2018 Annual Review
At Centene, we don’t just embrace
the future; we take the lead.
Our core beliefs have positioned us to take bold
steps forward—through new technologies and
innovations—while always remaining true to our
purpose of transforming the health of the
community, one person at a time.
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
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2
6
8
12
15
16
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18
19
20
2018 At a Glance
Letter from the Chairman
Company and Financial Summary
2018 Highlights
Providing Greater Healthcare Access with Dignity
Better Health Outcomes for Growing Families
Using the Latest Technology to Provide the Best Possible Care
Board of Directors
Quarterly Selected Financial Information
Selected Financial Information
Corporate Information
2018 AT A GLANCE
$60.1 B
IN TOTAL REVENUES
47,300
EMPLOYEES
$1.2 B
OPERATING CASH FLOW
14 M
MEMBERS
$2.26
DILUTED EARNINGS PER SHARE
$3.54
ADJUSTED DILUTED EARNINGS PER SHARE
CENTENE CORPORATION
1
MICHAEL F. NEIDORFF
Chairman & Chief Executive Officer
LETTER FROM THE CHAIRMAN
2018: A HEALTHCARE COMPANY IN MOTION
In 2018, Centene achieved strong results across our business segments, reflecting the strength of
our diversification strategy and our portfolio approach. Centene’s ability to execute across our
strategic and operational initiatives propelled us to #61 on the Fortune 500® list of America’s
largest companies by revenue, and #1 on Fortune’s 100 Fastest-Growing Companies list based on
revenue growth over a 10-year period. We continued to diversify and add to our capabilities, driving
significant revenue and earnings growth and creating greater opportunities for margin expansion.
We ended 2018 as a $60 billion enterprise, and our success this past year was punctuated by the
two-for-one stock split announced at the end of 2018, effective in the first quarter of 2019.
At Centene, we don’t just embrace the future, we take the lead. We are a company in motion, and
we are taking action to build on our competitive strengths to drive further growth. We continued to
see our strategic approach yield results in 2018. Centene offers approximately 350 solutions
in 32 states, covering more than 14 million members in the U.S. and approximately 600,000
individuals internationally. Our size and scale afford us the necessary resources for further
investments in systems, markets, products, and capabilities that are improving our competitive
position in both the short and long term.
By combining our strong organic growth and strategic acquisitions, we have become a
transformational leader in the government-sponsored healthcare sector. Notably, we completed
Centene is a growth company with expectations of continued margin
expansion and strong growth in the top and bottom line.
All percentages as of Dec. 31, 2018
24%
Growth in Total
Revenues*
40%
Growth in Adjusted
Diluted Earnings
per Share*
14%
Total Shareholder
Return*
31%
Industry-Leading Five-Year
Compounded Total Shareholder
Return Annual Growth Rate
* Year Over Year
the acquisition of Fidelis Care, the leading government health plan in New York, establishing
Centene as a leader in the nation’s four largest Medicaid states. Fidelis has maintained its strong
operating performance throughout our successful integration, while the acquisition has expanded
our reach in Medicare Advantage and the Health Insurance Marketplace. Looking forward, it is
clear that we have an incredibly bright future. We have clear sight on new opportunities. We’re
expanding our U.S. footprint and we are growing internationally. This positions us to continue
delivering results for our members, communities, and shareholders.
DRIVING GROWTH
Centene drove organic growth in our core products of Medicaid, Medicare, and the Health
Insurance Marketplace in 2018. We were successful in reprocurement and service expansion wins
in multiple markets, and in 2019 we are expanding our Medicaid geographical footprint with new
contracts in Iowa and New Mexico. In addition, we grew our portfolio of Medicare products, offering
Medicare Advantage and D-SNP plans in eight new Centene Medicaid states, which will help bring
our Medicare product solutions to a total of 20 states. And we are the number one insurer in the
nation on the Health Insurance Marketplace. In 2018, we had strong marketplace enrollment of
over 1.6 million members at the peak, representing 35% growth over 2017 open enrollment metrics.
We now offer access to the Health Insurance Marketplace in 70% of our markets, having already
expanded into four new states for 2019 and exploring additional expansion activities for 2020.
Beyond these core offerings, we remain the largest provider of managed long-term services
and supports, one of the fastest-growing segments in the managed care market. Our Centurion
product is the market leader in correctional health by revenue and is widely recognized for its high
standards for quality and care and its innovative and transparent approach. In addition, through
our TRICARE program, we continued to be one of the nation’s largest providers of managed care
services for military families.
