EX-99.1 2 exhibit991.htm PRESS RELEASE 2015.04.28 Exhibit 99.1 Press Release


Exhibit 99.1
N E W S R E L E A S E                                                                                          
Contact:
Investor Relations Inquiries
 
Edmund E. Kroll, Jr.
 
Senior Vice President, Finance & Investor Relations
 
(212) 759-0382
 
Media Inquiries
 
Marcela Manjarrez Williams
 
Senior Vice President and Chief Communications Officer
 
(314) 725-4477

FOR IMMEDIATE RELEASE

- CENTENE CORPORATION REPORTS 2015 FIRST QUARTER RESULTS AND RAISES GUIDANCE -
-- Revenue increase of 42% and diluted earnings per share (EPS) from continuing operations of $0.52 --

ST. LOUIS, MISSOURI (April 28, 2015) -- Centene Corporation (NYSE: CNC) today announced its financial results for the quarter ended March 31, 2015.  The following discussions, with the exception of cash flow information, are in the context of continuing operations.
Premium and Service Revenues (in millions)
$
4,761

 
Consolidated Health Benefits Ratio
89.8
%
 
General & Administrative expense ratio
8.5
%
 
Diluted earnings per share (EPS)
$
0.52

 
Total cash flow from operations (in millions)
$
45

 

Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, “We had a strong start to 2015, delivering exceptional top and bottom line growth compared to last year.  We continue to be successful in executing on our robust growth pipeline while maintaining operational discipline.”

First Quarter Highlights

•
March 31, 2015 managed care membership of 4.4 million, an increase of 1.4 million members, or 44% compared to the first quarter of 2014.

•
Premium and service revenues for the first quarter of $4.8 billion, representing 42% growth compared to the first quarter of 2014.

•
Health Benefits Ratio of 89.8% for the first quarter 2015, compared to 89.3% in the first quarter of 2014.

•
General and Administrative expense ratio of 8.5% for the first quarter of 2015, compared to 8.8% in the first quarter of 2014.

•
Operating cash flow of $45 million for the first quarter of 2015.

•
Diluted EPS for the first quarter of 2015 of $0.52, compared to $0.29 in 2014.


1


Other Events
 
•
In April 2015, our Indiana subsidiary, Managed Health Services, began operating under an expanded contract with the Indiana Family & Social Services Administration to provide services to its ABD Medicaid enrollees who qualify for the new Hoosier Care Connect Program.

•
In April 2015, Centurion was recommended for an award by the Mississippi Department of Corrections to provide comprehensive correctional healthcare services. The contract is expected to commence in the third quarter of 2015.

•
In March 2015, we began operating under an expanded STAR+PLUS contract with the Texas Health and Human Service Commission (HHSC) to include nursing facility benefits. We also began operating under a new contract with the Texas HHSC and the Centers for Medicare and Medicaid Services to serve dual-eligible members in three counties as part of the state's dual demonstration program.

•
In March 2015, our Missouri subsidiary, Home State Health, was selected by the Missouri Division of Purchasing and Materials Management to continue providing managed care services to MO HealthNet Managed Care beneficiaries. The new contract will be effective in the third quarter of 2015.

•
In February 2015, Superior HealthPlan was tentatively recommended for a contract award by the Texas HHSC to continue to serve STAR Health (Foster Care) Medicaid recipients. The new STAR Health contract is expected to commence in the third quarter of 2015.

Accreditations & Senior Management Additions

•
In April 2015, we announced the appointment of Marcela Manjarrez Williams to Senior Vice President and Chief Communications Officer and the appointment of Ken Yamaguchi, M.D. to Executive Vice President and Chief Medical Officer.

•
In April 2015, Nurtur, our health and wellness subsidiary, received full Disease Management Accreditation renewal from URAC, a Washington, DC-based healthcare accrediting organization that establishes quality standards for the healthcare industry. In February 2015, Nurtur also received a three-year Wellness and Health Promotion Accreditation renewal from the National Committee for Quality Assurance (NCQA) for its wellness services.

•
In March 2015, NurseWise, our national multilingual nurse triage and health education subsidiary, also received full Health Call Center Accreditation renewal from URAC.


