CNC - Earnings call transcript Q4 2017

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Operator

Good morning and welcome to the Centene 2017 Fourth Quarter and Year End Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, today's event is being recorded. I would now like to turn the conference over to Ed Kroll, Senior Vice President of Finance and Investor Relations. ahead. go Please

Edmund E. Kroll

Executive at and dialing morning's will which us Rocco, year everyone. can you Financial and after Thank results website Vice Schwaneke, in Thank replay and A centene.com. available President and call, our good XXXX in joining Chief also Chief Chairman Neidorff, shortly on call. our of Canada, by playback full and this other dialing fourth will for call's the centene.com Jeff conference the U.S. Executive Centene, you, Officer also Michael countries morning, Officer, host completion at quarter earnings XXX-XXX-XXXX XXX-XXX-XXXX. be accessed or number be or through The by a that for constitute both of may provision Reform Centene from and expectations, by XXXX. XX-K statements about and forward-looking those under Litigation those filed Centene results Form of to will the forward-looking and prospects plans indicated future the those cause and these most XX-Q events public make dial-ins Form its Safe remarks Act result statements SEC subsequent in purposes of Actual Any may of Centene's anticipates change. for discussed filings. Securities other factors, developments Harbor materially recently including important Private is differ XXXXXXXX. various that estimates as and

so. obligation Centene's non-GAAP quarter directly do which press full section. statements under found point certain in some measures can our the is reconciliation website to these call fourth be the centene.com release, the refer at most company these specifically Investors the forward-looking measures XXXX GAAP at with While of we disclaim available elect A to on any comparable update year may in will measures. future, to The also

be April turn like centene.com. Michael Investors XXXX over events the Finally, found Tuesday, to a our XXXX. earnings that, also Michael? all for CEO, I'd investor to Chairman can With our the section on XX, of in Dates remaining and call will be that next reminder in call Neidorff.

Michael F. Neidorff

morning, quarter you everyone Good year Thank fourth and you, XXXX joining Centene's for full thank Ed. earnings call. and

will updates During this full provide markets the course our and on and year call, fourth and Centene's financial XXXX discuss results products. morning's quarter of we

our provide healthcare and regulatory will commentary become practice, has As we the legislative around landscape.

reform We effort debate year also healthcare years. Washington I'd the legislative program the up-to-date bring than SCHIP to was D.C. with this and you and more A unsuccessful. at was ultimately will an legislative most emerged, landscape. center replace and Since for funded more year on reauthorized being and the legislation regulatory then, receded quarters of and the like front in on the three repeal It Fidelis notably, healthcare ago and the time, tactical comprehensive efforts has begin update six have acquisition. consumed

several delayed, addition, have health been XXXX. ACA In including taxes the for insurance fee

of penalties minimal be part tax year, expect reform passed beginning the package eliminated that the impacts in which this to As will mandate associated we XXXX, have us. with on individual earlier the

the in look We to Congress to to do significant ways implement strong at efforts that there promote states aligns approach. XXXX. support seeing for local with replace unlikely any action a give well anticipate repeal to significant make these Centene's bipartisan as stabilize now believe continues CMS flexibility. regulatory program. reform healthcare are will additional and We be marketplace developments continues reinsurance and heightened This We

Audit partner believe the to announce Meeting. XXXX waivers. strong note, previously funding on that to Blume pleased Blume Chairman Shareholders April XXXX of Centene's stand for of appointed She of to On half the Annual finance Technology at as separate our via position We will the us Committee. having XXXX to brings we're Vice background She held XXXX. in bill reinstatement Ms. Directors. re-election omnibus serve addition, Board Committee these and state technology discussed was and be a Executive was she She that XX well Board In member a of a of served passes in in Deloitte, L. continues good was at the years. chance and Jessica an two the Deloitte of member and maximum first being have improvements greater Deloitte's Committee for Directors the a as elected for as of terms. as included where flexibility was of a CSR both U.S.

served In and Risk Finance, Compensation Strategic Evaluation and addition, the a Committees. Committee of well Investment Chair Executive as the she Governance, member of as the as

of quarter Now, quarter of the fourth member results by $X.XX $XX.X of strong guidance morning. for this almost financials. grew to growth $XX.X Centene, reported XXX,XXX we XX% mid-point. billion accomplishment surpassing EPS and year These by year and XXXX million adjusted off XX mark. XXXX the by guidance $X.XX. revenue full the XXXX, XX% robust and we at We XXXX and compare fourth members, to EPS revenues to adjusted favorably on to In initial billion the was our added another capped results

flow remains times $X.X from at operations income. cash strong net Our X.X billion or

in we to approach. business volatility Washington D.C. our year, as headline stuck the We surrounding the and usual by repeal distracted replace the were During not noise

XX%. ahead increased five-year Our our price XX%, as of shareholders benefited of CAGR Centene's stock well

Centene Medicaid rate and states Overall, Advantage successfully enhance new Arkansas, Medicare in XXXX and business Nebraska in the Nevada XX%. geography. by in one an expansion is and brand. of in Medicaid industry-leading contracts four Allwell launched new continued under of started to in Pennsylvania, in We RFPs effort our an our Illinois, win We and Washington. product diversification plan Medicaid State

an the continue summary, We G&A successful and growth our on operating strong with our remains is XXXX as to to important leveraging XXXX. In in year the another focus size momentum to be head our it effort and ensure was organization structure most and we're evaluate we of also company. efficient incremental into

great XXXX. have a know is interest discuss I'll in tax effect will federal what Next, and there federal in We reform tax it reform.

