UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
| | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended JuneSeptember 30, 2023
OR
| | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
Commission file number: 001-31826
CENTENE CORPORATION
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | |
| Delaware | | 42-1406317 |
| (State or other jurisdiction of | | (I.R.S. Employer |
| incorporation or organization) | | Identification Number) |
| | | |
| 7700 Forsyth Boulevard | | |
| St. Louis, | Missouri | | 63105 |
| (Address of principal executive offices) | | (Zip Code) |
Registrant's telephone number, including area code: (314) 725-4477
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
| Common Stock $0.001 Par Value | CNC | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | |
| Large accelerated filer | ☒ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 26,October 20, 2023, the registrant had 541,479,163534,201 thousand shares of common stock outstanding.
CENTENE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
| | | | | | | | |
| | | PAGE |
| | | |
| Part I |
| Financial Information |
| Item 1. | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Item 2. | | |
| Item 3. | | |
| Item 4. | | |
| Part II |
| Other Information |
| Item 1. | | |
| Item 1A. | | |
| Item 2. | | |
| Item 6. | | |
| | |
| |
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
All statements, other than statements of current or historical fact, contained in this filing 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 Corporation and its subsidiaries (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, value creation strategy, competition, expected activities in connection with completed and future acquisitions and dispositions, our investments, and the adequacy of our available cash resources. These statements may be found in the various sections of this filing, such as Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Part II, Item 1. "Legal Proceedings."
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 filing are based on information available to us on the date of this filing. Except as may be otherwise required by law, we undertake no obligation to update or revise the forward-looking statements included in this filing, whether as a result of new information, future events, or otherwise, after the date of this filing. 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:
•our ability to design and price products that are competitive and/or actuarially sound including but not limited to any impacts resulting from Medicaid redeterminations;
•our ability to maintain or achieve improvement in the Centers for Medicare and Medicaid Services (CMS) Star ratings and maintain or achieve improvement in other quality scores in each case that can impact revenue and future growth;
•our ability to accurately predict and effectively manage health benefits and other operating expenses and reserves, including fluctuations in medical utilization rates;
•competition, including our ability to reprocure our contracts and grow organically;
•the timing and extent of benefits from our value creation strategy, including the possibility that the benefits received may be lower than expected, may not occur, or will not be realized within the expected time periods;
•our ability to manage our information systems effectively;
•disruption, unexpected costs, or similar risks from business transactions, including acquisitions, divestitures, and changes in our relationships with third parties;
•impairments to real estate, investments, goodwill, and intangible assets;
•the risk that the election of new directors, changes in senior management, and anyloss of one or more key personnel or an inability to attract, hire, integrate and retain key personnel may create uncertainty or negatively impact our ability to execute quickly and effectively;skilled personnel;
•membership and revenue declines or unexpected trends;
•rate cuts or other payment reductions or delays by governmental payors and other risks and uncertainties affecting our government businesses;
•changes in healthcare practices, new technologies, and advances in medicine;
•increased healthcare costs;
•inflation;
•changes in economic, political, or market conditions;
•changes in federal or state laws or regulations, including changes with respect to income tax reform or government healthcare programs as well as changes with respect to the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act (collectively referred to as the ACA) and any regulations enacted thereunder;
•tax matters;
•disasters or major epidemics;
•changes in expected contract start dates;
•changes in provider, state, federal, foreign, and other contracts and delays in the timing of regulatory approval of contracts, including due to protests;
•the expiration, suspension, or termination of our contracts with federal or state governments (including, but not limited to, Medicaid, Medicare, TRICARE, or other customers);
•the difficulty of predicting the timing or outcome of legal or regulatory proceedings or matters, including, but not limited to, our ability to resolve claims and/or allegations made by states with regard to past practices, including at Centene Pharmacy Services (formerly Envolve Pharmacy Solutions, Inc. (Envolve)), as our pharmacy benefits manager (PBM) subsidiary, within the reserve estimate we previously recorded and on other acceptable terms, or at all, or whether additional claims, reviews or investigations will be brought by states, the federal government or shareholder litigants, or government investigations;
•challenges to our contract awards;
•cyber-attacks or other privacy or data security incidents;
•the exertion of management's time and our resources, and other expenses incurred and business changes required in connection with complying with the terms of our contracts and the undertakings in connection with any regulatory, governmental, or third party consents or approvals for acquisitions or dispositions;
•any changes in expected closing dates, estimated purchase price, or accretion for acquisitions or dispositions;dispositions, including due to the timing of regulatory approval for the pending sale of Circle Health Group (Circle Health);
•losses in our investment portfolio;
•restrictions and limitations in connection with our indebtedness;
•a downgrade of the credit rating of our indebtedness;
•the availability of debt and equity financing on terms that are favorable to us; and
•foreign currency fluctuations.
This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain other factors that may affect our business operations, financial condition, and results of operations, in our filings with the Securities and Exchange Commission (SEC), including our annual report on Form 10-K, other quarterly reports on Form 10-Q and current reports on Form 8-K. 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.
