Centene Corp 10-Q for FY2024 Q2

Centene Corp (CNC)

10-Q 2024-07-26 For: 2024-06-30

Added on April 09, 2026

About this 10-Q

Centene Corp filed this 10-Q on July 26, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).

Headline figures

Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $39.84B; up 5.9% from $37.61B a year earlier
Net income: $1.15B; up 8.3% from net income of $1.06B a year earlier
Diluted EPS: $2.16; up 12.5% from $1.92 a year earlier

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Delaware		42-1406317
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

7700 Forsyth Boulevard
St. Louis,	Missouri	63105
(Address of principal executive offices)		(Zip Code)


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock $0.001 Par Value	CNC	New York Stock Exchange


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


		PAGE

Part I
Financial Information
Item 1.	Financial Statements	1
	Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023	1
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	2
	Consolidated Statements of Comprehensive Earnings (Loss) for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	3
	Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	4
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (unaudited)	6
	Notes to the Consolidated Financial Statements (unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
Part II
Other Information
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 5.	Other Information	36
Item 6.	Exhibits	37
Signatures		38


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

GAAP net earnings attributable to Centene	$	1,146	$	1,058	$	2,309	$	2,188
Amortization of acquired intangible assets	173		179		346		362
Acquisition and divestiture related expenses	6		13		67		36
Other adjustments (1)	2		(74)		(97)		(127)
Income tax effects of adjustments (2)	(44)		(21)		(126)		(135)
Adjusted net earnings	$	1,283	$	1,155	$	2,499	$	2,324

GAAP diluted earnings per share (EPS) attributable to Centene	$	2.16	$	1.92	$	4.32	$	3.96
Amortization of acquired intangible assets	0.33		0.33		0.65		0.66
Acquisition and divestiture related expenses	0.01		0.02		0.13		0.07
Other adjustments (1)	—		(0.13)		(0.18)		(0.23)
Income tax effects of adjustments (2)	(0.08)		(0.04)		(0.24)		(0.25)
Adjusted diluted EPS	$	2.42	$	2.10	$	4.68	$	4.21


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	June 30, 2024		December 31, 2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	17,605	$	17,193
Premium and trade receivables	16,587		15,532
Short-term investments	2,609		2,459
Other current assets	1,605		5,572
Total current assets	38,406		40,756
Long-term investments	16,870		16,286
Restricted deposits	1,415		1,386
Property, software and equipment, net	2,041		2,019

Goodwill	17,558		17,558
Intangible assets, net	5,755		6,101
Other long-term assets	1,092		535
Total assets	$	83,137	$	84,641
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims liability	$	18,173	$	18,000
Accounts payable and accrued expenses	12,232		16,420
Return of premium payable	1,615		1,462
Unearned revenue	597		715
Current portion of long-term debt	112		119
Total current liabilities	32,729		36,716
Long-term debt	17,516		17,710
Deferred tax liability	665		641
Other long-term liabilities	4,770		3,618
Total liabilities	55,680		58,685
Commitments and contingencies
Redeemable noncontrolling interests	16		19
Stockholders' equity:
Preferred stock, $0.001 par value; authorized 10,000 shares; no shares issued or outstanding at June 30, 2024 and December 31, 2023	—		—
Common stock, $0.001 par value; authorized 800,000 shares; 619,495 issued and 526,001 outstanding at June 30, 2024, and 615,291 issued and 534,484 outstanding at December 31, 2023	1		1
Additional paid-in capital	20,461		20,304
Accumulated other comprehensive (loss)	(646)		(652)
Retained earnings	14,352		12,043
Treasury stock, at cost (93,494 and 80,807 shares, respectively)	(6,817)		(5,856)
Total Centene stockholders' equity	27,351		25,840
Nonredeemable noncontrolling interest	90		97
Total stockholders' equity	27,441		25,937
Total liabilities, redeemable noncontrolling interests and stockholders' equity	$	83,137	$	84,641


	Centene Stockholders' Equity
	Common Stock									Treasury Stock
	$0.001 Par Value Shares	Amt		Additional Paid-in Capital		Accumulated Other Comprehensive Earnings (Loss)		Retained Earnings		$0.001 Par Value Shares	Amt		Noncontrolling Interest		Total
Balance, December 31, 2023	615,291	$	1	$	20,304	$	(652)	$	12,043	80,807	$	(5,856)	$	97	$	25,937
Comprehensive Earnings:
Net earnings (loss)	—	—		—		—		1,163		—	—		(4)		1,159
Other comprehensive earnings, net of $(12) tax	—	—		—		22		—		—	—		—		22


