operating under a contract with the Nebraska Department of Health and Human Services’ Division of Medicaid and Long Term Care as one of three managed care organizations to administer its new Heritage Health Program for Medicaid, ABD, CHIP, Foster Care and LTC enrollees.
- In November 2016, our subsidiary, Peach State Health Plan, was awarded a statewide managed care contract to continue serving members enrolled in the Georgia Families managed care program, including PeachCare for Kids and Planning for Healthy Babies. Through the new contract, Peach State Health Plan will be one of four managed care organizations providing medical, behavioral, dental and vision health benefits for its members. The contract is expected to become effective July 1, 2017.
- In November 2016, our Nevada subsidiary, Silver Summit Health Plan, was selected to serve Medicaid recipients enrolled in Nevada’s Medicaid managed care program. The contract is expected to commence on July 1, 2017, pending regulatory approval and successful completion of a readiness review.
- In November 2016, the Company issued $1.2 billion in aggregate principal amount of 4.75% Senior Notes due 2025. The Company used the net proceeds of the offering to redeem its 5.75% Senior Notes due 2017 and Health Net Inc.'s 6.375% Senior Notes due 2017, to repay amounts outstanding under its Revolving Credit Facility, to pay related fees and expenses and for general corporate purposes.
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