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 in evaluating the Company's performance and for planning purposes, by allowing management to focus on period-to-period changes in the Company's core business operations, and in determining employee incentive compensation. 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, and acquisition and divestiture related expenses, as well as other items, allows investors to develop a more meaningful understanding of the Company's core performance over time.
The tables below provide reconciliations of non-GAAP items ($ in millions, except per share data):
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| | GAAP net earnings (loss) attributable to Centene | $ | 1,058 | | | $ | (172) | | | $ | 2,188 | | | $ | 677 | | |
| GAAP net earnings attributable to Centene | | GAAP net earnings attributable to Centene | $ | 469 | | | $ | 738 | | | $ | 2,657 | | | $ | 1,415 | |
| Amortization of acquired intangible assets | Amortization of acquired intangible assets | 179 | | | 199 | | | 362 | | | 398 | | Amortization of acquired intangible assets | 180 | | | 211 | | | 542 | | | 609 | |
| Acquisition and divestiture related expenses | Acquisition and divestiture related expenses | 13 | | | 22 | | | 36 | | | 119 | | Acquisition and divestiture related expenses | 16 | | | 30 | | | 52 | | | 149 | |
Other adjustments (1) | Other adjustments (1) | (74) | | | 1,445 | | | (127) | | | 1,447 | | Other adjustments (1) | 472 | | | (222) | | | 345 | | | 1,225 | |
Income tax effects of adjustments (2) | Income tax effects of adjustments (2) | (21) | | | (452) | | | (135) | | | (519) | | Income tax effects of adjustments (2) | (55) | | | (2) | | | (190) | | | (521) | |
| Adjusted net earnings | Adjusted net earnings | $ | 1,155 | | | $ | 1,042 | | | $ | 2,324 | | | $ | 2,122 | | Adjusted net earnings | $ | 1,082 | | | $ | 755 | | | $ | 3,406 | | | $ | 2,877 | |
| | GAAP diluted earnings (loss) per share attributable to Centene | $ | 1.92 | | | $ | (0.29) | | | $ | 3.96 | | | $ | 1.15 | | |
| GAAP diluted earnings per share (EPS) attributable to Centene | | GAAP diluted earnings per share (EPS) attributable to Centene | $ | 0.87 | | | $ | 1.27 | | | $ | 4.85 | | | $ | 2.41 | |
| Amortization of acquired intangible assets | Amortization of acquired intangible assets | 0.33 | | | 0.34 | | | 0.66 | | | 0.68 | | Amortization of acquired intangible assets | 0.33 | | | 0.36 | | | 0.99 | | | 1.04 | |
| Acquisition and divestiture related expenses | Acquisition and divestiture related expenses | 0.02 | | | 0.04 | | | 0.07 | | | 0.20 | | Acquisition and divestiture related expenses | 0.03 | | | 0.05 | | | 0.09 | | | 0.25 | |
Other adjustments (1) | Other adjustments (1) | (0.13) | | | 2.45 | | | (0.23) | | | 2.45 | | Other adjustments (1) | 0.87 | | | (0.38) | | | 0.63 | | | 2.09 | |
Income tax effects of adjustments (2) | Income tax effects of adjustments (2) | (0.04) | | | (0.77) | | | (0.25) | | | (0.88) | | Income tax effects of adjustments (2) | (0.10) | | | — | | | (0.35) | | | (0.89) | |
| Adjusted diluted earnings per share (EPS) | $ | 2.10 | | | $ | 1.77 | | | $ | 4.21 | | | $ | 3.60 | | |
| Adjusted diluted EPS | | Adjusted diluted EPS | $ | 2.00 | | | $ | 1.30 | | | $ | 6.21 | | | $ | 4.90 | |
(1) Other adjustments include the following pre-tax items:
2023:
(a) for the three months ended JuneSeptember 30, 2023: Circle Health impairment of $251 million, or $0.46 per share ($0.50 after-tax), Operose Health impairment of $142 million, or $0.26 per share ($0.24 after-tax), real estate impairments of $47 million, or $0.09 per share ($0.09 after-tax), severance costs due to a restructuring of $22 million, or $0.04 per share ($0.03 after-tax), and a reduction to the previously recorded gain on the sale of Magellan Rx of $10 million, or $0.02 per share ($0.00 after-tax);
(b) for the nine months ended September 30, 2023: Circle Health impairment of $251 million, or $0.46 per share ($0.49 after-tax), Operose Health impairment of $142 million, or $0.26 per share ($0.24 after-tax), real estate impairments of $92 million, or $0.17 per share ($0.15 after-tax), gain on the sale of Apixio of $91 million, or $0.16$0.17 per share ($0.11 after-tax), gain on the previously reported divestiture of Centurion of $15 million, or $0.02 per share ($0.01 after-tax), an additional loss on the divestiture of our Spanish and Central European businesses of $13 million, or $0.02 per share ($0.01 after-tax), and real estate impairments of $19 million, or $0.03 per share ($0.02 after-tax);
(b) for the six months ended June 30, 2023: gain on the sale of Apixio of $91 million, or $0.16 per share ($0.110.12 after-tax), gain on the sale of Magellan Specialty Health of $79 million, or $0.14 per share ($0.12 after-tax), severance costs due to a restructuring of $22 million, or $0.04 per share ($0.03 after-tax), gain on the previously reported divestiture of Centurion of $15 million, or $0.03 per share ($0.02 after-tax), an additional loss on the divestiture of our Spanish and Central European businesses of $13 million, or $0.02 per share ($0.01 after-tax), and real estate impairmentsa reduction to the previously recorded gain on the sale of $45Magellan Rx of $10 million, or $0.08$0.02 per share ($0.060.00 after-tax).
