2017 Annual Review
From the very beginning, Centene has been a transformative company
founded on the belief that everyone deserves access to affordable,
quality healthcare with dignity.
Today, and every day, we are making a real difference in people’s lives.
CENTENE CORPORATION
Centene Corporation, a Fortune 100 company, is a diversified, multi-national
healthcare enterprise that provides a portfolio of services to government
sponsored and commercial healthcare programs, focusing on under-insured
and uninsured individuals. Centene operates local health plans and offers
a range of health insurance solutions and specialty services.
Table of Contents
1
2
6
8
12
14
16
18
19
20
2017 At a Glance
Letter from the Chairman
Company and Financial Summary
2017 Highlights
Expanding Access to Quality Healthcare
Addressing Healthcare Challenges
Going Beyond Traditional Methods of Care
Quarterly Financial Information
Selected Financial Information
Corporate Information
2017 AT A GLANCE
$48.4 BILLION IN TOTAL REVENUES
33,700 EMPLOYEES
$1.5 BILLION TOTAL OPERATING CASH FLOW
12.2 MILLION MEMBERS (includes 2.8 million TRICARE eligibles)
$4.69 GAAP DILUTED EARNINGS PER SHARE
$5.03 ADJUSTED DILUTED EARNINGS PER SHARE
1
CENTENE CORPORATION
1
Letter... MICHAEL F. NEIDORFF
Chairman & Chief Executive Officer
For Centene, 2017 was a year of strategic
and financial growth in which we built
momentum and delivered strong results by
leveraging our diverse portfolio and M&A
expertise. While our industry continues
to evolve and become more complex, we
understand the opportunities for healthcare
and are excited about the future for Centene.
We have a clear line of sight into our growth
drivers and long-term expectations of
double-digit top and bottom line growth.
Strong Performance
in 2017 was driven
by our leadership
across several
products and markets
combined with our
ability to execute
on key merger
and acquisition
opportunities.
Growth in Total
Revenues
19%
Total Shareholder
Return
79%
Growth in Adjusted Diluted
Earnings Per Share
14%
Industry-Leading 5-Year
Compounded Total Shareholder
Return Annual Growth Rate
38%
Because of our operational and financial performance, in 2017 we advanced on a number
of the FORTUNE lists, including to #66 on the annual ranking of America’s largest companies
by revenue, and to #244 on the Global 500 list. Increased 2017 revenue gained Centene
a #27 ranking on the FORTUNE Fastest Growing Companies list, and we are most proud of
our #19 ranking on FORTUNE’s Change the World list, which recognizes companies making
positive social impact part of their core businesses.
We enter 2018 as the largest Medicaid managed care organization in the U.S., with more
than 12 million members domestically. In 2018, pending the close of the Fidelis Care
transaction, Centene will be a $60 billion enterprise, bringing approximately 300 integrated
solutions across the country. We will have a leadership position in the country’s four largest
Medicaid states — California, Florida, New York and Texas.
DRIVING GROWTH IN AN EVER-CHANGING INDUSTRY
Centene continues to drive organic growth in our core products of Medicaid, Medicare and
the Health Insurance Marketplace:
W e expanded into multiple new Medicaid markets, including Nebraska, Nevada
and Pennsylvania.
Within e
xisting Medicaid markets we expanded or reprocured contracts in
Georgia, Illinois, Indiana, Mississippi and Missouri.
We expanded our Medicare offerings, entering Arkansas, Indiana, Kansas,
Louisiana, Missouri, Pennsylvania, South Carolina and Washington, and expanded our
footprint in Ohio.
We are the number one insurer in the nation on the Health Insurance Marketplace.
In January 2017 we added over 500,000 new members. In 2018 we expanded our
offerings in six existing markets and entered Kansas, Missouri and Nevada. We continue
to prove that we remain one of the few companies that can successfully navigate the
Health Insurance Marketplace.
We continue to be the largest provider of managed Long-Term Services and Supports,
one of the fastest-growing segments in the managed care market. In addition, through
our TRICARE and Veterans Choice programs, we continue to be one of the nation’s largest
providers of managed care services for military families and veterans. We also continued
to grow internationally in Spain and the U.K., where we believe our investments in these
countries provide an opportunity for further global entry and partnership.
2
Letter from the Chairman
3
CENTENE CORPORATION
A key tenet of our strategy continues to be expanding our growth platform through strategic
mergers and acquisitions. In September 2017, we signed a definitive agreement to acquire
Fidelis Care, which will make Centene the leader in providing government-sponsored
healthcare in New York. We expect this acquisition to create significant strategic and
financial value for Centene. As a blueprint for the Fidelis Care integration plan, we are
applying the skills and models developed during the successful integration of Health Net,
which we acquired in 2016.
WELL POSITIONED FOR SUCCESS
Centene has a proven history of top and bottom line growth, and we are confident that our
competitive advantages position us for growth and shareholder value creation:
We have more than 30 years of experience applying our local approach to
government-sponsored healthcare programs. We have gone beyond traditional
healthcare, partnering with states and other key stakeholders to offer programs
and services that address the health and social needs of our country’s most vulnerable
populations. This year, we will launch our inaugural community investment report
to illustrate the depth of our local commitment as a core part of Centene’s
business strategy.
We are continuing to invest in key technology. Driven by critical mass attained
through organic and external growth, we have the resources and capabilities to innovate
and develop better systems, products, tools and techniques that help us collect and
analyze data to understand and better prioritize our members’ needs. We firmly believe
that our differentiated technology and analytics are a fundamental strength
that will help us achieve long-term success.
Preparing for the future by developing talent. During the fourth quarter, we
announced a number of senior appointments to align our leadership structure with the
company’s strategic objectives and capitalize on Centene’s management depth and
culture of excellence. To ensure we maximize our collective strengths to create
stakeholder value, we also established an office of the president — a core team of
executives to help guide strategy and execution.
