[X] | 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 |
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) |
Large accelerated filer x | Accelerated filer | o |
Non-accelerated filer o (do not check if a smaller reporting company) | Smaller reporting company | o |
Emerging growth company | o |
PAGE | ||
Part I | ||
Financial Information | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II | ||
Other Information | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 6. | ||
• | our ability to accurately predict and effectively manage health benefits and other operating expenses and reserves; |
• | competition; |
• | membership and revenue declines or unexpected trends; |
• | changes in healthcare practices, new technologies, and advances in medicine; |
• | increased healthcare costs; |
• | changes in economic, political or market conditions; |
• | changes in federal or state laws or regulations, including changes with respect to income tax reform or government healthcare programs as well as changes with respect to the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act and any regulations enacted thereunder that may result from changing political conditions; |
• | rate cuts or other payment reductions or delays by governmental payors and other risks and uncertainties affecting our government businesses; |
• | our ability to adequately price products on federally facilitated and state-based Health Insurance Marketplaces; |
• | tax matters; |
• | disasters or major epidemics; |
• | the outcome of legal and regulatory proceedings; |
• | changes in expected contract start dates; |
• | provider, state, federal and other contract changes and timing of regulatory approval of contracts; |
• | the expiration, suspension, or termination of our contracts with federal or state governments (including but not limited to Medicaid, Medicare, TRICARE or other customers); |
• | the difficulty of predicting the timing or outcome of pending or future litigation or government investigations; |
• | challenges to our contract awards; |
• | cyber-attacks or other privacy or data security incidents; |
• | the possibility that the expected synergies and value creation from acquired businesses, including, without limitation, the acquisition (Health Net Acquisition) of Health Net, Inc. (Health Net) and the Fidelis Care Acquisition, will not be realized, or will not be realized within the expected time period; |
• | the exertion of management’s time and our resources, and other expenses incurred and business changes required in connection with complying with the undertakings in connection with any regulatory, governmental or third party consents or approvals for the Health Net Acquisition or the Fidelis Care Acquisition; |
• | disruption caused by significant completed and pending acquisitions, including the Health Net Acquisition and the Fidelis Care Acquisition, making it more difficult to maintain business and operational relationships; |
• | the risk that unexpected costs will be incurred in connection with the completion and/or integration of acquisition transactions, including among others, the Health Net Acquisition and the Fidelis Care Acquisition; |
• | changes in expected closing dates, estimated purchase price and accretion for acquisitions; |
• | the risk that acquired businesses, including Health Net and Fidelis Care, will not be integrated successfully; |
• | the risk that, following the Fidelis Care Acquisition, we may not be able to effectively manage our expanded operations; |
• | restrictions and limitations in connection with our indebtedness; |
• | our ability to achieve improvement in the Centers for Medicare and Medicaid Services (CMS) Star ratings and maintain or achieve improvement in other quality scores in each case that can impact revenue and future growth; |
• | availability of debt and equity financing, on terms that are favorable to us; |
• | inflation; and |
• | foreign currency fluctuations. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
GAAP net earnings | $ | 300 | $ | 254 | $ | 640 | $ | 393 | |||||||
Amortization of acquired intangible assets | 45 | 39 | 84 | 79 | |||||||||||
Acquisition related expenses | 1 | 1 | 22 | 6 | |||||||||||
California minimum medical loss ratio changes | 30 | — | 30 | — | |||||||||||
Penn Treaty assessment expense | — | — | — | 47 | |||||||||||
Income tax effects of adjustments (1) | (16 | ) | (14 | ) | (30 | ) | (48 | ) | |||||||
Adjusted net earnings | $ | 360 | $ | 280 | $ | 746 | $ | 477 | |||||||
GAAP diluted earnings per share (EPS) | $ | 1.50 | $ | 1.44 | $ | 3.39 | $ | 2.23 | |||||||
Amortization of acquired intangible assets (2) | 0.17 | 0.14 | 0.35 | 0.28 | |||||||||||
Acquisition related expenses (3) | 0.01 | 0.01 | 0.10 | 0.03 | |||||||||||
California minimum medical loss ratio changes (4) | 0.12 | — | 0.12 | — | |||||||||||
Penn Treaty assessment expense (5) | — | — | — | 0.17 | |||||||||||
Adjusted Diluted EPS | $ | 1.80 | $ | 1.59 | $ | 3.96 | $ | 2.71 |
(1) | The income tax effects of adjustments are based on the effective income tax rates applicable to adjusted (non-GAAP) results. |
(2) | The amortization of acquired intangible assets per diluted share are net of an income tax benefit of $0.05 and $0.08 for the three months ended June 30, 2018 and 2017, respectively and $0.10 and $0.17 for the six months ended June 30, 2018 and 2017, respectively. |
(3) | Acquisition related expenses per diluted share are net of an income tax benefit of $0.00 for both the three months ended June 30, 2018 and 2017, and $0.02 and $0.01 for the six months ended June 30, 2018 and 2017, respectively. |
(4) | The impact of retroactive changes to the California minimum medical loss ratio (MLR) is net of an income tax benefit of $0.03 and $0.04 per diluted share for the three and six months ended June 30, 2018, respectively. |
(5) | The Penn Treaty assessment expense per diluted share is net of an income tax benefit of $0.09 for the six months ended June 30, 2017. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
GAAP selling, general and administrative expenses | $ | 1,237 | $ | 1,065 | $ | 2,553 | $ | 2,156 | |||||||
Acquisition related expenses | 1 | 1 | 22 | 6 | |||||||||||
Penn Treaty assessment expense | — | — | — | 47 | |||||||||||
Adjusted selling, general and administrative expenses | $ | 1,236 | $ | 1,064 | $ | 2,531 | $ | 2,103 |
June 30, 2018 | December 31, 2017 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 6,707 | $ | 4,072 | |||
Premium and trade receivables | 4,067 | 3,413 | |||||
Short-term investments | 602 | 531 | |||||
Other current assets | 1,001 | 687 | |||||
Total current assets | 12,377 | 8,703 | |||||
Long-term investments | 5,746 | 5,312 | |||||
Restricted deposits | 1,943 | 135 | |||||
Property, software and equipment, net | 1,327 | 1,104 | |||||
Goodwill | 5,346 | 4,749 | |||||
Intangible assets, net | 1,501 | 1,398 | |||||
Other long-term assets | 503 | 454 | |||||
Total assets | $ | 28,743 | $ | 21,855 | |||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Medical claims liability | $ | 5,003 | $ | 4,286 | |||
Accounts payable and accrued expenses | 3,803 | 4,165 | |||||
Return of premium payable | 529 | 549 | |||||
Unearned revenue | 523 | 328 | |||||
Current portion of long-term debt | 4 | 4 | |||||
Total current liabilities | 9,862 | 9,332 | |||||
Long-term debt | 6,275 | 4,695 | |||||
Other long-term liabilities | 1,898 | 952 | |||||
Total liabilities | 18,035 | 14,979 | |||||
Commitments and contingencies | |||||||
Redeemable noncontrolling interests | 11 | 12 | |||||
Stockholders’ equity: | |||||||
Preferred stock, $0.001 par value; authorized 10,000 shares; no shares issued or outstanding at June 30, 2018 and December 31, 2017 | — | — | |||||
Common stock, $0.001 par value; authorized 400,000 shares; 207,413 issued and 205,247 outstanding at June 30, 2018, and 180,379 issued and 173,437 outstanding at December 31, 2017 | — | — | |||||
Additional paid-in capital | 7,355 | 4,349 | |||||
Accumulated other comprehensive loss | (67 | ) | (3 | ) | |||
Retained earnings | 3,403 | 2,748 | |||||
Treasury stock, at cost (2,166 and 6,942 shares, respectively) | (81 | ) | (244 | ) | |||
Total Centene stockholders’ equity | 10,610 | 6,850 | |||||
Noncontrolling interest | 87 | 14 | |||||
Total stockholders’ equity | 10,697 | 6,864 | |||||
Total liabilities, redeemable noncontrolling interests and stockholders’ equity | $ | 28,743 | $ | 21,855 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Premium | $ | 12,113 | $ | 10,905 | $ | 24,016 | $ | 21,543 | |||||||
Service | 762 | 536 | 1,415 | 1,063 | |||||||||||
Premium and service revenues | 12,875 | 11,441 | 25,431 | 22,606 | |||||||||||
Premium tax and health insurer fee | 1,306 | 513 | 1,944 | 1,072 | |||||||||||
Total revenues | 14,181 | 11,954 | 27,375 | 23,678 | |||||||||||
Expenses: | |||||||||||||||
Medical costs | 10,380 | 9,413 | 20,419 | 18,735 | |||||||||||
Cost of services | 658 | 456 | 1,201 | 897 | |||||||||||
Selling, general and administrative expenses | 1,237 | 1,065 | 2,553 | 2,156 | |||||||||||
Amortization of acquired intangible assets | 45 | 39 | 84 | 79 | |||||||||||
Premium tax expense | 1,189 | 543 | 1,735 | 1,133 | |||||||||||
Health insurer fee expense | 183 | — | 354 | — | |||||||||||
Total operating expenses | 13,692 | 11,516 | 26,346 | 23,000 | |||||||||||
Earnings from operations | 489 | 438 | 1,029 | 678 | |||||||||||
Other income (expense): | |||||||||||||||
Investment and other income | 65 | 45 | 106 | 86 | |||||||||||
Interest expense | (80 | ) | (62 | ) | (148 | ) | (124 | ) | |||||||
Earnings from operations, before income tax expense | 474 | 421 | 987 | 640 | |||||||||||
Income tax expense | 175 | 169 | 350 | 256 | |||||||||||
Net earnings | 299 | 252 | 637 | 384 | |||||||||||
Loss attributable to noncontrolling interests | 1 | 2 | 3 | 9 | |||||||||||
Net earnings attributable to Centene Corporation | $ | 300 | $ | 254 | $ | 640 | $ | 393 | |||||||
Net earnings per common share attributable to Centene Corporation: | |||||||||||||||
Basic earnings per common share | $ | 1.53 | $ | 1.47 | $ | 3.46 | $ | 2.28 | |||||||
Diluted earnings per common share | $ | 1.50 | $ | 1.44 | $ | 3.39 | $ | 2.23 | |||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net earnings | $ | 299 | $ | 252 | $ | 637 | $ | 384 | |||||||
Reclassification adjustment, net of tax | — | (1 | ) | — | (1 | ) | |||||||||
Change in unrealized gain (loss) on investments, net of tax | (11 | ) | 20 | (63 | ) | 34 | |||||||||
Foreign currency translation adjustments | (2 | ) | 3 | (1 | ) | 4 | |||||||||
Other comprehensive earnings (loss) | (13 | ) | 22 | (64 | ) | 37 | |||||||||
Comprehensive earnings | 286 | 274 | 573 | 421 | |||||||||||
Comprehensive loss attributable to noncontrolling interests | 1 | 2 | 3 | 9 | |||||||||||
Comprehensive earnings attributable to Centene Corporation | $ | 287 | $ | 276 | $ | 576 | $ | 430 |
Centene Stockholders’ Equity | |||||||||||||||||||||||||||||||||
Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||
$.001 Par Value Shares | Amt | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | $.001 Par Value Shares | Amt | Non- controlling Interest | Total | |||||||||||||||||||||||||
Balance, December 31, 2017 | 180,379 | $ | — | $ | 4,349 | $ | (3 | ) | $ | 2,748 | 6,942 | $ | (244 | ) | $ | 14 | $ | 6,864 | |||||||||||||||
Comprehensive Earnings: | |||||||||||||||||||||||||||||||||
Net earnings | — | — | — | — | 640 | — | — | 1 | 641 | ||||||||||||||||||||||||
Other comprehensive loss, net of ($19) tax | — | — | — | (64 | ) | — | — | — | — | (64 | ) | ||||||||||||||||||||||
Common stock issued for acquisitions | — | — | 331 | — | — | (4,894 | ) | 176 | — | 507 | |||||||||||||||||||||||
Common stock issued | 26,604 | — | 2,780 | — | — | — | — | — | 2,780 | ||||||||||||||||||||||||
Common stock issued for employee benefit plans | 430 | — | 8 | — | — | — | — | — | 8 | ||||||||||||||||||||||||
Common stock repurchases | — | — | — | — | — | 118 | (13 | ) | — | (13 | ) | ||||||||||||||||||||||
Stock compensation expense | — | — | 68 | — | — | — | — | — | 68 | ||||||||||||||||||||||||
Cumulative-effect of adopting new accounting guidance | — | — | — | — | 15 | — | — | — | 15 | ||||||||||||||||||||||||
Purchase of noncontrolling interest | — | — | (181 | ) | — | — | — | — | — | (181 | ) | ||||||||||||||||||||||
Acquisition resulting in noncontrolling interest | — | — | — | — | — | — | — | 72 | 72 | ||||||||||||||||||||||||
