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Analysis

Centene Posts 19% Revenue Growth, Bolstered by Fidelis Acquisition

By Jack O'Brien  
   July 24, 2018

The insurer's eventful first half of 2018 culminated in continued growth among membership and adjusted earnings per share, despite negative cash flows.

Centene Corp. achieved total revenues of $14.2 billion, an increase of 19% year-over-year, according to its Q2 earnings report released Tuesday morning.

Centene's earnings report marks the company's first financial filings since it purchased Fidelis Care from the Archdiocese of New York earlier this month for $3.75 billion. The move marks Centene's entrance into the Empire State market and is expected to produce more than $11 billion in revenue for the company.

Related: Fidelis-Centene Deal Closes, Catholic Church Creates $3.2B Health Foundation

"Centene's strong fundamentals will be enhanced by the strategic and financial benefits of our recently closed Fidelis Care acquisition," Michael Neidorff, CEO of Centene, said in a statement.

On the company's conference call to discuss earnings, executives expressed optimism about the upcoming 2019 enrollment period supported by its Q2 membership growth and expansion plans for the second half of 2018. Centene is already set to expand its operations in Pennsylvania next year, offering plans in Philadelphia and two nearby counties.  

Related: Centene's Solid Q1 Earnings Buoyed By Managed Care Membership

“Centene Corporation, which we upgraded in May, produced solid results in the second quarter driven by strong growth in its ACA individual marketplace business," Dean Ungar, senior analyst for Moody’s Investors Service, said in a statement. "Premium and service revenue was up, and the company also achieved modest growth in Medicare. Encouragingly, we also saw Centene’s leverage improve, as measured by a decline in the firm’s debt-to-capital.”

Below are highlights from Centene's Q2 earnings report:  

  • The insurer posted a managed care membership totalling 12.8 million, a 5% increase year-over-year.

  • Centene also registered a negative cash flow of $526 million for Q2, which the insurer attributed to the repayment of $630 million in Medicaid expansion rate overpayments. 

  • The insurer's Medicaid and Medicare revenues grew modestly year-over-year at 11% and 6%, respectively. However, commercial revenues represented the strongest growth area at 48% year-over-year.

  • Centene's adjusted diluted earnings per share (EPS) for Q2 totalled $1.80; eclipsing the $1.59 EPS this time last year.

Additional information is available in Centene's filing with the Securities and Exchange Commission.

Editor's note: This story has been updated to include a comment from Moody's.

Jack O'Brien is the finance editor at HealthLeaders. 


KEY TAKEAWAYS

The insurer's Q2 filing is its first since finalizing its purchase of Fidelis Care in New York and offering on-exchange plans in Philadelphia.

Negative cash flows were due to Medicaid expansion rate overpayments, specifically in California. 

The company's stock hovered around its all-time high on the day before the Q2 earnings release.


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