Centene Corporation third-quarter 2009 net earnings increases to $22.7

Centene CorporationOct 27 2009

Centene Corporation (NYSE: CNC) today announced its net earnings from continuing operations for the quarter ended September 30, 2009 were $22.7 million, or $0.51 per diluted share, compared to $18.1 million, or $0.41 per diluted share in the third quarter of 2008. The results of operations for our New Jersey health plan, University Health Plans, are classified as discontinued operations. The discussions below, with the exception of cash flow information, are in the context of continuing operations and all financial ratios are calculated using revenues excluding premium taxes and investment income.

Third Quarter Highlights

• Quarter-end managed care at-risk membership of 1,386,400, an increase of 215,300 lives year over year.
• Premium and Service revenues of $987.3 million, representing 18.1% year over year growth.
• Health Benefits Ratio (HBR) of 83.7%.
• General and Administrative (G&A) expense ratio of 13.2%.
• Cash flow from operations of $114.9 million.
• Days in claims payable of 47.1.
• Diluted earnings per share from continuing operations of $0.51, compared to $0.41 in the third quarter of 2008. Earnings per diluted share in 2008 included a $0.06 loss on investments from the Primary Reserve fund.

Other Events

• On August 31, 2009, Centene announced that the State of Massachusetts had accepted its proposal to manage healthcare services for the Commonwealth Bridge Program through its subsidiary, CeltiCare Health Plan of Massachusetts, effective October 1, 2009, through June 30, 2010.
• Effective September 1, 2009, Centene converted 62,100 members in Florida from Access Health Solutions to at-risk under our Sunshine State Health Plan.
• On October 24, 2009, Centene announced a settlement agreement with Amerigroup Corporation associated with the sale of our New Jersey health plan. Pursuant to the settlement agreement, the parties will move forward with the transaction, which is subject to regulatory approval and expected to be completed in the first quarter of 2010.
• In August 2009, Jason Harrold, president and CEO of OptiCare Managed Vision, Inc. was appointed to Senior Vice President of Centene’s Specialty Business Unit. Mr. Harrold assumed the leadership role over the specialty companies previously held by William Scheffel.
• On October 26, 2009 our Board of Directors approved an extension of our stock repurchase program.

Michael F. Neidorff, Centene’s Chairman and Chief Executive Officer, stated, “We are pleased with the ability of our team to deliver solid results across Centene's products and markets in a challenging economic environment.”

The following table depicts membership in Centene’s managed care organizations, by state, at September 30, 2009 and 2008:

The following table depicts membership in Centene’s managed care organizations, by member category, at September 30, 2009 and 2008:

Statement of Operations

• For the third quarter of 2009, Premium and Service Revenues increased 18.1% to $987.3 million from $835.7 million in the third quarter of 2008. The increase was primarily driven by premium rate increases and membership growth in all states, including the commencement of our Arizona acute care contract in October 2008, the consolidation of Access and conversion of members to our at-risk plan in Florida.
• The consolidated HBR, which reflects medical costs as a percent of premium revenues, was 83.7%. A reconciliation of the change in HBR from the prior year same period and from the immediately preceding quarter is presented below:

The increase in the third quarter of 2009 over the comparable period in 2008 was due to the March 1, 2009 rate decrease for our CHIP/Perinate product in Texas which brought the HBR more in line with our normal range and the impact of additional costs related to the flu. We also experienced improvements in our ABD product, particularly in Ohio, which was mostly offset by the impact of changes in rates and benefit structures in other markets. Sequentially, the increase in the HBR reflects the impact of additional costs related to the flu along with the effect of reserving at higher rates for new markets and receiving pass-through payments which increase the HBR ratio.

• Consolidated G&A expense as a percent of premium and service revenues was 13.2% in the third quarter of 2009, a decrease from 14.2% in the third quarter of 2008. The reduction in the G&A ratio between years reflects improved leveraging of our costs over a higher revenue base and the impact of additional revenue from new business (Arizona Acute Care, Florida and South Carolina).
• Earnings per diluted share from continuing operations were $0.51, compared to $0.41 in the third quarter of 2008. Earnings per diluted share in 2008 included a $0.06 loss on investments from the Primary Reserve fund.

Balance Sheet and Cash Flow

At September 30, 2009, the Company had cash and investments of $939.0 million, including $911.4 million held by its regulated entities and $27.6 million held by its unregulated entities. Medical claims liabilities totaled $411.0 million, representing 47.1 days in claims payable, a decrease of 0.4 days from June 30, 2009. Total debt was $277.3 million and debt to capitalization was 31.9%. Year to date cash flow from operations was $177.0 million.

A reconciliation of the Company’s change in days in claims payable from the immediately preceding quarter-end is presented below:

Outlook

The table below depicts the Company’s annual guidance from continuing operations for 2009:

Stock Repurchase Authorization

On October 26, 2009, the Company’s Board of Directors extended the Company’s stock repurchase program. The program authorizes the repurchase of up to 4,000,000 shares of the Company’s common stock from time to time on the open market or through privately negotiated transactions. No duration has been placed on the repurchase program and we reserve the right to discontinue the repurchase program at any time.