Balance, June 30, 2018 | 207,413 | $ | — | $ | 7,355 | $ | (67 | ) | $ | 3,403 | 2,166 | $ | (81 | ) | $ | 87 | $ | 10,697 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 637 | $ | 384 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities | |||||||
Depreciation and amortization | 215 | 173 | |||||
Stock compensation expense | 67 | 62 | |||||
Deferred income taxes | 4 | (58 | ) | ||||
Changes in assets and liabilities | |||||||
Premium and trade receivables | (553 | ) | (696 | ) | |||
Other assets | 2 | 65 | |||||
Medical claims liabilities | 717 | 243 | |||||
Unearned revenue | 202 | 241 | |||||
Accounts payable and accrued expenses | (865 | ) | (257 | ) | |||
Other long-term liabilities | 865 | 781 | |||||
Other operating activities, net | 29 | 4 | |||||
Net cash provided by operating activities | 1,320 | 942 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (362 | ) | (181 | ) | |||
Purchases of investments | (1,375 | ) | (1,317 | ) | |||
Sales and maturities of investments | 721 | 1,015 | |||||
Acquisitions, net of cash acquired | (237 | ) | — | ||||
Other investing activities, net | — | (1 | ) | ||||
Net cash used in investing activities | (1,253 | ) | (484 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from the issuance of common stock | 2,780 | — | |||||
Proceeds from long-term debt | 5,146 | 810 | |||||
Payments of long-term debt | (3,471 | ) | (762 | ) | |||
Common stock repurchases | (13 | ) | (15 | ) | |||
Purchase of noncontrolling interest | (63 | ) | — | ||||
Other financing activities, net | (1 | ) | 6 | ||||
Net cash provided by financing activities | 4,378 | 39 | |||||
Net increase in cash, cash equivalents and restricted cash | 4,445 | 497 | |||||
Cash, cash equivalents, and restricted cash and cash equivalents, beginning of period | 4,089 | 3,936 | |||||
Cash, cash equivalents, and restricted cash and cash equivalents, end of period | $ | 8,534 | $ | 4,433 | |||
Supplemental disclosures of cash flow information: | |||||||
Interest paid | $ | 130 | $ | 99 | |||
Income taxes paid | $ | 195 | $ | 205 | |||
Equity issued in connection with acquisitions | $ | 507 | $ | — |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Total revenues | $ | 17,013 | $ | 14,494 | $ | 32,923 | $ | 28,583 | |||||||
Net earnings attributable to Centene Corporation | $ | 395 | $ | 312 | $ | 772 | $ | 489 | |||||||
Diluted earnings per share | $ | 1.89 | $ | 1.54 | $ | 3.73 | $ | 2.41 |
• | Additional premium tax expense related to Fidelis Care no longer being a non-for-profit entity. |
• | Additional Health Insurer Fee revenue and expense related to Fidelis Care as those revenues will be subject to the Health Insurer Fee following the first year of the closing of the Fidelis Care Acquisition. |
• | Reduced Fidelis Care investment income to reflect lower investment balances associated with the acquired assets. |
• | Interest expense associated with debt incurred to finance the transaction. |
• | An adjustment to basic and diluted shares outstanding to reflect the shares issued by Centene to finance the transaction. |
• | An adjustment to income tax expense to reflect the tax impact of the acquisition and Fidelis Care becoming subject to income tax. |
• | Elimination of acquisition related costs. |
June 30, 2018 | December 31, 2017 | ||||||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ | 267 | $ | — | $ | (3 | ) | $ | 264 | $ | 311 | $ | — | $ | (2 | ) | $ | 309 | |||||||||||||
Corporate securities | 2,441 | 4 | (43 | ) | 2,402 | 2,208 | 12 | (10 | ) | 2,210 | |||||||||||||||||||||
Restricted certificates of deposit | 4 | — | — | 4 | 4 | — | — | 4 | |||||||||||||||||||||||
Restricted cash equivalents | 1,827 | — | — | 1,827 | 17 | — | — | 17 | |||||||||||||||||||||||
Municipal securities | 2,224 | 3 | (25 | ) | 2,202 | 2,085 | 12 | (10 | ) | 2,087 | |||||||||||||||||||||
Asset-backed securities | 498 | 1 | (3 | ) | 496 | 437 | 1 | (1 | ) | 437 | |||||||||||||||||||||
Residential mortgage-backed securities | 363 | — | (12 | ) | 351 | 337 | 1 | (6 | ) | 332 | |||||||||||||||||||||
Commercial mortgage-backed securities | 296 | — | (7 | ) | 289 | 272 | 1 | (2 | ) | 271 | |||||||||||||||||||||
Fair value and equity method investments | 322 | — | — | 322 | 176 | — | — | 176 | |||||||||||||||||||||||
Life insurance contracts | 134 | — | — | 134 | 135 | — | — | 135 | |||||||||||||||||||||||
Total | $ | 8,376 | $ | 8 | $ | (93 | ) | $ | 8,291 | $ | 5,982 | $ | 27 | $ | (31 | ) | $ | 5,978 |
June 30, 2018 | December 31, 2017 | ||||||||||||||||||||||||||||||
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 | $ | (2 | ) | $ | 160 | $ | (1 | ) | $ | 88 | $ | (1 | ) | $ | 222 | $ | (1 | ) | $ | 79 | |||||||||||
Corporate securities | (35 | ) | 1,772 | (8 | ) | 180 | (6 | ) | 1,044 | (4 | ) | 185 | |||||||||||||||||||
Municipal securities | (19 | ) | 1,404 | (6 | ) | 172 | (7 | ) | 943 | (3 | ) | 175 | |||||||||||||||||||
Asset-backed securities | (3 | ) | 355 | — | 26 | (1 | ) | 228 | — | 28 | |||||||||||||||||||||
Residential mortgage-backed securities | (4 | ) | 161 | (8 | ) | 155 | (1 | ) | 109 | (5 | ) | 171 | |||||||||||||||||||
Commercial mortgage-backed securities | (4 | ) | 200 | (3 | ) | 51 | (1 | ) | 112 | (1 | ) | 51 | |||||||||||||||||||
Total | $ | (67 | ) | $ | 4,052 | $ | (26 | ) | $ | 672 | $ | (17 | ) | $ | 2,658 | $ | (14 | ) | $ | 689 |
June 30, 2018 | December 31, 2017 | ||||||||||||||||||||||||||||||
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 | $ | 584 | $ | 578 | $ | 1,840 | $ | 1,840 | $ | 474 | $ | 474 | $ | 48 | $ | 47 | |||||||||||||||
One year through five years | 2,286 | 2,253 | 104 | 103 | 2,424 | 2,420 | 88 | 88 | |||||||||||||||||||||||
Five years through ten years | 1,758 | 1,740 | — | — | 1,773 | 1,779 | — | — | |||||||||||||||||||||||
Greater than ten years | 647 | 641 | — | — | 129 | 130 | — | — | |||||||||||||||||||||||
Asset-backed securities | 1,157 | 1,136 | — | — | 1,046 | 1,040 | — | — | |||||||||||||||||||||||
Total | $ | 6,432 | $ | 6,348 | $ | 1,944 | $ | 1,943 | $ | 5,846 | $ | 5,843 | $ | 136 | $ | 135 |
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. |
Level I | Level II | Level III | Total | ||||||||||||
Assets | |||||||||||||||
Cash and cash equivalents | $ | 6,707 | $ | — | $ | — | $ | 6,707 | |||||||
Investments available for sale: | |||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ | 152 | $ | — | $ | — | $ | 152 | |||||||
Corporate securities | — | 2,402 | — | 2,402 | |||||||||||
Municipal securities | — | 2,202 | — | 2,202 | |||||||||||
Asset-backed securities | — | 496 | — | 496 | |||||||||||
Residential mortgage-backed securities | — | 351 | — | 351 | |||||||||||
Commercial mortgage-backed securities | — | 289 | — | 289 | |||||||||||
Total investments | $ | 152 | $ | 5,740 | $ | — | $ | 5,892 | |||||||
Restricted deposits available for sale: | |||||||||||||||
Cash and cash equivalents | $ | 1,827 | $ | — | $ | — | $ | 1,827 | |||||||
Certificates of deposit | 4 | — | — | 4 | |||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 112 | — | — | 112 | |||||||||||
Total restricted deposits | $ | 1,943 | $ | — | $ | — | $ | 1,943 | |||||||
Other long-term assets: Interest rate swap agreements | $ | — | $ | — | $ | — | $ | — | |||||||
Total assets at fair value | $ | 8,802 | $ | 5,740 | $ | — | $ | 14,542 | |||||||
Liabilities | |||||||||||||||
Other long-term liabilities: | |||||||||||||||
Interest rate swap agreements | $ | — | $ | 136 | $ | — | $ | 136 | |||||||
Total liabilities at fair value | $ | — | $ | 136 | $ | — | $ | 136 |
Level I | Level II | Level III | Total | ||||||||||||
Assets | |||||||||||||||
Cash and cash equivalents | $ | 4,072 | $ | — | $ | — | $ | 4,072 | |||||||
Investments available for sale: | |||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ | 195 | $ | — | $ | — | $ | 195 | |||||||
Corporate securities | — | 2,210 | — | 2,210 | |||||||||||
Municipal securities | — | 2,087 | — | 2,087 | |||||||||||
Asset-backed securities | — | 437 | — | 437 | |||||||||||
Residential mortgage-backed securities | — | 332 | — | 332 | |||||||||||
Commercial mortgage-backed securities | — | 271 | — | 271 | |||||||||||
Total investments | $ | 195 | $ | 5,337 | $ | — | $ | 5,532 | |||||||
Restricted deposits available for sale: | |||||||||||||||
Cash and cash equivalents | $ | 17 | $ | — | $ | — | $ | 17 | |||||||
Certificates of deposit | 4 | — | — | 4 | |||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 114 | — | — | 114 | |||||||||||
Total restricted deposits | $ | 135 | $ | — | $ | — | $ | 135 | |||||||
Other long-term assets: | |||||||||||||||
Interest rate swap agreements | $ | — | $ | 1 | $ | — | $ | 1 | |||||||
Total assets at fair value | $ | 4,402 | $ | 5,338 | $ | — | $ | 9,740 | |||||||
Liabilities | |||||||||||||||
Other long-term liabilities: | |||||||||||||||
Interest rate swap agreements | $ | — | $ | 72 | $ | — | $ | 72 | |||||||
Total liabilities at fair value | $ | — | $ | 72 | $ | — | $ | 72 |
Six Months Ended June 30, | ||||||||
2018 | 2017 | |||||||
Balance, January 1 | $ | 4,286 | $ | 3,929 | ||||
Less: Reinsurance recoverable | 18 | 5 | ||||||
Balance, January 1, net | 4,268 | 3,924 | ||||||
Incurred related to: | ||||||||
Current year | 20,748 | 19,087 | ||||||
Prior years | (329 | ) | (352 | ) | ||||
Total incurred | 20,419 | 18,735 | ||||||
Paid related to: | ||||||||
Current year | 16,738 | 15,477 | ||||||
Prior years | 2,963 | 3,022 | ||||||
Total paid | 19,701 | 18,499 | ||||||
Balance at June 30, net | 4,986 | 4,160 | ||||||
Plus: Reinsurance recoverable | 17 | 10 | ||||||
Balance, June 30 | $ | 5,003 | $ | 4,170 |
June 30, 2018 | December 31, 2017 | ||||||
Risk adjustment | $ | (1,325 | ) | $ | (677 | ) | |
Reinsurance | 1 | 15 | |||||
Risk corridor | 5 | 6 | |||||
Minimum MLR | (79 | ) | (22 | ) | |||
Cost sharing reductions | (56 | ) | (96 | ) |
June 30, 2018 | December 31, 2017 | ||||||
$1,400 million 5.625% Senior notes, due February 15, 2021 | $ | 1,400 | $ | 1,400 | |||
$1,000 million 4.75% Senior notes, due May 15, 2022 | 1,006 | 1,006 | |||||
$1,000 million 6.125% Senior notes, due February 15, 2024 | 1,000 | 1,000 | |||||
$1,200 million 4.75% Senior notes, due January 15, 2025 | 1,200 | 1,200 | |||||
$1,800 million 5.375% Senior notes, due June 1, 2026 | 1,800 | — | |||||
Fair value of interest rate swap agreements | (136 | ) | (71 | ) | |||
Total senior notes | 6,270 | 4,535 | |||||
Revolving credit agreement | — | 150 | |||||
Mortgage notes payable | 59 | 61 | |||||
Construction loan payable | 26 | — | |||||
Capital leases and other | 5 | 18 | |||||
Debt issuance costs | (81 | ) | (65 | ) | |||
Total debt | 6,279 | 4,699 | |||||
Less current portion | (4 | ) | (4 | ) | |||
Long-term debt | $ | 6,275 | $ | 4,695 |
Expiration Date | Notional Amount | |||
February 15, 2021 | $ | 600 | ||
May 15, 2022 | 500 | |||
February 15, 2024 | 1,000 | |||
January 15, 2025 | 600 | |||
Total | $ | 2,700 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Earnings attributable to Centene Corporation | $ | 300 | $ | 254 | $ | 640 | $ | 393 | |||||||
Shares used in computing per share amounts: | |||||||||||||||
Weighted average number of common shares outstanding | 195,518 | 172,357 | 184,720 | 172,215 | |||||||||||
Common stock equivalents (as determined by applying the treasury stock method) | 3,933 | 4,063 | 3,851 | 3,905 | |||||||||||
Weighted average number of common shares and potential dilutive common shares outstanding | 199,451 | 176,420 | 188,571 | 176,120 | |||||||||||
Net earnings per common share attributable to Centene Corporation: | |||||||||||||||
Basic earnings per common share | $ | 1.53 | $ | 1.47 | $ | 3.46 | $ | 2.28 | |||||||
Diluted earnings per common share | $ | 1.50 | $ | 1.44 | $ | 3.39 | $ | 2.23 |
Managed Care | Specialty Services | Eliminations | Consolidated Total | ||||||||||||
Total revenues from external customers | $ | 13,283 | $ | 898 | $ | — | $ | 14,181 | |||||||
Total revenues from internal customers | 26 | 2,338 | (2,364 | ) | — | ||||||||||
Total revenues | $ | 13,309 | $ | 3,236 | $ | (2,364 | ) | $ | 14,181 | ||||||
Earnings from operations | $ | 421 | $ | 68 | $ | — | $ | 489 |
Managed Care | Specialty Services | Eliminations | Consolidated Total | ||||||||||||
Total revenues from external customers | $ | 11,341 | $ | 613 | $ | — | $ | 11,954 | |||||||
Total revenues from internal customers | 11 | 2,412 | (2,423 | ) | — | ||||||||||
Total revenues | $ | 11,352 | $ | 3,025 | $ | (2,423 | ) | $ | 11,954 | ||||||