companies reform. the of tax deploy Specifically, benefit potential how with will to respect

purpose. For can continuing members we better time. Centene, our With to growth person we health to of including reform with use customers employee our invest digital other the that invest transforming by training, processes, community we the at one development health initiatives, tax serve capabilities in intend in We and of well programs serve company's technology leadership believe that and including and purpose, benefit to analytics. and said, started the our a as and as

will reform, help as our of further will he'll this better of tax well lower cost. financial guidance. outcomes into mission of impact All regarding financial update the go at Jeff drive details XXXX

Fidelis In October acquisition were we of under I waiting XXXX, Hart-Scott-Rodino. period termination of granted early the Now, Care. will the discuss

We approval. process for are a New actually approval currently process. York moving regulatory dual-track is through the This

a necessary this up health the of Catholic appears Church is our with approvals longer with acquisition a plan typical to which process of expected. in the progressing the on it than State the the industry, York the at New in portion are reasonable mission pace. working foundation First, proceeds. taking case, secondly, Unfortunately, for to officials this set And intends be

continue going is initial XXXX date. The to well. and extremely closing an work We April underway integration planning X, towards

is including trend around up the higher more Next flu saw our second at in flu January, Conference indicated data Subsequently, to The flu that flu. I early peak on medical latest holidays. we the presentation costs, peak season again my year. intense Investor In we a the than for last indicate saw membership.

not We clearly higher and expected in potential the over happen first is five seen headwind It have this than years. for a quarter.

ability of remind trends episodic our we to manage indicative and not as view However, costs. flu you, overall medical we

trends cost Importantly, stable we with in see expectations low as continue well to medical the anticipate consistent as our overall single-digits.

market to product and first, on Medicaid we'll discuss Moving activity. updates, recent

New month New statewide Western three Community one contract vendors awarded Last the Care Program. announced Mexico Sky was of that Care Mexico. it for Centennial subsidiary was X.X our a

and Managed New long-term program coverage, health nearly current Care beneficiaries. XXX,XXX services Medicaid provides behavioral to Mexico's including integrated support

particularly have pleased of awarded been an this, incumbent. to as a an are and was re-procurement it contract was not Centene existing We

ultimately we will they're successful. have While unfounded and believe appeals been suits, and there not be

serving operates facilities In New our subsidiary, to X, through provider correctional the expect this Centurion in Illinois. January Centene IlliniCare, throughout sole as Mexico our January, subsidiary currently of in Illinois services health on contract XX the state. We XXXX. statewide commence needy XX began all expanded operated revenue. XXX and counties state. beneficiaries increase Medicaid Under counties and operating operate a and in in the children. under materially Centene membership previously the contract our contract, in new we will

we will implemented start January, enrolled In serving Term Southwest We by which on Our date fully Pennsylvania. for Foster new zone. enrolled Long should to began source program and to July be pleased the of program. of Care be new commence by were January XXXX. exception April members Pennsylvania's in be beneficiaries The the X all Foster X. zones' remaining is in vary Care the with provider the expected Care, sole

managed risk individuals health membership In individuals a In to services received health license venture our will and program behavioral needs become Apple organization. of and with Arkansas January state's managing XXXX, contract risk-based enrolled our of population October LifeShare in with in began expectations. Arkansas. the integrates our and take comprised intellectual Health region population January, risk-based began come organizations was has provider high far, Mercy special with of into a existing north-central providing in this So non-risk our needs care the full of above Care In Health and manage disabilities. to Fully Washington. Integrated the and This state. a of Centene February, a re-procurement Medicaid in beneficiaries the joint program. Approved provider now beginning XXXX. behavioral we developmental

we MMP Medicare. over end, served to At on and XXX,XXX Now year Medicare beneficiaries.

pleased metrics These We D-SNP insights Advantage business will began operating XXXX under of the are the Medicare XXXX. close premium deal, January, Centene's we X Star applied in members launch Upon we XXXX. D-SNP parent Medicare of plans for plans bonus In the plans. with We in Medicare for serving MA Allwell towards our with in and York. XXXX in rating New initial book we will a membership are under the line expectations. the eight all in Centene operating are states. Medicaid and and The of new growth also gained Advantage Fidelis performance in Advantage eligible XXXX brand be

Medicare over of XX% our Over to to our continue drive product growth annual expect the Advantage long-term, rate. we

This quarter XX,XXX to The represents million of business line year Health the sequential members. X fourth served a with well due decline in on Insurance attrition. This of Marketplace approximately was in Moving under we to full our beneficiaries exchange at performed normal and end, year just expectations. Marketplace, XXXX.

assistance exchange low-income We these paid million remain X.X focus Missouri. and exchange our on transaction, rate began Investor in new of composite an care This individuals. XXXX to will offering the of December In demographics of the high-quality states, Nevada providing with Kansas, tier The financial had shift states in approximately bronze from includes comments modest outlook, products members. anticipated. Fidelis plans, increase medal affordable remains up Shifting exchange over including rate three our and year. our XX XXXX exchange made XXXX: at age, products we last to health Day. we Our January, gender, X%. to members, be key XX Care in offering closing adjustment which a was for Medicaid states Upon gears consistent silver was from

another of Centene. preliminary are was We XXXX. line to appear expectations. Notice adjustment of increase with issued and our Medicaid In Advance rates Separately, a the approximately for in CMS XXXX Advantage last successful expecting week, rate X% also be in conclusion, composite XXXX year Medicare an