2



Membership

The following table sets forth the Company's membership by state for its managed care organizations:
 
March 31,
 
2015
 
2014
Arizona
202,200

 
169,800

Arkansas
43,200

 
16,400

California
171,200

 
118,100

Florida
463,100

 
230,300

Georgia
405,600

 
331,400

Illinois
184,800

 
22,400

Indiana
227,700

 
198,700

Kansas
143,700

 
145,000

Louisiana
359,500

 
149,800

Massachusetts
64,500

 
50,800

Minnesota
9,500

 
9,400

Mississippi
141,900

 
85,400

Missouri
75,600

 
58,100

New Hampshire
67,500

 
37,100

Ohio
296,000

 
181,800

South Carolina
106,000

 
96,300

Tennessee
20,800

 
21,100

Texas
974,900

 
904,000

Vermont
1,600

 
—

Washington
207,100

 
151,700

Wisconsin
82,100

 
70,800

Total at-risk membership
4,248,500

 
3,048,400

Non-risk membership
153,200

 
—

Total
4,401,700

 
3,048,400


At March 31, 2015, the Company served 331,800 Medicaid members in Medicaid expansion programs in California, Illinois, Indiana, Massachusetts, New Hampshire, Ohio and Washington included in the table above.

The following table sets forth our membership by line of business:

 
March 31,
 
2015
 
2014
Medicaid
3,133,900

 
2,169,100

CHIP & Foster Care
233,600

 
269,200

ABD, Medicare & Duals
410,400

 
300,500

Long Term Care (LTC)
71,200

 
51,800

Health Insurance Marketplaces
161,700

 
39,700

Hybrid Programs 1
—

 
14,400

Behavioral Health
195,100

 
162,700

Correctional Healthcare Services
42,600

 
41,000

Total at-risk membership
4,248,500

 
3,048,400

Non-risk membership
153,200

 
—

Total
4,401,700

 
3,048,400

 
 
 
 
1 In February 2015, hybrid programs in Indiana and Massachusetts were converted to Medicaid expansion contracts.


3


The following table identifies our dual-eligible membership by line of business. The membership tables above include these members.

 
March 31,
 
2015
 
2014
ABD
112,600

 
72,800

LTC
52,000

 
41,300

Medicare
6,800

 
6,500

Medicaid / Medicare Duals
12,600

 
—

Total
184,000

 
120,600


Statement of Operations: Three Months Ended March 31, 2015

•
For the first quarter of 2015, Premium and Service Revenues increased 42% to $4.8 billion from $3.4 billion in the first quarter of 2014. The increase was a result of a full quarter's impact from expansions or new programs in 2014 in many of our states, particularly Florida, Illinois and Ohio.

•
Consolidated HBR of 89.8% for the first quarter of 2015 represents an increase from 89.3% in the comparable period in 2014 and an increase from 89.3% in the fourth quarter of 2014. The year over year HBR increase is primarily attributable to an increase in higher acuity membership and higher flu related costs over the prior year.

•
The following table compares the results for new business and existing business for the quarters ended March 31:
 
2015
 
2014
Premium and Service Revenue
 
 
 
New business
23
%
 
20
%
Existing business
77
%
 
80
%
 
 
 
 
HBR
 
 
 
New business
91.0
%
 
93.1
%
Existing business
89.5
%
 
88.3
%

•
Consolidated G&A expense ratio for the first quarter of 2015 was 8.5%, compared to 8.8% in the prior year.  The year over year decrease in the G&A ratio reflects the leveraging of expenses over higher revenues in 2015 as well as the impact of transaction costs recognized in 2014.

•
Diluted earnings per share of $0.52 in the first quarter of 2015, compared to $0.29 in 2014. Diluted earnings per share in 2014 was impacted by $0.11 of net cost associated with the health insurer fee and acquisition transaction costs.

Balance Sheet and Cash Flow

At March 31, 2015, the Company had cash, investments and restricted deposits of $3.4 billion, including $97 million held by its unregulated entities. Medical claims liabilities totaled $2.0 billion, representing 45.5 days in claims payable. Total debt was $1.1 billion, which includes $125 million of borrowings on the $500 million revolving credit facility at quarter end. Debt to capitalization was 36.6% at March 31, 2015, excluding the $69 million non-recourse mortgage note.

Cash flow from operations for the three months ended March 31, 2015, was $45 million, or 0.7 times net earnings. Cash flow was reduced in the first quarter as a result of a one time change in payment terms for one of our states.

A reconciliation of the Company's change in days in claims payable from the immediately preceding quarter-end is presented below:
 
 
 
Days in claims payable, December 31, 2014
44.2

 
Timing of claim payments
1.3

 
Days in claims payable, March 31, 2015
45.5

 
 
 
 

4



Outlook

The table below depicts the Company's annual GAAP guidance for 2015.
 