We also continue to gather international momentum by leveraging our public sector and
population health expertise, as well as our technology and analytics capabilities, to advance our
position in the Spanish and UK markets. At the end of 2018, Centene acquired an 89% ownership
in University Hospital of Torrejón, serving approximately 150,000 people with a broad portfolio of
services and facilities. This investment furthers the reach of our successful whole health model.
2
2
Letter from the Chairman
Letter from the Chairman
3
CENTENE CORPORATION
BUILDING ON OUR COMPETITIVE ADVANTAGES
Our core beliefs have stood the test of time, and today, as we build on those foundations through
new technologies and innovations, we are able to take bold steps forward while remaining true
to our purpose of transforming the health of the community, one person at a time.
For example, we are proactively streamlining our organization to achieve efficiencies, protect
quality and outcomes, and capture the best of our capabilities and talents. In 2018, we launched
Centene Forward, an initiative designed to generate operating and economic efficiencies and
accelerate margin expansion. Through Centene Forward, we expect to realize up to $500 million
in savings over a multiyear period. In addition to long-term savings, this initiative will provide us
with additional capital to invest in capabilities and technologies that better position Centene
for long-term growth, increased margins, and enhanced profitability.
We continue to invest in technology, which enhances our ability to scale, coordinate, and
deliver care. With our focus on innovation, we deliver the next generation of healthcare services
through new IT platforms, enhanced data analytics, and technology-based partnerships. In 2018,
we introduced RxAdvance, a solution for pharmacy benefit management (PBM), and have been
pleased with its early performance. We will continue this implementation across our health
plans throughout 2019 and 2020, and will consistently leverage new technology to improve
health outcomes.
We are also driving integrated innovation through our organization. Through our Health Care
Enterprises group, highlighted by Casenet’s TruCare solutions, we are improving health
outcomes by developing more efficient care models and reducing healthcare costs. We also
made a significant investment in Interpreta, an innovative health IT company focused on clinical
and genomic data and analytics. Interpreta can rapidly identify physiological or laboratory
changes by analyzing 12 million medical data points in less than a minute, which allows for
continuous interpretation of each patient’s past, present, and future care needs.
Our ongoing initiatives build on more than 30 years of experience in applying our local approach
to government-sponsored healthcare programs. Centene goes 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 commitment
is a core piece of Centene’s business strategy.
LEADING THE WAY FORWARD
The healthcare industry is ever-changing as the nation debates the shape and scope of healthcare
policy. That said, the midterm elections of 2018 demonstrated that there is bipartisan support to
provide high-quality, efficient, and affordable care to all Americans. This goal has been Centene’s
focus and commitment for more than 30 years. We will continue focusing on what we can control.
As an exceptionally local, fully integrated, tech-enabled enterprise, we deliver consistent
year-over-year market expansion by strategically optimizing our core business.
Ultimately, Centene’s success is due to the talent, skill, and dedication of our more than 47,000
employees, as well as their commitment to providing the highest quality of care to the vulnerable
populations entrusted to us. From the leaders we develop through our leadership training programs
at Centene University to the individual employees running local programs to promote healthier lives
for our members, it is our workforce that facilitates our growth. I want to thank our employees for
their commitment, passion, and innovation, which enable Centene to deliver on our mission to
provide better health outcomes at lower costs. I also want to use this opportunity to note my
appreciation for the guidance and leadership of our Board of Directors.
We have a clear line of sight into our growth drivers for 2019 and beyond. We will keep building
on our momentum to deliver enhanced value to shareholders as we transform the health of our
communities, one person at a time.
MICHAEL F. NEIDORFF
Chairman & Chief Executive Officer
4
Letter from the Chairman
5
CENTENE CORPORATION FINANCIAL HIGHLIGHTS
(in millions)
2018
2017
2016
2015
2014
Total Revenues
$ 60,116
$ 48,382
$ 40,607
$ 22,760
$ 16,560
Net Earnings(1)
900
Adjusted Net Earnings(1)
1,411
828
889
562
730
355
386
271
281
Total Assets
30,901
21,855
20,197
7,339
5,824
TOTAL REVENUES
(in millions)
NET EARNINGS(1)
(in millions)
MEMBERSHIP
(in thousands)
60,116
48,328
40,607
22,760
16,560
90 0
828
562
355
271
14,020
12,207
11,442
5,108
4,061
8
1
0
2
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
8
1
0
2
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
8
1
0
2
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
(1) Attributable to Centene Corporation
GROUP & PRODUCT
SOLUTIONS
INTERNATIONAL
Since our investment in 2014, we
continue expanding our international
presence in Europe. Our joint venture
in Spain, Ribera Salud, is a health
management group primarily
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 2018,
Centene acquired a controlling
interest in University Hospital of
Torrejón in Madrid, which is managed
by Ribera Salud. 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.