2022:
(a) for the three months ended JuneSeptember 30, 2022: gain on the sale of PANTHERx Rare (PANTHERx) of $490 million, or $0.84 per share ($0.65 after-tax), impairment of assets associated with the divestiture of our Spanish and Central European businesses of $165 million, or $0.28 per share ($0.23 after-tax), real estate impairments of $1,454$127 million, or $2.46$0.22 per share ($1.800.16 after-tax), increase to the previously reported gain on debt extinguishmentthe divestiture of U.S. Medical Management (USMM) due to the finalization of working capital adjustments of $13 million, or $0.02 per share ($0.01 after-tax), gain on debt extinguishment related to the repurchases of senior notes of $10 million, or $0.02 per share ($0.01 after-tax), and an adjustment to the costs related to the PBM legal settlement of $4$1 million, or $0.01$0.00 per share ($0.010.00 after-tax);
(b) for the sixnine months ended JuneSeptember 30, 2022: real estate impairments of $1,454$1,581 million, or $2.46$2.69 per share ($1.801.98 after-tax), gain on the sale of PANTHERx of $490 million, or $0.83 per share ($0.65 after-tax), impairment of assets associated with the divestiture of our Spanish and Central European businesses of $165 million, or $0.28 per share ($0.23 after-tax), gain on debt extinguishment of $23 million, or $0.04 per share ($0.03 after-tax), increase to the previously reported gain on the divestiture of USMM due to the finalization of working capital adjustments of $13 million, or $0.02 per share ($0.010.02 after-tax), and costs related to the PBM legal settlement of $6$5 million, or $0.01 per share ($0.01 after-tax).
(2) The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. In addition, the sixnine months ended JuneSeptember 30, 2023, include a one-time income tax benefit of $69 million, or $0.12 per share, resulting from the distribution of long-term stock awards to the estate of the Company's former CEO. The three and sixnine months ended JuneSeptember 30, 2022, also include an $18 million, or $0.03 per share, increase to the income tax benefit on the previously reported non-cash impairment of our equity method investment in RxAdvance.
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| | GAAP selling, general and administrative expenses | GAAP selling, general and administrative expenses | $ | 3,016 | | | $ | 2,800 | | | $ | 6,027 | | | $ | 5,545 | | GAAP selling, general and administrative expenses | $ | 3,048 | | | $ | 2,846 | | | $ | 9,075 | | | $ | 8,391 | |
| Less: | Less: | | Less: | |
| Acquisition and divestiture related expenses | Acquisition and divestiture related expenses | 13 | | | 22 | | | 36 | | | 121 | | Acquisition and divestiture related expenses | 16 | | | 28 | | | 52 | | | 149 | |
| Restructuring costs | | Restructuring costs | 22 | | | — | | | 22 | | | — | |
| Costs related to the PBM legal settlement | Costs related to the PBM legal settlement | — | | | 2 | | | — | | | 4 | | Costs related to the PBM legal settlement | — | | | 1 | | | — | | | 5 | |
| Real estate optimization | Real estate optimization | 1 | | | 4 | | | 7 | | | 4 | | Real estate optimization | — | | | 3 | | | 7 | | | 7 | |
| Adjusted selling, general and administrative expenses | Adjusted selling, general and administrative expenses | $ | 3,002 | | | $ | 2,772 | | | $ | 5,984 | | | $ | 5,416 | | Adjusted selling, general and administrative expenses | $ | 3,010 | | | $ | 2,814 | | | $ | 8,994 | | | $ | 8,230 | |
| |
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except shares in thousands and per share data in dollars)
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
| (Unaudited) | | |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 17,170 | | | $ | 12,074 | |
| Premium and trade receivables | 13,601 | | | 13,272 | |
| Short-term investments | 2,212 | | | 2,321 | |
| Other current assets | 1,883 | | | 2,461 | |
| Total current assets | 34,866 | | | 30,128 | |
| Long-term investments | 16,108 | | | 14,684 | |
| Restricted deposits | 1,355 | | | 1,217 | |
| Property, software and equipment, net | 2,416 | | | 2,432 | |
| | | |
| Goodwill | 18,716 | | | 18,812 | |
| Intangible assets, net | 6,520 | | | 6,911 | |
