Centene Corporation Reports Twenty-First Consecutive Quarter of Increased Profitability.ST. LOUIS -- Centene Corporation Centene Corporation is in the industry of Medicaid managed care. Centene is a multi-line healthcare enterprise operating primarily in two segments: Medicaid Managed Care and Specialty Services. (NYSE NYSE See: New York Stock Exchange :CNC (Computerized Numerical Control) See numerical control. CNC - Collaborative Networked Communication ) today announced its financial results for the quarter ended September September: see month. 30, 2004. Third Quarter Highlights --Revenues of $253.7 million, a 27.7% increase over the third quarter of 2003. --Earnings from operations of $16.5 million, a 30.3% increase over the third quarter of 2003. --Earnings per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share of $0.52. --Organic membership growth of 32.3% over the third quarter of 2003, including the Texas Exclusive Provider Organization exclusive provider organization (EPO), n a dental benefits plan that provides benefits only if care is rendered by institutional and professional providers with whom the plan contracts (with some exceptions for emergency and out-of-area services). (EPO EPO see erythropoietin. EPO Erythropoietin, see there ) contract. --Texas EPO start-up Start-up The earliest stage of a new business venture. costs moved Medicaid Medicaid, national health insurance program in the United States for low-income persons; established in 1965 with passage of the Social Security Amendments and now run by the Centers for Medicare and Medicaid Services. Managed Care segment G&A expense ratio to 10.5% (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) and 10.0%, exclusive of the effect of premium taxes (non-GAAP). --Operating cash flows of $57.5 million for the nine months ended September 30, 2004. --Days in claims payable of 57.3 and claims inventory of 141,200, also driven by the Texas EPO contract. --Signed definitive agreement to purchase FirstGuard, serving over 136,000 members and marking Centene's entry into Kansas Kansas, state, United States Kansas (kăn`zəs), midwestern state occupying the center of the coterminous United States. It is bordered by Missouri (E), Oklahoma (S), Colorado (W), and Nebraska (N). and Missouri Missouri, state, United States Missouri (mĭz  r`ē, –ə), one of the midwestern states of the United States. , two additional Medicaid-mandated states.--Realigned Specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. Companies into a subsidiary company named CenCorp Health Solutions(TM). --Announced plans to establish a claims processing facility in Great Falls, Montana Great Falls is a city located in Cascade County, Montana, United States. As of the 2000 census, the city had a total population of 56,690. It is the county seat of Cascade CountyGR6 to accommodate growth initiatives for 2005 and beyond. Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. F. Neidorff, Centene's chairman and chief executive officer, said, "I am pleased to report another strong quarter, marking our 21st quarter of consecutive earnings growth. We remain focused on growing our business methodically me·thod·i·cal also me·thod·ic adj. 1. Arranged or proceeding in regular, systematic order. 2. Characterized by ordered and systematic habits or behavior. See Synonyms at orderly. and predictably while continuing to work with the states in which we operate to offer better member care while achieving costs savings for the states. We experienced strong growth in Indiana Indiana, state, United States Indiana, midwestern state in the N central United States. It is bordered by Lake Michigan and the state of Michigan (N), Ohio (E), Kentucky, across the Ohio R. (S), and Illinois (W). and Texas, while New Jersey and Ohio were relatively flat, as anticipated. We are pleased to have added the 94,500 SCHIP SCHIP State Children's Health Insurance Program Exclusive Provider Organization members in Texas, effective September 1, 2004, ahead of schedule. In New Jersey, we anticipate marginal (jargon) marginal - 1. Extremely small. "A marginal increase in core can decrease GC time drastically." In everyday terms, this means that it is a lot easier to clean off your desk if you have a spare place to put some of the junk while you sort through it. 2. growth for the year and are working actively with the State to expand our SSI (1) See server-side include and single-system image. (2) (Small-Scale Integration) Less than 100 transistors on a chip. See MSI, LSI, VLSI and ULSI. 1. (electronics) SSI - small scale integration. 