ALASKA
HA AII
W
MEDICAID/CHIP
MEDICARE
Arizona, Arkansas (Private Option), California,
Florida, Georgia, Illinois, Indiana, Iowa*, Kansas,
Louisiana, Maryland*, Mississippi, Missouri,
Nebraska, Nevada, New Hampshire, New Mexico*,
New York, North Carolina*, Ohio, Oregon,
South Carolina, Texas, Washington, Wisconsin
ABD (NON-DUAL)
Arizona, California, Florida, Illinois, Indiana,
Iowa*, Kansas, Louisiana, Maryland*, Mississippi,
Nebraska, New Hampshire, New Mexico*, New York,
North Carolina*, Ohio, Oregon, South Carolina,
Texas, Washington, Wisconsin
ABD (MEDICAID ONLY DUAL-ELIGIBLE)
Arizona, California, Florida, Iowa*, Kansas,
Nebraska, New Hampshire, New Mexico*,
New York, Ohio, Oregon, Pennsylvania, Texas,
Wisconsin
LONG-TERM SERVICES & SUPPORTS
California, Florida, Illinois, Iowa*, Kansas,
New Mexico*, New York, North Carolina*, Ohio,
Pennsylvania, Texas
FOSTER CARE
California, Florida, Illinois*, Indiana, Kansas,
Louisiana, Mississippi, Missouri, Nebraska,
New Hampshire, New Mexico*, New York,
Ohio, Texas, Washington
Arizona, Arkansas, California, Florida, Georgia,
Illinois, Indiana, Kansas, Louisiana, Mississippi,
Missouri, New Mexico*, New York, Ohio, Oregon,
Pennsylvania, South Carolina, Texas, Wisconsin
MEDICAID-MEDICARE PLANS (INCLUDES LTSS)
California, Illinois, Michigan, New York, Ohio,
South Carolina, Texas
CORRECTIONAL HEALTHCARE
Arizona, California, Connecticut, Florida, Georgia,
Maryland, Massachusetts, Minnesota, Mississippi,
New Hampshire, New Mexico, Pennsylvania,
Tennessee, Vermont
HEALTH INSURANCE MARKETPLACE
Arizona, Arkansas, California, Florida,
Georgia, Illinois, Indiana, Kansas, Mississippi,
Missouri, Nevada, New Hampshire, New York,
North Carolina, Ohio, Pennsylvania,
South Carolina, Tennessee, Texas, Washington
COMMERCIAL INSURANCE
Arizona, California, New York, Oregon
TRICARE
Alaska, Arizona, California, Colorado, Hawaii,
Idaho, Iowa, Kansas, Minnesota, Missouri,
Montana, Nebraska, Nevada, New Mexico,
North Dakota, Oregon, South Dakota, Texas,
Utah, Washington, Wyoming
* Maryland is a non-risk Managed Service Organization
(MSO) contract. Contracts in Iowa and New Mexico,
and the foster care contract in Illinois, commence
membership operations in 2019. The contract in
North Carolina is expected to commence membership
operations in 2020.
6
Company and Financial Summary
CENTENE CORPORATION
7
2018 QUARTERLY
HIGHLIGHTS
Q1
JANUARY
Centene’s New Mexico subsidiary, Western Sky Community Care, is
awarded the statewide contract for the Centennial Care 2.0 Program.
The program provides integrated Medicaid managed care coverage
to nearly 700,000 Medicaid members.
FEBRUARY
Centene signs a definitive agreement to acquire MHM Services, Inc.,
a national provider of healthcare and staffing services to correctional
systems and other government agencies.
MARCH
Centene announces it has agreed to acquire Community Medical
Holdings Corp., a leading at-risk primary care provider, serving over
70,000 Medicaid, Medicare Advantage, and Health Insurance
Marketplace program patients in Miami-Dade County, Florida.
Centene makes an initial investment in RxAdvance, a full-service
pharmacy benefit manager. The partnership includes both a customer
relationship and strategic investment in RxAdvance.
Q2
MAY
Centurion Detention Health Services, a Centene subsidiary, is selected
by the Pima County Arizona Board of Supervisors to provide
comprehensive healthcare services to detainees of the county’s adult
and juvenile detention facilities in Tucson, Arizona.
