CENTENE CORPORATION REPORTS THIRD QUARTER 2024 RESULTS
-- Diluted EPS of $1.36; Adjusted Diluted EPS of $1.62 --
-- Reaffirms 2024 Adjusted Diluted EPS Guidance Floor of Greater Than $6.80 --
Adjusted diluted EPS of $1.62 in the third quarter of 2024.
Premium and service revenues of $36.9 billion in the third quarter of 2024.
Membership increases of 22% in Marketplace and 49% in Medicare Prescription Drug Plans, compared to the third quarter of 2023.
Continued execution on capital deployment with $1.2 billion of share repurchases during the third quarter of 2024 and an additional $380 million in October, bringing full-year repurchases to $2.4 billion through October 2024.
ST. LOUIS, Oct. 25, 2024 /PRNewswire/ -- Centene Corporation (NYSE:CNC) ("the Company") announced today its financial results for the third quarter ended September 30, 2024. In summary, the 2024 third quarter results were as follows:
Total revenues (in millions)
$ 42,023
Premium and service revenues (in millions)
$ 36,899
Health benefits ratio
89.2 %
SG&A expense ratio
8.3 %
Adjusted SG&A expense ratio (1)
8.3 %
GAAP diluted EPS
$ 1.36
Adjusted diluted EPS (1)
$ 1.62
Total cash flow used in operations (in millions)
$ (978)
(1)
Represents a non-GAAP financial measure. A full reconciliation of the adjusted diluted earnings per share (EPS) and adjusted selling, general and administrative (SG&A) expenses is shown in the Non-GAAP Financial Presentation section of this release.
"Our diversified portfolio has allowed us to successfully navigate a dynamic landscape in the quarter. At the same time, we delivered on fundamentals that carry positive implications for Centene's multi-year earnings trajectory, including notable RFP wins, Medicare Stars improvements and ongoing operational efficiencies," said Chief Executive Officer of Centene, Sarah M. London. "We remain confident in our full year outlook for adjusted diluted EPS of greater than $6.80 and are well positioned to capture the powerful, long-term growth opportunities we see in government-sponsored healthcare."
Other Events
In October, the Centers for Medicare and Medicaid Services (CMS) issued 2025 Medicare Advantage Star Ratings. Based on the data, Centene has approximately 46% of its Medicare Advantage membership enrolled in plans rated 3.5 stars or higher, compared to approximately 23% in the prior year. This represents meaningful progress and is consistent with internal expectations despite higher than industry-anticipated cut point changes. Additionally, we are appealing CMS' scoring of our TTY (Text-to-Voice teletypewriter services for the hearing impaired) measure which, if successful, could further increase our percentage of Medicare Advantage members enrolled in plans rated 3.5 stars or higher.
In October, Centene's subsidiary, Meridian Health Plan of Michigan, was selected by the Michigan Department of Health and Human Services to provide highly integrated Medicare and Medicaid services for dually eligible Michiganders through a Highly Integrated Dual Eligible Special Needs Plan. The plan is expected to launch on January 1, 2026 and is a seven-year term, with three optional one-year extensions, for a total of 10 possible contract years.
In October, Centene completed the sale of Collaborative Health Systems, a management services organization.
In September, Centene's subsidiary, Health Net Community Solutions, was selected by the California Department of Health Care Services to provide managed dental health care services to beneficiaries of Medi-Cal, the State's Medicaid program, in Los Angeles and Sacramento counties. The new 54-month contract is expected to take effect on July 1, 2025.
In September, Centene's subsidiary, Iowa Total Care, was selected by the Iowa Department of Health and Human Services to continue providing Medicaid managed care services under the Iowa Health Link program. The contract is expected to begin July 1, 2025 and is a four-year term, with an optional two-year extension, for a total of six possible contract years.
