Centene Corporation (NYSE: CNC) today announced its financial results for the quarter ended March 31, 2011. The discussions below, with the exception of cash flow information, are in the context of continuing operations and all financial ratios exclude premium taxes.
First Quarter Highlights
- Quarter-end managed care at-risk membership of 1,542,500, an increase of 71,200 members, or 4.8% year over year.
- Premium and Service Revenues of $1.2 billion, representing 15.4% year over year growth.
- Health Benefits Ratio of 83.0%, compared to 84.0% in the prior year.
- General and Administrative expense ratio of 13.8%, compared to 13.3% in the prior year.
- Cash flow from operations of $94.0 million, or 4.1 times net earnings.
- Diluted earnings per share from continuing operations of $0.46 (which does not include earnings of $0.07 per diluted share as a result of the delay in the recognition of our Mississippi contract discussed below), compared to $0.41 in the prior year.
In January 2011, we began operating in Mississippi through the Mississippi Coordinated Access Network (MississippiCan) program, serving 33,100 members at March 31, 2011. While the plan has been operating since January 1, 2011 and we have received monthly premium payments and paid claims, the contract remains subject to CMS approval. Accordingly, we did not recognize revenue of $54.5 million and associated medical costs, which delayed the recognition of earnings of approximately $0.07 per diluted share. General and administrative expenses related to the Mississippi operations were recognized in our consolidated statement of operations. Upon CMS approval, the revenues, medical costs and related earnings from our Mississippi operations will be recognized in our consolidated statement of operations in the period final approval is obtained, retroactive to January 1, 2011.
Other Events
- In February 2011, we began operating under 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.
- In March 2011, Standard & Poor's raised its counterparty credit and senior unsecured debt ratings on Centene Corporation to BB from BB-.
- In April 2011, CeltiCare Health Plan of Massachusetts, Inc. announced the renewal of its contract with the Commonwealth of Massachusetts to serve Commonwealth Care members, effective July 1, 2011. CeltiCare will continue to be one of the lowest-cost health plan options for low-income, working adults (up to 300% of the federal poverty level) enrolled in the Commonwealth Care program.
Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "Our continued focus on fundamentals and enhanced systems capabilities drove solid first quarter performance and a favorable start in a year of opportunity."
Statement of Operations: Three Months Ended March 31, 2011
- For the first quarter of 2011, Premium and Service Revenues increased 15.4% to $1,179.2 million from $1,022.2 million in the first quarter of 2010. 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.
- Consolidated HBR of 83.0% for the first quarter of 2011 represents a decrease of 1.0% from the comparable period in 2010. The year over year improvement in HBR is due to rate increases and lower utilization levels in 2011. Consolidated HBR decreased 0.3% sequentially from the fourth quarter of 2010.
- Consolidated G&A expense as a percent of premium and service revenues was 13.8% in the first quarter of 2011, an increase from 13.3% in the first quarter of 2010. The 2011 G&A ratio reflects an increase of 0.6% as a result of including general and administrative expenses for Mississippi but not recording the Mississippi premium revenue discussed above.
- Earnings from continuing operations increased to $39.1 million in 2011 from $29.6 million in 2010, or 32.0% year over year. Net earnings from continuing operations were $23.7 million, or $0.46 per diluted share in 2011, compared to $20.1 million, or $0.41 per diluted share in the first quarter of 2010.
Balance Sheet and Cash Flow
At March 31, 2011, the Company had cash and investments of $1,128.0 million, including $1,096.3 million held by its regulated entities and $31.7 million held by its unregulated entities. Medical claims liabilities totaled $471.7 million, representing 44.4 days in claims payable. Total debt was $305.4 million and debt to capitalization was 21.4% at March 31, 2011 excluding the $79.6 million non-recourse mortgage note. Cash flows from operations were $94.0 million, or 4.1 times net earnings.
During the first quarter of 2011, we continued to experience increased electronic claims submissions and auto-adjudication of claims which reduced the average time from claims incurred to claims paid by 0.6 days. Reduced utilization and the related absence of claims payable due to average completion time decreased days in claims payable by 0.3 days. Days in claims payable was also reduced by 0.3 days as a result of the timing of pharmacy claims payments. As we continue to experience increasing claims auto-adjudication (5% increase from the fourth quarter 2010 to the first quarter 2011) and EDI submission rates, our targeted range for days in claims payable is under review.