Centene’s Iowa subsidiary, Iowa Total Care, is tentatively awarded a
statewide contract for the IA Health Link Program, which provides
integrated Medicaid managed care coverage to over 600,000 Medicaid
members in the state. Pending regulatory approval, the contract is
expected to commence on July 1, 2019.
Coordinated Care, Centene’s subsidiary in Washington state, is chosen
to provide managed care services to Apple Health’s Integrated Managed
Care Medicaid beneficiaries in the King, Pierce, North Sound, Greater
Columbia, and North Central Regional Service Areas.
JUNE
Centene announces a partnership with the National Council on
Independent Living on an initiative to increase the accessibility of
provider medical offices and services for people with disabilities.
Centene’s Provider Accessibility Initiative launches the company’s
Barrier Removal Fund in three pilot states, Illinois, Texas and Ohio,
as well as educational and compliance components that will be
implemented in all Centene markets nationwide.
Centene’s Kansas subsidiary, Sunflower Health Plan, is chosen to
provide managed care services to KanCare beneficiaries statewide.
KanCare provides medical and behavioral health benefits, as well as
long-term services and supports, to approximately 400,000 members.
Q3
JULY
Centene completes its acquisition of Fidelis Care, expanding
Centene’s national leadership in government-sponsored healthcare
and giving Centene a presence in New York, the country’s second
largest managed care state by membership.
Health Net Federal Services, a Centene subsidiary, is awarded the
next generation Military & Family Life Counseling Program contract
through its MHN Government Services (MHNGS) company. Under the
contract, MHNGS will deploy highly skilled and licensed behavioral
health counselors on assignments throughout the United States,
U.S. territories, and countries where the U.S. military is deployed.
Centene and Ascension, the nation’s largest Catholic and nonprofit
health system, announce they will explore a joint venture to establish
a leading Medicare Advantage plan. The plan is expected to be
implemented in multiple geographic markets beginning in 2020.
AUGUST
Centurion Detention Health Services is selected to provide
comprehensive healthcare services to detainees of Volusia County’s
detention facilities located near Daytona, Florida.
Q4
OCTOBER
Centurion Detention Health Services is selected to provide
comprehensive healthcare services to detainees at the Metropolitan
Detention Center in Albuquerque, New Mexico.
Centene’s Arizona subsidiary, Health Net Access, begins providing
physical and behavioral healthcare services through the Arizona Health
Care Cost Containment System Complete Care program in the central
and southern regions.
DECEMBER
Centene’s Mississippi subsidiary, Magnolia Health, completes
implementation of a transformative pharmacy benefit management
model using RxAdvance’s Collaborative PBM Cloud™ platform, covering
240,000 Mississippi Medicaid members.
Centene’s Florida subsidiary, Sunshine Health, begins providing
physical and behavioral healthcare services through Florida’s Statewide
Medicaid Managed Care Program under its new five-year contract,
which was implemented for all 11 regions by February 2019.
Centene Corporation, which owns 50% of the Ribera Salud Group in
Spain, announces it has purchased Sanitas’ and Asisa’s stake of the
Torrejón Salud company, concessionaire of the University Hospital of
Torrejón de Ardoz in Madrid. With this transaction, Centene owns 89%
of the University Hospital, and Ribera Salud will assume management
of the center.
8
2018 Highlights
CENTENE CORPORATION
9
2018 NOTEWORTHY
ACCREDITATIONS AND AWARDS
Centene continues to gain national recognition for growth
and innovation, as well as for our commitment to diversity
and inclusion.
NO.
61
NO.
210
Ranked No. 61 on
FORTUNE® 500 List (2018):
Centene ranked No. 61 on the 2018 FORTUNE
500® list of largest U.S. corporations by
revenue, up from No. 66 in 2017. Since first
entering the list in 2010, Centene has climbed
425 spots.
Ranked No. 210 on
FORTUNE® Global 500 List (2018):
Centene ranked No. 210 on the 2018 FORTUNE
Global 500® list of the world’s largest
corporations by revenue. Centene first
appeared on the list in 2016 at No. 470.
Gender-Equality Index:
Centene is listed on Bloomberg’s 2019
Gender-Equality Index for our strong dedication
to gender equality and the advancement of
women in the workplace.
Patriot Award:
Centene received the Patriot Award from the Office of the Secretary of
Defense in recognition of our company’s support of the National Guard,
Reserve Forces, and their families.