Earnings from operations | $ | 374 | $ | 64 | $ | — | $ | 438 |
Managed Care | Specialty Services | Eliminations | Consolidated Total | ||||||||||||
Total revenues from external customers | $ | 25,733 | $ | 1,642 | $ | — | $ | 27,375 | |||||||
Total revenues from internal customers | 51 | 4,569 | (4,620 | ) | — | ||||||||||
Total revenues | $ | 25,784 | $ | 6,211 | $ | (4,620 | ) | $ | 27,375 | ||||||
Earnings from operations | $ | 891 | $ | 138 | $ | — | $ | 1,029 |
Managed Care | Specialty Services | Eliminations | Consolidated Total | ||||||||||||
Total revenues from external customers | $ | 22,456 | $ | 1,222 | $ | — | $ | 23,678 | |||||||
Total revenues from internal customers | 22 | 4,745 | (4,767 | ) | — | ||||||||||
Total revenues | $ | 22,478 | $ | 5,967 | $ | (4,767 | ) | $ | 23,678 | ||||||
Earnings from operations | $ | 561 | $ | 117 | $ | — | $ | 678 |
• | periodic compliance and other reviews and investigations by various federal and state regulatory agencies with respect to requirements applicable to the Company's business, including, without limitation, those related to payment of out-of-network claims, submissions to CMS for risk adjustment payments or the False Claims Act, pre-authorization penalties, timely review of grievances and appeals, timely and accurate payment of claims, and the Health Insurance Portability and Accountability Act of 1996; |
• | litigation arising out of general business activities, such as tax matters, disputes related to healthcare benefits coverage or reimbursement, putative securities class actions and medical malpractice, privacy, real estate, intellectual property and employment-related claims; |
• | disputes regarding reinsurance arrangements, claims arising out of the acquisition or divestiture of various assets, class actions and claims relating to the performance of contractual and non-contractual obligations to providers, members, employer groups and others, including, but not limited to, the alleged failure to properly pay claims and challenges to the manner in which the Company processes claims and claims alleging that the Company has engaged in unfair business practices. |
• | Managed care membership of 12.8 million, an increase of 584,700 members, or 5% year-over-year. |
• | Total revenues of $14.2 billion, representing 19% growth year-over-year. |
• | Health benefits ratio of 85.7%, compared to 86.3% in 2017. |
• | SG&A expense ratio and Adjusted SG&A expense ratio of 9.6% for the second quarter of 2018, compared to 9.3% for the second quarter of 2017. |
• | Operating cash flows of $(526) million due to the repayment of approximately $630 million of Medicaid expansion rate overpayments in California, which was previously accrued. |
• | Diluted earnings per share (EPS) for the second quarter of 2018 of $1.50, compared to $1.44 for the second quarter of 2017. |
• | Adjusted Diluted EPS for the second quarter of 2018 of $1.80, compared to $1.59 for the second quarter of 2017. |
Three Months Ended June 30, | |||||||
2018 | 2017 | ||||||
GAAP diluted EPS | $ | 1.50 | $ | 1.44 | |||
Amortization of acquired intangible assets | 0.17 | 0.14 | |||||
Acquisition related expenses | 0.01 | 0.01 | |||||
California minimum medical loss ratio changes | 0.12 | — | |||||
Adjusted Diluted EPS | $ | 1.80 | $ | 1.59 |
• | In June, health plans in California were notified that CMS did not approve the Medicaid Expansion rates for the period from July 2016 to June 2017. CMS is requiring a risk corridor of an 85% minimum and a 95% maximum as a condition of approving the rates. The State is currently evaluating the impact of the feedback from CMS. |
• | In the fourth quarter of 2016, we recorded a favorable impact associated with the retroactive change in the minimum MLR calculation under California's Medicaid expansion program. Upon submission to the State, the calculation of the minimum MLR was further refined for periods prior to July 2016, reducing our liability under the program. |
• | The net impact of the Medicaid expansion and MLR updates in California resulted in $30 million reduction to pre-tax earnings or $0.12 per diluted share. |
• | Arkansas. In February 2018, our Arkansas subsidiary, Arkansas Total Care, began managing a Medicaid special needs population comprised of people with high behavioral health needs and individuals with developmental/intellectual disabilities. Arkansas Total Care will assume full-risk on this population beginning in January 2019. |
• | CMG. In March 2018, we completed the acquisition of CMG, an at-risk primary care provider serving approximately 70,000 Medicaid, Medicare Advantage, and Health Insurance Marketplace patients in Miami-Dade County, Florida. |
• | Correctional. In April 2018, we completed the acquisition of MHM, a national provider of healthcare and staffing services to correctional systems and other government agencies. Under the terms of the agreement, Centene also acquired the remaining 49% ownership of Centurion, the correctional healthcare services joint venture between Centene and MHM. In June 2017, Centurion began operating under an expanded contract to provide correctional healthcare services for the Florida Department of Corrections in South Florida. |
• | Health Insurance Marketplace. In January 2018, we expanded our offerings in the 2018 Health Insurance Marketplace. We entered Kansas, Missouri and Nevada, and expanded our footprint in the following six existing markets: Florida, Georgia, Indiana, Ohio, Texas, and Washington. |
• | Health Net Federal Services. In January 2018, our subsidiary, Health Net Federal Services, began operating under the TRICARE West Region contract to provide administrative services to Military Health System eligible beneficiaries. |
• | Illinois. In January 2018, our Illinois subsidiary, IlliniCare Health, began operating under a state-wide contract for the Medicaid Managed Care Program. Implementation dates varied by region and the contract was fully implemented statewide in April 2018. The new contract will include children who are in need through the Department of Children and Family Services/Youth in Care by the Illinois Department of Healthcare and Family Services and Foster Care. These additional products are expected to be implemented in the fourth quarter of 2018. |
• | Interpreta. In March 2018, we acquired an additional 61% ownership in Interpreta, a clinical and genomics data analytics business, bringing our total ownership to 80%. |
• | Maryland. In July 2017, our specialty solutions subsidiary, Envolve, Inc., began providing health plan management services for Medicaid operations in Maryland. |
• | Medicare. In January 2018, we expanded our offerings in Medicare. We entered Arkansas, Indiana, Kansas, Louisiana, Missouri, Pennsylvania, South Carolina, and Washington and expanded our footprint in Ohio. |
• | Missouri. In May 2017, our Missouri subsidiary, Home State Health, began providing managed care services to MO HealthNet Managed Care beneficiaries under an expanded statewide contract. |
• | Nevada. In July 2017, our Nevada subsidiary, SilverSummit Healthplan, began serving Medicaid recipients enrolled in Nevada's Medicaid managed care program. |
• | Pennsylvania. In January 2018, our Pennsylvania subsidiary, Pennsylvania Health & Wellness, began serving enrollees in the Community HealthChoices program. Contract commencement dates vary by zone and will be fully implemented statewide by January 2020. |
• | RxAdvance. In March 2018, we made a 25% equity method investment in RxAdvance, a full-service PBM, and expect to use its platform to improve health outcomes and reduce avoidable drug-impacted medical and administrative costs. This partnership includes both a customer relationship and a strategic investment in RxAdvance. As part of the initial transaction, Centene has certain rights to expand its equity investment in the future. In May 2018, we made an additional investment in RxAdvance, bringing the total ownership to 28%. |
• | Washington. In January 2018, our Washington State subsidiary, Coordinated Care of Washington, began providing managed care services to Apple Health's Fully Integrated Managed Care beneficiaries in the North Central Region. |
• | We were successful in reprocuring our contract in Georgia. However, the Medicaid program was expanded to include additional insurers, effective July 2017, which has reduced our market share. In addition, we are no longer serving LTSS members in Arizona or Medicaid members in Massachusetts. |
• | Beginning in January 2018, the State of California no longer includes costs for in-home support services (IHSS) in its Medicaid contracts. |
• | Beginning in July 2018, we no longer serve correctional healthcare members in Massachusetts. |
• | We expect to realize the full year benefit in 2018 of business commenced during 2017 in Florida, Maryland, Missouri and Nevada, as discussed above. |
• | In July 2018, we completed the acquisition of substantially all of the assets of Fidelis Care for $3.75 billion of cash consideration, making Fidelis Care Centene's health plan in New York State. |
• | In July 2018, our subsidiary, Health Net Federal Services, was awarded the next generation Military & Family Life Counseling Program contract. The awarded contract is up to ten years, including multiple one-year option periods. |
• | In July 2018, Centurion began operating under a contract to provide healthcare services for correctional facilities in Pima County, Arizona. In addition, Centurion's contracts for correctional facilities were reprocured in Florida, New Hampshire and Tennessee. |
• | In June 2018, our Kansas subsidiary, Sunflower Health Plan, was selected to continue providing managed care services to KanCare beneficiaries statewide. The new contract is expected to commence January 1, 2019. |
• | In May 2018, our Washington State subsidiary, Coordinated Care of Washington, was selected to provide expanded managed care services to Apple Health's Fully Integrated Managed Care (FIMC) Medicaid beneficiaries. This new contract integrates physical and behavioral health. |
• | In May 2018, our Iowa subsidiary, Iowa Total Care, Inc., was selected to negotiate a new statewide contract for the IA Health Link Program. Pending regulatory approval, the contract is expected to commence on July 1, 2019. |
• | In May 2018, our Florida subsidiary, Sunshine Health, was awarded a contract to provide physical and behavioral health care services in all 11 regions through Florida's Statewide Medicaid Managed Care Program, subject to regulatory approval and successful completion of readiness review. The five year contract is expected to begin December 1, 2018 and will be implemented by region through February 2019. |
• | In March 2018, our Arizona subsidiary, Health Net Access, was selected to provide physical and behavioral health care services through the Arizona Health Care Cost Containment System Complete Care program in the Central region and the Southern region. Pending regulatory approval and successful completion of readiness review, the three-year agreement, with the possibility of two two-year extensions, is expected to commence on October 1, 2018. |
• | In January 2018, our New Mexico subsidiary, Western Sky Community Care, was awarded a statewide contract in New Mexico for the Centennial Care 2.0 Program. The new contract is expected to commence membership operations in January 2019. |
• | In June 2017, our Mississippi subsidiary, Magnolia Health, was selected by the Mississippi Division of Medicaid to continue serving Medicaid recipients enrolled in the Mississippi Coordinated Access Network. Pending regulatory approval, the new three-year agreement, which also includes the option of two one-year extensions, is expected to commence in October 2018. |
• | In January 2017, we signed a joint venture agreement with the North Carolina Medical Society, working in conjunction with the North Carolina Community Health Center Association, to collaborate on a patient-focused approach to Medicaid under the reform plan enacted in the State of North Carolina. The newly created health plan, Carolina Complete Health, was created to establish, organize and operate a physician-led health plan to provide Medicaid managed care services in North Carolina. |
• | Effective October 2018, we will no longer be serving veterans under the PC3 program. |