Common stock issued for employee benefit plans	3,882	—		14		—		—		—	—		—		14
Common stock repurchases	—	—		—		—		—		1,983	(151)		—		(151)
Stock compensation expense	—	—		70		—		—		—	—		—		70


Divestiture of non-controlling interest	—	—		—		—		—		—	—		(3)		(3)


Balance, March 31, 2024	619,173	$	1	$	20,388	$	(630)	$	13,206	82,790	$	(6,007)	$	90	$	27,048
Comprehensive Earnings:
Net earnings	—	—		—		—		1,146		—	—		—		1,146
Other comprehensive loss, net of $(5) tax	—	—		—		(16)		—		—	—		—		(16)


Common stock issued for employee benefit plans	322	—		11		—		—		—	—		—		11
Common stock repurchases	—	—		—		—		—		10,704	(810)		—		(810)
Stock compensation expense	—	—		62		—		—		—	—		—		62





Balance, June 30, 2024	619,495	$	1	$	20,461	$	(646)	$	14,352	93,494	$	(6,817)	$	90	$	27,441


	June 30, 2024								December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	591	$	—	$	(7)	$	584	$	403	$	—	$	(8)	$	395
Corporate securities	10,554		32		(468)		10,118		9,984		78		(461)		9,601
Restricted certificates of deposit	4		—		—		4		4		—		—		4
Restricted cash equivalents	110		—		—		110		259		—		—		259
Short-term time deposits	586		—		—		586		746		—		—		746
Municipal securities	4,229		7		(184)		4,052		4,135		21		(171)		3,985
Asset-backed securities	1,741		8		(29)		1,720		1,665		8		(35)		1,638
Residential mortgage-backed securities	1,606		2		(129)		1,479		1,503		7		(103)		1,407
Commercial mortgage-backed securities	1,222		2		(79)		1,145		1,149		5		(82)		1,072
Equity securities	17		—		—		17		17		—		—		17
Private equity investments	890		—		—		890		833		—		—		833
Life insurance contracts	189		—		—		189		174		—		—		174
Total	$	21,739	$	51	$	(896)	$	20,894	$	20,872	$	119	$	(860)	$	20,131


	June 30, 2024								December 31, 2023
	Less Than 12 Months				12 Months or More				Less Than 12 Months				12 Months or More
	Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	—	$	205	$	(7)	$	224	$	—	$	79	$	(8)	$	232
Corporate securities	(20)		1,895		(448)		6,017		(6)		658		(455)		6,260
Municipal securities	(11)		959		(173)		2,365		(4)		553		(167)		2,237
Asset-backed securities	(1)		266		(28)		519		(2)		197		(33)		855
Residential mortgage-backed securities	(7)		397		(122)		857		(2)		153		(101)		814
Commercial mortgage-backed securities	(1)		147		(78)		802		(2)		114		(80)		754
Short-term time deposits	—		—		—		—		—		31		—		—
Total	$	(40)	$	3,869	$	(856)	$	10,784	$	(16)	$	1,785	$	(844)	$	11,152


	June 30, 2024								December 31, 2023
	Investments				Restricted Deposits				Investments				Restricted Deposits
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	2,428	$	2,403	$	395	$	392	$	2,308	$	2,284	$	566	$	564
One year through five years	7,877		7,546		733		709		7,738		7,431		527		504
Five years through ten years	4,166		3,947		291		278		3,905		3,735		298		283
Greater than ten years	147		143		37		36		155		154		34		35
Asset-backed securities	4,569		4,344		—		—		4,317		4,117		—		—
Total	$	19,187	$	18,383	$	1,456	$	1,415	$	18,423	$	17,721	$	1,425	$	1,386


Level Input:						Input Definition:
Level I						Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level II						Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date.

Level III						Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.


	Medicaid		Medicare		Commercial		Other		Consolidated Total
Balance, January 1, 2024	$	10,814	$	3,612	$	3,460	$	114	$	18,000
Less: Reinsurance recoverable	5		—		44		—		49
Balance, January 1, 2024, net	10,809		3,612		3,416		114		17,951

Incurred related to:
Current year	39,398		10,953		12,274		758		63,383
Prior years	(1,136)		(316)		(326)		7		(1,771)
Total incurred	38,262		10,637		11,948		765		61,612
Paid related to:
Current year	30,696		8,093		9,143		633		48,565
Prior years	7,918		2,562		2,367		121		12,968
Total paid	38,614		10,655		11,510		754		61,533
Plus: Premium deficiency reserve	—		85		—		—		85
Balance, June 30, 2024, net	10,457		3,679		3,854		125		18,115
Plus: Reinsurance recoverable	15		—		43		—		58
Balance, June 30, 2024	$	10,472	$	3,679	$	3,897	$	125	$	18,173