FORTUNE World’s Most
Admired Companies:
In 2018, Centene was selected
as one of FORTUNE World’s
Most Admired Companies,
a recognition chosen by
healthcare industry executives,
directors, and analysts asked
to rate enterprises in their
own industry on nine criteria,
from investment value and
quality of management and
products to social responsibility
and ability to attract talent.
Disability Equality:
Centene was again
recognized as a top employer
by the American Association
of People with Disabilities
(AAPD).
From FORTUNE Magazine, February 2019, ©2019 Fortune Media IP Limited. FORTUNE and The World’s Most Admired Companies are registered
trademarks of Fortune Media IP Limited and are used under license. FORTUNE and Fortune Media IP Limited are not affiliated with, and do not endorse
the products or services of, Centene Corporation.
Supported by our solid foundation, we are
continuously developing new ways to help
our members get—and stay—healthy.
Through innovative ideas and programs, combined
with cutting-edge technology, we continue to enhance
access to high-quality care. With each step forward,
we remain committed to the principles upon which
our company was founded.
10
2018 Highlights
CENTENE CORPORATION
11
Centene’s Provider Access
Initiative received the 2019
Health Equity Award by
the Centers for Medicare
& Medicaid Services.
The award recognizes
organizations that close
gaps in healthcare quality
and access.
PROVIDING GREATER HEALTHCARE ACCESS WITH DIGNITY
From the beginning, Centene has believed in removing barriers that may
prevent our members from accessing quality healthcare. For those living with
disabilities, physical barriers may serve as literal obstacles, deterring them
from receiving the care they deserve. Centene’s partnership with the National
Council on Independent Living aims to change that.
In keeping with our company’s history of removing healthcare barriers, Centene launched its Provider
Accessibility Initiative to assist those living with disabilities in accessing quality healthcare. Designed in
collaboration with the National Council on Independent Living (NCIL), the initiative aims to transition
healthcare delivery into a fully accessible system for everyone.
As part of the initiative, Centene established a Barrier Removal Fund that invites participating providers to
submit projects that focus on the removal of architectural barriers and the purchase of medical equipment,
such as adjustable examination tables and weight scales. Proposals selected by local review committees
made up of representatives from Centene health plans, health plan members, and disability advocacy
organizations award grant money to fund each project, directly benefiting those with disabilities in their
communities.
The initiative also expands the level of disability-inclusion information that Centene shares with members,
including details about physical access to healthcare facilities, accessible equipment, and providers’
programmatic access, such as the capability to communicate with patients who have hearing, vision,
intellectual, or developmental disabilities.
In 2018, the initiative awarded more than 50 grants to participating network providers in three states—
Illinois, Ohio, and Texas—where Centene operates health plans. Centene will expand the Provider
Accessibility Initiative into additional states where the company operates subsidiaries. Centene also
incorporated standardized disability access surveys as part of its provider credentialing process to gather
more information about barriers to healthcare. Improving the accuracy and transparency of disability access
data in provider directories is a top priority. Centene has long been committed to providing equal access to
quality healthcare and services across our membership.
“Centene is leading the way on removing barriers to healthcare. The disabled community
has just lived with these barriers to healthcare for so long. That’s what makes Centene’s
program so important; it’s changing the landscape.”
— Kelly Buckland, Executive Director of the NCIL and member of Centene’s National Disability Advisory Council
12
Providing Greater Healthcare Access with Dignity
13
CENTENE CORPORATION
BETTER HEALTH OUTCOMES FOR GROWING FAMILIES
By providing valuable health resources and information, Centene empowers
our members to make healthy decisions that benefit themselves and
their families.
For over 10 years, Start Smart for Your Baby®, Centene’s award-winning education and outreach program,
has helped pregnant members achieve healthy pregnancies while preventing premature births, low
birthweight deliveries, and infant disease. One of the essential components of the program is the
Notification of Pregnancy process, which identifies pregnant members and their risk factors as early
as possible in order to establish a relationship between the member, provider, and health plan staff.
Centene health plans manage over 200,000 deliveries each year.
Start Smart for Your Baby Program Features
:: Outreach activities such as baby showers
connect members with clinical teams, care
coordinators, and community partners in a
fun and engaging setting.
:: Educational materials and incentives encourage
prenatal, postpartum, and well-child visits.
:: Access to a personal nursing staff and advice
line provides 24/7 healthcare support.
:: Robust text and email campaigns provide tips
on pregnancy and newborn care, including
information on 2, 4, 6, 9, and 12-month
milestones.