 
Full Year 2015
 
 
 
Low
 
High 
 
Premium and Service Revenues (in millions)
 
$
20,500

 
$
21,000

 
Diluted EPS
 
$
2.60

 
$
2.72

 
Consolidated Health Benefits Ratio
 
89.2
%
 
89.6
%
 
General & Administrative expense ratio
 
8.0
%
 
8.4
%
 
Effective Tax Rate
 
48.0
%
 
50.0
%
 
Diluted Shares Outstanding (in millions)
 
123.0

 
124.0

 
 
 
 
 
 
 
Consistent with our policy, the above table does not include acquisitions that have not yet closed.

Conference Call

As previously announced, the Company will host a conference call Tuesday, April 28, 2015, at 8:30 AM (Eastern Time) to review the financial results for the first quarter ended March 31, 2015, and to discuss its business outlook.  Michael F. Neidorff and William N. Scheffel will host the conference call. 

Investors and other interested parties are invited to listen to the conference call by dialing 1-866-739-7850 in the U.S. and Canada; +1-412-902-6577 from abroad; or via a live, audio webcast on the Company's website at www.centene.com, under the Investors section. Or, participants can register for the conference call in advance by navigating to http://dpregister.com/10061838, to receive a dial-in number upon registration. A webcast replay will be available for on-demand listening shortly after the completion of the call for the next twelve months or until 11:59 PM (Eastern Time) on Tuesday, April 26, 2016, at the aforementioned URL. In addition, a digital audio playback will be available until 9:00 AM Eastern Time on Wednesday, May 6, 2015, by dialing 1-877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad, and entering access code 10061838.

Other Information

The discussion in the third bullet under the heading "Statement of Operations: Three Months Ended March 31, 2015" contains financial information for new and existing businesses. Existing businesses are primarily state markets or significant geographic expansion in an existing state or product that we have managed for four complete quarters. New businesses are primarily new state markets or significant geographic expansion in an existing state or product that conversely, we have not managed for four complete quarters.

About Centene Corporation

Centene Corporation, a Fortune 500 company, is a diversified, multi-national healthcare enterprise that provides a portfolio of services to government sponsored healthcare programs, focusing on under-insured and uninsured individuals. Many receive benefits provided under Medicaid, including the State Children's Health Insurance Program (CHIP), as well as Aged, Blind or Disabled (ABD), Foster Care and Long Term Care (LTC), in addition to other state-sponsored/hybrid programs, and Medicare (Special Needs Plans). The Company operates local health plans and offers a range of health insurance solutions. It also contracts with other healthcare and commercial organizations to provide specialty services including behavioral health management, care management software, correctional healthcare services, dental benefits management, in-home health services, life and health management, managed vision, pharmacy benefits management, specialty pharmacy and telehealth services.


5


The information provided in this press release contains forward-looking statements that relate to future events and future financial performance of Centene. Subsequent events and developments may cause the Company's estimates to change. The Company disclaims any obligation to update this forward-looking financial information in the future. Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, regulatory, competitive and other factors that may cause Centene's or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Actual results may differ from projections or estimates due to a variety of important factors, including Centene's ability to accurately predict and effectively manage health benefits and other operating expenses and reserves; competition; membership and revenue projections; timing of regulatory contract approval; changes in healthcare practices; changes in federal or state laws or regulations, including the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act and any regulations enacted thereunder; changes in expected contract start dates; changes in expected closing dates, estimated purchase price and accretion for acquisitions; inflation; foreign currency fluctuations; provider and state contract changes; new technologies; advances in medicine; reduction in provider payments by governmental payors; major epidemics; disasters and numerous other factors affecting the delivery and cost of healthcare; the expiration, cancellation or suspension of our Medicare or Medicaid managed care contracts by federal or state governments; the outcome of pending legal proceedings; availability of debt and equity financing, on terms that are favorable to us; and general economic and market conditions, as well as those factors disclosed in the Company's publicly filed documents.

This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain risk factors that may affect our business operations, financial condition and results of operations, in our filings with the Securities and Exchange Commission, including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.