In short, we believe Centene’s competitive advantages provide
the discipline, capacity and capabilities to adapt and thrive
in the changing healthcare industry and political landscape.
LOOKING AHEAD
We are confident that, by focusing on fundamentals as we execute our strategies, we will
continue to be a high-growth, industry-leading company with the ability to successfully
navigate our changing industry. In the long term, we expect to continue to achieve double-
digit growth in revenues and earnings per share as we capitalize on opportunities in the
$1.9 trillion addressable healthcare market.
Our success as a company is a testament to the commitment and tireless efforts of the more
than 37,000 talented individuals at Centene. I want to take this opportunity to thank them
for enabling Centene to deliver on our mission to provide better health outcomes at lower
costs. We also value the support of our eight independent Board of Directors, including
Jessica L. Blume who was appointed in early 2018.
We look forward to building on Centene’s growth, innovation and global presence while
achieving consistently high levels of performance in driving value for members, partners
and shareholders.
MICHAEL F. NEIDORFF
Chairman & Chief Executive Officer
Leading Position in the Country
’s
4 LARGEST
MEDICAID
STATES
CA
FL
NY*
TX
*The Fidelis Care transaction is expected to close in the second quarter of 2018, subject to various closing conditions and
receipt of New York regulatory approvals, including approvals under the New York Not-for-Profit Corporation Law.
4
Letter from the Chairman
5
CENTENE CORPORATION
FINANCIAL HIGHLIGHTS
FROM CONTINUING OPERATIONS
(in millions)
2017
2016
2015
2014
2013
Total Revenues
$48,382
$40,607
$22,760
$16,560
$10,863
Net Earnings(1)
Adjusted Net Earnings(1)
828
889
559
727
356
387
268
278
161
165
Total Assets
21,855
20,197
7,339
5,824
3,519
Total Revenues
(in millions)
Managed Care
Membership
(in thousands)
Net Earnings(1)
(in millions)
2
8
3
,
8
74
0
6
,
0
4
7
0
2
,
2
1
2
4
4
,
1
1
8
2
8
9
5
5
0
6
7
,
2
02
6
5
,
6
1
3
6
8
,
0
1
8
0
1
,
5
1
6
0
,
4
0
8
8
,
2
6
5
3
8
6
2
1
6
1
2017
2016
2015 2014
2013
2017
2016
2015 2014
2013
2017
2016
2015
2014
2013
(1) Attributable to Centene Corporation
GROUP & PRODUCT
SOLUTIONS
ALASKA
DISTRICT OF COLUMBIA
HAWAII
PUERTO RICO
U.S. VIRGIN ISLANDS
MEDICAID
/CHIP
Arizona, Arkansas (Private Option), California,
Florida, Georgia, Illinois, Indiana, Kansas, Louisiana,
Maryland*, Mississippi, Missouri, Nebraska, Nevada,
New Hampshire, New Mexico*, New York*, Ohio,
Oregon, South Carolina, Texas, Washington, Wisconsin
ABD
(NON-DUAL)
Arizona, California, Florida, Illinois, Indiana, Kansas,
Louisiana, Maryland*, Mississippi, Nebraska,
New Hampshire, New Mexico*, New York*, Ohio,
Oregon, South Carolina, Texas, Washington, Wisconsin
ABD (MEDICAID ONL
Y DUAL-ELIGIBLE)
Arizona, California, Florida, Kansas, Nebraska,
New Hampshire, New Mexico*, New York*, Ohio,
Oregon, Pennsylvania, Texas, Wisconsin
LONG-TERM SERVICES & SUPPORTS
Arizona, California, Florida, Illinois, Kansas, New
Mexico*, New York*, Ohio, Pennsylvania, Texas
F OSTER CARE
California, Florida, Indiana, Kansas, Louisiana,
Mississippi, Missouri, Nebraska, New Hampshire,
New Mexico*, New York*, Oregon, Texas, Washington
MEDICARE
Arizona, Arkansas, California, Florida, Georgia,
Indiana, Kansas, Louisiana, Mississippi, Missouri,
New York*, Ohio, Oregon, Pennsylvania,
South Carolina, Texas, Washington, Wisconsin
MEDICAID
-MEDICARE PLANS (INCLUDES LTSS)
California, Illinois, Michigan, New York*, Ohio,
South Carolina, Texas
CORRECTIONAL HEAL
THCARE
California, Florida, Massachusetts, Minnesota,
Mississippi, New Mexico, Tennessee, Vermont
HEAL
TH INSURANCE MARKETPLACE
Arizona, Arkansas, California, Florida, Georgia, Illinois,
Indiana, Kansas, Mississippi, Missouri, Nevada, New
Hampshire, New York*, Ohio, Texas, Washington
COMMERCIAL INSURANCE
Arizona, California, Oregon, Washington
TRICARE
Alaska, Arizona, California, Colorado, Hawaii, Idaho,
Iowa (except the Rock Island Arsenal area), Kansas,
Minnesota, Missouri (except the St. Louis area),
Montana, Nebraska, Nevada, New Mexico, North
Dakota, Oregon, South Dakota, Texas (areas of
Western Texas only), Utah, Washington, Wyoming
V A PROGRAMS
Alabama, Colorado, Connecticut, Delaware,
District of Columbia, Florida, Georgia, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Maine,
Maryland, Massachusetts, Michigan, Minnesota,
Missouri, Montana, Nebraska, Nevada, New
Hampshire, New Jersey, New York, North Carolina,
North Dakota, Ohio, Pennsylvania, Puerto Rico,
Rhode Island, South Carolina, South Dakota,
U.S. Virgin Islands, Utah, Vermont, Virginia,
West Virginia, Wisconsin, Wyoming
* Maryland is a non-risk Managed Service Organization (MSO) contract. The Fidelis Care transaction in New York is expected
to close in the second quarter of 2018, subject to various closing conditions and receipt of New York regulatory approvals,
including approvals under the New York Not-for-Profit Corporation Law. The new five-year contract in New Mexico was
effective in January 2018 and is expected to commence membership operations in January 2019.