| Other long-term assets | 2,872 | | | 2,686 | |
| Total assets | $ | 82,853 | | | $ | 76,870 | |
| LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY | | | |
| Current liabilities: | | | |
| Medical claims liability | $ | 16,884 | | | $ | 16,745 | |
| Accounts payable and accrued expenses | 9,868 | | | 9,525 | |
| Return of premium payable | 2,071 | | | 1,634 | |
| Unearned revenue | 2,373 | | | 478 | |
| Current portion of long-term debt | 110 | | | 82 | |
| Total current liabilities | 31,306 | | | 28,464 | |
| Long-term debt | 17,896 | | | 17,938 | |
| Deferred tax liability | 495 | | | 615 | |
| Other long-term liabilities | 7,369 | | | 5,616 | |
| Total liabilities | 57,066 | | | 52,633 | |
| Commitments and contingencies | | | |
| Redeemable noncontrolling interests | 19 | | | 56 | |
| Stockholders' equity: | | | |
| Preferred stock, $0.001 par value; authorized 10,000 shares; no shares issued or outstanding at June 30, 2023 and December 31, 2022 | — | | | — | |
| Common stock, $0.001 par value; authorized 800,000 shares; 614,743 issued and 546,003 outstanding at June 30, 2023, and 607,847 issued and 550,754 outstanding at December 31, 2022 | 1 | | | 1 | |
| Additional paid-in capital | 20,183 | | | 20,060 | |
| Accumulated other comprehensive (loss) | (998) | | | (1,132) | |
| Retained earnings | 11,529 | | | 9,341 | |
| Treasury stock, at cost (68,740 and 57,093 shares, respectively) | (5,044) | | | (4,213) | |
| Total Centene stockholders' equity | 25,671 | | | 24,057 | |
| Nonredeemable noncontrolling interest | 97 | | | 124 | |
| Total stockholders' equity | 25,768 | | | 24,181 | |
| Total liabilities, redeemable noncontrolling interests and stockholders' equity | $ | 82,853 | | | $ | 76,870 | |
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| (Unaudited) | | |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 18,190 | | | $ | 12,074 | |
| Premium and trade receivables | 15,503 | | | 13,272 | |
| Short-term investments | 2,241 | | | 2,321 | |
| Other current assets | 5,471 | | | 2,461 | |
| Total current assets | 41,405 | | | 30,128 | |
| Long-term investments | 15,234 | | | 14,684 | |
| Restricted deposits | 1,343 | | | 1,217 | |
| Property, software and equipment, net | 2,004 | | | 2,432 | |
| | | |
| Goodwill | 17,558 | | | 18,812 | |
| Intangible assets, net | 6,277 | | | 6,911 | |
| Other long-term assets | 560 | | | 2,686 | |
| Total assets | $ | 84,381 | | | $ | 76,870 | |
| LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY | | | |
| Current liabilities: | | | |
| Medical claims liability | $ | 17,141 | | | $ | 16,745 | |
| Accounts payable and accrued expenses | 15,081 | | | 9,525 | |
| Return of premium payable | 2,160 | | | 1,634 | |
| Unearned revenue | 2,356 | | | 478 | |
| Current portion of long-term debt | 113 | | | 82 | |
| Total current liabilities | 36,851 | | | 28,464 | |
| Long-term debt | 17,888 | | | 17,938 | |
| Deferred tax liability | 577 | | | 615 | |
| Other long-term liabilities | 3,649 | | | 5,616 | |
| Total liabilities | 58,965 | | | 52,633 | |
| Commitments and contingencies | | | |
| Redeemable noncontrolling interests | 21 | | | 56 | |
| Stockholders' equity: | | | |
| Preferred stock, $0.001 par value; authorized 10,000 shares; no shares issued or outstanding at September 30, 2023 and December 31, 2022 | — | | | — | |
| Common stock, $0.001 par value; authorized 800,000 shares; 614,956 issued and 534,596 outstanding at September 30, 2023, and 607,847 issued and 550,754 outstanding at December 31, 2022 | 1 | | | 1 | |
| Additional paid-in capital | 20,243 | | | 20,060 | |
| Accumulated other comprehensive (loss) | (1,122) | | | (1,132) | |
| Retained earnings | 11,998 | | | 9,341 | |
| Treasury stock, at cost (80,360 and 57,093 shares, respectively) | (5,825) | | | (4,213) | |
| Total Centene stockholders' equity | 25,295 | | | 24,057 | |
| Nonredeemable noncontrolling interest | 100 | | | 124 | |
| Total stockholders' equity | 25,395 | | | 24,181 | |
| Total liabilities, redeemable noncontrolling interests and stockholders' equity | $ | 84,381 | | | $ | 76,870 | |
The accompanying notes to the consolidated financial statements are an integral part of these statements.