Our our both been and line with stage percentages. into by strong continues growth Centene quarter has XXXX. result be and company fourth sets momentum expectations double-digit growing a to top bottom maintain to positive of the

efficiencies as process We and we maintain expand scale. focus expect continue on our increasing through margins our to to automation

Centene's populations Fidelis' vulnerable acquisition the Our high-quality, low-cost is in York. to pending health value well for create Fidelis care shareholders as New significant stakeholders, as expected services to provide and most

We and ability to large our have integrate proven effectively acquire acquisitions.

ability are Fidelis. successfully We in confident our integrate to

our We government-sponsored care. future extend health ability to position leadership are optimistic and Centene's in about continue to

supplemental you would change I reporting Jeff Before diversified a details fourth in the to on to and over out provide I continued by for be give no heads over a category product turn adding on you the product full our our in thank quarter breaking Due up I Jeff. will We regarding emphasis we by of platform Centene, and XXXX. a and will in to we be year beginning disclosure XXXX call further quarter like to fourth Also, format. results, categories, now the membership interest longer will our call state. revenue increasingly to turn

Jeffrey A. Schwaneke

and quarter strong and Thank morning, you, XXXX Michael, this morning. results. fourth good full we Earlier year reported

were revenues growth Insurance XXXX. billion, earnings Net's and last year total XXXX results, the an guidance of product in XXXX, business Marketplace X% $XX.X full per year in XXXX the than by Adjusted the an of full XXXX over increase the XX% increase over driven and initial Health For year, of Health expansions XX% were and share market diluted for our midpoint. and $X.XX, higher full year

results, Before quarter a tax I discuss spend I fourth few minutes discuss to reform. would the like and

our the we the limited expectations tax and commercial As state adjusted before tax initiatives also which technology not to enhancing members to markets. million customers. minimum and have This and full to flow growth the tax lower $XX in that I'd expected benefit million Michael approximately $XXX support on in for previously to of highlight reflect our earnings XXXX. mentioned, MLRs investments capabilities reform, is net XXXX by and year, after year was benefit analytics of like the during is and our our cash serve year, by in additional rate to investments based our guidance employee

results. the $X.XX We reported in billion, total earnings guidance, minutes, will the expansion fourth and diluted discuss discuss this decrease Medicare $X.XX the effective reform the flu. per let fourth diluted full increase The XXXX result significant but year of quarter was with of prior and strong Marketplace the compared quarter compared share earnings spent investment growth year fourth We the $XX.X for me in and associated to results diluted in quarter of share business with in the last diluted $X.XX of quarter X% few a tax an share initiatives fourth adjusted businesses $X.XX impact of is quarter of the per to on the share first, We XXXX per fourth revised quarter per in the costs XXXX. and year. revenues adjusted over including the XXXX

of $X.XX with in acquired For or or the the items: by rate $XX of of tax following a with CSR a lower fourth company's charitable diluted XXXX. share, was in quarter deferred reform, million expense liabilities to quarter, lack per that net adjusted December excludes associated expense $X.XX a share $X.XX the per of earnings passed $X.XX associated million share assets of per share. re-measurement additional diluted and the in foundation fourth tax million from per tax of the as benefit the reform $X.XX diluted with to associated tax intangible tax XXXX, connection per with contribution per $XX XX% share $XXX the result of approximately or government our diluted the funding of share, diluted amortization expenses federal acquisition-related diluted

and benefiting Missouri growth the of startup Nebraska more and the our Insurance health $XXX details a grew XXXX in programs new Nevada the approximately million moratorium insurer me offset some Let the was in of $XXX MLR quarter plans by year. in last actions fourth the business fee and amendment associated margin health taken membership in year lower revenue of the of result last of commercial XXXX million expansion for XXXX, many our provide states contract in primarily of Health the result with of and from a Total Marketplace quarter. as partially year-over-year in This the the as in expansions the business, in including in California revenues of California, XXXX. improvement one-year XXXX growth

primarily year MLR HBR, HBR year in year-over-year to XX.X% amendment compared XXX the to ratio the decreased increase the points. on benefit last year's fourth fourth quarter. our XX.X% by year's the The and recorded This in Moving to third minimum related basis California. in in benefits XX% this driven health approximately last quarter, by last was is quarter

This the primarily quarter California, HBR of fourth decrease point markets, our business is XX was the initially CSR effective expanded performance lack in affected Sequentially, additional attributable higher quarter negatively to performance premium XXXX, the costs, associated expenses basis newer flu the higher a July the from with HBR. the by XXXX's Additionally, Medicaid favorable and of at which in funding, operate third reduction Expansion as rate favorable to Marketplace third partially for XX CSR XX compared Medicaid, our including offset and costs premium full of basis business. and the fourth well quarter. year in for performance increased by points The flu as adjustments rate the in accounted was mentioned quarter the point fourth performed a business previously HBR increase expense, the basis the which well in XXXX. Marketplace quarter in

of end year. during the receivable positions government $X.XX the per share, where recognizing mentioned, the previously As of on of additional we effect expense the we fourth quarter, represents recorded This funding not the CSRs federal have at the primarily CSRs. states, diluted

For received that full for represent of have we CSRs. XXXX our payments the year majority our states, CSR

As X.X our million December paid Investor January is XXXX, mentioned, expectations than at members, previously we Day. for Michael our discussed we which have higher over

guidance have reflect revised to membership We updated our our expectations.