• | In the first quarter of 2018, Health Net of Arizona, Inc. notified the Arizona Department of Insurance of its decision to discontinue and non-renew all of its Employer Group plans for small and large business groups in Arizona beginning January 1, 2019. The effective date of coverage termination for existing groups is dependent on remaining renewals; however, coverage will no longer be provided to any group policyholders and/or members after December 31, 2019. |
June 30, 2018 | December 31, 2017 | June 30, 2017 | ||||||
Medicaid: | ||||||||
TANF, CHIP & Foster Care | 5,852,000 | 5,807,300 | 5,854,400 | |||||
ABD & LTSS | 874,200 | 846,200 | 843,500 | |||||
Behavioral Health | 454,600 | 463,700 | 466,500 | |||||
Total Medicaid | 7,180,800 | 7,117,200 | 7,164,400 | |||||
Commercial | 2,051,700 | 1,558,300 | 1,743,600 | |||||
Medicare (1) | 343,800 | 333,700 | 327,500 | |||||
Correctional | 157,900 | 157,500 | 160,400 | |||||
Total at-risk membership | 9,734,200 | 9,166,700 | 9,395,900 | |||||
TRICARE eligibles | 2,851,500 | 2,824,100 | 2,823,200 | |||||
Non-risk membership | 218,100 | 216,300 | — | |||||
Total | 12,803,800 | 12,207,100 | 12,219,100 | |||||
(1) Membership includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and Medicare-Medicaid Plans (MMP). |
June 30, 2018 | December 31, 2017 | June 30, 2017 | ||||||
Dual-eligible (2) | 489,500 | 474,500 | 467,500 | |||||
Health Insurance Marketplace | 1,503,100 | 959,600 | 1,084,600 | |||||
Medicaid Expansion | 1,079,700 | 1,091,500 | 1,101,900 | |||||
(2) Membership includes dual-eligible ABD & LTC and dual-eligible Medicare membership in the table above. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2018 | 2017 | % Change 2017-2018 | 2018 | 2017 | % Change 2017-2018 | ||||||||||||||||
Premium | $ | 12,113 | $ | 10,905 | 11 | % | $ | 24,016 | $ | 21,543 | 11 | % | |||||||||
Service | 762 | 536 | 42 | % | 1,415 | 1,063 | 33 | % | |||||||||||||
Premium and service revenues | 12,875 | 11,441 | 13 | % | 25,431 | 22,606 | 12 | % | |||||||||||||
Premium tax and health insurer fee | 1,306 | 513 | 155 | % | 1,944 | 1,072 | 81 | % | |||||||||||||
Total revenues | 14,181 | 11,954 | 19 | % | 27,375 | 23,678 | 16 | % | |||||||||||||
Medical costs | 10,380 | 9,413 | 10 | % | 20,419 | 18,735 | 9 | % | |||||||||||||
Cost of services | 658 | 456 | 44 | % | 1,201 | 897 | 34 | % | |||||||||||||
Selling, general and administrative expenses | 1,237 | 1,065 | 16 | % | 2,553 | 2,156 | 18 | % | |||||||||||||
Amortization of acquired intangible assets | 45 | 39 | 15 | % | 84 | 79 | 6 | % | |||||||||||||
Premium tax expense | 1,189 | 543 | 119 | % | 1,735 | 1,133 | 53 | % | |||||||||||||
Health insurer fee expense | 183 | — | 100 | % | 354 | — | 100 | % | |||||||||||||
Earnings from operations | 489 | 438 | 12 | % | 1,029 | 678 | 52 | % | |||||||||||||
Investment and other income (expense), net | (15 | ) | (17 | ) | 12 | % | (42 | ) | (38 | ) | (11 | )% | |||||||||
Earnings from operations, before income tax expense | 474 | 421 | 13 | % | 987 | 640 | 54 | % | |||||||||||||
Income tax expense | 175 | 169 | 4 | % | 350 | 256 | 37 | % | |||||||||||||
Net earnings | 299 | 252 | 19 | % | 637 | 384 | 66 | % | |||||||||||||
Loss attributable to noncontrolling interests | 1 | 2 | (50 | )% | 3 | 9 | (67 | )% | |||||||||||||
Net earnings attributable to Centene Corporation | $ | 300 | $ | 254 | 18 | % | $ | 640 | $ | 393 | 63 | % | |||||||||
Diluted earnings per common share attributable to Centene Corporation | $ | 1.50 | $ | 1.44 | 4 | % | $ | 3.39 | $ | 2.23 | 52 | % |
2018 | 2017 | % Change 2017-2018 | ||||||||
Medicaid | $ | 8,919 | $ | 8,068 | 11 | % | ||||
Commercial | 3,143 | 2,122 | 48 | % | ||||||
Medicare (1) | 1,203 | 1,134 | 6 | % | ||||||
Other | 916 | 630 | 45 | % | ||||||
Total Revenues | $ | 14,181 | $ | 11,954 | 19 | % | ||||
(1) Medicare includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and MMP. |
2018 | 2017 | ||||||
Investment and other income | $ | 65 | $ | 45 | |||
Interest expense | (80 | ) | (62 | ) | |||
Other income (expense), net | $ | (15 | ) | $ | (17 | ) |
2018 | 2017 | % Change 2017-2018 | ||||||||
Total Revenues | ||||||||||
Managed Care | $ | 13,309 | $ | 11,352 | 17 | % | ||||
Specialty Services | 3,236 | 3,025 | 7 | % | ||||||
Eliminations | (2,364 | ) | (2,423 | ) | 2 | % | ||||
Consolidated Total | $ | 14,181 | $ | 11,954 | 19 | % | ||||
Earnings from Operations | ||||||||||
Managed Care | $ | 421 | $ | 374 | 13 | % | ||||
Specialty Services | 68 | 64 | 6 | % | ||||||
Consolidated Total | $ | 489 | $ | 438 | 12 | % |
2018 | 2017 | % Change 2017-2018 | ||||||||
Medicaid | $ | 17,124 | $ | 16,035 | 7 | % | ||||
Commercial | 6,206 | 4,122 | 51 | % | ||||||
Medicare (1) | 2,365 | 2,266 | 4 | % | ||||||
Other | 1,680 | 1,255 | 34 | % | ||||||
Total Revenues | $ | 27,375 | $ | 23,678 | 16 | % | ||||
(1) Medicare includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and MMP. |
2018 | 2017 | ||||||
Investment and other income | $ | 106 | $ | 86 | |||
Interest expense | (148 | ) | (124 | ) | |||
Other income (expense), net | $ | (42 | ) | $ | (38 | ) |
2018 | 2017 | % Change 2017-2018 | ||||||||
Total Revenues | ||||||||||
Managed Care | $ | 25,784 | $ | 22,478 | 15 | % | ||||
Specialty Services | 6,211 | 5,967 | 4 | % | ||||||
Eliminations | (4,620 | ) | (4,767 | ) | 3 | % | ||||
Consolidated Total | $ | 27,375 | $ | 23,678 | 16 | % | ||||
Earnings from Operations | ||||||||||
Managed Care | $ | 891 | $ | 561 | 59 | % | ||||
Specialty Services | 138 | 117 | 18 | % | ||||||
Consolidated Total | $ | 1,029 | $ | 678 | 52 | % |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Net cash provided by operating activities | $ | 1,320 | $ | 942 | |||
Net cash used in investing activities | (1,253 | ) | (484 | ) | |||
Net cash provided by financing activities | 4,378 | 39 | |||||
Net increase in cash, cash equivalents, and restricted cash and cash equivalents | $ | 4,445 | $ | 497 |
• | the diversion of management’s attention from ongoing business concerns and performance shortfalls as a result of the devotion of management’s attention to each integration; |
• | managing a larger combined company; |
• | maintaining employee morale and retaining key management and other employees; |
• | the possibility of faulty assumptions underlying expectations regarding the integration process; |
• | retaining existing business and operational relationships and attracting new business and operational relationships; |
• | consolidating corporate and administrative infrastructures and eliminating duplicative operations; |
• | coordinating geographically separate organizations; |
• | unanticipated issues in integrating information technology, communications and other systems; |
• | unanticipated changes in federal or state laws or regulations, including the ACA and any regulations enacted thereunder; |
• | unforeseen expenses or delays associated with the acquisition and/or integration; and |
• | decreases in premiums paid under government sponsored healthcare programs by any state in which we operate. |
Issuer Purchases of Equity Securities Second Quarter 2018 | |||||||||||
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(2) | |||||||
April 1 - April 30, 2018 | 19,745 | $ | 109.41 | — | 3,335,448 | ||||||
May 1 - May 31, 2018 | 9,185 | 115.71 | — | 3,335,448 | |||||||
June 1 - June 30, 2018 | 5,579 | 120.22 | — | 3,335,448 | |||||||
Total | 34,509 | $ | 112.83 | — | 3,335,448 | ||||||
(1) Shares acquired represent shares relinquished to the Company by certain employees for payment of taxes or option cost upon vesting of restricted stock units or option exercise. (2) Our Board of Directors adopted a stock repurchase program which allows for repurchases of up to a remaining amount of 3,335,448 shares. No duration has been placed on the repurchase program. |
EXHIBIT NUMBER | DESCRIPTION | ||
4.1 | |||
12.1 | |||
31.1 | |||
31.2 | |||
32.1 | |||
32.2 | |||
101.1 | XBRL Taxonomy Instance Document. | ||
101.2 | XBRL Taxonomy Extension Schema Document. | ||
101.3 | XBRL Taxonomy Extension Calculation Linkbase Document. | ||
101.4 | XBRL Taxonomy Extension Definition Linkbase Document. | ||
101.5 | XBRL Taxonomy Extension Label Linkbase Document. | ||
101.6 | XBRL Taxonomy Extension Presentation Linkbase Document. | ||
CENTENE CORPORATION | ||
By: | /s/ MICHAEL F. NEIDORFF | |
Chairman and Chief Executive Officer (principal executive officer) |
By: | /s/ JEFFREY A. SCHWANEKE | |
Executive Vice President and Chief Financial Officer (principal financial officer) |
By: | /s/ CHRISTOPHER R. ISAAK | |
Senior Vice President, Corporate Controller and Chief Accounting Officer (principal accounting officer) |
Six Months Ended | Year Ended December 31, | ||||||||||||||||||
6/30/18 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Earnings: | |||||||||||||||||||
Pre-tax earnings from continuing operations | $ | 987 | $ | 1,134 | $ | 1,157 | $ | 697 | $ | 457 | |||||||||
Addback: | |||||||||||||||||||
Fixed charges | 181 | 311 | 262 | 65 | 50 | ||||||||||||||
Add (Subtract): | |||||||||||||||||||
Noncontrolling interest | 3 | 20 | 1 | (2 | ) | 7 | |||||||||||||
Total earnings | $ | 1,171 | $ | 1,465 | $ | 1,420 | $ | 760 | $ | 514 | |||||||||
Fixed Charges: | |||||||||||||||||||
Interest expense | $ | 148 | $ | 255 | $ | 217 | $ | 43 | $ | 35 | |||||||||
Interest component of rental payments (1) | 33 | 56 | 45 | 22 | 15 | ||||||||||||||
Total fixed charges | $ | 181 | $ | 311 | $ | 262 | $ | 65 | $ | 50 | |||||||||
Ratio of earnings to fixed charges | 6.5 | 4.7 | 5.4 | 11.7 | 10.3 | ||||||||||||||
(1) Estimated at 33% of rental expense as a reasonable approximation of the interest factor. |
1. | I have reviewed this Quarterly Report on Form 10-Q of Centene Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: | July 24, 2018 | /s/ MICHAEL F. NEIDORFF | |
Chairman and Chief Executive Officer (principal executive officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Centene Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: | July 24, 2018 | /s/ JEFFREY A. SCHWANEKE | |
Executive Vice President and Chief Financial Officer (principal financial officer) |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | July 24, 2018 | /s/ MICHAEL F. NEIDORFF | |
Chairman and Chief Executive Officer (principal executive officer) |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | July 24, 2018 | /s/ JEFFREY A. SCHWANEKE | |
Executive Vice President and Chief Financial Officer (principal financial officer) |
Document And Entity Information - shares |
6 Months Ended | |
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Jun. 30, 2018 |
Jul. 13, 2018 |
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Document and Entity Information [Abstract] | ||
Entity Registrant Name | CENTENE CORP | |
Entity Central Index Key | 0001071739 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 205,256,671 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
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Stockholders' equity | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 400,000,000 | 400,000,000 |
Common stock, shares issued | 207,413,000 | 180,379,000 |
Common stock, shares outstanding | 205,247,000 | 173,437,000 |
Treasury stock (in shares) | 2,166,000 | 6,942,000 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Statement of Comprehensive Income [Abstract] | ||||
Net earnings | $ 299 | $ 252 | $ 637 | $ 384 |
Reclassification adjustment, net of tax | 0 | (1) | 0 | (1) |
Change in unrealized gain (loss) on investments, net of tax | (11) | 20 | (63) | 34 |
Foreign currency translation adjustments | (2) | 3 | (1) | 4 |
Other comprehensive earnings (loss) | (13) | 22 | (64) | 37 |
Comprehensive earnings | 286 | 274 | 573 | 421 |
Comprehensive loss attributable to noncontrolling interests | 1 | 2 | 3 | 9 |
Comprehensive earnings attributable to Centene Corporation | $ 287 | $ 276 | $ 576 | $ 430 |
Consolidated Statement of Stockholders' Equity (Parenthetical) - USD ($) $ in Millions |
6 Months Ended | |
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Jun. 30, 2018 |
Dec. 31, 2017 |
|
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Other comprehensive loss, tax | $ (19) | |
Common stock | ||
Common stock, par value (in dollars per share) | $ 0.001 | 0.001 |
Treasury Stock | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Organization and Operations |
6 Months Ended |