In August, Centene's subsidiary, PA Health and Wellness, was selected by the Pennsylvania Department of Human Services to continue to administer Pennsylvania's Community HealthChoices program, the Medicaid managed care program that covers adults who are dually eligible for Medicare and Medicaid or who qualify to receive Medicaid long-term services and supports due to a need for the level of care provided in a nursing facility. The contract is expected to begin April 1, 2025 and is a five-year term, with three optional one-year extensions, for a total of eight possible contract years.
In July, the State of Florida announced plans to execute agreements with eight health plans, including Centene's subsidiary, Sunshine Health. The Statewide Medicaid Managed Care program includes integrated Managed Medical Assistance, Long-Term Care services, Serious Mental Illness, Child Welfare and HIV specialty products. The contract is expected to begin on February 1, 2025.
Awards & Community Engagement
In the aftermath of Hurricanes Helene and Milton, Centene's first priority was to conduct outreach to assess the safety of our employees and members. Centene, the Centene Foundation and our health plans then worked to provide on-the-ground support in affected areas in the forms of medical supplies and over-the-counter medications to community health centers and provider practices, hard-to-find essential supplies and monetary donations to approximately two dozen non-profit organizations across Florida, Georgia, North Carolina, South Carolina and Tennessee.
In September, the Centene Foundation announced grants to both The Jed Foundation and the Washington State Opportunity Scholarship in order to expand services to protect the emotional health of teens and young adults and increase access to healthcare careers for students.
In September, WellCare of North Carolina, a Medicaid health plan and a Centene subsidiary, announced a donation available to nine Family Justice Centers across North Carolina. These funds will support Camp HOPE America, a week-long overnight camp specially designed for youth impacted by domestic violence and trauma.
In September, Centene was recognized by Fortune magazine as one of the Best Workplaces in Health Care 2024™ for the third consecutive year in the Large Company category.
In August, Newsweek named Centene among America's Greatest Workplaces for Parents & Families 2024, and U.S. Veterans Magazine included Centene as a Top Veteran-Friendly Employer.
Membership
The following table sets forth membership by line of business:
September 30,
2024
2023
Traditional Medicaid (1)
11,478,600
13,470,900
High Acuity Medicaid (2)
1,590,200
1,769,600
Total Medicaid
13,068,800
15,240,500
Commercial Marketplace
4,501,300
3,681,600
Commercial Group
426,600
424,200
Total Commercial
4,927,900
4,105,800
Medicare (3)
1,129,900
1,310,600
Medicare PDP
6,766,400
4,539,800
Total at-risk membership
25,893,000
25,196,700
TRICARE eligibles
2,747,000
2,773,200
Total
28,640,000
27,969,900
(1)
Membership includes Temporary Assistance for Needy Families (TANF), Medicaid Expansion, Children's Health Insurance Program (CHIP), Foster Care and Behavioral Health.
(2)
Membership includes Aged, Blind, or Disabled (ABD), Intellectual and Developmental Disabilities (IDD), Long-Term Services and Supports (LTSS) and Medicare-Medicaid Plans (MMP) Duals.
(3)
Membership includes Medicare Advantage and Medicare Supplement.
Premium and Service Revenues
The following table sets forth supplemental revenue information ($ in millions):
Three Months Ended September 30,
2024
2023
% Change
Medicaid
$ 21,316
$ 21,619
(1) %
Commercial
8,693
6,453
35 %
Medicare (1)
5,643
5,430
4 %
Other
1,247
1,465
(15) %
Total premium and service revenues
$ 36,899
$ 34,967
6 %
(1)
Medicare includes Medicare Advantage, Medicare Supplement, Dual Eligible Special Needs Plans (D-SNPs) and Medicare Prescription Drug Plan (PDP).
Statement of Operations: Three Months Ended September 30, 2024
For the third quarter of 2024, premium and service revenues increased 6% to $36.9 billion from $35.0 billion in the comparable period of 2023. The increase was primarily driven by Medicaid rate increases and membership growth in the Marketplace business due to strong product positioning as well as overall market growth, partially offset by lower Medicaid membership primarily due to redeterminations and recent divestitures in the Other segment.