2. coverage into additional counties. As we continue to build our physician network and seek to enter new service areas in Ohio, we are confident in the growth opportunities within this State. In Wisconsin Wisconsin, state, United States Wisconsin (wĭskŏn`sən, –sĭn), upper midwestern state of the United States. It is bounded by Lake Superior and the Upper Peninsula of Michigan, from which it is divided by the Menominee , the State has implemented new verification See verify. verification - The process of determining whether or not the products of a given phase in the life-cycle fulfil a set of established requirements. requirements for BadgerCare BadgerCare is a health-care cost-reimbursement program created by former Wisconsin Governor Tommy Thompson. It went into effect July 1, 1999, and was created to provide health-care coverage to Wisconsinites whose employers didn't provide it and who made too much money to be covered recipients, resulting in a decline in enrollment from the sequential One after the other in some consecutive order such as by name or number. quarter. In the past, we have experienced similar short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. variances in other markets, namely Indiana and Texas, and will work with the State of Wisconsin to re-qualify recipients. These temporary changes are part of the normal course of doing business and do not affect our prospects for ongoing organic growth of 10-12%. A significant highlight during the quarter was the announcement of our definitive agreement to purchase FirstGuard, two health plan entities that serve 136,000 members in Kansas and Missouri, marking our entry into two additional Medicaid-mandated states. The organic growth opportunities are significant, given the 1.2 million Medicaid and 120,000 SSI eligibles in both states. We will also be able to leverage our local approach, and the acquisition will be accretive in 2005, consistent with our prior guidance. Subject to regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals, we expect the transaction to close by the first quarter of 2005. In addition, our plans to establish a second claims processing center in Great Falls, Montana are underway. When completed, this facility will provide Centene with geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. diversity and redundancy Having a secondary peripheral, computer system or network device that takes over when the primary unit fails. See fault tolerant, mirroring, RAID, hot standby and backup types. 1. capabilities, while enabling us to methodically plan for our growth initiatives for 2005 and beyond," concluded Neidorff. The following table depicts membership in Centene's managed care organizations by state at September 30, 2004 and 2003:
2004 2003
---------- -----------
Indiana 150,000 112,100
New Jersey 53,200 52,700
Ohio 23,500 --
Texas 250,200 152,100
Wisconsin 164,700 150,200
---------- -----------
TOTAL 641,600 467,100
========== ===========
The following table depicts membership in Centene's managed care organizations by member category at September 30, 2004 and 2003:
2004 2003
---------- -----------
Medicaid (excluding SSI) 479,500 389,200
SCHIP 152,100 68,600
SSI 10,000(a) 9,300(b)
---------- -----------
TOTAL 641,600 467,100
========== ===========
(a) 4,500 at-risk, 5,500 ASO
(b) 4,300 at-risk; 5,000 ASO
Statement of Earnings Highlights --For the third quarter of 2004, revenues increased 27.7% to $253.7 million from $198.8 million in the third quarter of 2003. --The health benefits ratio (HBR HBR Harvard Business Review HBR Harbor HBR High Bit Rate HBR Human Behavioral Representation HBR Heijmans Blackwell Remediation HBR Hydrobromide Acid HBR House Budget Resolution HBR Hybrid Block Repair HBR Host-Based Replication ), which reflects medical costs as a percent of premium revenues, was 80.7% (GAAP) compared to 82.0% (GAAP) for the same period in 2003. Excluding premium taxes imposed by the State of Texas beginning September 1, 2003, and the State of New Jersey beginning July July: see month. 1, 2004, the HBR was 81.2% (non-GAAP) for the current quarter. --Consolidated general and administrative (G&A) expenses as a percent of revenues increased to 12.7% (GAAP) in 2004 from 11.4% (GAAP) in the third quarter of 2003. Excluding the effect of premium taxes, the expense ratio was 12.2% (non-GAAP). The Medicaid Managed Care segment G&A ratio was 10.0% (non-GAAP) compared to 10.1% (non-GAAP) for the same prior year period and included $400,000 of start up costs associated with the Texas State Children's Health Children's Health Definition Children's health encompasses the physical, mental, emotional, and social well-being of children from infancy through adolescence. Insurance Program Exclusive Provider Organization contract that was effective September 1, 2004. The Specialty Segment G&A ratio was 56.0%. The quarter's results included approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $445,000 in due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. costs for a transaction that we decided not to pursue as well as costs associated with the closing of our clinic facilities in California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). and Texas. --Earnings from operations increased 30.3% to $16.5 million from $12.6 million in the third quarter of 2003. --Net earnings were $11.4 million, or $0.52 per diluted share, compared to $8.7 million, or $0.44 per diluted share, for the third quarter of 2003. --For the nine months ended September 30, 2004, revenues increased 26.8% to $712.9 million from $562.4 million for the same period in the prior year. The health benefits ratio was 80.9% (GAAP), with the Medicaid component at 80.3%, compared to 82.0% for the same period in 2003. General and administrative expenses as a percent of revenues for the Medicaid segment