increase recognized million expense in due amendment XXXX quarter which in associated and Moving in Income MLR The the compared in in and both the is revenue fourth periods XX.X% was due costs year-over-year an on, to administrative the the increased our the general the year the for X.X% ratio of recognized sequential increase with The Reform. the enrollment the income prior adjusted in of this to quarter third last the to the to to Marketplace benefit XXXX. cost year expansion adjusted open selling, SG&A and due is X.X% of expense California, tax business quarter fourth related businesses. minimum We of fourth Tax quarter XXXX year reduced Medicare and ratio. increased ratio $XX

Excluding the been quarter charitable rate our tax and tax the fourth contribution, reform XX.X%. have effective would

million totaled including subsidiaries. investments and by $XX.X the unregulated $XXX at onto sheet, billion cash Now held balance quarter-end,

level. XXX% year borrowings to end excess revolving million capital including billion, for continues percentage credit $XXX Debt control was the on our of authorized be at filers $X.X in of facility. Our risk-based NAIC of

note at the ratio end end debt-to-capital XX.X% our third of excluding non-recourse last XX.X% Our quarter was the to XX.X%, year compared mortgage and at XXXX.

of the We continued are company the pleased the points by deleveraging year. during XXX with basis

in payable X.X flow million $X.X billion earnings. totaled quarter year claims full compared last medical and or the year $XXX and days end claims Our by the in for fourth XX was at XXXX liabilities net Cash represents XX operations provided times $X.X billion to days quarter.

provide would I the like to Next, update Fidelis an on transaction.

transaction fund debt. X of billion to we an Michael to expect billion transaction and continue and mentioned, of $X.X with As equity $X.X April toward work closing approximately the

have our we issuance timing ultimate change release be As subject to these X. in February our and indicated assumptions today, we to and updated the equity financing will earnings market debt of timing are equity March to have X guidance Again, from the guidance the conditions.

guidance, updated annual XXXX clarity and press to turning have our Lastly, several the this included our release XXXX for we issued to table a have provide items morning in more changes. on guidance

guidance the associated per increase insurer Medicaid GAAP The approximately decreased million also in our business. was associated revenue million expectations health tax following: $XXX tax has gross-up lower earnings. of adjustment the increase The earnings additional which $X.XX. share on an the increased revenue the by This partially on net the reform, fee no over in by offset rate our adjusted $XXX on Health effect the by business. the revenue our and updated membership We the revenue Marketplace Insurance midpoint have approximately our diluted for with in membership at higher with effective

we $X.XX in or This previously or share $XX and million share expect and expense the $X.XX investment reform. technology $X.XX diluted impact with tax discussed. per on of diluted after associated as diluted $XXX tax employees' per earnings share before adjusted previously lower respectively million additional mentioned, is Additionally, for approximately per GAAP systems and we tax

to in share. diluted share equity previously, between is our of $X.XX summary, per per guidance as of $X.XX. the diluted the full billion increased count per transaction discussed change share have share to and and $X.XX Fidelis year adjusted per updated follows: earnings revenue as earnings and Lastly, adjusted per issuance revised by for timing GAAP financing. total share our diluted This to $XX.X revenues XXXX our earnings both we $XX.X the GAAP share reflect billion, and $X.XX, $X.XX for earnings In

comment quick on earnings. spread a quarterly Lastly, of the our

result membership, than a Marketplace the period As and of last membership increased shorter earlier peak the product for year. is open enrollment

XXXX. first the year As and similar half a earnings of the second our the result, expect we distribution to of half between be to

we versus more year the expect company's we However, That this and XXXX. second. are And, for year summary, with In earnings pleased my concludes open you in operator, line the fourth the full momentum now into may and carry results quarter first remarks. we slightly questions. quarter the the

Operator

you. Thank

question-and-answer begin now first Steve will of Tanal comes session. Today's the go Sachs. from Please We question Goldman ahead.

Stephen Tanal

taking Thanks the morning, for Good question. guys.

Michael F. Neidorff

Good morning.

Stephen Tanal

there just potential what's New you thoughts I of would versus there reform sort that sort of the comment for mind guidance just one that's a I guess tax was on is top of the a us, on and accretion concern, if the wondering York in for tax proposed. the numbers offsets. what net bit is windfall was Any of not? assumed State

Michael F. Neidorff

want to I up? pick do you think Jeff, – start, then Yeah, I'll

Jeffrey A. Schwaneke

that mean, now specific York I there something Those those think New this I and point was think to at passed, California. in in law aren't right time. Yeah, haven't I is

rate lower we in other today. the projected our that's in So not guidance that anything federal have than tax

have We'll I in early. Medicaid business. the Investor see opportunity on wait stated longer-term, is and impact what But the Day, business. and it's Medicaid again, the our in So we see to commercial as both

On the commercial side, it really dynamics. the depends competitive on

Michael F. Neidorff

on to find And (XX:XX) of there was set so the those products, a And some that amount charge of share types that they and way don't legislation fund Medicaid federal can laws are state of to Medicaid. it through the a their tax on taxing. up specifically

play to short-term we effect us. having on and way any longer-term long a it's not or has that see out something this think I So

Stephen Tanal

about Or this that out growth Marketplace, upside that at stage? strong Michael, Where from? helpful. maybe is from Curious perspective, really your coming me, to there, very to really backing numbers seeing know much for that? That's how guys enrollment. is Understood. lastly where growth are competitors And on of just you

Michael F. Neidorff

last And and among the think retained from manage we XX% systems population right to Missouri, states; third develop about – year. networks, we one. some entered have we had the reputation. I of is we new it that Nevada have think and Well, this I right the the capability mentioned We've we've and

And If and in are most state, some it, people so pick some how account is out and our states. the the I backing own it's franchise. we're of obviously that we all-better of coming those But marketplace doing believe, we new reputation with we're of membership. from will things on up that and have in the (XX:XX)

Stephen Tanal

it. you. Got Thank

Operator

go next Josh comes from our Please And Raskin of question Research. Nephron ahead.