[Tables Follow]

6



CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions except share data)
(Unaudited)
 
March 31, 2015
 
December 31, 2014
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,666

 
$
1,610

Premium and related receivables
1,245

 
912

Short term investments
151

 
177

Other current assets
528

 
335

Total current assets
3,590

 
3,034

Long term investments
1,527

 
1,280

Restricted deposits
98

 
100

Property, software and equipment, net
450

 
445

Goodwill
786

 
754

Intangible assets, net
131

 
120

Other long term assets
114

 
91

Total assets
$
6,696

 
$
5,824

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Medical claims liability
$
1,950

 
$
1,723

Accounts payable and accrued expenses
1,002

 
768

Return of premium payable
269

 
236

Unearned revenue
117

 
168

Current portion of long term debt
5

 
5

Total current liabilities
3,343

 
2,900

Long term debt
1,123

 
874

Other long term liabilities
238

 
159

Total liabilities
4,704

 
3,933

Commitments and contingencies


 


Redeemable noncontrolling interests
155

 
148

Stockholders’ equity:
 

 
 

Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued or outstanding at March 31, 2015 and December 31, 2014
—

 
—

Common stock, $.001 par value; authorized 200,000,000 shares; 124,562,959 issued and 118,886,912 outstanding at March 31, 2015, and 124,274,864 issued and 118,433,416 outstanding at December 31, 2014
—

 
—

Additional paid-in capital
870

 
840

Accumulated other comprehensive loss
(1
)
 
(1
)
Retained earnings
1,066

 
1,003

Treasury stock, at cost (5,676,047 and 5,841,448 shares, respectively)
(98
)
 
(98
)
Total Centene stockholders’ equity
1,837

 
1,744

Noncontrolling interest
—

 
(1
)
Total stockholders’ equity
1,837

 
1,743

Total liabilities and stockholders’ equity
$
6,696

 
$
5,824




7



CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share data)
(Unaudited)

 
Three Months Ended March 31,
 
2015
 
2014
Revenues:
 
 
 
Premium
$
4,299

 
$
3,071

Service
462

 
281

Premium and service revenues
4,761

 
3,352

Premium tax and health insurer fee
370

 
108

Total revenues
5,131

 
3,460

Expenses:
 
 
 
Medical costs
3,861

 
2,743

Cost of services
402

 
242

General and administrative expenses
403

 
296

Premium tax expense
281

 
78

Health insurer fee expense
55

 
31

Total operating expenses
5,002

 
3,390

Earnings from operations
129

 
70

Other income (expense):
 
 
 
Investment and other income
9

 
5

Interest expense
(10
)
 
(7
)
Earnings from continuing operations, before income tax expense
128

 
68

Income tax expense
63

 
35

Earnings from continuing operations, net of income tax expense
65

 
33

Discontinued operations, net of income tax expense of $0 and $0, respectively
(1
)
 
(1
)
Net earnings
64

 
32

(Earnings) loss attributable to noncontrolling interests
(1
)
 
1

Net earnings attributable to Centene Corporation
$
63

 
$
33

 
 
 
 
Amounts attributable to Centene Corporation common shareholders:
Earnings from continuing operations, net of income tax expense
$
64

 
$
34

Discontinued operations, net of income tax expense (benefit)
(1
)
 
(1
)
Net earnings
$
63

 
$
33

 
 
 
 
Net earnings (loss) per common share attributable to Centene Corporation:
Basic:
 
 
 
Continuing operations
$
0.54

 
$
0.30

Discontinued operations
(0.01
)
 
(0.01
)
Basic earnings per common share
$
0.53

 
$
0.29

 
 
 
 
Diluted:
 
 
 
Continuing operations
$
0.52

 
$
0.29

Discontinued operations
(0.01
)
 
(0.01
)
Diluted earnings per common share
$
0.51

 
$
0.28

 
 
 
 
Weighted average number of common shares outstanding:
Basic
118,783,755

 
114,967,752

Diluted
122,572,366

 
118,722,532



8



CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Three Months Ended March 31,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net earnings
$
64

 
$
32

Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization
27

 
20

Stock compensation expense
16

 
11

Deferred income taxes
(6
)
 
(8
)
Gain on settlement of contingent consideration
(10
)
 
—

Changes in assets and liabilities
 

 
 

Premium and related receivables
(334
)
 
(119
)
Other current assets
(3
)
 
3

Other assets
(13
)
 
(14
)
Medical claims liabilities
227

 
196

Unearned revenue
(51
)
 
35

Accounts payable and accrued expenses
58

 
91

Other long term liabilities
68

 
4

Other operating activities
2

 
1

Net cash provided by operating activities
45

 
252

Cash flows from investing activities:
 