A DECADE OF LITTLE MIRACLES:
Nearly 1.2 million babies have been
born to health plan members since
Start Smart launched in 2008.
EARLY SOLUTIONS FOR BETTER CARE MANAGEMENT:
Births with a Notification of Pregnancy on
file increased from 10.55% in 2007 to
61.10% in 2017.
14
Better Health Outcomes for Growing Families
15
CENTENE CORPORATION USING THE LATEST TECHNOLOGY TO PROVIDE THE BEST POSSIBLE CARE
BOARD OF DIRECTORS
Centene has long leveraged innovative ideas to shape how
healthcare is provided. That innovative spirit extends to
technology, where Centene is using the latest tools to
develop new methods of improving healthcare outcomes.
To better help the underserved, Centene utilizes cutting-edge technology to analyze
crucial healthcare data and turn it into meaningful results for our members.
Developing complex algorithms through machine learning to better predict human
behavior means that we can proactively deliver specialized programs and targeted
interventions to populations most in need. Our powerful analytics engine, Interpreta,
uses a robust database that can reveal which segments of the population are more
susceptible to important health concerns. TruCare is our case management system
for critically ill members who need more comprehensive management. And through
our relationship with the pharmacy benefit manager RxAdvance, providers will be
able to identify potential lower-cost drug options within therapeutic categories. Our
investment in the latest technology allows us to move beyond simply responding to
illness and enhances our ability to help our members take charge of their health.
Leveraging technology
to improve
health outcomes
By analyzing 12 million
medical data points in
less than a minute,
Interpreta can identify
physiological
or laboratory changes
that could signal trouble.
Our continued investments in new technology have significantly enhanced our ability
to scale, coordinate, and deliver care. While we embrace technological progress,
we never lose sight of our purpose: transforming the health of the community,
one person at a time.
Centene’s Board of Directors
provides exceptional business
and healthcare insight that has
helped shape our corporate
culture of accountability,
ethics, and integrity.
Back row:
Frederick H. Eppinger, Orlando Ayala,
Tommy G. Thompson, Richard A. Gephardt
Front row:
David L. Steward, Robert K. Ditmore,
Michael F. Neidorff, Jessica L. Blume,
John R. Roberts
Michael F. Neidorff
Chairman and Chief Executive Officer,
Centene Corporation
Orlando Ayala
Retired Chairman and Corporate Vice
President of Emerging Businesses for
Microsoft Corporation
Jessica L. Blume
Retired Vice Chairman of Deloitte LLP
Robert K. Ditmore
Retired Director, President and Chief
Operating Officer of United Healthcare
Corporation
Frederick H. Eppinger
Retired Director, President and Chief
Executive Officer of The Hanover
Insurance Group, Inc.
Richard A. Gephardt
Chief Executive Officer and President of
Gephardt Group, LLC; Former Majority
Leader of the U.S. House of
Representatives
John R. Roberts
Retired Regional Managing Partner,
Arthur Andersen LLP
David L. Steward
Founder and Chairman of World Wide
Technology, Inc.
Tommy G. Thompson
Chairman and Chief Executive Officer
of Thompson Holdings; Retired Partner
of Akin Gump Strauss Hauer & Feld
LLP; Former Governor of the State of
Wisconsin; Former Health and Human
Services Secretary
16
Using the Latest Technology to Provide the Best Possible Care
CENTENE CORPORATION
17
QUARTERLY SELECTED
FINANCIAL INFORMATION
Total revenues
Net earnings attributable to Centene Corporation
Net earnings per common share attributable to
Centene Corporation:
Basic earnings per common share
Diluted earnings per common share
Total revenues
Net earnings attributable to Centene Corporation
Net earnings per common share attributable to
Centene Corporation:
Basic earnings per common share
Diluted earnings per common share
For the Quarter Ended, 2018
(in millions, except per share data in dollars)
(unaudited)
March 31
$ 13,194
$ 340
June 30
September 30
December 31
$ 14,181
$ 300
$ 16,182
$ 16,559
$ 19
$ 241
$ 0.98
$ 0.96
$ 0.77
$ 0.75
$ 0.05
$ 0.05
$ 0.59
$ 0.57
For the Quarter Ended, 2017
(in millions, except per share data in dollars)