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Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Operations | Organization and Operations Basis of Presentation The accompanying interim financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited financial statements included in the Form 10-K for the fiscal year ended December 31, 2017. The unaudited interim financial statements herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, footnote disclosures which would substantially duplicate the disclosures contained in the December 31, 2017 audited financial statements have been omitted from these interim financial statements, where appropriate. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of the interim periods presented. Certain 2017 amounts in the consolidated financial statements and notes to the consolidated financial statements have been reclassified to conform to the 2018 presentation. These reclassifications have no effect on net earnings or stockholders' equity as previously reported. Recently Adopted Accounting Guidance In June 2018, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) that simplifies the accounting for share-based payment arrangements with nonemployees for goods and services. Under the ASU, the guidance on such payments to nonemployees is aligned with the accounting for share-based payments granted to employees, including the measurement of equity-classified awards, which is fixed at the grant date under the new guidance. The Company adopted the new guidance in the second quarter of 2018 using the modified retrospective approach with an immaterial cumulative-effect adjustment to retained earnings. In February 2018, the FASB issued an ASU which allows a reclassification from accumulated other comprehensive income (OCI) to retained earnings for stranded tax effects resulting from the Tax Cuts and Job Acts (TCJA). Consequently, the amendments eliminate the stranded tax effects resulting from the TCJA and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the TCJA, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this ASU also require certain disclosures about stranded tax effects. The Company adopted the new guidance in the first quarter of 2018 and elected to reclassify stranded tax effects as a result of the TCJA related to unrealized gains and losses on investments and defined benefit plan obligations. The Company uses the individual security approach to release income tax effects from accumulated OCI. The new guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows. In November 2016, the FASB issued an ASU clarifying the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted the new guidance in the first quarter of 2018. The new guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows. Cash, cash equivalents, and restricted cash and cash equivalents reported on the Consolidated Statements of Cash Flows includes restricted cash and cash equivalents of $6 million, $8 million, $17 million and $1,827 million as of December 31, 2016, June 30, 2017, December 31, 2017 and June 30, 2018, respectively. The restricted cash and cash equivalents as of June 30, 2018 includes cash held in escrow related to the issuance of long-term debt as further discussed in Note 7. Debt. In March 2016, the FASB issued an ASU which requires entities to measure equity investments at fair value and recognize any change in fair value in net income. The standard does not apply to accounting methods that result in consolidation of the investee and those accounted for under the equity method. The standard also requires entities to record changes in instrument-specific credit risk for financial liabilities measured under the fair value option in other comprehensive income. Companies are required to record a cumulative-effect adjustment to the statement of financial position as of the beginning of the fiscal year in which the guidance is adopted, with the exception of amendments related to equity investments without readily determinable fair values, which will be applied prospectively to all investments that exist as of the date of adoption. The Company adopted the new guidance in the first quarter of 2018. The new guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows. In May 2014, the FASB issued an ASU which supersedes existing revenue recognition standards with a single model unless those contracts are within the scope of other standards (e.g., an insurance entity's insurance contracts). Under the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the new guidance in the first quarter of 2018 using the modified retrospective approach with a cumulative-effect increase to retained earnings of $16 million. The Company also elected the practical expedient of applying the new guidance only to contracts that are not completed as of the date of initial application. The majority of the Company's revenues are derived from insurance contracts and are excluded from the new standard. Accounting Guidance Not Yet Adopted In February 2018, the FASB issued an ASU which makes technical corrections and clarifications to certain aspects of the new guidance on recognizing and measuring financial instruments. The amendment clarifies, among other things, that entities will use a prospective transition approach only for equity securities they elect to measure using the new measurement alternative. The amendments are effective for annual periods beginning in 2018 and interim periods beginning in the third quarter of 2018. The new guidance is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows. In February 2016, the FASB issued an ASU which introduces a lessee model that requires the majority of leases to be recognized on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in Accounting Standards Codification 606, the FASB's new revenue recognition standard, and addresses other concerns related to the current lessee model. The standard also requires lessors to increase the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. It is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The initial standard required a modified retrospective transition approach, with application, including disclosures, in all comparative periods presented. In March 2018, the FASB tentatively approved an amendment to the new guidance that allows companies the option of using the effective date of the new standard as the date of initial application. The Company is currently evaluating the effect of the new lease guidance. |
Fidelis Care Acquisition |
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Fidelis Care Acquisition | Fidelis Care Acquisition On July 1, 2018, the Company acquired substantially all of the assets of Fidelis Care for approximately $3.75 billion of cash consideration. The acquisition consideration was funded through the issuance of 26.6 million shares of Centene common stock as further discussed in Note 8. Stockholders Equity and the issuance of long-term debt as further discussed in Note 7. Debt. The Fidelis Care Acquisition expanded the Company's scale and presence to New York State. The acquisition of Fidelis Care will be accounted for as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. The valuation of assets acquired and liabilities assumed has not yet been finalized. Any necessary adjustments from preliminary estimates will be finalized within one year from the date of acquisition. Measurement period adjustments will be recorded in the period in which they are determined, as if they had been completed at the acquisition date. Due to the timing of the acquisition, the Company has performed limited valuation procedures, and the valuation of all assets and liabilities assumed is not yet complete. The Company anticipates a significant amount of goodwill related primarily to buyer specific synergies expected from the acquisition and the assembled workforce of Fidelis Care. The goodwill will be assigned to the Managed Care segment and will be deductible for income tax purposes. Unaudited Pro Forma Financial Information The following table presents supplemental pro forma information for the three and six months ended June 30, 2018 and 2017, respectively ($ in millions, except per share data):
The pro forma results do not reflect any anticipated synergies, efficiencies, or other cost savings of the acquisition. Accordingly, the unaudited pro forma financial information is not indicative of the results if the acquisition had been completed on January 1, 2017 and is not a projection of future results. The unaudited pro forma financial information reflects the historical results of Centene and Fidelis Care adjusted as if the acquisition had occurred on January 1, 2017, primarily for the following:
Commitments As part of the regulatory approval process, the Company entered into certain undertakings with the New York State Department of Health. The undertakings contain various commitments by the Company effective upon completion of the Fidelis Care Acquisition. One of the undertakings includes a $340 million contribution by the Company to the State of New York to be paid over a five-year period for initiatives consistent with our mission of providing high quality healthcare to vulnerable populations within New York State. As a result of the closing of the Fidelis Care Acquisition, the present value of the $340 million contribution to the State of New York, approximately $324 million, will be expensed in SG&A during the third quarter of 2018. |
Short-term and Long-term Investments, Restricted Deposits |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-term and Long-term Investments, Restricted Deposits | Short-term and Long-term Investments, Restricted Deposits Short-term and long-term investments and restricted deposits by investment type consist of the following ($ in millions):
The Company’s investments are debt securities classified as available-for-sale with the exception of life insurance contracts and certain fair value and equity method investments. The Company’s investment policies are designed to provide liquidity, preserve capital and maximize total return on invested assets with the focus on high credit quality securities. The Company limits the size of investment in any single issuer other than U.S. treasury securities and obligations of U.S. government corporations and agencies. As of June 30, 2018, 96% of the Company’s investments in rated securities carry an investment grade rating by nationally recognized statistical rating organizations. At June 30, 2018, the Company held certificates of deposit, life insurance contracts and fair value and equity method investments which did not carry a credit rating. The Company's residential mortgage-backed securities are primarily issued by the Federal National Mortgage Association, Government National Mortgage Association or Federal Home Loan Mortgage Corporation, which carry implicit or explicit guarantees of the U.S. government. The Company's commercial mortgage-backed securities are primarily senior tranches with a weighted average rating of AA+ and a weighted average duration of 3.9 years at June 30, 2018. In March 2018, the Company completed a 25% investment in RxAdvance, a full-service pharmacy benefit manager. In May 2018, the Company made an additional investment, bringing the total ownership to 28%. The investment is accounted for using the equity method of accounting. The fair value of available-for-sale debt securities with gross unrealized losses by investment type and length of time that individual securities have been in a continuous unrealized loss position were as follows ($ in millions):
As of June 30, 2018, the gross unrealized losses were generated from 2,818 positions out of a total of 3,697 positions. The change in fair value of fixed income securities is primarily a result of movement in interest rates subsequent to the purchase of the security. For each security in an unrealized loss position, the Company assesses whether it intends to sell the security or if it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If the security meets this criterion, the decline in fair value is other-than-temporary and is recorded in earnings. The Company does not intend to sell these securities prior to maturity and it is not likely that the Company will be required to sell these securities prior to maturity; therefore, there is no indication of other-than-temporary impairment for these securities. The contractual maturities of short-term and long-term investments and restricted deposits are as follows ($ in millions):