INTERNATIONAL
We currently have an international presence
in two markets, Spain and the United Kingdom.
Our joint venture in Spain, Ribera Salud, is a
health management group mainly operating in
the fully integrated Accountable Care System
sector. Ribera Salud also has other controlling
and noncontrolling interests in Spain, Latin
America and Slovakia. In the United Kingdom,
Centene UK leverages our local strategic assets
to support UK accountable care initiatives based
on the blueprint outlined by the National Health
Service (NHS), which is the publicly funded,
national healthcare system for England.
We partner with local health and social
commissioners on opportunities to support
coordination and integration of care.
6
Company and Financial Summary
CENTENE CORPORATION
7
2017 QUARTERLY HIGHLIGHTS
Q1
JANUARY
Nebraska Total Care, a Centene subsidiary, begins operating under a
contract with the Nebraska Department of Health and Human Services’
Division of Medicaid and Long Term Care as one of three managed care
organizations to administer its new Heritage Health Program for
Medicaid, ABD, CHIP, Foster Care and LTSS enrollees.
Centene’s Indiana subsidiary, MHS, begins operating under a contract
with the Indiana Family & Social Services Administration to continue
providing risk-based managed care services for enrollees in the Healthy
Indiana Plan and Hoosier Healthwise programs.
Centene signs a joint venture agreement with the North Carolina
Medical Society, working in conjunction with the North Carolina
Community Health Center, to collaborate on a patient-focused
approach to Medicaid under the reform plan enacted in the State of
North Carolina.
FEBRUARY
Centene announces the appointment of former Missouri Attorney
General Chris Koster to senior vice president, Corporate Services.
Q2
MAY
Centene’s Missouri subsidiary, Home State Health, begins providing
managed care services to MO HealthNet Managed Care beneficiaries
under an expanded statewide contract.
Coordinated Care, a Centene subsidiary, is selected by the Washington
State Health Care Authority to provide managed care services to Apple
Health’s Fully Integrated Managed Care (FIMC) beneficiaries in the
North Central Region, commencing January 2018.
JUNE
Centurion begins operating under an expanded contract to provide
correctional healthcare services for the Florida Department of
Corrections in South Florida.
Centene announces an expansion of offerings in the 2018 Health
Insurance Marketplace, including plans to enter Kansas, Missouri and
Nevada, and expanding its footprint in six existing markets: Florida,
Georgia, Indiana, Ohio, Texas and Washington.
Centene’s subsidiary, Magnolia Health, is selected by the Mississippi
Division of Medicaid to continue serving Medicaid recipients enrolled in
the Mississippi Coordinated Access Network (MississippiCAN). Pending
regulatory approval, the new three-year agreement, which also
includes the option of two one-year extensions, is expected to
commence midyear 2018.
Q3
JULY
Centene’s specialty solutions subsidiary, Envolve, Inc., begins providing
health plan management services for Medicaid operations in Maryland.
SilverSummit Healthplan, a Centene subsidiary, begins serving
Medicaid recipients enrolled in Nevada’s Medicaid managed care
program.
Centene’s Georgia subsidiary, Peach State Health Plan, begins operating
under a statewide managed care contract to continue serving members
enrolled in the Georgia Families managed care program.
AUGUST
Centurion is recommended for a contract award by the Tennessee
Department of Correction to continue providing inmate health services.
IlliniCare Health, Centene’s Illinois subsidiary, is awarded the
statewide contract for the Medicaid Managed Care Program, which
includes children who are in need through the Department of Children
and Family Services (DCFS)/Youth in Care by the Illinois Department of
Healthcare and Family Services (HFS).
SEPTEMBER
Centene signs a definitive agreement under which Fidelis Care will
become Centene’s health plan in New York State. Under the terms of
the agreement, the Company will acquire substantially all of the assets
of Fidelis Care for $3.75 billion, subject to certain adjustments, closing
conditions and receipt of New York regulatory approvals.
Q4
OCTOBER
Mercy Health of Arkansas and Centene subsidiaries LifeShare and
Arkansas Health & Wellness announce that their joint venture,
Arkansas Total Care, has received a license from the Arkansas
Insurance Department to become a risk-based provider organization
and manage a Medicaid special needs population composed of
people with high behavioral health needs and individuals with
developmental/intellectual disabilities.
NOVEMBER
Centene announces an enhanced organizational structure and the
appointments of several key executives, including the appointment
of Cynthia J. Brinkley as president and chief operating officer,
Jesse N. Hunter as executive vice president of Mergers & Acquisitions
and chief strategy officer, Mark J. Brooks as executive vice president
and chief information officer, and Kevin J. Counihan as senior vice
president of Products.
Centene, Schnuck Markets Inc., and Betty Jean Kerr People’s Health
Centers open a full-service health center located within the Schnucks
supermarket in Ferguson, Missouri. The facility is expected to provide
services to over 8,000 people annually.
2017 NOTEWORTHY
ACCREDITATIONS AND
AWARDS
Centene’s integrated healthcare
solutions company, Envolve, Inc.,
received an AVA Digital Award and
Honorable Mention for its animated
series of health tips, “Did You Know?”
The series provides easy-to-understand
clinical health information for
consumers.
The 2017 Hermes Creative Awards
honored several books in Centene’s
series of Health Education
publications focusing on topics such
as asthma management and life
lessons for teens. Centene videos and
publications earned both Platinum
and Gold awards.