Joshua Raskin

Hi. Thanks.

guys. morning, good So

Michael F. Neidorff

Good morning.

Joshua Raskin

Morning, Michael.

you the So a understand little was but I sort took the that what? like better start, jumped Or on accruals you're that when quarter are is account coming you the and just bit because why in for quarter. it numbers was is first to a that books? of flu, I'm thing just what it surprised guess expecting it closed second better the I'm fourth strong. than first expecting out, I based to Marketplace better quarter bigger than curious sounds just knew numbers the XQ the simply off the you flu Street the

Jeffrey A. Schwaneke

say, mix than business Yeah, things, a to first, have more years several ago. we have used Josh. commercial couple we I'd

other specifically the in of because Marketplace it flipped commercial into entrance the So first Medicaid used earnings amount and but of we've be markets. had the least kind in the of business, quarter to the

the earlier earnings the year. coming it quarter. did the the mentioned, quarter membership happening than And previous higher with fourth makes is Marketplace we enrollment do on so earlier see this money than the it we open of as year, in first does profile in more And we've

date right? the I membership any is economic other in money So shift, right? it's throughout months I phenomenon make actually year quarter of the that's a first just to than trying product, higher and couple talk a the Marketplace happens we're because the driving different that's more the an that the last So peak think bit earlier the really year little you the about, dynamics than earlier, membership really think deductibles, of and quarter where in and because

Michael F. Neidorff

the we've the anticipated it. to relative about I of think I mean, And I peak. flu, second talked some

flu. tend size medical that the it's our in scale we population I've be element we the get there offsets. part think recognize it's flu it, Tamiflu the of We've higher physician We it others. and of a headwind states we it's some see total one In we it carefully. programs testing is and that offsets. of serve, some monitor prevention for do seen said to So and had function things. and higher costs, flu. And is benefit the and there have I little Josh, some and a than We And is cost on where

it's the is it, costs seeing ambulatory-type So which that on manageable. we're more much more

Joshua Raskin

That you. got you, Got makes sense.

Jeffrey A. Schwaneke

so... I not a other just, month quarter one mean, guidance, does And I thing. make One Yeah. annual a or year, right? mean, provide we

Joshua Raskin

big do of just reform caught getting it's this I not up Texas today, I rebate we contracts looking your of you mechanics are say to do California fair. states surprising, not specifically, was about New – and windfall any know how think these York more not just that think benefit states? they and if come the on long-term. it, to the capturing states, Do perspectives there. for hear minimum know of benefit. the back also a you then That's to none the you mechanisms? think was That's on the I'd then not guys surprised your back exist be you sustainability always of around talked a they're which but try? you example, seeing taxes any but get I for tax commercial business, MLRs flows and question the any California And Yes. you in to Are fair. the curious And paying certain with state are states,

Michael F. Neidorff

commented get the like we do really actuarially are We we there I on comment, sound might Josh, that also constraints. Texas. encourage We'll to think earlier legislative states I program. some rates. in do what I

it have highest million that there, checks to a and $XXX – quality the the which say, balanced scores cutting board. the just do that, see We across with is versus them you're, when very and giving for efficient they we're very way

and decisions you'll they And budgets to that going go talk so any through but making think I that's states basis I'm it as about things, the not hear on happen.

Joshua Raskin

Thanks. right. All Okay.

Operator

And Rigg Bank. comes Chris of Please question today Deutsche next from our go ahead.

Chris Rigg

Good Hi. morning.

Just ask the wanted to about -

Michael F. Neidorff

Good morning.

Chris Rigg

but afar been just mean, may I'm morning, looks some that SG&A there not maybe guys, in the quarter. ratio was I there Good have wrong. like discretionary spending the planned, in it from fourth maybe

Just in the get how looked sense at want quarter. investment you you. a to fourth for spending Thank

Jeffrey A. Schwaneke

No.

at above SG&A go to expected ratio. adjusted be our SG&A looking if excluding XX.X%. back said I'm Guidance ratio contribution. we we what we the to at charitable I'm, the the you I think obviously, Day, said

of So a if kind recall, the costs their enrollment we really, of and spending the it so we on and for the added the to and preview you open the gap. And Marketplace on quarter. those specifically And we the somewhere period. around incur dollars the second government expected restricted and Marketplace stepped Medicare that filled kind was in third

took So we that have, invest included, XXXX, in was it's effectively guidance the been obviously, and those really When to results for And, wasn't very our new successful. we with spending look steps original you at for that products. that us.