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except shares in thousands and per share data in dollars)
(Unaudited)
| | | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| Revenues: | Revenues: | | | | | | | | Revenues: | | | | | | | |
| Premium | Premium | $ | 33,713 | | | $ | 31,510 | | | $ | 67,538 | | | $ | 63,399 | | Premium | $ | 33,866 | | | $ | 31,848 | | | $ | 101,404 | | | $ | 95,247 | |
| Service | Service | 1,125 | | | 2,458 | | | 2,252 | | | 4,801 | | Service | 1,101 | | | 1,878 | | | 3,353 | | | 6,679 | |
| Premium and service revenues | Premium and service revenues | 34,838 | | | 33,968 | | | 69,790 | | | 68,200 | | Premium and service revenues | 34,967 | | | 33,726 | | | 104,757 | | | 101,926 | |
| Premium tax | Premium tax | 2,770 | | | 1,968 | | | 6,707 | | | 4,921 | | Premium tax | 3,075 | | | 2,139 | | | 9,782 | | | 7,060 | |
| Total revenues | Total revenues | 37,608 | | | 35,936 | | | 76,497 | | | 73,121 | | Total revenues | 38,042 | | | 35,865 | | | 114,539 | | | 108,986 | |
| Expenses: | Expenses: | | | | | | | | Expenses: | | | | | | | |
| Medical costs | Medical costs | 29,347 | | | 27,312 | | | 58,781 | | | 55,150 | | Medical costs | 29,479 | | | 28,111 | | | 88,260 | | | 83,261 | |
| Cost of services | Cost of services | 877 | | | 2,099 | | | 1,747 | | | 4,087 | | Cost of services | 856 | | | 1,571 | | | 2,603 | | | 5,658 | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | 3,016 | | | 2,800 | | | 6,027 | | | 5,545 | | Selling, general and administrative expenses | 3,048 | | | 2,846 | | | 9,075 | | | 8,391 | |
| Depreciation expense | Depreciation expense | 146 | | | 164 | | | 288 | | | 320 | | Depreciation expense | 148 | | | 150 | | | 436 | | | 470 | |
| Amortization of acquired intangible assets | Amortization of acquired intangible assets | 179 | | | 199 | | | 362 | | | 398 | | Amortization of acquired intangible assets | 180 | | | 211 | | | 542 | | | 609 | |
| Premium tax expense | Premium tax expense | 2,854 | | | 2,041 | | | 6,865 | | | 5,047 | | Premium tax expense | 3,156 | | | 2,211 | | | 10,021 | | | 7,258 | |
| | Impairment | Impairment | 18 | | | 1,450 | | | 38 | | | 1,450 | | Impairment | 440 | | | 289 | | | 478 | | | 1,739 | |
| | Total operating expenses | Total operating expenses | 36,437 | | | 36,065 | | | 74,108 | | | 71,997 | | Total operating expenses | 37,307 | | | 35,389 | | | 111,415 | | | 107,386 | |
| Earnings (loss) from operations | 1,171 | | | (129) | | | 2,389 | | | 1,124 | | |
| Earnings from operations | | Earnings from operations | 735 | | | 476 | | | 3,124 | | | 1,600 | |
| Other income (expense): | Other income (expense): | | | | | Other income (expense): | | | | |
| Investment and other income | Investment and other income | 425 | | | 42 | | | 778 | | | 94 | | Investment and other income | 214 | | | 692 | | | 992 | | | 786 | |
| Debt extinguishment | Debt extinguishment | — | | | 13 | | | — | | | 16 | | Debt extinguishment | — | | | 10 | | | — | | | 26 | |
| Interest expense | Interest expense | (181) | | | (162) | | | (361) | | | (322) | | Interest expense | (181) | | | (169) | | | (542) | | | (491) | |
| Earnings (loss) before income tax | 1,415 | | | (236) | | | 2,806 | | | 912 | | |
| Income tax expense (benefit) | 360 | | | (65) | | | 621 | | | 231 | | |
| Net earnings (loss) | 1,055 | | | (171) | | | 2,185 | | | 681 | | |
| (Earnings) loss attributable to noncontrolling interests | 3 | | | (1) | | | 3 | | | (4) | | |
| Net earnings (loss) attributable to Centene Corporation | $ | 1,058 | | | $ | (172) | | | $ | 2,188 | | | $ | 677 | | |
| Earnings before income tax | | Earnings before income tax | 768 | | | 1,009 | | | 3,574 | | | 1,921 | |
| Income tax expense | | Income tax expense | 293 | | | 269 | | | 914 | | | 500 | |
| Net earnings | | Net earnings | 475 | | | 740 | | | 2,660 | | | 1,421 | |
| (Earnings) attributable to noncontrolling interests | | (Earnings) attributable to noncontrolling interests | (6) | | | (2) | | | (3) | | | (6) | |
| Net earnings attributable to Centene Corporation | | Net earnings attributable to Centene Corporation | $ | 469 | | | $ | 738 | | | $ | 2,657 | | | $ | 1,415 | |