Health benefits ratio (HBR) of 89.2% for the third quarter of 2024 represents an increase from 87.0% in the comparable period in 2023. The increase was primarily driven by higher acuity in Medicaid resulting from the redetermination process as we continue to work with states to match rates with acuity. The increase was also driven by Medicare Star rating impacts.
The SG&A expense ratio was 8.3% for the third quarter of 2024, compared to 8.7% in the third quarter of 2023. The adjusted SG&A expense ratio was 8.3% for the third quarter of 2024, compared to 8.6% in the third quarter of 2023. The decreases were primarily driven by the divestiture of Circle Health Group (Circle Health), which operated at a higher SG&A expense ratio, and continued leveraging of expenses over higher revenues. The decreases were partially offset by growth in the Marketplace business, which operates at a meaningfully higher SG&A expense ratio as compared to Medicaid.
The effective tax rate was 22.9% for the third quarter of 2024, compared to 38.2% in the third quarter of 2023. The effective tax rate for the third quarter of 2023 reflects the tax effects of impairments as well as the then pending divestiture of Circle Health. For the third quarter of 2024, our effective tax rate on adjusted earnings was 23.3%, compared to 24.2% in the third quarter of 2023.
For the third quarter of 2024, adjusted diluted EPS of $1.62, including a $0.10 net benefit associated with a Marketplace premium tax benefit originally expected in the fourth quarter of 2024.
Cash flow used in operations for the third quarter of 2024 was $1.0 billion, primarily driven by the settlement of Marketplace risk adjustment payables for the 2023 benefit year, Medicaid rate increases not yet collected and an increase in Part D receivables, partially offset by net earnings.
Balance Sheet
At September 30, 2024, the Company had cash, investments and restricted deposits of $36.7 billion and maintained $266 million of cash and cash equivalents in its unregulated entities. Medical claims liabilities totaled $18.0 billion. The Company's days in claims payable was 51 days, a decrease of three days as compared to the second quarter of 2024, and a decrease of two days as compared to the third quarter of 2023. Approximately two days of the sequential quarter decrease was driven by the impact of state directed payments. Total debt was $17.6 billion, which included no borrowings on the $2.0 billion Revolving Credit Facility at quarter end.
During the third quarter of 2024, the Company repurchased 16.3 million shares for $1.2 billion. In October 2024, the Company repurchased an additional 5.2 million shares for $380 million. As of October 25, 2024, $2.8 billion remains available under the Company's stock repurchase program.
Outlook
The Company is updating its 2024 GAAP diluted EPS guidance floor to greater than $5.92 and reaffirming its 2024 adjusted diluted EPS guidance floor of greater than $6.80. A full reconciliation of adjusted diluted EPS is shown in the Non-GAAP Financial Presentation section of this release.
The Company's updated annual guidance for 2024 is as follows and will be discussed further on our conference call:
Full Year 2024
GAAP diluted EPS
> $5.92
Adjusted diluted EPS (1)
> $6.80
(1) A full reconciliation of adjusted diluted EPS is shown in the Non-GAAP Financial Presentation section of this release.
Full Year 2024
Low
High
Total revenues (in billions)
$ 159.0
$ 161.0
Premium and service revenues (in billions)
$ 143.5
$ 144.5
HBR
88.3 %
88.5 %
SG&A expense ratio
8.5 %
8.7 %
Adjusted SG&A expense ratio (2)
8.5 %
8.7 %
Effective tax rate
22.9 %
23.9 %
Adjusted effective tax rate (3)
24.0 %
24.5 %
Diluted shares outstanding (in millions)
522.2
525.2
(2) Represents a non-GAAP financial measure. Adjusted SG&A expense ratio excludes acquisition and divestiture related expenses and severance costs due to a restructuring of approximately $85 million to $95 million.
(3) Represents a non-GAAP financial measure. Adjusted effective tax rate excludes income tax effects of adjustments of approximately $210 million to $220 million.
Conference Call
As previously announced, the Company will host a conference call Friday, October 25, 2024, at 8:30 a.m. ET to review the financial results for the third quarter ended September 30, 2024.