For its quality management framework
and processes, Health Net Federal
Services, LLC, was awarded the
International Organization for
Standardization (ISO) 9001:2015
certification in May of 2017. The
internationally recognized standard
for quality management systems is
effective through 2020.
Centene and three subsidiaries —
Home State Health, Centurion and
Envolve, Inc. — were honored for
innovative member programs at the
May 2017 Decision Health’s Eighth
Annual Case in Point Platinum
Awards.
Several Centene subsidiaries earned
clinical accreditations in 2017:
Health Net Federal Services, LLC,
earned the Disease Management
Accreditation from URAC, and
Envolve Dental, Inc., earned URAC
accreditations for Dental
Plan and Health Management.
In addition, Buckeye Health Plan,
Coordinated Care of Washington,
Louisiana Healthcare Connections,
CeltiCare Health and New Hampshire
Healthy Families all earned NCQA
Commendable Health Plan
Accreditations.
Health Net Federal Services, LLC,
(HNFS), announced that it has earned
the Health Utilization Management
and Case Management Accreditations
from URAC in 2017. URAC is an
independent organization that
promotes health care quality through
accreditation, certification and
measurement.
8
2017 Highlights
CENTENE CORPORATION
9
NO.
66
NO.
244
NO.
27
NO.
19
NO.
36
FORTUNE 500®
Ranking:
Centene ranked No.
66 on the 2017
FORTUNE 500 list of
largest U.S.
corporations by
revenue, up from
No. 124 in 2016.
Since first entering
the list in 2010,
Centene has
climbed 420 spots.
FORTUNE®
Global 500
Ranking:
Centene ranked
No. 244 on the 2017
FORTUNE Global
500 list of the
world’s largest
corporations by
revenue. Centene
first appeared on
the list in 2016 at
No. 470.
FORTUNE 100
Fastest
Growing
Companies List:
For the second year,
Centene has been
placed on the list of
FORTUNE 100
Fastest Growing
Companies, ranked
No. 27. The list is
based on revenue
growth, EPS growth
rate and three-year
annualized total
return ending June
30, 2017.
FORTUNE®
2017 Change
the World List:
Centene ranked
No. 19 on the
FORTUNE 2017
Change the World
list. Companies are
recognized for, and
competitively
ranked on,
innovative
strategies that
positively impact
the world.
Forbes Global
2000 Growth
Champion List:
Centene is
positioned in the
No. 36 spot on the
2017 Forbes Global
2000 Growth
Champion list. The
list ranks 250
companies around
the globe by highest
compound annual
growth rate in
revenues from 2013
through 2016.
Centene is the
highest ranked
among healthcare
companies.
In 2017, Centene was among the top scorers in the Human
Rights Campaign Corporate Equality Index for policies and
practices regarding LGBTQ employees and was recognized
by the Disability Equality Index, sponsored by United States
Business Leadership Network (USBLN) and the American
Association of People with Disabilities (AAPD). Additionally,
Centene Chairman and CEO Michael F. Neidorff was one of
the nation’s first CEOs to sign on to the CEO Action for
Diversity & Inclusion Pledge.
As transformational leaders, we never lose sight of what’s important.
By working together and remaining focused on our members and the
communities they call home, we are able to continue to expand access to
quality healthcare, reach beyond traditional methods of care
and address the challenges of today and tomorrow.
10
2017 Highlights
CENTENE CORPORATION
11
Centene was founded on the belief that everyone
deserves access to quality healthcare with dignity.
Today, one way we help more people live healthier
lives is through our Health Insurance Marketplace
product, Ambetter.
EXPANDING ACCESS TO
QUALITY HEALTHCARE
It was announced in the summer of 2017 that Centene’s SilverSummit
Healthplan in Nevada would provide Health Insurance Marketplace
options to all 17 counties in the state, including counties where 8,000
people were at risk of having no health exchange options in 2018,
after other insurance carriers left the market. Centene is providing
health insurance coverage in Missouri under similar circumstances for
25 counties that would otherwise have no marketplace options.
Centene’s ability to provide coverage for communities in need
demonstrates the company’s continued success in navigating the
healthcare landscape. Where uncertainty about national healthcare
policy has caused most health insurance providers to trim back their
exchange programs, Centene has experienced steady growth. With
1.2 million members in 2017, Centene was the number one insurer in
the nation on the Health Insurance Marketplace.
New products such as Ambetter are a valuable extension of the way
Centene has helped transform the health of communities for more
than three decades. And, as the world of healthcare continues to
evolve, Centene stands ready to continue taking the lead.
COVERING
COMMUNITIES IN 2017
Ambetter expands Centene’s
ability to help more people in
more communities across the
United States.
13States
365
Counties
9,158
Zip Codes
Launched in 2014, Ambetter
has transformed into the No. 1
carrier in the Health Insurance
Marketplace today.
Peak Membership*:
2014
76,000
2015
167,000
2016
683,000
2017
1,200,000
*2014-2015 exclude Health Net
Centene’s Marketplace footprint continues to
develop in 2018 with expansion in six existing
Ambetter exchange markets, as well as
entrance into three new states: Kansas,
Missouri and Nevada. Expansion into New
York’s Marketplace is also expected pending
the close of the Fidelis Care acquisition.
To help achieve better health outcomes, Ambetter
invites members to participate in the MyHealthPays™
Rewards Program, which rewards members for
participation in a number of healthy activities.
Rewards can be earned for completion of annual well
visits and receiving an annual flu vaccination.
12
Expanding Access to Quality Healthcare
CENTENE CORPORATION
13
13
CENTENE CORPORATION Our geographic footprint and leadership
position in managed care allow us to develop
and apply evidence-based clinical best practices
to address some of the country’s most pervasive
healthcare challenges.
