Centene Corporation Reports 2006 Fourth Quarter Results

Centene Corporation today announced its financial results for the quarter and year ended December 31, 2006.

Fourth Quarter Summary

• Year-end Medicaid Managed Care membership of 1.3 million, including 138,900 Kansas and Missouri members.
• Membership growth of 44.8% over the 2005 fourth quarter.
• Revenues of $697.4 million, a 64.8% increase over the 2005 fourth quarter.
• Earnings per diluted share of $0.41, excluding $7.4 million (pre-tax) FirstGuard exit costs, compared to $0.31 in the 2005 fourth quarter.
• Health Benefits Ratio (HBR) for Centene’s Medicaid and SCHIP populations, which reflects medical costs as a percent of premium revenues, of 82.1%.
• Medicaid Managed Care G&A expense ratio of 12.7% and Specialty Services G&A ratio of 14.4%.
• Operating cash flows of $70.5 million.
• Days in claims payable of 46.4.

Other Events

• Commenced operations in the 16 new counties awarded in the Northwest market of Ohio.
• Commenced Arizona Long-Term Care contract effective October 1, 2006.
• Awarded an Ohio Medicaid ABD contract in all four regions in which we submitted a bid.
• Received notice of tentative contract award of the Texas Comprehensive Health Care for Foster Care, subject to contract finalization.
• Announced definitive agreement to divest the assets of FirstGuard Health Plan, Inc., our Missouri health plan. The sale was completed effective February 1, 2007.
• Exited Kansas Medicaid market.

Michael F. Neidorff, Centene’s Chairman and Chief Executive Officer, stated, "Our fourth quarter results were consistent with our expectations, with strong growth in Georgia, Texas, and Ohio. Our overall Medicaid and SCHIP HBR was 82.1%, as guided. We saw a decline in our Indiana membership as we initiated re-contracting with our physician network and due to the state’s decision to implement a one-month freeze on assigning members into new plans. Our Indiana plan continues to require focused attention on pharmacy costs; we believe that we have begun to favorably impact the medical cost trend in that state. In addition, the company-wide medical management initiatives that we put in place earlier this year are giving us added visibility of trends and we continue to evaluate further steps to more effectively control and manage these costs.

"We are pleased with the performance of our Georgia business which has exceeded our expectations, reaching 308,800 members at year-end. While we faced some specific challenges regarding provider claims due to a substantial number of doctors signing contracts at the last minute, we are paying current claims in a timely fashion and expect to have the backlog for the older claims cleared up by the end of February.

"We were disappointed with the loss of our contract to serve the state of Kansas’ Medicaid recipients. We have managed a smooth transition of our membership and have recognized all of the significant financial charges in 2006. Additionally, we sold our Missouri health plan assets to Healthcare USA when the state continued its unfavorable posture towards Medicaid; this transaction closed on February 1, 2007. We expect to incur minimal additional exit costs in 2007.

"In Ohio, the state commenced its Aged, Blind or Disabled (ABD) roll-out in the Northeast and Southwest regions on January 1, and February 1, respectively; we expect the East Central and Northwest regions to begin enrolling members in March and April. Our contract to serve Texas Star Plus members commenced on February 1, a slight delay from the original January 1 start date. We look forward to serving the health needs of these recipients.

"We’ve closed the fourth quarter and year with the knowledge and confidence that we have taken considerable steps to address and resolve our medical management issues and look forward to pursuing the growth opportunities that exist in our core business and specialty companies with the goal of covering more of the nation’s 50 million uninsured Americans," concluded Neidorff.

The complete Fourth Quarter Results, complete with graphs and math, can be found here.