were 10.4% (GAAP) and 9.9% (non-GAAP) as compared to 10.3% (GAAP) in 2003. Earnings from operations increased 42.2% to $47.1 million from $33.1 million in 2003. Net earnings improved to $32.3 million, or $1.49 per diluted share. Balance Sheet Highlights At September 30, 2004, the Company had cash and investments of $323.6 million, a portion of which is restricted due to state regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. . Medical claims liabilities totaled $126.4 million, representing 57.3 days in claims payable versus 53.5 days from the previous quarter. This increase reflects higher claims inventory levels primarily resulting from transitioning the EPO members to Centene effective September 1, 2004. Outlook Karey L. Witty wit·ty adj. wit·ti·er, wit·ti·est 1. Possessing or demonstrating wit in speech or writing; very clever and humorous. 2. , Centene's chief financial officer, commented, "Our fourth quarter 2004 revenue guidance is in the range of $265 million to $267 million, and we anticipate net earnings of $0.52 to $0.53 per diluted share, based on 22.0 million fully diluted shares outstanding. This anticipates incurring in·cur tr.v. in·curred, in·cur·ring, in·curs 1. To acquire or come into (something usually undesirable); sustain: incurred substantial losses during the stock market crash. 2. approximately $900,000 in start-up costs during the fourth quarter in preparation for the FirstGuard closing. For 2005, we anticipate revenue in the range of $1.22 billion to $1.24 billion, and net earnings per diluted share of $2.39 to $2.47. Since the FirstGuard transaction is subject to regulatory approvals, our guidance excludes any impact related to the transaction. In addition, this guidance does not include the effects of any pending changes to the accounting treatment for stock options." A review of the results for the third quarter and additional details on management's outlook for the fourth quarter, together with preliminary views on 2005, will take place during the Company's scheduled third quarter earnings call. Conference Call As previously announced, the Company will host a conference call tomorrow, October October: see month. 26, 2004, at 8:30 a.m. (Eastern Time) to review the financial results for the third quarter ended September 30, 2004, and to discuss its business outlook. Michael F. Neidorff and Karey L. Witty will host the conference call. Investors are invited to participate in the conference call by dialing 800-273-1254 in the U.S. and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , 706-679-8592 from abroad, or via a live Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the broadcast on the Company's website at www.centene.com, under the Investor Relations Investor relations The process by which the corporation communicates with its investors. section. A replay will be available for on demand listening shortly after the completion of the call until 11:59 p.m. (Eastern Time) on November November: see month. 10, 2004 at the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. , or by dialing 800-642-1687 in the U.S. and Canada, or 706-645-9291 from abroad, and entering access code 1093292. Financial Presentation The Company is providing certain non-GAAP financial measures in this release as the Company believes that these figures are helpful in allowing individuals to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently. The pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma (non-GAAP) information presented above in the fifth bullet under "Third Quarter Highlights" and second, third and sixth bullets under "Statement of Earnings Highlights" and presented below in tables excludes the impact of the premium taxes enacted in September 2003 by the State of Texas and in July 2004 by the State of New Jersey. This assumption has been made in the non-GAAP financial measures as management believes that this assumption generally provides a more consistent measure of the Company's performance. The Company uses the presented non-GAAP financial measures internally to focus management on period-to-period changes in the Company's core business. Therefore, the Company believes that this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. About Centene Corporation Centene Corporation provides multi-line managed care programs and related services to individuals receiving benefits under Medicaid, including Supplemental Security Income Supplemental Security Income A Social Security program established to help the blind, disabled, and poor. (SSI), and the State Children's Health Insurance Program (SCHIP). The Company operates health plans in Indiana, New Jersey, Ohio, Texas and Wisconsin. In addition, the Company contracts with other healthcare organizations to provide specialty services including behavioral health Behavioral health was first used in the 1980's to name the combination of the fields mental health and substance abuse. As an example, an organization serving both mental health and substance abuse clients might refer to its practice as behavioral health or , nurse triage triage Division of patients for priority of care, usually into three categories: those who will not survive even with treatment; those who will survive without treatment; and those whose survival depends on treatment. and treatment compliance. Information regarding Centene is available via the Internet at www.centene.com. The information provided in the paragraphs following the bullet listing under "Third Quarter Highlights," and the paragraph under "Outlook" above contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that relate to future events and future financial performance of Centene. These forward-looking statements represent the Company's estimates as of October 25, 2004. Subsequent events and developments may cause the Company's estimates to change. The Company disclaims any obligation to update this forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. financial information in the future. Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, regulatory, competitive and other factors that may cause Centene's or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by these forward-looking statements. Actual results may differ from projections or estimates due to a variety of important factors, including Centene's ability to accurately predict and effectively manage health benefits and other operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , competition, changes in healthcare practices, changes in federal or state laws or regulations, inflation, provider contract changes, new technologies, reduction in provider payments by governmental payors, major epidemics This article is a list of major epidemics. Worldwide Pandemics
2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created , cancellation cancellation (See: cancel) CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob. or suspension suspension, in vehicles suspension, in automobiles, system of springs used to suspend the frame, body, engine, and power train above the wheels. Its principal purpose is to lessen the jarring of the automobile that is caused by irregularities in the roads of Centene's Medicaid managed care contracts by state governments would also negatively affect Centene. (Tables Follow)
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
September 30, December 31,
2004 2003
-------------- ----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $88,687 $64,346
Premium and related receivables, net
of allowances of $470 and $607,
respectively 22,739 20,308
Short-term investments, at fair
value (amortized cost $43,640 and
$15,192, respectively) 43,568 15,160
Deferred income taxes 3,143 2,732
Other current assets 12,561 7,755
-------------- ----------------
Total current assets 170,698 110,301
Long-term investments, at fair value
(amortized cost $170,061 and
$183,749, respectively) 170,126 184,811
Restricted deposits, at fair value
(amortized cost $21,176 and $20,201,
respectively) 21,202 20,364
Property, software and equipment 28,831 23,106
Goodwill 17,142 13,066
Other intangible assets 6,808 6,294
Other assets 6,346 4,750
-------------- ----------------
Total assets $421,153 $362,692
============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims liabilities $126,394 $106,569
Accounts payable and accrued
expenses 21,907 17,965
Unearned revenue 3,670 3,673
Current portion of long-term debt
and notes payable 288 579
-------------- ----------------
Total current liabilities 152,259 128,786
Long-term debt 7,400 7,616
Other liabilities 5,571 6,175
-------------- ----------------
Total liabilities 165,230 142,577
Stockholders' equity:
Common stock, $.001 par value;
authorized 100,000,000 shares;
issued and outstanding 20,520,026
and 20,131,924 shares, respectively 21 20
Additional paid-in capital 161,613 157,380
Accumulated other comprehensive income:
Unrealized gain on investments,
net of tax 12 740
Retained earnings 94,277 61,975
-------------- ----------------
Total stockholders' equity 255,923 220,115
-------------- ----------------
Total liabilities and
stockholders' equity $421,153 $362,692
============== ================
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
Revenues:
Premiums $251,536 $196,173 $705,556 $555,285
Services 2,207 2,580 7,320 7,134
----------- ----------- ----------- -----------
Total revenues 253,743 198,753 712,876 562,419
----------- ----------- ----------- -----------
Expenses:
Medical costs 202,974 160,812 570,720 460,123
Cost of services 2,111 2,681 6,149 6,269
General and
administrative
expenses 32,187 22,620 88,915 62,904
----------- ----------- ----------- -----------
Total operating
expenses 237,272 186,113 665,784 529,296
----------- ----------- ----------- -----------
Earnings from
operations 16,471 12,640 47,092 33,123
Other income (expense):
Investment and other
income 1,683 1,245 4,529 3,476
Interest expense (126) (71) (317) (102)
----------- ----------- ----------- -----------
Earnings before
income taxes 18,028 13,814 51,304 36,497
Income tax expense 6,677 5,110 19,002 13,805
Minority interest -- -- -- 881
----------- ----------- ----------- -----------
Net earnings $11,351 $8,704 $32,302 $23,573
=========== =========== =========== ===========
Earnings per share:
Basic earnings per
common share $0.55 $0.47 $1.59 $1.38
Diluted earnings
per common share $0.52 $0.44 $1.49 $1.28
Weighted average number
of shares outstanding:
Basic 20,486,429 18,430,713 20,346,902 17,094,621
Diluted 21,820,090 19,842,145 21,682,060 18,439,050
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
September 30,
-------------------
2004 2003
--------- ---------
(Unaudited)
Cash flows from operating activities:
Net earnings $32,302 $23,573
Adjustments to reconcile net earnings to net
cash provided by operating activities --
Depreciation and amortization 7,219 4,299
Stock compensation expense 44 232
Minority interest -- (881)
Gain on sale of investments (212) (1,188)
Changes in assets and liabilities --
Premium and related receivables (2,431) (4,132)
Other current assets (4,803) (849)
Deferred income taxes (303) 452
Other assets (1,873) 363
Medical claims liabilities 19,825 558
Accounts payable and accrued expenses 5,184 (396)
Other operating activities 2,523 293
--------- ---------
Net cash provided by operating
activities 57,475 22,324
--------- ---------
Cash flows from investing activities:
Purchase of property, software and equipment (9,487) (16,242)
Purchase of investments (207,385) (291,462)
Sales and maturities of investments 188,918 202,306
Acquisitions, net of cash acquired (7,005) (3,218)
--------- ---------
Net cash used in investing activities (34,959) (108,616)
--------- ---------
Cash flows from financing activities:
Reduction of long-term debt and notes payable (507) (24)
Extinguishment of acquired liabilities -- (1,218)
Proceeds from stock options and employee stock
purchase plan 2,332 803
Net proceeds from issuance of common stock -- 81,403
Proceeds from borrowings -- 8,581
Cash paid for fractional share impact of stock
split -- (3)
--------- ---------
Net cash provided by financing
activities 1,825 89,542
--------- ---------
Net increase in cash and cash
equivalents 24,341 3,250
--------- ---------
Cash and cash equivalents, beginning of period 64,346 59,656
--------- ---------
Cash and cash equivalents, end of period $88,687 $62,906
========= =========
Interest paid $324 $85
Income taxes paid $18,844 $13,479
CENTENE CORPORATION
SUPPLEMENTAL FINANCIAL DATA
Q3 Q2 Q1 Q4
2004 2004 2004 2003
-------- -------- -------- --------
MEMBERSHIP
Indiana 150,000 132,900 125,400 119,400
New Jersey 53,200 54,000 54,000 54,000
Ohio 23,500 23,800 23,800 --
Texas 250,200 155,300 154,000 158,400
Wisconsin 164,700 167,300 165,200 157,800
-------- -------- -------- --------
TOTAL 641,600 533,300 522,400 489,600
======== ======== ======== ========
Medicaid 479,500 460,300 446,900 411,800
SCHIP 152,100 63,200 65,900 68,400
SSI 10,000 9,800 9,600 9,400
-------- -------- -------- --------
TOTAL 641,600 533,300 522,400 489,600
======== ======== ======== ========
REVENUE PER MEMBER $144.70 $145.31 $145.19 $142.38
CLAIMS
Period-end inventory 141,200 89,700 102,300 131,000
Average inventory 96,800 98,800 107,400 102,500
Period-end inventory per member 0.22 0.17 0.20 0.27
DAYS IN CLAIMS PAYABLE (a) 57.3 53.5 55.4 59.0
(a) Days in Claims Payable is a calculation of Medical Claims
Liabilities at the end of the period divided by average claims
expense per calendar day for such period.
ANNUALIZED RETURN ON EQUITY (b) 18.2% 18.2% 17.9% 18.1%
(b) Annualized Return on Equity is calculated as follows: (net income
for quarter x 4) divided by ((beginning of period equity + end of
period equity) divided by 2).
HEALTH BENEFITS RATIO BY CATEGORY:
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------- -----------------
2004 2003 2004 2003
-------- -------- -------- --------
Medicaid and SCHIP 80.1% 81.3% 80.3% 82.0%
SSI 92.8 102.9 96.6 103.5
Total (GAAP) 80.7 82.0 80.9 82.9
Total (non-GAAP) 81.2 82.1 81.3 82.9
GENERAL AND ADMINISTRATIVE EXPENSE RATIO BY BUSINESS SEGMENT:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2004 2003 2004 2003
------------- ------------- ------------- -------------
Non- Non- Non- Non-
GAAP GAAP(c) GAAP GAAP(c) GAAP GAAP(c) GAAP GAAP(c)
------------- ------------- ------------- -------------
Medicaid
Managed Care 10.5% 10.0% 10.2% 10.1% 10.4% 9.9% 10.3% 10.3%
Specialty
Services 56.0 56.0 32.0 32.0 51.8 51.8 31.0 31.0
Total 12.7 12.2 11.4 11.2 12.5 12.0 11.2 11.1
(c) Excluding effect of premium taxes.
MEDICAL CLAIMS LIABILITES
(In thousands)
Four rolling quarters of the changes in medical claims liabilities are
summarized as follows:
----------------
2004
----------------
Balance, September 30, 2003 $91,739
Incurred related to:
Current period 750,116
Prior period (13,330)
----------------
Total incurred 736,786
----------------
Paid related to:
Current period 630,164
Prior period 71,967
----------------
Total paid 702,131
----------------
Balance, September 30, 2004 $126,394
================
Centene's claims reserving process utilizes a consistent actuarial
methodology to estimate Centene's ultimate liability. Any reduction in
the "Incurred related to: Prior period" claims may be offset as
Centene actuarially determines "Incurred related to: Current period."
As such, only in the absence of a consistent reserving methodology
would favorable development of prior period claims liability estimates
reduce medical costs. Centene believes it has consistently applied its
claims reserving methodology in each of the periods presented.
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