FIGHTING THE FLU THROUGH
VACCINATION
For nearly 10 years, Centene’s Medical Affairs division has worked
to decrease the spread of the flu by increasing the number of
its managed care members that receive an annual flu vaccination.
Centene’s multilayered campaign is designed to promote vaccinations
as the key to flu prevention. Health plan members, particularly those
in high-risk groups such as the elderly, young children and pregnant
women, receive personal outreach calls, visits, mailers, text messages,
media and social media communications that stress the importance of
getting vaccinated against the flu virus.
Texas, home to Centene’s subsidiary Superior HealthPlan, has been one
of the states hardest hit during the 2017-2018 flu season. Partnerships
with school districts and community health organizations played a key
role in helping Superior HealthPlan communicate with members.
“In October and November, we called more than 190,000 members,”
said Susan Mills, vice president of Quality and Improvement at
Superior HealthPlan. “We also focused on educating school-aged
members by distributing thousands of stickers with a message about
hand washing and getting a flu shot. Hundreds of schools, youth
clubs and health organizations helped us get the word out to kids
and their families.”
INCREASE IN VACCINATION RATES FOR
VULNERABLE POPULATIONS, 2016/2017
FLU SEASON
↑ 3.4%: pregnant women
↑ 3.27%: adults over 65
↑ 4.2%: young children (6 months to 4 years old)
DECREASE IN ANNUAL COST OF FLU
↓ $8-10 Million in cost savings
ADDRESSING THE NATIONAL
OPIOID EPIDEMIC
In November 2017, a task force composed of over a dozen
health insurance companies, including Centene, announced
its commitment to saving lives and improving outcomes
through quality enhancements and access to addiction
treatment. The initiative, which was launched in response
to the nation’s growing opioid crisis, aligned with Centene’s
strategy to combat the opioid epidemic.
The opioid epidemic spans every community where
Centene operates health plans, including both urban
and rural areas. Realizing this epidemic’s impact on our
membership, our clinical leadership developed the
comprehensive OpiEndTM clinical program. OpiEnd utilizes
Centene’s proprietary business intelligence tools to identify
at-risk members for opioid misuse before formal diagnosis.
This proactive approach employs early intervention to
prevent opioid misuse and ultimately save lives, one
member at a time.
The OpiEnd Pharmacy Advisory Group established a
pharmacy opioid policy designed to prevent opioid misuse
by restricting the daily dosage and maximum days of use
prescribed for members. OpiEnd has trended toward positive
results, specifically among our Medicaid members. In 2017,
OpiEnd observed a trend toward a decrease in the percent
of opioid prescriptions, opioid utilizers and opioid utilizers
greater than 30 days.
Centene encourages local innovation, and state health plans
are hosting opioid summits to provide a forum for healthcare
and community leaders to engage and identify grassroots
solutions to the crisis. For example, Centene’s Sunshine
Health plan developed an online provider toolkit and
presented free online courses to help providers share best
practices and identify ways to support the prevention of
opioid misuse and addiction.
Centene’s comprehensive strategy to address the national
opioid epidemic demonstrates how the company has
long used technology, innovation and key collaborative
partnerships to improve the quality of life for its members.
TRENDS IN OPIOID UTILIZATION AMONG
CENTENE’S MEDICAID MEMBERS, 2015-2017
n
o
i
t
a
z
i
l
i
t
U
d
i
o
i
p
O
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
2015 2016 2017
2015 2016 2017
2015 2016 2017
% Opioid RX
% Opioid Utilizer
% Opioid Utilizer
> 30 days
14
Adressing Healthcare Challenges
15
CENTENE CORPORATION
At Centene, we know we have a responsibility
to address more than just the physical health of
our members. Our specialty health solutions,
including behavioral health, allow us to provide
a more integrated whole health approach to care.
GOING BEYOND TRADITIONAL
METHODS OF CARE
The Tucson Police Department in Arizona reports that one out of eight
service calls they receive involves a member of the public who is
potentially dealing with a mental health issue. A subsidiary of Centene
in Arizona, Cenpatico Integrated Care, began a collaboration with local
law enforcement agencies to develop programs that can help officers
resolve crisis situations in a peaceful manner.
As the Regional Behavioral Health Authority for Pima County, Cenpatico
Integrated Care has developed a mental health first-aid training program
for the Tucson Police Department. The specialized program instructs
officers on tools they can use to de-escalate a crisis situation. So far,
300 officers have completed the training, and there are plans to
complete training for an additional 900 law enforcement officers.
Improving police response and police interactions with persons affected
by mental illness is the goal, according to Cenpatico Integrated Care
President James D. Stover. “Cenpatico Integrated Care believes in
working closely with law enforcement. The Mental Health First Aid
Training program is a good example of how we can partner together to
help the communities we serve.”
Additionally, the Pinal County Sheriff’s Department and Tucson PD have
implemented a co-responder program that pairs a police officer with
a Cenpatico Integrated Care crisis clinician. The co-responder team
answers service calls where behavioral health skills can be beneficial.
The teams provide a number of on-the-ground services, including crisis
assessments, coordination of care, safety planning, de-escalation and
placement facilitation.
CRISIS INTERVENTION PROGRAM 2017
AT A GLANCE
Number of crisis calls handled by the
Crisis Response Center:
125,000
Number of Crisis Response Teams
dispatched to crisis scenes:
25,000
Cenpatico Integrated Care operates the
state-of-the-art crisis phone line at the Tucson,
Arizona, Crisis Response Center.
At no cost to callers, members of the community
can call the crisis line, 24 hours a day, seven
days a week. Behavioral health clinicians are
available over the phone, and a Crisis Response
Team can be dispatched to any location in
the Tucson area.