 
 

Capital expenditures
(27
)
 
(18
)
Purchases of investments
(307
)
 
(167
)
Sales and maturities of investments
111

 
112

Proceeds from asset sale
7

 
—

Investments in acquisitions, net of cash acquired
(9
)
 
(77
)
Net cash used in investing activities
(225
)
 
(150
)
Cash flows from financing activities:
 

 
 

Proceeds from exercise of stock options
2

 
2

Proceeds from borrowings
500

 
645

Payment of long term debt
(253
)
 
(519
)
Excess tax benefits from stock compensation
3

 
—

Common stock repurchases
(4
)
 
(2
)
Contribution from noncontrolling interest
—

 
5

Debt issue costs
(4
)
 
—

Payment of contingent consideration obligation
(8
)
 
—

Net cash provided by financing activities
236

 
131

Net increase in cash and cash equivalents
56

 
233

Cash and cash equivalents, beginning of period
1,610

 
1,038

Cash and cash equivalents, end of period
$
1,666

 
$
1,271

Supplemental disclosures of cash flow information:
 

 
 

Interest paid
$
2

 
$
2

Income taxes paid
$
24

 
$
21

Equity issued in connection with acquisitions
$
13

 
$
132








9



CENTENE CORPORATION
SUPPLEMENTAL FINANCIAL DATA FROM CONTINUING OPERATIONS
 
Q1
 
Q4
 
Q3
 
Q2
 
Q1
 
2015
 
2014
 
2014
 
2014
 
2014
MANAGED CARE MEMBERSHIP
 
 
 
 
 
 
 
 
 
Arizona
202,200

 
204,000

 
202,500

 
189,200

 
169,800

Arkansas
43,200

 
38,400

 
36,600

 
31,100

 
16,400

California
171,200

 
163,900

 
144,700

 
131,100

 
118,100

Florida
463,100

 
425,700

 
411,200

 
313,800

 
230,300

Georgia
405,600

 
389,100

 
382,600

 
373,000

 
331,400

Illinois
184,800

 
87,800

 
31,300

 
29,500

 
22,400

Indiana
227,700

 
197,700

 
199,500

 
200,500

 
198,700

Kansas
143,700

 
143,300

 
144,200

 
146,100

 
145,000

Louisiana
359,500

 
152,900

 
150,800

 
148,600

 
149,800

Massachusetts
64,500

 
48,400

 
46,600

 
47,200

 
50,800

Minnesota
9,500

 
9,500

 
9,500

 
9,400

 
9,400

Mississippi
141,900

 
108,700

 
99,300

 
97,400

 
85,400

Missouri
75,600

 
71,000

 
64,900

 
58,700

 
58,100

New Hampshire
67,500

 
62,700

 
56,600

 
39,500

 
37,100

Ohio
296,000

 
280,100

 
261,000

 
225,900

 
181,800

South Carolina
106,000

 
109,700

 
106,500

 
101,800

 
96,300

Tennessee
20,800

 
21,000

 
21,200

 
21,300

 
21,100

Texas
974,900

 
971,000

 
961,100

 
921,500

 
904,000

Vermont
1,600

 
—

 
—

 
—

 
—

Washington
207,100

 
194,400

 
192,500

 
193,800

 
151,700

Wisconsin
82,100

 
83,200

 
74,700

 
67,300

 
70,800

Total at-risk membership
4,248,500

 
3,762,500

 
3,597,300

 
3,346,700

 
3,048,400

Non-risk membership
153,200

 
298,400

 
303,500

 
—

 
—

TOTAL
4,401,700

 
4,060,900

 
3,900,800

 
3,346,700

 
3,048,400

 
 
 
 
 
 
 
 
 
 
Medicaid
3,133,900

 
2,754,900

 
2,578,300

 
2,385,500

 
2,169,100

CHIP & Foster Care
233,600

 
222,700

 
247,700

 
261,800

 
269,200

ABD, Medicare & Duals
410,400

 
392,700

 
383,400

 
329,700

 
300,500

LTC
71,200

 
60,800

 
55,200

 
53,500

 
51,800

Health Insurance Marketplaces
161,700

 
74,500

 
76,000

 
75,700

 
39,700

Hybrid Programs
—

 
18,900

 
19,900

 
17,000

 
14,400

Behavorial Health
195,100

 
197,000

 
195,500

 
182,200

 
162,700

Correctional Healthcare Services
42,600

 
41,000

 
41,300

 
41,300

 
41,000

Total at-risk membership
4,248,500

 
3,762,500

 
3,597,300

 
3,346,700

 
3,048,400

Non-risk membership
153,200

 
298,400

 
303,500

 
—

 
—

TOTAL
4,401,700

 
4,060,900

 
3,900,800

 
3,346,700

 
3,048,400

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUE PER MEMBER PER MONTH(a)
$
349