|
| | | | | | | |
| | | | | | | |
| Net earnings (loss) per common share attributable to Centene Corporation: | | |
| Basic earnings (loss) per common share | $ | 1.93 | | | $ | (0.29) | | | $ | 3.98 | | | $ | 1.16 | | |
| Diluted earnings (loss) per common share | $ | 1.92 | | | $ | (0.29) | | | $ | 3.96 | | | $ | 1.15 | | |
| Net earnings per common share attributable to Centene Corporation: | | Net earnings per common share attributable to Centene Corporation: | |
| Basic earnings per common share | | Basic earnings per common share | $ | 0.87 | | | $ | 1.29 | | | $ | 4.86 | | | $ | 2.44 | |
| Diluted earnings per common share | | Diluted earnings per common share | $ | 0.87 | | | $ | 1.27 | | | $ | 4.85 | | | $ | 2.41 | |
|
| |
| |
| Weighted average number of common shares outstanding: | Weighted average number of common shares outstanding: | | Weighted average number of common shares outstanding: | |
| Basic | Basic | 548,932 | | | 583,644 | | | 549,850 | | | 583,435 | | Basic | 539,535 | | | 573,961 | | | 546,374 | | | 580,277 | |
| Diluted | Diluted | 550,308 | | | 583,644 | | | 551,996 | | | 590,226 | | Diluted | 541,270 | | | 580,607 | | | 548,412 | | | 587,084 | |
|
The accompanying notes to the consolidated financial statements are an integral part of these statements.
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
(In millions)
(Unaudited)
| | | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| Net earnings (loss) | $ | 1,055 | | | $ | (171) | | | $ | 2,185 | | | $ | 681 | | |
| Net earnings | | Net earnings | $ | 475 | | | $ | 740 | | | $ | 2,660 | | | $ | 1,421 | |
| Change in unrealized gain (loss) on investments | Change in unrealized gain (loss) on investments | (142) | | | (446) | | | 111 | | | (1,161) | | Change in unrealized gain (loss) on investments | (235) | | | (503) | | | (124) | | | (1,664) | |
| Change in unrealized gain (loss) on investments, tax effect | Change in unrealized gain (loss) on investments, tax effect | 34 | | | 106 | | | (27) | | | 277 | | Change in unrealized gain (loss) on investments, tax effect | 56 | | | 120 | | | 29 | | | 397 | |
| Change in unrealized gain (loss) on investments, net of tax | Change in unrealized gain (loss) on investments, net of tax | (108) | | | (340) | | | 84 | | | (884) | | Change in unrealized gain (loss) on investments, net of tax | (179) | | | (383) | | | (95) | | | (1,267) | |
| | Reclassification adjustment, net of tax | Reclassification adjustment, net of tax | 2 | | | 7 | | | 4 | | | 9 | | Reclassification adjustment, net of tax | 57 | | | 3 | | | 61 | | | 12 | |
| Foreign currency translation adjustments, net of tax | Foreign currency translation adjustments, net of tax | 23 | | | (95) | | | 46 | | | (115) | | Foreign currency translation adjustments, net of tax | (22) | | | (101) | | | 24 | | | (216) | |
| Net unrealized gain on cash flow hedge, net of tax | | Net unrealized gain on cash flow hedge, net of tax | 20 | | | — | | | 20 | | | — | |
| Other comprehensive earnings (loss) | Other comprehensive earnings (loss) | (83) | | | (428) | | | 134 | | | (990) | | Other comprehensive earnings (loss) | (124) | | | (481) | | | 10 | | | (1,471) | |
| Comprehensive earnings (loss) | Comprehensive earnings (loss) | 972 | | | (599) | | | 2,319 | | | (309) | | Comprehensive earnings (loss) | 351 | | | 259 | | | 2,670 | | | (50) | |
| Comprehensive (earnings) loss attributable to noncontrolling interests | 3 | | | (1) | | | 3 | | | (4) | | |
| Comprehensive (earnings) attributable to noncontrolling interests | | Comprehensive (earnings) attributable to noncontrolling interests | (6) | | | (2) | | | (3) | | | (6) | |
| Comprehensive earnings (loss) attributable to Centene Corporation | Comprehensive earnings (loss) attributable to Centene Corporation | $ | 975 | | | $ | (600) | | | $ | 2,322 | | | $ | (313) | | Comprehensive earnings (loss) attributable to Centene Corporation | $ | 345 | | | $ | 257 | | | $ | 2,667 | | | $ | (56) | |
The accompanying notes to the consolidated financial statements are an integral part of these statements.