16
Going Beyond Traditional Methods of Care
CENTENE CORPORATION
17
17
CENTENE CORPORATION QUARTERLY SELECTED
FINANCIAL INFORMATION
Amounts Attributable
to Centene Corporation
Common Shareholders
Net Earnings Per Common Share
Attributable to Centene Corporation
SELECTED FINANCIAL
INFORMATION
For the Quarter Ended, 2017
(in millions) (unaudited)
March 31
$11,724
June 30
September 30
December 31
$11,954
$11,898
$12,806
Revenues
139
—
$139
$0.81
—
$0.81
$0.79
—
$0.79
254
—
$254
$1.47
—
$1.47
$1.44
—
$1.44
205
—
$205
$1.19
—
$1.19
$1.16
—
$1.16
230
—
$230
$1.33
—
$1.33
$1.30
—
$1.30
Expenses
Other Income (Expense)
Total revenues
Earnings from continuing
operations, net of income tax
expense
Discontinued operations,
net of income tax expense
Net earnings
Basic:
Continuing operations
Discontinued operations
Basic earnings per common share
Diluted:
Continuing operations
Discontinued operations
Diluted earnings per common share
Amounts Attributable
to Centene Corporation
Common Shareholders
Net Earnings (Loss) Per Common Share
Attributable to Centene Corporation
Total revenues
Earnings (loss) from continuing
operations, net of income tax
expense
Discontinued operations,
net of income tax expense (benefit)
Net earnings (loss)
Basic:
Continuing operations
Discontinued operations
Basic earnings (loss) per common share
Diluted:
Continuing operations
Discontinued operations
Diluted earnings (loss) per common share
For the Quarter Ended, 2016
(in millions) (unaudited)
March 31
$6,953
June 30
September 30
December 31
$10,897
$10,846
$11,911
(15)
(1)
$(16)
$(0.12)
(0.01)
$(0.13)
$(0.12)
(0.01)
$(0.13)
171
(1)
$170
$1.00
—
$1.00
$0.98
(0.01)
$0.9 7
148
(1)
$147
$0.87
(0.01)
$0.86
$0.84
—
$0.84
255
6
$261
$1.49
0.04
$1.53
$1.45
0.04
$1.49
18
Quarterly Financial Information / Selected Financial Information
Premium
Service
Premium and service revenues
Premium tax and health insurer fee
Total Revenues
Medical costs
Cost of services
Selling, general and administrative expenses
Amortization of acquired intangible assets
Premium tax expense
Health insurer fee expense
Total operating expenses
Earnings from operations
Investment and other income
Interest expense
Earnings from continuing
operations, before income
tax expense
Income tax expense
Earnings from continuing operations,
net of income tax expense
Discontinued operations, net of income
tax expense (benefit)
Net earnings
(Earnings) loss attributable
to noncontrolling interests
Net earnings attributable
to Centene Corporation
Amounts Attributable to Centene
Corporation Common Shareholders
Earnings from continuing operations,
net of income tax expense
Net Earnings (Loss) Per Common Share
Attributable to Centene Corporation
Discontinued operations, net of
income tax expense (benefit)
Net earnings
Basic:
Continuing operations
Discontinued operations
Basic earnings per common share
Diluted:
Continuing operations
Discontinued operations
Diluted earnings per common share
Year Ended December 31
(in millions)
2017
$43,353
2,267
45,620
2,762
48,382
37,851
1,847
4,446
156
2,883
—
47,183
1,199
190
(255)
1,134
326
808
—
808
20
$828
$828
—
$828
$4.80
—
$4.80
$4.69
—
$4.69
2016
$35,399
2,180
37,579
3,028
40,607
30,636
1,864
3,676
147
2,563
461
39,347
1,260
114
(217)
1,157
599
558
3
561
1
$562
$559
3
$562
$3.50
0.02
$3.52
$3.41
0.02
$3.43
2015
$19,389
1,876
21,265
1,495
22,760
17,242
1,621
1,802
24
1,151
215
22,055
705
35
(43)
697
339
358
(1)
357
(2)
$355
$356
(1)
$355
$2.99
(0.01)
$2.98
$2.89
(0.01)
$2.88
19
CENTENE CORPORATION
STOCK PERFORMANCE
Year Ended December 31
(in dollars)
Centene Corporation
S&P Supercomposite
Managed Healthcare Index
New York Stock Exchange
Composite Index
$500
$400
$300
$200
$100
$0
2012
2013
2014
2015
2016
2017
NON-GAAP FINANCIAL RECONCILIATIONS*
Year ended December 31
GAAP net earnings from continuing operations
Amortization of acquired intangible assets
Acquistion related expenses
Penn Treaty assessment expense
Cost sharing reductions
Income Tax Reform
Charitable contribution(1)
California minimum medical loss ratio change
Debt extinguishment
Income tax effects of adjustments(2)
Adjusted net earnings from continuing operations
GAAP diluted earnings per share (EPS)
Amortization of acquired intangible assets(3)
Acquistion related expenses(4)
Penn Treaty assessment expense(5)
Cost sharing reductions(6)
Income Tax Reform
Charitable contribution(7)
2017
$828
156
20
56
22
(125)
40
—
—
(108)
$889
$4.69
0.56
0.07
0.20
0.08
(0.71)
0.14
2016
$559
147
234
—
—
—
50
(195)
11
(79)
$727
$3.41
0.57
0.98
—
—
—
0.19
California minimum medical loss ratio change(8)
Debt extinguishment(9)
Adjusted Diluted EPS from continuing operations
— (0.76)
—
$5.03
0.04
$4.43
2015
$356
2014
$268
2013
$161
16
—
—
—
—
—
—
—
6
—
—
—
—
—
—
—
(6)
$278
(2)
$165
24
27
—
—
—
—
—
—
(20)
$387
$2.89
0.11
0.14
—
—
—
—
—
—
$3.14
(1) In connection with the favorable impact of the Tax Cuts and Jobs Act (Income Tax Reform) passed in late 2017 and the additional revenue
associated with the California minimum medical loss ratio (MLR) change in 2016, the Company made charitable commitments to its foundation
in 2017 and 2016, respectively.