Michael F. Neidorff

that on investment return very in worthwhile. Yeah. G&A The was

Chris Rigg

there the that back and a in is floors the Or of dynamic dynamic generally. coming overall the because I a I sure, where, in And to the profitability not and Thanks. you to the statutory but Understood. want then for keep or that the of is states includes threshold? all think the make the context helps just the to there, certain there case? Medicaid both apologize business MLR that I'm at about component commercial, entity Marketplace trying under

Jeffrey A. Schwaneke

than leverage that's everybody some And financial to more I would not most think the form the as basis is reasons cuff why the dried you're general, of in one, so could to I because, be it's Well, tax states would would in little products a the you right statutory each multiple that complicated off may think statements. and think. it's cut seem mean, of right, be there one have as

Chris Rigg

Thanks lot. Great. a

Operator

next go question Sarah Please Jaffray. of from our comes And ahead. Piper James

Sarah E. James

us update so just Could of talking few a ago. did versus unusual so possibly anything on had And it was invitation It the negotiate just anything about regions? competitors was a you. Thank on problems existing looks in Centene some was like your way how on that your states the put set up. I in Florida like your one RFP in was not past, to the days protest, out unusual this this one? was whether Ohio or there love know thoughts just would there you

Michael F. Neidorff

unhappy you Yeah, mechanism the reasons Chris those protests, want on (XX:XX), we'll goes with do that's to up out. will And their do, they've expectations, there's various we've I'm asked not in we're to for what watching as well a to anything been that our and and that comment successful I world we've to I'm play things do asked to to to let filing not more – it. And sound, are forward, going on and but their you more on who add? we'll is and tell there. that business And right. what continue it it's delivered Florida do. not confident not so think is individuals states us the and comment I

Unknown Speaker

just way there's add, so process would come. out with far Michael, is I to reiterate more the and that and the real turning pleased No, were we that

Sarah E. James

walking pieces And year. MLR this guidance. through few year think I from we the next bridge a follow-up of the Great. on through a appreciate just as on you to moving guidance

that Just step-down in wanted books to there improve. a to step-up and any to or are costs if then clarify if in expected XXXX; was XXXX anticipated flu there's

for is I so or has ABD relatively example, ramping? new, matured is Pennsylvania it yet So know that still that

Jeffrey A. Schwaneke

the respect we With of one year That's flu, medical of right month talking out little costs. entire I We're Flu month. component only now. kind one that. over Michael an is of a all have on, about covered think, information Yes. to really a

programs, we six down different they come what leave absolutely have for question, improvements And obviously new the in, there's and mean, expect nothing months medical so we're I I And the our in first nothing Missouri, second and mentioned Usually, results yeah, about run those management historically so that so there. and there. would we care – the to then than to new and the expect said plans. higher fourth provisions with continuity nine there's I'll quarter in Pennsylvania. I initiatives, HBR commentary new we if think And say, the HBRs your Nebraska, that just I higher

Michael F. Neidorff

even calculated, interest add, in that number just be a may might I higher the just Sarah, of conservatism. book we in what of abundance

Sarah E. James

you. Thank

Operator

And question Merrill from comes ahead. our next Lynch. Please Kevin Bank Fischbeck of America of go

Kevin Mark Fischbeck

the is the XXXX a going individual back wanted and Thanks. go have to mandate comment to repeal to that meaningful business. the thought not Great. impact on made a you about I

when out people one case, to that Woodwork be there. going Expansion mandate be how impacted the from surprised the second, was to and that and wanted Just potential kind the the color forward. guess that insurance why went get of you some exchanges. a the people obviously, around I Effect then Woodwork came wouldn't dynamic about And the guys Medicaid get that first Thoughts all who on headwind on would of things why

Michael F. Neidorff

Well, sure, Kevin.

very our think I our a that's costs. sticking cliché socioeconomic population, goes, reimbursement knitting, to population. the full we're consistent on focused population our full that we of those for as focused given And with coverage really on level or gets have

cost therefore, it's not to going having them them so of it's what or join because And coverage. get question to the they a

how a but say marketplace on impact individual the why won't little that's will And overall of the effect said I no because of reason in coverage on as see we in change XXXX. And so any, receive. it has we it, to we mandate, our have going will our very said, have level population won't think growth it it and executing we're the minimal us, I

Kevin Mark Fischbeck

that that the about guess Woodwork how helping you If I on effect? drove kind mandate Effect, not think what that? then do the of And

Michael F. Neidorff

and offer the just premium. impact and enroll through legislation, mean, able to think subsidies our to the with subsidies did overall we're they I the able CSRs, Well, of be I in the when so away are the continued what plans coverage. to socioeconomic with population the the premium again, once

been to going it's Now that going well think publicized; why reconsider it'll I money way. cost they're CSRs forward. that's more the And government

people and them. we as the protect the the population serve had came So subsidies coverage, wanted to premium out still

Kevin Mark Fischbeck

But report hasn't I strong kind it Fidelis about the timing raised core you've you time the to in how wondering year and guidance what is you been December gave you providing guidance guys that? a guess early guidance. the timing. Obviously, momentum? also don't you guidance things a so in think on on reaffirming used pretty then basically the so is actually last different. of remember And basis and And reform that tax so this just QX confidence kind actually like guidance unique quickly, because you Okay. items, kind results moving just done it that past I'm in the the do when the I on of of item this unique to

Jeffrey A. Schwaneke

something members. if now that I really Yeah, just the around I mean, on we're in go number I looking X.X to we so And business. paid Marketplace results X.X at guided it's you of actual December, greater back, mean, of a million. membership expectations think, think we back million have and far I than kind

we're and us. that and it's it's successful obviously been perspective, certainty – we open for from passed enrollment very time the on So number more of enrollees, a have just has

the earnings deliver. And revenue to additional so we needed we that's change to and for guidance going felt that

Michael F. Neidorff

more happened you conversion had super typically lot to a and we in going I'm in to a to would had this premium. not XXs get Well see estimated specific, a and a color percentage I add we January, actually X,XXX,XXX but people, sign for At up is convert much pay a more little I'll people conference premium. whole year, it. most people. higher in here the but pay particular what's the

gives going wanted you and it's that confidence when insurance see the so it stick. to they some And you happening, it that says

Kevin Mark Fischbeck

Thank you. All Great. right.