Actual maturities may differ from contractual maturities due to call or prepayment options. Fair value and equity method investments and life insurance contracts are included in the five years through ten years category. The Company has an option to redeem at amortized cost substantially all of the securities included in the greater than ten years category listed above. The Company continuously monitors investments for other-than-temporary impairment. Certain investments have experienced a decline in fair value due to changes in credit quality, market interest rates and/or general economic conditions. The Company recognizes an impairment loss for fair value and equity method investments when evidence demonstrates that it is other-than-temporarily impaired. Evidence of a loss in value that is other-than-temporary may include the absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are categorized based upon observable or unobservable inputs used to estimate fair value. Level inputs are as follows:
The following table summarizes fair value measurements by level at June 30, 2018, for assets and liabilities measured at fair value on a recurring basis ($ in millions):
The following table summarizes fair value measurements by level at December 31, 2017, for assets and liabilities measured at fair value on a recurring basis ($ in millions):
The Company periodically transfers U.S. Treasury securities and obligations of U.S. government corporations and agencies between Level I and Level II fair value measurements dependent upon the level of trading activity for the specific securities at the measurement date. The Company’s policy regarding the timing of transfers between Level I and Level II is to measure and record the transfers at the end of the reporting period. At June 30, 2018, there were no transfers from Level I to Level II and no transfers from Level II to Level I. The Company utilizes matrix pricing services to estimate fair value for securities which are not actively traded on the measurement date. The Company designates these securities as Level II fair value measurements. The aggregate carrying amount of the Company’s life insurance contracts and other non-majority owned investments, which approximates fair value, was $456 million and $311 million as of June 30, 2018 and December 31, 2017, respectively. |
Medical Claims Liability |
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Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Medical Claims Liability | Medical Claims Liability The following table summarizes the change in medical claims liability ($ in millions):
Reinsurance recoverables related to medical claims are included in premium and related receivables. Changes in estimates of incurred claims for prior years are primarily attributable to reserving under moderately adverse conditions. Additionally, as a result of development within "Incurred related to: Prior years" due to minimum HBR and other return of premium programs, we recorded $22 million and $4 million as a reduction to premium revenues in the six months ended June 30, 2018 and 2017, respectively. Incurred but not reported (IBNR) plus expected development on reported claims as of June 30, 2018 was $3,866 million. Total IBNR plus expected development on reported claims represents estimates for claims incurred but not reported, development on reported claims, and estimates for the costs necessary to process unpaid claims at the end of each period. We estimate our liability using actuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice. These actuarial methods consider factors such as historical data for payment patterns, cost trends, product mix, seasonality, utilization of healthcare services and other relevant factors. |
Affordable Care Act |
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Affordable Care Act [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Affordable Care Act | Affordable Care Act The Affordable Care Act (ACA) established risk spreading premium stabilization programs effective January 1, 2014. These programs, commonly referred to as the “three Rs,” include a permanent risk adjustment program, a transitional reinsurance program, and a temporary risk corridor program. Additionally, the ACA established a minimum annual MLR and cost sharing reductions. Each of the three R programs are taken into consideration to determine if the Company’s estimated annual medical costs are less than the minimum loss ratio and require an adjustment to Premium revenue to meet the minimum MLR. The Company recognized a $79 million net pre-tax benefit related to the reconciliation of the 2017 risk adjustment program during the second quarter of 2018 and a $48 million net pre-tax benefit related to the reconciliation of the 2016 risk adjustment program during the second quarter of 2017. The Company's net receivables (payables) for each of these programs are as follows ($ in millions):
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Debt consists of the following ($ in millions):
Senior Notes In May 2018, a wholly owned unrestricted subsidiary of the Company (Escrow Issuer) issued $1,800 million in aggregate principal amount of 5.375% Senior Notes at par due 2026. The Company used the net proceeds of the offering to finance a portion of the cash consideration for the Fidelis Care Acquisition, which closed in July 2018, to pay related fees and expenses, and for general corporate purposes, including the repayment of outstanding indebtedness. The indentures governing the senior notes listed in the table above contain restrictive covenants of Centene Corporation. At June 30, 2018, the Company was in compliance with all covenants. Interest Rate Swaps The Company uses interest rate swap agreements to convert a portion of its interest rate exposure from fixed rates to floating rates to more closely align interest expense with interest income received on its cash equivalent and variable rate investment balances. The following is a summary of the notional amounts of the Company's interest rate swap agreements as of June 30, 2018:
The fair value of the swap agreements shown above are recorded in other long-term assets and other long-term liabilities, respectively, in the Consolidated Balance Sheets. Under the swap agreements, the Company receives a fixed rate of interest and pays an average variable rate of either the three or one month LIBOR plus 3.61% adjusted monthly or quarterly, based on the terms of the individual swap agreements. At June 30, 2018, the weighted average rate was 5.90%. The swap agreements are formally designated and qualify as fair value hedges. Gains and losses due to changes in fair value of the interest rate swap agreements completely offset changes in the fair value of the hedged portion of the underlying debt. Therefore, no gain or loss has been recognized due to hedge ineffectiveness. Offsetting changes in fair value of both the interest rate swaps and the hedged portion of the underlying debt both were recognized in interest expense in the Consolidated Statements of Operations. The Company does not hold or issue any derivative instrument for trading or speculative purposes. Revolving Credit Agreement The Company has an unsecured $1,500 million revolving credit facility. The agreement has a maturity date of December 14, 2022. Borrowings under the agreement bear interest based upon LIBOR rates, the Federal Funds Rate or the Prime Rate. As of June 30, 2018, the Company had no borrowings outstanding under the agreement and the Company was in compliance with all covenants. The revolving credit facility contains non-financial and financial covenants, including requirements of minimum fixed charge coverage ratios and maximum debt-to-EBITDA ratios. The Company is required to not exceed a maximum debt-to-EBITDA ratio of 3.5 to 1.0. As of June 30, 2018, there were no limitations on the availability under the revolving credit agreement as a result of the debt-to-EBITDA ratio. Mortgage Notes Payable The Company has a non-recourse mortgage note of $59 million at June 30, 2018 collateralized by its corporate headquarters building. The mortgage note is due January 1, 2021 and bears a 5.14% interest rate. The collateralized property had a net book value of $166 million at June 30, 2018. Construction Loan The Company has a $200 million non-recourse construction loan to fund the expansion of the Company's corporate headquarters. The loan bears interest based on the one month LIBOR plus 2.70% and matures in April 2021 with an optional one-year extension. The agreement contains financial and non-financial covenants aligning with the Company's revolving credit agreement. The Company has guaranteed completion of the construction project associated with the loan. As of June 30, 2018, the Company had $26 million in borrowings outstanding under the loan. Letters of Credit & Surety Bonds The Company had outstanding letters of credit of $57 million as of June 30, 2018, which were not part of the revolving credit facility. The Company also had letters of credit for $44 million (valued at June 30, 2018 conversion rate), or €38 million, representing its proportional share of the letters of credit issued to support Ribera Salud’s outstanding debt, which are a part of the revolving credit facility. Collectively, the letters of credit bore interest at 1.31% as of June 30, 2018. The Company had outstanding surety bonds of $464 million as of June 30, 2018. |
Stockholders' Equity |
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Equity [Abstract] | |
Stockholders' Equity | Stockholders' Equity In May 2018, the Company completed a registered offering of 26.6 million shares of Centene common stock with a fair value of $2,860 million. This included the 10% over allotment option to purchase additional shares from the Company which was exercised in full by the underwriters. Net proceeds after underwriting discounts and commissions was $2,780 million. The Company used the net proceeds of the offering to finance a portion of the cash consideration in connection with the Fidelis Care Acquisition, to pay related fees and expenses, and for general corporate purposes, including the repayment of outstanding indebtedness. In April 2018, the Company acquired MHM Services Inc. (MHM) and issued 1.7 million shares of Centene common stock to the selling shareholders, with a fair value of $183 million. In March 2018, the Company acquired Community Medical Holdings Corp., d/b/a Community Medical Group (CMG) and issued 1.4 million shares of Centene common stock to the selling shareholders, with a fair value of $149 million. In March 2018, the Company acquired an additional 61% of Interpreta and issued 1.7 million shares of Centene common stock to the selling shareholders, with a fair value of $175 million. |
Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share The following table sets forth the calculation of basic and diluted net earnings per common share ($ in millions, except shares in thousands and per share data in dollars):
The calculation of diluted earnings per common share for both the three and six months ended June 30, 2018 excludes the impact of 13 thousand shares related to anti-dilutive stock options, restricted stock and restricted stock units. The calculation of diluted earnings per common share for both the three and six months ended June 30, 2017 excludes the impact of 5 thousand and 40 thousand shares, respectively, related to anti-dilutive stock options, restricted stock and restricted stock units. |
Segment Information |
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Segment Information | Segment Information Centene operates in two segments: Managed Care and Specialty Services. The Managed Care segment consists of Centene’s health plans, including all of the functions needed to operate them. The Specialty Services segment consists of Centene’s specialty companies offering auxiliary healthcare services and products. Segment information for the three months ended June 30, 2018, follows ($ in millions):
Segment information for the three months ended June 30, 2017, follows ($ in millions):
Segment information for the six months ended June 30, 2018, follows ($ in millions):
Segment information for the six months ended June 30, 2017, follows ($ in millions):
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Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||