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In millions, except shares in thousands and per share data in dollars)
(Unaudited)
Three and SixNine Months Ended JuneSeptember 30, 2023
| | | | Centene Stockholders' Equity | | | | | | | Centene Stockholders' Equity | | | | | |
| | | Common Stock | | | | | | | | Treasury Stock | | | | | | | Common Stock | | | | | | | | Treasury Stock | | | | | |
| | | $0.001 Par Value Shares | | Amt | | Additional Paid-in Capital | | Accumulated Other Comprehensive
Earnings (Loss) | | Retained Earnings | | $0.001 Par Value Shares | | Amt | | Noncontrolling
Interest | | Total | | | $0.001 Par Value Shares | | Amt | | Additional Paid-in Capital | | Accumulated Other Comprehensive
Earnings (Loss) | | Retained Earnings | | $0.001 Par Value Shares | | Amt | | Noncontrolling
Interest | | Total | |
| Balance, December 31, 2022 | Balance, December 31, 2022 | 607,847 | | | $ | 1 | | | $ | 20,060 | | | $ | (1,132) | | | $ | 9,341 | | | 57,093 | | | $ | (4,213) | | | $ | 124 | | | $ | 24,181 | | | Balance, December 31, 2022 | 607,847 | | | $ | 1 | | | $ | 20,060 | | | $ | (1,132) | | | $ | 9,341 | | | 57,093 | | | $ | (4,213) | | | $ | 124 | | | $ | 24,181 | | |
| | Comprehensive Earnings: | | Comprehensive Earnings: | | | | | | | | | | | | | | | | | | |
| Net earnings | Net earnings | — | | | — | | | — | | | — | | | 1,130 | | | — | | | — | | | — | | | 1,130 | | | Net earnings | — | | | — | | | — | | | — | | | 1,130 | | | — | | | — | | | — | | | 1,130 | | |
| Other comprehensive earnings, net of $61 tax | Other comprehensive earnings, net of $61 tax | — | | | — | | | — | | | 217 | | | — | | | — | | | — | | | — | | | 217 | | | Other comprehensive earnings, net of $61 tax | — | | | — | | | — | | | 217 | | | — | | | — | | | — | | | — | | | 217 | | |
| | Common stock issued for employee benefit plans | Common stock issued for employee benefit plans | 6,508 | | | — | | | 12 | | | — | | | — | | | — | | | — | | | — | | | 12 | | | Common stock issued for employee benefit plans | 6,508 | | | — | | | 12 | | | — | | | — | | | — | | | — | | | — | | | 12 | | |
| Common stock repurchases | Common stock repurchases | — | | | — | | | — | | | — | | | — | | | 5,548 | | | (423) | | | — | | | (423) | | | Common stock repurchases | — | | | — | | | — | | | — | | | — | | | 5,548 | | | (423) | | | — | | | (423) | | |
| Stock compensation expense | Stock compensation expense | — | | | — | | | 61 | | | — | | | — | | | — | | | — | | | — | | | 61 | | | Stock compensation expense | — | | | — | | | 61 | | | — | | | — | | | — | | | — | | | — | | | 61 | | |
| | Purchase of redeemable noncontrolling interest | Purchase of redeemable noncontrolling interest | — | | | — | | | (12) | | | — | | | — | | | — | | | — | | | — | | | (12) | | | Purchase of redeemable noncontrolling interest | — | | | — | | | (12) | | | — | | | — | | | — | | | — | | | — | | | (12) | | |
| | Balance, March 31, 2023 | Balance, March 31, 2023 | 614,355 | | | $ | 1 | | | $ | 20,121 | | | $ | (915) | | | $ | 10,471 | | | 62,641 | | | $ | (4,636) | | | $ | 124 | | | $ | 25,166 | | | Balance, March 31, 2023 | 614,355 | | | $ | 1 | | | $ | 20,121 | | | $ | (915) | | | $ | 10,471 | | | 62,641 | | | $ | (4,636) | | | $ | 124 | | | $ | 25,166 | | |
| | Comprehensive Earnings: | | Comprehensive Earnings: | | | | | | | | | | | | | | | | | | |
| Net earnings (loss) | Net earnings (loss) | — | | | — | | | — | | | — | | | 1,058 | | | — | | | — | | | (3) | | | 1,055 | | | Net earnings (loss) | — | | | — | | | — | | | — | | | 1,058 | | | — | | | — | | | (3) | | | 1,055 | | |
| Other comprehensive loss, net of $(34) tax | Other comprehensive loss, net of $(34) tax | — | | | — | | | — | | | (83) | | | — | | | — | | | — | | | — | | | (83) | | | Other comprehensive loss, net of $(34) tax | — | | | — | | | — | | | (83) | | | — | | | — | | | — | | | — | | | (83) | | |
| | Common stock issued for employee benefit plans | Common stock issued for employee benefit plans | 388 | | | — | | | 9 | | | — | | | — | | | — | | | — | | | — | | | 9 | | | Common stock issued for employee benefit plans | 388 | | | — | | | 9 | | | — | | | — | | | — | | | — | | | — | | | 9 | | |