(unaudited)
March 31
$ 11,724
$ 139
June 30
September 30
December 31
$ 11,954
$ 254
$ 11,898
$ 12,806
$ 205
$ 230
$ 0.40
$ 0.39
$ 0.74
$ 0.72
$ 0.59
$ 0.58
$ 0.67
$ 0.65
SELECTED FINANCIAL
INFORMATION
Income Statement Data:
Total revenues
Net earnings attributable to Centene
Corporation
Per Share Data:
Net income attributable to Centene:
Basic
Diluted
Other Information (unaudited):
Health benefits ratio (1)
Selling, general, and administrative
expense ratio(2)
Year Ended December 31
(in millions, except share data in dollars
and membership data)
2018
2017
2016
2015
2014
$ 60,116
$ 48,382
$ 40,607
$ 22,760
$ 16,560
$ 900
$ 828
$ 562
$ 355
$ 271
$ 2.31
$ 2.26
$ 2.40
$ 2.34
$ 1.76
$ 1.71
$ 1.49
$ 1.44
$ 1.16
$ 1.12
85.9%
87.3%
86.5%
88.9%
89.3%
10.7%
9.7%
9.8%
8.5%
8.3%
Membership
14,019,600
12,207,100
11,441,800
5,107,900
4,060,900
Consolidated Balance Sheet Data:
Cash and cash equivalents,
Investments and restricted deposits
Total assets
Medical claims liability
Long-term debt
Total stockholders’ equity
$ 13,480
30,901
6,831
6,648
11,013
$ 10,050
21,855
4,286
4,695
6,864
$ 9,118
20,197
3,929
4,651
5,909
$ 3,978
7,339
2,298
1,216
2,168
$ 3,167
5,824
1,723
874
1,743
(1) Health benefits ratio represents medical costs as a percentage of premium revenue.
(2) Selling, general, and administrative (SG&A) expense ratio represents SG&A expenses as a percentage of premium and service revenues.
18
Quarterly Financial Information / Selected Financial Information
19
CENTENE CORPORATION
CORPORATE
INFORMATION
The graph on the right compares the
cumulative total stockholder return on
our common stock for the period from
December 31, 2013, to December 31, 2018,
with the cumulative total return of the
New York Stock Exchange Composite
Index, the Standard & Poor’s
Supercomposite Managed Healthcare
Index, and the Standard & Poor’s 500
over the same period. The graph
assumes an investment of $100 on
December 31, 2013, in our common stock
(at the last reported sale price on such
day), the New York Stock Exchange
Composite Index, the Standard & Poor’s
500, and the Standard & Poor’s
Supercomposite Managed Healthcare
Index, and assumes the reinvestment
of any dividends.
STOCK PERFORMANCE
Year Ended December 31
(in dollars)
Centene Corporation
New York Stock Exchange
Composite Index
S&P 500
S&P Supercomposite
Managed Healthcare Index
$400
$350
$300
$250
$200
$150
$100
$50
2013
2014
2015
2016
2017
2018
NON-GAAP FINANCIAL RECONCILIATIONS
GAAP net earnings attributable to Centene
Amortization of acquired intangible assets
Acquisition related expenses
Other adjustments(1)
Income tax effects of adjustments(2)
Year Ended December 31
(in millions, except per share data in dollars)
2018
2017
2016
$ 900
$ 828
$ 562
211
425
30
156
20
(7)
(155)
(108)
147
234
(134)
(79)
2015
$355
24
27
—
(20)
2014
$271
16
—
—
(6)
Adjusted net earnings
$ 1,411
$ 889
$ 730
$386
$281
GAAP diluted earnings per share (EPS) attributable to Centene
$ 2.26
$ 2.34
Amortization of acquired intangible assets(3)
Acquisition related expenses(4)
Other adjustments(1)
Adjusted Diluted EPS
0.41
0.81
0.28
0.04
0.06
(0.14)
$ 3.54
$ 2.52
(1) Other adjustments include the following items:
2018 — the impact of retroactive changes to the California minimum medical loss ratio (MLR) of $30 million of expense or $0.06 per diluted
share, net of an income tax benefit of $0.02;
2017 — (a) the Penn Treaty assessment expense of $56 million or $0.10 per diluted share, net of an income tax benefit of $0.06; (b) the cost
sharing reduction (CSR) expense of $22 million or $0.04 per diluted share, net of an income tax benefit of $0.02; (c) the charitable contribution of
$40 million or $0.07 per diluted share, net of an income tax benefit of $0.05; and (d) the benefit associated with income tax reform of $125 million
or $0.35 per diluted share; and
2016 — (a) the impact of retroactive changes to the California minimum medical loss ratio (MLR) of a $195 million benefit or $0.38 per diluted
share, net of an income tax expense of $0.21; (b) the charitable contribution of $50 million or $0.09 per diluted share, net of an income tax
benefit of $0.06; and (c) the debt extinguishment cost of $11 million or $0.02 per diluted share, net of the income tax benefit of $0.01.