Contingencies | Contingencies Overview The Company records reserves and accrues costs for certain legal proceedings and regulatory matters to the extent that it determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While such reserves and accrued costs reflect the Company's best estimate of the probable loss for such matters, the recorded amounts may differ materially from the actual amount of any such losses. In some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and regulatory proceedings, which may be exacerbated by various factors, including but not limited to, they may involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; involve a large number of parties, claimants or regulatory bodies; are in the early stages of the proceedings; involve a number of separate proceedings and/or a wide range of potential outcomes; or result in a change of business practices. As of the date of this report, amounts accrued for legal proceedings and regulatory matters were not material. However, it is possible that in a particular quarter or annual period the Company’s financial condition, results of operations, cash flow and/or liquidity could be materially adversely affected by an ultimate unfavorable resolution of or development in legal and/or regulatory proceedings, including as described below. Except for the proceedings discussed below, the Company believes that the ultimate outcome of any of the regulatory and legal proceedings that are currently pending against it should not have a material adverse effect on financial condition, results of operations, cash flow or liquidity. California On October 20, 2015, the Company's California subsidiary, Health Net of California, Inc. (Health Net California), was named as a defendant in a California taxpayer action filed in Los Angeles County Superior Court, captioned as Michael D. Myers v. State Board of Equalization, Dave Jones, Insurance Commissioner of the State of California, Betty T. Yee, Controller of the State of California, et al., Los Angeles Superior Court Case No. BS158655. This action is brought under a California statute that permits an individual taxpayer to sue a governmental agency when the taxpayer believes the agency has failed to enforce governing law. Plaintiff contends that Health Net California, a California licensed Health Care Service Plan (HCSP), is an “insurer” for purposes of taxation despite acknowledging it is not an “insurer” under regulatory law. Under California law, “insurers” must pay a gross premiums tax (GPT), calculated as 2.35% on gross premiums. As a licensed HCSP, Health Net California has paid the California Corporate Franchise Tax (CFT), the tax generally paid by California businesses. Plaintiff contends that Health Net California must pay the GPT rather than the CFT. Plaintiff seeks a writ of mandate directing the California taxing agencies to collect the GPT, and seeks an order requiring Health Net California to pay GPT, interest and penalties for a period dating to eight years prior to the October 2015 filing of the complaint. This lawsuit is being coordinated with similar lawsuits filed against other entities. In September 2017, the Company filed a demurrer seeking to dismiss the complaint, and a motion to strike the allegations seeking retroactive relief. In March 2018, the Court overruled the Company's demurrer and denied the motion to strike. The Court held a status conference in May 2018 and set a schedule for the filing of additional motions. The Company intends to vigorously defend itself against these claims; however, this matter is subject to many uncertainties, and an adverse outcome in this matter could potentially have a materially adverse impact on our financial position, results of operations and cash flows. Federal Securities Class Action On November 14, 2016, a putative federal securities class action, Israel Sanchez v. Centene Corp., et al., was filed against the Company and certain of its executives in the U.S. District Court for the Central District of California. In March 2017, the court entered an order transferring the matter to the U.S. District Court for the Eastern District of Missouri. The plaintiffs in the lawsuit allege that the Company's accounting and related disclosures for certain liabilities acquired in the acquisition of Health Net violated federal securities laws. In July 2017, the lead plaintiff filed a Consolidated Class Action Complaint. The Company filed a motion to dismiss this complaint in September 2017. In February 2018, the Court held a hearing on the motion to dismiss but has not yet issued a ruling. The Company denies any wrongdoing and is vigorously defending itself against these claims. Nevertheless, this matter is subject to many uncertainties and the Company cannot predict how long this litigation will last or what the ultimate outcome will be, and an adverse outcome in this matter could potentially have a materially adverse impact on our financial position and results of operations. Additionally, on January 24, 2018, a separate derivative action was filed by plaintiff Harkesh Parekh on behalf of Centene Corporation against the Company and certain of its officers and directors in the United States District Court for the Eastern District of Missouri. Plaintiff purports to bring suit derivatively on behalf of the Company against certain officers and directors for violation of securities laws, breach of fiduciary duty, waste of corporate assets and unjust enrichment. The derivative complaint repeats many of the allegations in the federal securities class action described above and asserts that defendants made inaccurate or misleading statements, and/or failed to correct the alleged misstatements. A second shareholder derivative action was filed on March 9, 2018, by plaintiffs Laura Wood and Peoria Police Pension Fund on behalf of Centene Corporation against the Company and certain of its officers and directors in the United States District Court for the Eastern District of Missouri. This second derivative complaint repeats many of the allegations in the securities class action and the first derivative suit. The derivative suits are expected to be consolidated and a lead plaintiff appointed for the litigation. Medicare Parts C and D Matter In December 2016, a Civil Investigative Demand (CID) was issued to Health Net by the United States Department of Justice regarding Health Net’s submission of risk adjustment claims to CMS under Parts C and D of Medicare. The CID may be related to a federal qui tam lawsuit filed under seal in 2011 naming more than a dozen health insurers including Health Net. The lawsuit was unsealed in February 2017 when the Department of Justice intervened in the case with respect to one of the insurers (not Health Net). In subsequent pleadings, both the Department of Justice and the Relator excluded Health Net from the lawsuit. The Company is complying with the CID and will vigorously defend any lawsuits. At this point, it is not possible to determine what level of liability, if any, the Company may face as a result of this matter. Veterans Administrative Matter In October 2017, a CID was issued to Health Net Federal Services, LLC (HNFS) by the United States Department of Justice. The CID seeks documents and interrogatory responses concerning whether HNFS submitted, or caused to be submitted, excessive, duplicative or otherwise improper claims to the U.S. Department of Veterans Affairs under a contract to arrange health care services for veterans. The contract began in late 2014. In 2016, modifications to the contract were made to allow for possible duplicate billings with a reconciliation period at the end of the contract term. The Company is complying with the CID and believes it has been meeting its contractual obligations. At this point, it is not possible to determine what level of liability, if any, the Company may face as a result of this matter. Ambetter Class Action On January 11, 2018, a putative class action lawsuit was filed by Cynthia Harvey and Steven A. Milman against the Company and certain subsidiaries in the U.S. District Court for the Eastern District of Washington. The complaint alleges that the Company failed to meet federal and state requirements for provider networks and directories with regard to its Ambetter policies, denied coverage and/or refused to pay for covered benefits, and failed to address grievances adequately, causing some members to incur unexpected costs. In March 2018, the Company filed separate motions to dismiss each defendant. The court held a hearing on the motions to dismiss in July 2018. The parties are awaiting a ruling on those motions. The Company intends to vigorously defend itself against these claims. Nevertheless, this matter is subject to many uncertainties and the Company cannot predict how long this litigation will last or what the ultimate outcome will be, and an adverse outcome in this matter could potentially have a materially adverse impact on our financial position and results of operations. Miscellaneous Proceedings Excluding the matters discussed above, the Company is also routinely subjected to legal and regulatory proceedings in the normal course of business. These matters can include, without limitation:
Among other things, these matters may result in awards of damages, fines or penalties, which could be substantial, and/or could require changes to the Company’s business. The Company intends to vigorously defend itself against the miscellaneous legal and regulatory proceedings to which it is currently a party; however, these proceedings are subject to many uncertainties. In some of the cases pending against the Company, substantial non-economic or punitive damages are being sought. |
Organization and Operations - (Recent Accounting Pronouncements) (Policies) |
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Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Recent Accounting Pronouncements and Accounting Guidance Not Adopted | Recently Adopted Accounting Guidance In June 2018, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) that simplifies the accounting for share-based payment arrangements with nonemployees for goods and services. Under the ASU, the guidance on such payments to nonemployees is aligned with the accounting for share-based payments granted to employees, including the measurement of equity-classified awards, which is fixed at the grant date under the new guidance. The Company adopted the new guidance in the second quarter of 2018 using the modified retrospective approach with an immaterial cumulative-effect adjustment to retained earnings. In February 2018, the FASB issued an ASU which allows a reclassification from accumulated other comprehensive income (OCI) to retained earnings for stranded tax effects resulting from the Tax Cuts and Job Acts (TCJA). Consequently, the amendments eliminate the stranded tax effects resulting from the TCJA and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the TCJA, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this ASU also require certain disclosures about stranded tax effects. The Company adopted the new guidance in the first quarter of 2018 and elected to reclassify stranded tax effects as a result of the TCJA related to unrealized gains and losses on investments and defined benefit plan obligations. The Company uses the individual security approach to release income tax effects from accumulated OCI. The new guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows. In November 2016, the FASB issued an ASU clarifying the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted the new guidance in the first quarter of 2018. The new guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows. Cash, cash equivalents, and restricted cash and cash equivalents reported on the Consolidated Statements of Cash Flows includes restricted cash and cash equivalents of $6 million, $8 million, $17 million and $1,827 million as of December 31, 2016, June 30, 2017, December 31, 2017 and June 30, 2018, respectively. The restricted cash and cash equivalents as of June 30, 2018 includes cash held in escrow related to the issuance of long-term debt as further discussed in Note 7. Debt. In March 2016, the FASB issued an ASU which requires entities to measure equity investments at fair value and recognize any change in fair value in net income. The standard does not apply to accounting methods that result in consolidation of