Operator

comes our next question ahead. Markets. of Capital BMO Matt from Please And today Borsch go

Matthew Borsch

just I could continue membership. thread on on along ACA the that Maybe exchange

you subsidized at So fix membership the I you kind wondering guess, what are relative to you're you of looking mostly that I'm composition typical members. say is what about profile do measuring of million. low and your on of income, X.X how have

Michael F. Neidorff

a profile in shift I seen, would have and silver than was consistent Investor we our that, few membership aspect the the is age, the as that say we where received at historically the everything Yes, we've historically There I'll said the to it percent that. of what but with we bronze, gender, that every it attracted. is of from restate basically other Day have

Matthew Borsch

coverage, carrier potential to pressure broader it your having maybe only a in regulatory extent of off what fend fit And make as you are providing find yourself to markets you're where the spectrum you to network insureds? to change

Michael F. Neidorff

that are are. the we would we We're I basically say No, what coverage. Medicaid

that Medicare than and those We we're and now traditional also try to looks that. have not some to going is be more providers,

products and Now pressure traditional insureds-type markets, and membership. only would I want pressure remind move an to been very the, any some that our exchange there we no there's resist products. through the to product, may people, quick from we're standpoint, states, while from away no, change available exchange to what some be is in are be individual the other But from

Matthew Borsch

you. Thank

Operator

go And Dave Please Jefferies. ahead. of from our question comes today next Windley

David Howard Windley

morning. Good Hi.

Michael F. Neidorff

Morning.

David Howard Windley

with markets level kind your also I'm some you've MA, in to Advantage then if of seen for Medicare your curious you proposed is you on describe the of Shifting if CMS's of satisfaction change that stick and how to expansion could that that'll might not to your if think reaction your available you Thanks. impact mitigate XXXX you. the crosswalking, to enrollment and calculation Stars

Michael F. Neidorff

build and factors. as that growth I We've because careful as of at several the it's the programs And eligible they year to of early growing very did it. about continuing to think methodical and and not there's to the enroll stages we satisfied exchange being been age individuals sticking just the between we're to products, there's we're Medicare the that become (XX:XX) move said end that, levels. it's once into again it's now Medicare. And

not was this of to talk the a we that's remind continue some reach it to all the fully and calculations our defined, Relative before And is about Centene problem. Net that and of occurred. Stars. the CMS that I So to how crosswalk, aspect level double not Health they And was owned jeopardy. there everybody, been this

that CMS listening our And little finding we're a think I has play is it and out. it, through to to arguments. still ways working we're So

David Howard Windley

submit bids clarity Would the think on you what conclude do conversations to on for having you be expect XXXX? timing you those that? before Or would

Michael F. Neidorff

near based clarity that. the some we appropriate in not to very on bids, Oh, look XXXX, will we'll just bid, future. But I think at our have what's

David Howard Windley

All Thank Sure. right. you.

Michael F. Neidorff

is say – a you're Let very can it look benefit that's just having This me and XXXX, for billion $XX offsets there size. want When company, a our of be careful. the and one and are that to I at year. one-year scale issue to you

scope issue, I if multiple But be else. year something at within big look a it, a would it now it's our copability. right well as of it was so then and And

David Howard Windley

it. you. Got Thank

Operator

today And from A. Suisse Please J. comes go (USA) Suisse. Thanks. Rice everybody. Credit Securities our question LLC - A. next ahead. Rice Hello, Credit of J.

Michael F. Neidorff

to and approved LLC Indiana, Good are included morning. out? trying that it. as Securities states we to there far those those have looking add (USA) mentioned sure - they that Suisse a Credit Michael, What states, that, been others that? the that waiver your and are have and roll know work First, waivers going at Rice are J. I And process to and A. you're is make Kentucky on particular aspects you two through requirement so view

Michael F. Neidorff

it I'm public haven't announced. talking we're we program. they careful on they exchange this, Okay. to when do carefully as they can and something work, you will And where the the hear Suisse Well, to of that it. - Credit affordable think over very join and our what's A. that. (USA) are the do LLC policy, sound where advocate do, would working things want at in are, Rice what's it. Securities be and we I important successful they workforce, become and don't move we J. with I'm at looking states But and about look I I we states an be talking tell what about When to that

think, quarter, in you expect anything Just there? a two Is was see Services Services to growth after do there to point And where business the on in grow, business I XXXX? highlight it the saw we year-to-year down. the X% quarters,

Michael F. Neidorff

Jeff, that? to take you want

Jeffrey A. Schwaneke

would Centurion Services the I the things. reconciliations A Services couple the business lumpy line, for the on Fed business, Yeah. top bit say by is business. really driven contract little a

But Investor we is revenue. we did fibrosis thing Okay. growth specialty think our so will that Securities of a we're to small where looking a to I pharmacy XXXX (USA) a company, other dollar I our LLC Thanks Suisse added couple million maybe at year-over-year, J. acquisition bit The mentioned at Day a XXXX. lot. A. Rice cystic little have hundred - add Credit

Operator

Justin Lake of And our Wolfe comes next from Please today question Research. ahead. go

Justin Lake

Thanks. Good morning.

Michael F. Neidorff

Good morning.