 
$
360

 
$
354

 
$
344

 
$
340

 
 
 
 
 
 
 
 
 
 
CLAIMS(a)
 
 
 
 
 
 
 
 
 
Period-end inventory
1,217,000

 
1,086,600

 
1,021,200

 
771,900

 
832,600

Average inventory
841,000

 
806,000

 
660,200

 
603,700

 
584,700

Period-end inventory per member
0.29

 
0.29

 
0.28

 
0.23

 
0.27

(a) Revenue per member and claims information are presented for the Managed Care at-risk members.
 
 
 
 
 
 
 
 
 
 
NUMBER OF EMPLOYEES
14,800

 
13,400

 
12,900

 
12,300

 
11,200



10


 
Q1
 
Q4
 
Q3
 
Q2
 
Q1
 
2015
 
2014
 
2014
 
2014
 
2014
 
 
 
 
 
 
 
 
 
 
DAYS IN CLAIMS PAYABLE (b)
45.5

 
44.2

 
43.1

 
42.9

 
42.6

(b) Days in Claims Payable is a calculation of Medical Claims Liabilities at the end of the period divided by average claims expense per calendar day for such period.
 
 
 
 
 
 
 
 
 
 
CASH, INVESTMENTS AND RESTRICTED DEPOSITS (in millions)
Regulated
$
3,345

 
$
3,082

 
$
2,829

 
$
2,353

 
$
2,167

Unregulated
97

 
85

 
70

 
50

 
49

TOTAL
$
3,442

 
$
3,167

 
$
2,899

 
$
2,403

 
$
2,216

 
 
 
 
 
 
 
 
 
 
DEBT TO CAPITALIZATION
38.0
%
 
33.5
%
 
36.4
%
 
35.3
%
 
36.2
%
DEBT TO CAPITALIZATION EXCLUDING NON-RECOURSE DEBT(c)
36.6
%
 
31.7
%
 
34.6
%
 
33.4
%
 
34.1
%
(c) The non-recourse debt represents the Company's mortgage note payable ($69 million at March 31, 2015).
Debt to Capitalization is calculated as follows: total debt divided by (total debt + total equity).
Operating Ratios:
 
Three Months Ended March 31,
 
2015
 
2014
Health Benefits Ratios:
 
 
 
Medicaid, CHIP, Foster Care & Health Insurance Marketplaces
87.6
%
 
86.9
%
ABD, LTC & Medicare
92.9

 
92.9

Specialty Services
85.2

 
87.7

  Total
89.8

 
89.3

 
 
 
 
Total General & Administrative Expense Ratio
8.5
%
 
8.8
%
MEDICAL CLAIMS LIABILITY (In millions)
The changes in medical claims liability are summarized as follows:
Balance, March 31, 2014
 
$
1,299

Incurred related to:
 
 
Current period
 
13,981

Prior period
 
(185
)
Total incurred
 
13,796

Paid related to:
 
 
Current period
 
12,072

Prior period
 
1,073

Total paid
 
13,145

Balance, March 31, 2015
 
$
1,950

Centene's claims reserving process utilizes a consistent actuarial methodology to estimate Centene's ultimate liability. Any reduction in the “Incurred related to: Prior period” amount may be offset as Centene actuarially determines “Incurred related to: Current period.” As such, only in the absence of a consistent reserving methodology would favorable development of prior period claims liability estimates reduce medical costs. Centene believes it has consistently applied its claims reserving methodology in each of the periods presented. Additionally, as a result of minimum HBR and other state return of premium programs, approximately $60 million of the “Incurred related to: Prior period” was reclassified to Return of Premium Payable.
The amount of the “Incurred related to: Prior period” above represents favorable development and includes the effects of reserving under moderately adverse conditions, new markets where we use a conservative approach in setting reserves during the initial periods of operations, receipts from other third party payors related to coordination of benefits and lower medical utilization and cost trends for dates of service prior to March 31, 2014.

11