the investee and those accounted for under the equity method. The standard also requires entities to record changes in instrument-specific credit risk for financial liabilities measured under the fair value option in other comprehensive income. Companies are required to record a cumulative-effect adjustment to the statement of financial position as of the beginning of the fiscal year in which the guidance is adopted, with the exception of amendments related to equity investments without readily determinable fair values, which will be applied prospectively to all investments that exist as of the date of adoption. The Company adopted the new guidance in the first quarter of 2018. The new guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows. In May 2014, the FASB issued an ASU which supersedes existing revenue recognition standards with a single model unless those contracts are within the scope of other standards (e.g., an insurance entity's insurance contracts). Under the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the new guidance in the first quarter of 2018 using the modified retrospective approach with a cumulative-effect increase to retained earnings of $16 million. The Company also elected the practical expedient of applying the new guidance only to contracts that are not completed as of the date of initial application. The majority of the Company's revenues are derived from insurance contracts and are excluded from the new standard. Accounting Guidance Not Yet Adopted In February 2018, the FASB issued an ASU which makes technical corrections and clarifications to certain aspects of the new guidance on recognizing and measuring financial instruments. The amendment clarifies, among other things, that entities will use a prospective transition approach only for equity securities they elect to measure using the new measurement alternative. The amendments are effective for annual periods beginning in 2018 and interim periods beginning in the third quarter of 2018. The new guidance is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows. In February 2016, the FASB issued an ASU which introduces a lessee model that requires the majority of leases to be recognized on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in Accounting Standards Codification 606, the FASB's new revenue recognition standard, and addresses other concerns related to the current lessee model. The standard also requires lessors to increase the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. It is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The initial standard required a modified retrospective transition approach, with application, including disclosures, in all comparative periods presented. In March 2018, the FASB tentatively approved an amendment to the new guidance that allows companies the option of using the effective date of the new standard as the date of initial application. The Company is currently evaluating the effect of the new lease guidance. |
Fidelis Care Acquisition (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pro Forma Financial Information (unaudtied) | The following table presents supplemental pro forma information for the three and six months ended June 30, 2018 and 2017, respectively ($ in millions, except per share data):
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Short-term and Long-term Investments, Restricted Deposits (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-term and long-term investments and restricted deposits by investment type | Short-term and long-term investments and restricted deposits by investment type consist of the following ($ in millions):
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Fair value of available-for-sale investments with gross unrealized losses by investment type and length of time | The fair value of available-for-sale debt securities with gross unrealized losses by investment type and length of time that individual securities have been in a continuous unrealized loss position were as follows ($ in millions):
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Contractual maturities of short-term and long-term investments and restricted deposits | The contractual maturities of short-term and long-term investments and restricted deposits are as follows ($ in millions):
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements by Level for Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following table summarizes fair value measurements by level at June 30, 2018, for assets and liabilities measured at fair value on a recurring basis ($ in millions):
The following table summarizes fair value measurements by level at December 31, 2017, for assets and liabilities measured at fair value on a recurring basis ($ in millions):
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Medical Claims Liability (Tables) |
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Schedule of change in medical claims liability | The following table summarizes the change in medical claims liability ($ in millions):
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Affordable Care Act (Tables) |
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Affordable Care Act [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of net receivables (payables) related to the Affordable Care Act Programs | The Company's net receivables (payables) for each of these programs are as follows ($ in millions):
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt | Debt consists of the following ($ in millions):
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Summary of Notional Amounts of Interest Rate Swap Agreements | The following is a summary of the notional amounts of the Company's interest rate swap agreements as of June 30, 2018:
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Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Calculation of Basic and Diluted Net Earnings Per Common Share | The following table sets forth the calculation of basic and diluted net earnings per common share ($ in millions, except shares in thousands and per share data in dollars):
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Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment information for the three months ended June 30, 2018, follows ($ in millions):
Segment information for the three months ended June 30, 2017, follows ($ in millions):
Segment information for the six months ended June 30, 2018, follows ($ in millions):
Segment information for the six months ended June 30, 2017, follows ($ in millions):
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Organization and Operations (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
Restricted cash and cash equivalents | $ 1,827 | $ 17 | $ 8 | $ 6 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Cumulative effect adjustment to retained earnings | 15 | ||||
Retained Earnings | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Cumulative effect adjustment to retained earnings | $ 15 | ||||
Retained Earnings | Accounting Standards Codification Topic 606 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Cumulative effect adjustment to retained earnings | $ 16 |
Short-term and Long-term Investments, Restricted Deposits - (Narrative) (Details) - position |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
May 31, 2018 |
Mar. 31, 2018 |
|
Schedule Of Investments And Restricted Deposits By Type [Line Items] | |||
Positions from which gross unrealized losses were generated | 2,818 | ||
Total unrealized investment positions | 3,697 | ||
RxAdvance | |||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | |||
Equity method investment, percentage | 28.00% | 25.00% | |
Commercial mortgage-backed securities | |||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | |||
Investments recorded at fair value that carry rating of AA Plus, weighted average (in years) | 3 years 11 months | ||
Rated Securities | External Credit Rating, Investment Grade | |||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | |||
Percentage of investments in rated securities carry an investment grade rating by nationally recognized statistical rating organizations | 96.00% |
Fair Value Measurements - (Narrative) (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Transfers from Level I to Level II | $ 0 | |
Transfers from Level II to Level I | 0 | |
Life insurance contracts and other non-majority owned investments, fair value | $ 456 | $ 311 |
Medical Claims Liability - (Schedule of Change in Medical Claims Liability) (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | ||
Balance, January 1 | $ 4,286 | $ 3,929 |
Less: Reinsurance recoverable | 18 | 5 |
Balance, January 1, net | 4,268 | 3,924 |
Incurred related to: | ||
Current year | 20,748 | 19,087 |
Prior years | (329) | (352) |
Total incurred | 20,419 | 18,735 |
Paid related to: | ||
Current year | 16,738 | 15,477 |
Prior years | 2,963 | 3,022 |
Total paid | 19,701 | 18,499 |
Balance at June 30, net | 4,986 | 4,160 |
Plus: Reinsurance recoverable | 17 | 10 |
Balance, June 30 | $ 5,003 | $ 4,170 |
Medical Claims Liability - (Narrative) (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Insurance [Abstract] | ||
Amounts recorded as an adjustment to premium revenues related to minimum HBR and return of premium programs | $ 22 | $ 4 |
Short-duration insurance contracts, Incurred but not reported and expected development on reported claims | $ 3,866 |
Affordable Care Act (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Affordable Care Act [Abstract] | |||
Risk adjustment and reinsurance pre-tax benefit | $ 79 | $ 48 | |
Risk adjustment | (1,325) | $ (677) | |
Reinsurance | 1 | 15 | |
Risk corridor | 5 | 6 | |
Minimum MLR | (79) | (22) | |
Cost sharing reductions | $ (56) | $ (96) |
Debt - (Senior Notes) (Details) - Senior Notes - $1,800 million 5.375% Senior notes, due 2026 - USD ($) |
Jun. 30, 2018 |
May 31, 2018 |
---|---|---|
Debt Instrument [Line Items] | ||
Aggregate principal | $ 1,800,000,000 | $ 1,800,000,000 |
Interest rate, stated | 5.375% | 5.375% |
Debt - (Interest Rate Swaps) (Details) |
Jun. 30, 2018
USD ($)
|
---|---|
February 15, 2021 | |
Debt Instrument [Line Items] | |
Notional amount of interest rate swap agreements | $ 600,000,000 |
May 15, 2022 | |
Debt Instrument [Line Items] | |
Notional amount of interest rate swap agreements | 500,000,000 |
February 15, 2024 | |
Debt Instrument [Line Items] | |
Notional amount of interest rate swap agreements | 1,000,000,000 |
January 15, 2025 | |
Debt Instrument [Line Items] | |
Notional amount of interest rate swap agreements | 600,000,000 |
Interest rate swap | |
Debt Instrument [Line Items] | |
Notional amount of interest rate swap agreements | $ 2,700,000,000 |
Average variable rate, interest rate swap agreements (percent) | 3.61% |
Weighted average rate, interest rate swap agreements (percent) | 5.90% |
Debt - (Revolving Credit Agreement) (Details) - Revolving credit agreement |
6 Months Ended | |
---|---|---|
Jun. 30, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
|
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 1,500,000,000 | |
Borrowings outstanding | $ 0 | $ 150,000,000 |
Ratio of debt to EBITDA | 3.5 |
Debt - (Mortgage Note Payable) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Dec. 31, 2017 |
|
Debt Instrument [Line Items] | ||
Mortgage notes payable | $ 59 | $ 61 |
Non-recourse Mortgage Note Due January 1, 2021 | ||
Debt Instrument [Line Items] | ||
Mortgage notes payable | $ 59 | |
Interest rate | 5.14% | |
Net book value of collateralized properties | $ 166 |
Debt - (Construction Loan) (Details) - Construction Loan |
6 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
| |
Debt Instrument [Line Items] | |
Debt, face amount | $ 200,000,000 |
Optional extension term | 1 year |
Borrowings outstanding | $ 26,000,000 |
LIBOR | |
Debt Instrument [Line Items] | |
Interest rate | 2.70% |
Debt - (Letters of Credit & Surety Bonds) (Details) € in Millions, $ in Millions |
Jun. 30, 2018
USD ($)
|
Jun. 30, 2018
EUR (€)
|
---|---|---|
Surety Bond | ||
Debt Instrument [Line Items] | ||
Surety bonds | $ 464 | |
Letter of Credit | ||
Debt Instrument [Line Items] | ||
Letters of credit outstanding | $ 57 | |
Letters of credit, effective yield (percent) | 1.31% | 1.31% |
Letter of Credit | Ribera Salud | ||
Debt Instrument [Line Items] | ||
Borrowings outstanding | $ 44 | € 38 |
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