	June 30, 2024		December 31, 2023
Risk adjustment receivable	$	2,047	$	893
Risk adjustment payable	(3,475)		(2,553)
Minimum medical loss ratio	(675)		(164)
Cost sharing reduction receivable	12		—
Cost sharing reduction payable	(111)		(114)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues:
Premium	$	35,140	$	33,713	$	70,669	$	67,538
Service	833		1,125		1,641		2,252
Premium and service revenues	35,973		34,838		72,310		69,790
Premium tax	3,863		2,770		7,933		6,707
Total revenues	39,836		37,608		80,243		76,497
Expenses:
Medical costs	30,765		29,347		61,697		58,781
Cost of services	680		877		1,349		1,747
Selling, general and administrative expenses	2,894		3,016		6,112		6,027
Depreciation expense	133		146		268		288
Amortization of acquired intangible assets	173		179		346		362
Premium tax expense	3,962		2,854		8,123		6,865

Impairment	—		18		13		38

Total operating expenses	38,607		36,437		77,908		74,108
Earnings from operations	1,229		1,171		2,335		2,389
Other income (expense):
Investment and other income	463		425		1,008		778

Interest expense	(176)		(181)		(354)		(361)
Earnings before income tax	1,516		1,415		2,989		2,806
Income tax expense	370		360		685		621
Net earnings	1,146		1,055		2,304		2,185
Loss attributable to noncontrolling interests	—		3		5		3
Net earnings attributable to Centene Corporation	$	1,146	$	1,058	$	2,309	$	2,188

Net earnings per common share attributable to Centene Corporation:
Basic earnings per common share	$	2.16	$	1.93	$	4.34	$	3.98
Diluted earnings per common share	$	2.16	$	1.92	$	4.32	$	3.96

Weighted average number of common shares outstanding:
Basic	529,602		548,932		532,385		549,850
Diluted	530,755		550,308		534,517		551,996


	Medicaid		Medicare		Commercial		Other		Consolidated Total
Balance, January 1, 2023	$	11,253	$	3,431	$	1,921	$	140	$	16,745
Less: Reinsurance recoverable	7		—		19		—		26
Balance, January 1, 2023, net	11,246		3,431		1,902		140		16,719

Incurred related to:
Current year	40,622		10,083		8,857		773		60,335
Prior years	(1,153)		(191)		(208)		(2)		(1,554)
Total incurred	39,469		9,892		8,649		771		58,781
Paid related to:
Current year	31,837		7,726		6,751		656		46,970
Prior years	7,890		2,357		1,282		137		11,666
Total paid	39,727		10,083		8,033		793		58,636
Balance, June 30, 2023, net	10,988		3,240		2,518		118		16,864
Plus: Reinsurance recoverable	5		—		15		—		20
Balance, June 30, 2023	$	10,993	$	3,240	$	2,533	$	118	$	16,884


	June 30, 2024		December 31, 2023
$2,500 million 4.25% Senior Notes due December 15, 2027	$	2,397	$	2,395
$2,300 million 2.45% Senior Notes due July 15, 2028	2,303		2,303
$3,500 million 4.625% Senior Notes due December 15, 2029	3,277		3,277
$2,000 million 3.375% Senior Notes due February 15, 2030	2,000		2,000
$2,200 million 3.00% Senior Notes due October 15, 2030	2,200		2,200
$2,200 million 2.50% Senior Notes due March 1, 2031	2,200		2,200
$1,300 million 2.625% Senior Notes due August 1, 2031	1,300		1,300

Total senior notes	15,677		15,675
Term Loan Facility	2,060		2,115
Revolving Credit Agreement	—		150
Finance leases and other	2		11
Debt issuance costs	(111)		(122)
Total debt	17,628		17,829
Less: current portion	(112)		(119)
Long-term debt	$	17,516	$	17,710


		Medicaid		Medicare		Commercial		Other/Eliminations		Consolidated Total
Premium		$	20,229	$	5,978	$	8,534	$	399	$	35,140
Service		21		—		1		811		833
Premium and service revenues		20,250		5,978		8,535		1,210		35,973
Premium tax		3,863		—		—		—		3,863
Total external revenues		24,113		5,978		8,535		1,210		39,836
Internal revenues		—		—		—		4,081		4,081
Eliminations		—		—		—		(4,081)		(4,081)
Total revenues		$	24,113	$	5,978	$	8,535	$	1,210	$	39,836

Medical costs		$	18,767	$	5,333	$	6,268	$	397	$	30,765

Cost of services		$	22	$	—	$	—	$	658	$	680

Gross margin (1)		$	1,461	$	645	$	2,267	$	155	$	4,528

(1)	Gross margin represents premium and service revenues less medical costs and cost of services.