(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 $0.12 and $0.16 for the years ended
December 31, 2018, and 2017, respectively.
(4) Acquisition related expenses per diluted share are net of an income tax benefit of $0.25 and $0.02 for the years ended December 31, 2018,
and 2017, respectively.
20
Corporate Information
CORPORATE
INFORMATION
Included in this 2018 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, 2018, filed with the Securities and
Exchange Commission (the “2018 Form 10-K”),
which also includes Management’s Discussion
and Analysis of Financial Condition and Results
of Operations. This 2018 Annual Review, together
with our 2018 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 2018 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
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, 2018,
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.
51 Mercedes Way
Edgewood, NY 11717
855-627-5087
https://shareholder.broadridge.com/bcis/
ANNUAL MEETING
The Annual Meeting of Stockholders will be
held on Tuesday, April 23, 2019, 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
2019*
2018
2017
High
Low
High
Low
High
Low
$69.25 $54.86 $ 56.21 $ 48.81 $ 36.62 $ 28.00
63.15
52.14
42.90 34.60
74.12
60.51
49.36
39.53
74.49
54.25
52.33
41.78
* Stock price through February 15, 2019
On December 12, 2018, the Board of Directors
declared a two-for-one split of Centene’s common
stock in the form of a 100% stock dividend
distributed February 6, 2019, to stockholders
of record as of December 24, 2018. All share,
per share and stock price information presented
in this Annual Review has been adjusted for
the two-for-one stock split.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
All statements, other than statements of current or historical fact, contained in this 2018 Annual Review are forward-looking statements. Without limiting the foregoing, forward-looking statements often
use words such as “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). Centene (the Company, our, or we) intends 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. In particular, these statements include, without limitation,
statements about our future operating or financial performance, market opportunity, growth strategy, competition, expected activities in completed and future acquisitions, including statements about the
impact of our recent acquisition (Fidelis Care Acquisition) of substantially all the assets of New York State Catholic Health Plan, Inc., d/b/a Fidelis Care New York (Fidelis Care) . These statements may be
found in the Annual Report on Form 10-K filed with the SEC on February 19, 2019, 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.” These forward-looking statements reflect our current views with respect to future events and are based on numerous assumptions and assessments
made by us in light of our experience and perception of historical trends, current conditions, business strategies, operating environments, future developments and other factors we believe appropriate.
By their nature, forward-looking statements involve known and unknown risks and uncertainties and are subject to change because they relate to events and depend on circumstances that will occur in the
future, 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 2018 Annual Review are based on information available to us on the date hereof. Except as may be otherwise required
by law, we undertake no obligation to update or revise the forward-looking statements included in this 2018 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, variables and events 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 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 , collectively referred to as the Affordable Care Act (ACA) and any
regulations enacted thereunder that may result from changing political conditions or judicial actions, including the ultimate outcome of the District Court decision in “Texas v. United States of America”
regarding the constitutionality of the ACA; (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
contracts with federal or state governments (including but not limited to Medicaid, Medicare, TRICARE or other customers); (xvi) the difficulty of predicting the timing or outcome of pending or future
litigation or government investigations; (xvii) challenges to our 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 Fidelis Care Acquisition, will not be realized, or will not be realized within the expected time period; (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 acquisitions, including the Fidelis Care Acquisition; (xxi) disruption caused by significant completed and pending acquisitions, including, among others, the Fidelis Care 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 Fidelis Care Acquisition; (xxiii) changes in expected closing dates, estimated purchase price and accretion for acquisitions; (xxxiv) the risk that acquired
businesses, including Fidelis Care, will not be integrated successfully; (xxxv) the risk that, following the Fidelis Care Acquisition, we may not be able to effectively manage our expanded operations; (xxxvi)
restrictions and limitations in connection with our indebtedness; (xxxvii) our ability to maintain 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; (xxxix) availability of debt and equity financing, on terms that are favorable to us; (xl) inflation; (xli) foreign currency fluctuations;
and (xlii) risks and uncertainties discussed in the reports that Centene has filed with the Securities and Exchange Commission. This list of important factors is not intended to be exhaustive. We discuss
certain of these matters more fully, as well as certain other 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 report 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, 2019 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 and selling, general
and administrative costs.
7700 Forsyth Boulevard
St. Louis, MO 63105 U.S.A.
1-314-725-4477
www.centene.com