(2) The income tax effects of adjustments are based on the effective income tax rates applicable to adjusted (non-GAAP) results. There is no
additional income tax effect from Income Tax Reform.
(3) Amortization of acquired intangible assets per diluted share is net of an income tax benefit of $0.32, $0.33, and $0.08 for the years ended
December 31, 2017, 2016 and 2015, respectively.
(4) Acquisition related expenses per diluted share are net of an income tax benefit of $0.04, $0.45 and $0.08 for the years ended December 31,
2017, 2016 and 2015, respectively.
(5) The Penn Treaty assessment expense per diluted share is net of an income tax benefit of $0.12 for the year ended December 31, 2017.
(6) The cost sharing reduction (CSR) expense per diluted share is net of an income tax benefit of $0.04 for the year ended December 31, 2017.
(7) The charitable contributions per diluted share are net of an income tax benefit of $0.09 and $0.11 for the years ended December 31, 2017 and
2016, respectively.
(8) The impact associated with the retroactive contract amendment received in the fourth quarter of 2016 that changed the minimum MLR
calculation per diluted share is net of the income tax expense of $(0.43) for the year ended December 31, 2016.
(9) The debt extinguishment cost per diluted share is net of the income tax benefit of $0.03 for the year ended December 31, 2016.
CORPORATE INFORMATION
The graph to the right compares the
cumulative total stockholder return on
our common stock for December 31,
2012, to December 31, 2017, with the
cumulative total return of the New York
Stock Exchange Composite Index and the
Standard & Poor’s Supercomposite
Managed Healthcare Index over the same
period. The graph assumes an investment
of $100 on December 31, 2012, in our
common stock (at the last reported sale
price on such day), the New York Stock
Exchange Composite Index and the
Standard & Poor’s Supercomposite
Managed Healthcare Index and assumes
the reinvestment of any dividends.
BOARD OF DIRECTORS
MICHAEL F. NEIDORFF
Chairman & CEO; Centene Corporation
ORLANDO AYALA
Retired Vice President, Chairman, Emerging
Markets & Chief Advisor to COO; Microsoft
Corporation
JESSICA L. BLUME
Retired Vice Chairman; Deloitte LLP
ROBERT K. DITMORE
Retired President & COO; United Healthcare
Corporation
FREDERICK H. EPPINGER
Retired President & CEO; The Hanover Insurance
Group, Inc.
RICHARD A. GEPHARDT
CEO of Gephardt & Associates; Former Majority
Leader of the U.S. House of Representatives
JOHN R. ROBERTS
Retired Regional Managing Partner;
Arthur Andersen LLP
DAVID L. STEWARD
Chairman of the Board; World Wide
Technology, Inc.
TOMMY G. THOMPSON
Former Health and Human Services Secretary;
Former Governor of Wisconsin
20
Corporate Information
investors to more accurately assess the ongoing
nature of the Company’s operations and measure
the Company’s performance more consistently
across periods. The Company uses the presented
non-GAAP financial measures internally to allow
management to focus on period-to-period
changes in the Company’s core business
operations. 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 with GAAP.
Specifically, the Company believes the
presentation of non-GAAP financial information
that excludes amortization of acquired intangible
assets, acquisition related expenses, as well as
other items, allows investors to develop a more
meaningful understanding of the Company’s
performance over time.
FORM 10-K
Centene has filed an Annual Report on Form
10-K for the year ended December 31, 2017,
with the Securities and Exchange Commission.
Stockholders may obtain a copy of this report,
without charge, by writing:
Investor Relations
Centene Corporation
7700 Forsyth Boulevard
St. Louis, MO 63105
www.centene.com
TRANSFER AGENT
Broadridge Corporate Issuer Solutions, Inc.
1717 Arch Street, Suite 1300
Philadelphia, PA 19103
855.627.5087
http://shareholder.broadridge.com/bcis/
ANNUAL MEETING
The Annual Meeting of Stockholders will be held
on Tuesday, April 24, 2018, at 10 a.m. at Centene
Corporation, 7700 Forsyth Blvd., St. Louis, MO
63105 in the Auditorium, 314.725.4477.
CASH DIVIDEND POLICY
Centene has not paid any dividends on its
common stock and expects that its earnings will
continue to be retained for use in the operation
and expansion of its business.
COMMON STOCK INFORMATION
Centene common stock is traded and quoted on
the New York Stock Exchange under the symbol
“CNC.”
Stock
Price
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
2018*
2017
2016
High
Low
High
Low
High
Low
$112.42 $97.61 $ 73.23 $ 56.00 $ 68.42 $ 47.36
$85.80 $ 69.20 $71.53 $ 55.60
$ 98.72 $ 79.06 $ 75.57 $ 63.37
$104.65 $ 83.56 $ 67.41 $ 50.00
* Stock price through February 16, 2018
CORPORATE INFORMATION
Included in this 2017 Annual Review are financial
and operating highlights and summary financial
statements. For complete financial statements,
including notes, please refer to Centene’s Annual
Report on Form 10-K for the fiscal year ended
December 31, 2017, filed with the Securities and
Exchange Commission (the “2017 Form 10-K”),
which also includes Management’s Discussion
and Analysis of Financial Condition and Results
of Operations. This 2017 Annual Review, together
with our 2017 Form 10-K, constitute our annual
report to security holders for purposes of Rule
14a-3(b) of the Securities Exchange Act of 1934, as
amended. Our 2017 Form 10-K may be obtained by
accessing the investor section of our company’s
website at www.centene.com, or by going to the
SEC’s website at www.sec.gov.