Justin Lake

discussion Wanted is to helpful. really on the your the up Fidelis The deal. follow foundation around comments around

was some The kind thing was it tax looking think cetera, other I collect to of kind $XXX was that et from in of M&A, the million like Governor's conversions, budget on not-for-profit conversion.

how it's So don't million, going From deal. that I if know for can aside And looking to it. proceeds know then think indicates the less perspective we in terms said $XXX I about they're calculate a deal. the could little bit $XXX a above million per the you maximum don't this? set talk they break proceeds, Fidelis than number where they of anything have agreement that they're

that, just purchase the bridge cetera. et So to is million, how increase it potentially price would $XXX curious, look I'm if you

So comments things of around really two those be any kind would helpful. Thanks.

Michael F. Neidorff

Sure.

their That middle and other I decide of you money, I'll those of more, negotiations so not to First, I'm balance to which we're they great. sense they get want and that that, the to $X.XX might that myself okay? be from the going a the between them not archbishops to if tell the Now and perspective, are for interject seven in to going want cardinal pay to careful very it. increase business little make pay billion bit

He's is the think in Because and it's working the it is regulatory know do a driving through I other has our has here effectively us. Chris AG's staff, very how point, it. going let best Missouri at that we're with out can former been with issues. to AG side I'm So dealing who the negotiation. Koster joined stay pleased for in and going. and the have that that's of I very effective them Governor And I we're this office and ongoing. of thing

you I'm interest or as get be off billion. some can I church the I to and diplomatic better $X.XX that of getting the tell because every significant nothing So has think to they done portion are trying as this

$XXX think that going the is million. million between mere I I'm any and million the you $XXX quoted difference and to to give the $XXX not credence a

Justin Lake

any Empire not-for-profit between Right, a up delineation there be clear, the always like no, and kind tax set that's is kind just sense. go which conversion there's to the of foundation, with it for-profit to right? a separate... top. when a with the Then to is that made million, was be This makes if of Whatever a foundation $XXX into conversion the on left and status is would expected (XX:XX)

Michael F. Neidorff

went is to company. status. not-for-profit this not-for-profit for-profit is This a assets, They different. buying one, from there is Which Justin, no you're a because very a conversion okay?

Justin Lake

Right.

Michael F. Neidorff

the matter it's the of say they foundation in So owns a speaking. of plan so some manner a negotiations speak, where they have to that

to just very cash, and asset now it's may some the distinctly very say that, so different in it's a that's conversion, small different. as it's Empire opportunity this and of But that and to And portion see converting discussions than we an state get fine. should from an

Justin Lake

that's Michael. helpful. Yeah, Thanks,

Michael F. Neidorff

Thank you.

Operator

Please And Gary JPMorgan. our comes next ahead. question from Taylor go of

Gary P. Taylor

morning. Good Hi.

Michael F. Neidorff

morning. Good

Gary P. Taylor

that about question Could was looks you development less just prior out? ask developments want I to was dropped period than $XXX any was of positive color. and about help or see XXXX? rolling in just if it wanted imply figure million I It the to XQ quarter. XQ that Jeff negative us like just a sequentially Does there

Jeffrey A. Schwaneke

number, right? figure XX-month rolling believe, a is I The

Gary P. Taylor

Right.

Jeffrey A. Schwaneke

look of So costs, the been but at consistency X.X% of is a as the medical we percentage the again, end X.X% medical of into to development. way think I as day, the we've historically cost development and at

general, I unusual in nothing what is there's there So would say.

Gary P. Taylor

rising for about and nothing $XXX sequentially. seven just out. quarters there's why in But jumped it's That's a dropped million been out? off row, It's you'd it call

Jeffrey A. Schwaneke

Yeah. specific. No. Nothing

Gary P. Taylor

XX for say XQ impact other Did Okay. that getting the wrong? thing. number of basis was the buzzed you write my one the made MLR numbers? when did I fourth Or on there you quarter. XXXX in comment about Oh, I flu points was ear

Jeffrey A. Schwaneke

you're If bridging XXXX of the third the from fourth quarter XX to it's quarter, bps.

Gary P. Taylor

Oh, sequentially.

Okay.

Jeffrey A. Schwaneke

is I Sequentially probably quoted. the Yes. number

Gary P. Taylor

you. Thank Yeah.

Operator

remarks. session. This turn the to I'd closing our question-and-answer back concludes Mr. Neidorff conference any to over for like

Michael F. Neidorff

I you company want of your We I I you. place saying we assets participation, the lot in believe all look is for by continue thank forward to optimistic. is investors that and a team to very can a to I'll that well. good with that serve close talking Well, to the think our

So look forward Thank talking to next to you quarter. you.

Operator

thank all you you, sir. for now concluded, and conference And presentation. Today's today's thank we attending has

disconnect lines, wonderful a and You may now day. your have

Edmund E. Kroll	Centene Corp.
Michael F. Neidorff	Centene Corp.
Jeffrey A. Schwaneke	Centene Corp.
Stephen Tanal	Goldman Sachs & Co. LLC
Joshua Raskin	Nephron Research LLC
Chris Rigg	Deutsche Bank Securities, Inc.
Sarah E. James	Piper Jaffray & Co.
Kevin Mark Fischbeck	Bank of America Merrill Lynch
Matthew Borsch	BMO Capital Markets (United States)
David Howard Windley	Jefferies LLC
A. J. Rice	Credit Suisse Securities (NYSE:USA) LLC
Justin Lake	Wolfe Research LLC
Gary P. Taylor	JPMorgan Securities LLC

Centene (CNC) 6 Feb 182017 Q4 Earnings call transcript