Investors and other interested parties are invited to listen to the conference call by dialing 1-877-883-0383 in the U.S. and Canada; +1-412-902-6506 from abroad, including the following Elite Entry Number: 1267976 to expedite caller registration; or via a live, audio webcast on the Company's website at www.centene.com, under the Investors section.
A webcast replay will be available for on-demand listening shortly following the completion of the call for the next 12 months or until 11:59 p.m. ET on Friday, October 24, 2025, at the aforementioned URL. In addition, a digital audio playback will be available until 9 a.m. ET on Friday, November 1, 2024, by dialing 1-877-344-7529 in the U.S., 1-855-669-9658 in Canada, or +1-412-317-0088 from abroad, and entering access code 1668275.
Non-GAAP Financial Presentation
The Company is providing certain non-GAAP financial measures in this release as the Company believes that these figures are helpful in allowing investors to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently across periods. The Company uses the presented non-GAAP financial measures internally in evaluating the Company's performance and for planning purposes, by allowing management to focus on period-to-period changes in the Company's core business operations, and in determining employee incentive compensation. Therefore, the Company believes that this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The Company strongly encourages investors to review its consolidated financial statements and publicly filed reports in their entirety and cautions investors that the non-GAAP financial measures used by the Company may differ from similar measures used by other companies, even when similar terms are used to identify such measures. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.
The Company believes the presentation of non-GAAP financial measures that excludes amortization of acquired intangible assets, acquisition and divestiture related expenses, as well as other items, allows investors to develop a more meaningful understanding of the Company's core performance over time.
The tables below provide reconciliations of non-GAAP items ($ in millions, except per share data):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
GAAP net earnings attributable to Centene
$ 713
$ 469
$ 3,022
$ 2,657
Amortization of acquired intangible assets
173
180
519
542
Acquisition and divestiture related expenses
8
16
75
52
Other adjustments (1)
—
472
(97)
345
Income tax effects of adjustments (2)
(45)
(55)
(171)
(190)
Adjusted net earnings
$ 849
$ 1,082
$ 3,348
$ 3,406
(1) Other adjustments include the following pre-tax items:
2024:
(a) for the nine months ended September 30, 2024: net gain on the previously reported divestiture of Magellan Specialty Health due to the achievement of contingent consideration and finalization of working capital adjustments of $83 million, net gain on the sale of property of $21 million, gain on the previously reported divestiture of Circle Health of $20 million, Health Net Federal Services asset impairment due to the 2024 final ruling on the TRICARE Managed Care Support Contract of $14 million, severance costs due to a restructuring of $13 million, an additional loss on the divestiture of our Spanish and Central European businesses of $7 million and gain on the previously reported divestiture of HealthSmart due to the finalization of working capital adjustments of $7 million.
2023:
(a) for the three months ended September 30, 2023: Circle Health impairment of $251 million, Operose Health impairment of $142 million, real estate impairments of $47 million, severance costs due to a restructuring of $22 million and a reduction to the previously recorded gain on the sale of Magellan Rx of $10 million;
(b) for the nine months ended September 30, 2023: Circle Health impairment of $251 million, Operose Health impairment of $142 million, real estate impairments of $92 million, gain on the sale of Apixio of $91 million, gain on the sale of Magellan Specialty Health of $79 million, severance costs due to a restructuring of $22 million, gain on the previously reported divestiture of Centurion of $15 million, an additional loss on the divestiture of our Spanish and Central European businesses of $13 million and a reduction to the previously recorded gain on the sale of Magellan Rx of $10 million.
(2) The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. The three and nine months ended September 30, 2024, include a tax benefit of $2 million related to tax adjustments on previously reported divestitures. The nine months ended September 30, 2023, includes a one-time income tax benefit of $69 million resulting from the distribution of long-term stock awards to the estate of the Company's former CEO.
Three Months Ended
September 30,
Nine Months Ended
September 30,
Annual Guidance
December 31, 2024
2024
2023
2024