NON-GAAP FINANCIAL PRESENTATION
The Company is providing certain non-GAAP
financial measures in this report as the Company
believes that these figures are helpful in allowing
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
All statements, other than statements of current or historical fact, contained in this 2017 Annual Review are forward-looking statements. We intend such forward looking statements to be covered by the
safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with these safe-harbor
provisions. We have attempted to identify these statements by terminology including “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “seek,” “target,” “goal,” “may,” “will,” “would,” “could,”
“should,” “can,” “continue” and other similar words or expressions (and the negative thereof) in connection with, among other things, any discussion of future operating or financial performance. In
particular, these statements include without limitation statements about our market opportunity, growth strategy, competition, expected activities and future acquisitions, including our proposed
acquisition of New York State Catholic Health Plan, Inc., d/b/a Fidelis Care New York (Fidelis Care) (Proposed Fidelis Acquisition or Fidelis Care Transaction), investments and the adequacy of our available
cash resources. These statements may be found in the various sections of the Annual Report on Form 10-K filed with the SEC on February 19, 2018, such as Part II, Item 7. “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” Part I, Item 3. “Legal Proceedings,” and Part I, Item 1A. “Risk Factors.” 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 our or our industry’s actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These statements are not
guarantees of future performance and are subject to risks, uncertainties and assumptions. All forward-looking statements included in this 2017 Annual Review are based on information available to us on the
date of this 2017 Annual Review. Except as may be otherwise required by law, we undertake no obligation to update or revise the forward-looking statements included in this 2017 Annual Review, whether as
a result of new information, future events or otherwise, after the date of this report. You should not place undue reliance on any forward looking statements, as actual results may differ materially from
projections, estimates, or other forward-looking statements due to a variety of important factors, including but not limited to (i) our ability to accurately predict and effectively manage health benefits and
other operating expenses and reserves; (ii) competition; (iii) membership and revenue declines or unexpected trends; (iv) changes in healthcare practices, new technologies, and advances in medicine; (v)
increased healthcare costs; (vi) changes in economic, political or market conditions; (vii) changes in federal or state laws or regulations, including changes with respect to 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; (viii) rate cuts or other payment reductions or delays by governmental payors and other risks and uncertainties affecting our government businesses; (ix) our ability to
adequately price products on federally facilitated and state based Health Insurance Marketplaces; (x) tax matters; (xi) disasters or major epidemics; (xii) the outcome of legal and regulatory proceedings;
(xiii) changes in expected contract start dates; (xiv) provider, state, federal and other contract changes and timing of regulatory approval of contracts; (xv) the expiration, suspension, or termination of our or
Fidelis Care’s contracts with federal or state governments (including but not limited to Medicaid, Medicare, and TRICARE); (xvi) the difficulty of predicting the timing or outcome of pending or future litigation
or government investigations; (xvii) challenges to our or Fidelis Care’s contract awards; (xviii) cyber-attacks or other privacy or data security incidents; (xix) 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 Proposed Fidelis Acquisition, will not be realized, or
will not be realized within the expected time period, including, but not limited to, as a result of any failure to obtain any regulatory, governmental or third party consents or approvals in connection with the
Proposed Fidelis Acquisition (including any such approvals under the New York Non-For-Profit Corporation Law) or any conditions, terms, obligations or restrictions imposed in connection with the receipt of
such consents or approvals; (xx) 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; (xxi) disruption caused by significant completed and pending acquisitions, including the
Health Net Acquisition and the Proposed Fidelis Acquisition, making it more difficult to maintain business and operational relationships; (xxii) 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 Proposed Fidelis Acquisition; (xxiii) changes in expected closing dates,
estimated purchase price and accretion for acquisitions; (xxiv) the risk that acquired businesses, including Health Net and Fidelis Care, will not be integrated successfully; (xxv) the risk that the conditions to
the completion of the Proposed Fidelis Acquisition may not be satisfied or completed on a timely basis, or at all; (xxvi) failure to obtain or receive any required regulatory approvals, consents or clearances
for the Proposed Fidelis Acquisition, and the risk that, even if so obtained or received, regulatory authorities impose conditions on the completion of the transaction that could require the exertion of
management’s time and our resources or otherwise have an adverse effect on Centene; (xxvii) business uncertainties and contractual restrictions while the Proposed Fidelis Acquisition is pending, which
could adversely affect our business and operations; (xxviii) change of control provisions or other provisions in certain agreements to which Fidelis Care is a party, which may be triggered by the completion of
the Proposed Fidelis Acquisition; (xxix) loss of management personnel and other key employees due to uncertainties associated with the Proposed Fidelis Acquisition; (xxx) the risk that, following completion
of the Proposed Fidelis Acquisition, the combined company may not be able to effectively manage its expanded operations; (xxxi) restrictions and limitations that may stem from the financing arrangements
that the combined company will enter into in connection with the Proposed Fidelis Acquisition; (xxxii) 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; (xxxiii) availability of debt and equity financing, on terms that are favorable to us; (xxxiv)
inflation; and (xxxv) foreign currency fluctuations. This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain other risk factors that may
affect our business operations, financial condition and results of operations, in our filings with the Securities and Exchange Commission, including our annual reports on Form 10-K, quarterly reports on Form
10-Q and current reports on Form 8-K. Item 1A. “Risk Factors” of Part I of our Annual Report on Form 10-K filed with the SEC on February 19, 2018 contains a further discussion of these and other important
factors that could cause actual results to differ from expectations. Due to these important factors and risks, we cannot give assurances with respect to our future performance, including without limitation
our ability to maintain adequate premium levels or our ability to control our future medical costs.
7700 Forsyth Boulevard
St. Louis, MO 63105 U.S.A.
1-314-725-4477
www.centene.com