		June 30, 2024	December 31, 2023	June 30, 2023
Traditional Medicaid (1)		11,640,900	12,754,000	14,260,400
High Acuity Medicaid (2)		1,499,000	1,718,000	1,799,200
Total Medicaid		13,139,900	14,472,000	16,059,600
Commercial Marketplace		4,401,300	3,900,100	3,295,200
Commercial Group		426,400	427,500	435,000
Total Commercial		4,827,700	4,327,600	3,730,200
Medicare (3)		1,138,400	1,284,200	1,329,000
Medicare PDP		6,603,600	4,617,800	4,493,700
Total at-risk membership		25,709,600	24,701,600	25,612,500
TRICARE eligibles		2,768,000	2,773,200	2,799,300
Total		28,477,600	27,474,800	28,411,800

(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.


		2024		2023		% Change
Total Revenues
Medicaid		$	24,113	$	24,665	(2)	%
Medicare		5,978		5,665		6	%
Commercial		8,535		5,734		49	%
Other		1,210		1,544		(22)	%
Consolidated total		$	39,836	$	37,608	6	%
Gross Margin (1)
Medicaid		$	1,461	$	2,434	(40)	%
Medicare		645		781		(17)	%
Commercial		2,267		1,090		108	%
Other		155		309		(50)	%
Consolidated total		$	4,528	$	4,614	(2)	%

(1)	Gross margin represents premium and service revenues less medical costs and cost of services.


Issuer Purchases of Equity Securities Second Quarter 2024 (Shares in thousands)
Period		Total Number of Shares Purchased (1)	Average Price Paid per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ($ in millions) (3)
April 1, 2024 - April 30, 2024		2,758	$	73.01	2,741	$	4,978
May 1, 2024 - May 31, 2024		7,928	75.78		7,919	4,378
June 1, 2024 - June 30, 2024		18	68.61		—	4,378
Total		10,704	$	75.05	10,660	$	4,378

(1)	Includes 44 thousand shares relinquished to the Company by certain employees for payment of taxes.
(2)	Average price paid per share excludes accrued share repurchase excise tax of approximately $7 million.
(3)	A remaining amount of approximately $4.4 billion is available under the stock repurchase program as of June 30, 2024.


EXHIBIT NUMBER		DESCRIPTION

10.1		Form of Non-Employee Director Compensation Plan

10.2		Form of Non-Employee Director Restricted Stock Unit Agreement #1

31.1		Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as amended.

31.2		Certification of Executive Vice President and Chief Financial Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as amended.

32.1	*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	*	Certification of Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from the Centene Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Earnings (Loss); (iv) the Consolidated Statements of Stockholders' Equity; (v) the Consolidated Statements of Cash Flows and (vi) related notes.

104		Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.

* This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.


			CENTENE CORPORATION

			By:			/s/ SARAH M. LONDON
						Chief Executive Officer (principal executive officer)


			By:			/s/ ANDREW L. ASHER
						Executive Vice President, Chief Financial Officer (principal financial officer)


			By:			/s/ KATIE N. CASSO
						Senior Vice President, Corporate Controller and Chief Accounting Officer (principal accounting officer)



(a)			Any “Person” (having the meaning ascribed to such term in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (“1934 Act”) and used in Sections 13(d) and 14(d) thereof, other than (A) Persons, who, on the Effective Date of the Plan, are beneficial owners (within the meaning of Rule 13d-3 under the 1934 Act) directly or indirectly of twenty-five percent (25%) or more of the Company's then outstanding voting securities entitled to vote generally in the election of directors (“Voting Securities”) or (B) a group which includes one or more Plan participants, is or become beneficial owners directly or indirectly of fifty percent (50%) or more of the combined voting power of the Company's Voting Securities.

(b)			If individuals who, as the Effective Date hereof, constitute the Board of Directors of the Company (the “Incumbent Board) cease for any reason to constitute at least a majority of the Board of Directors of the Company; provided, however, that an individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by at least a majority of the directors then comprising the Incumbent Board shall be included within the definition of Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual election contest (or such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board.


(c)			The shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, and such merger or consolidation occurs.

(d)			The shareholders of the Company approve a plan of complete liquidation or dissolution of the Company and such event commences, or there is consummated an agreement for the sale or disposition of all or substantially all of the assets of the Company, other than a sale or disposition by the Company of all or substantially all of the assets of the Company to an entity at least fifty percent (50%) of the combined voting securities of which are owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such transaction.


Dated:	July 26, 2024	/s/ SARAH M. LONDON
		Chief Executive Officer (principal executive officer)