| Common stock repurchases | Common stock repurchases | — | | | — | | | — | | | — | | | — | | | 6,099 | | | (408) | | | — | | | (408) | | | Common stock repurchases | — | | | — | | | — | | | — | | | — | | | 6,099 | | | (408) | | | — | | | (408) | | |
| Stock compensation expense | Stock compensation expense | — | | | — | | | 56 | | | — | | | — | | | — | | | — | | | — | | | 56 | | | Stock compensation expense | — | | | — | | | 56 | | | — | | | — | | | — | | | — | | | — | | | 56 | | |
| | Purchase of non-redeemable noncontrolling interests | Purchase of non-redeemable noncontrolling interests | — | | | — | | | (3) | | | — | | | — | | | — | | | — | | | (24) | | | (27) | | | Purchase of non-redeemable noncontrolling interests | — | | | — | | | (3) | | | — | | | — | | | — | | | — | | | (24) | | | (27) | | |
| | Balance, June 30, 2023 | Balance, June 30, 2023 | 614,743 | | | $ | 1 | | | $ | 20,183 | | | $ | (998) | | | $ | 11,529 | | | 68,740 | | | $ | (5,044) | | | $ | 97 | | | $ | 25,768 | | | Balance, June 30, 2023 | 614,743 | | | $ | 1 | | | $ | 20,183 | | | $ | (998) | | | $ | 11,529 | | | 68,740 | | | $ | (5,044) | | | $ | 97 | | | $ | 25,768 | | |
| Comprehensive Earnings: | | Comprehensive Earnings: | | | | | | | | | | | | | | | | | | |
| Net earnings | | Net earnings | — | | | — | | | — | | | — | | | 469 | | | — | | | — | | | 3 | | | 472 | | |
| Other comprehensive loss, net of $(34) tax | | Other comprehensive loss, net of $(34) tax | — | | | — | | | — | | | (124) | | | — | | | — | | | — | | | — | | | (124) | | |
| | Common stock issued for employee benefit plans | | Common stock issued for employee benefit plans | 213 | | | — | | | 11 | | | — | | | — | | | — | | | — | | | — | | | 11 | | |
| Common stock repurchases | | Common stock repurchases | — | | | — | | | — | | | — | | | — | | | 11,620 | | | (781) | | | — | | | (781) | | |
| Stock compensation expense | | Stock compensation expense | — | | | — | | | 50 | | | — | | | — | | | — | | | — | | | — | | | 50 | | |
| Purchase of non-redeemable noncontrolling interests | | Purchase of non-redeemable noncontrolling interests | — | | | — | | | (1) | | | — | | | — | | | — | | | — | | | — | | | (1) | | |
| | Balance, September 30, 2023 | | Balance, September 30, 2023 | 614,956 | | | $ | 1 | | | $ | 20,243 | | | $ | (1,122) | | | $ | 11,998 | | | 80,360 | | | $ | (5,825) | | | $ | 100 | | | $ | 25,395 | | |
Three and SixNine Months Ended JuneSeptember 30, 2022
| | | | Centene Stockholders' Equity | | | | | | Centene Stockholders' Equity | | | | |
| | | Common Stock | | | | | | | | Treasury Stock | | | | | | Common Stock | | | | | | | | Treasury Stock | | | | |
| | | $0.001 Par Value Shares | | Amt | | Additional Paid-in Capital | | Accumulated Other Comprehensive
Earnings (Loss) | | Retained Earnings | | $0.001 Par Value Shares | | Amt | | Noncontrolling
Interest | | Total | | $0.001 Par Value Shares | | Amt | | Additional Paid-in Capital | | Accumulated Other Comprehensive
Earnings (Loss) | | Retained Earnings | | $0.001 Par Value Shares | | Amt | | Noncontrolling
Interest | | Total |
| Balance, December 31, 2021 | Balance, December 31, 2021 | 602,704 | | | $ | 1 | | | $ | 19,672 | | | $ | 77 | | | $ | 8,139 | | | 20,225 | | | $ | (1,094) | | | $ | 145 | | | $ | 26,940 | | Balance, December 31, 2021 | 602,704 | | | $ | 1 | | | $ | 19,672 | | | $ | 77 | | | $ | 8,139 | | | 20,225 | | | $ | (1,094) | | | $ | 145 | | | $ | 26,940 | |
| | Comprehensive Earnings: | | Comprehensive Earnings: | | | | | | | | | | | | | | | | | |
| Net earnings (loss) | Net earnings (loss) | — | | | — | | | — | | | — | | | 849 | | | — | | | — | | | (1) | | | 848 | | Net earnings (loss) | — | | | — | | | — | | | — | | | 849 | | | — | | | — | | | (1) | | | 848 | |
| Other comprehensive loss, net of $(171) tax | Other comprehensive loss, net of $(171) tax | — | | | — | | | — | | | (562) | | | — | | | — | | | — | | | — | | | (562) | | Other comprehensive loss, net of $(171) tax | — | | | — | | | — | | | (562) | | | — | | | — | | | — | | | — | | | (562) | |
| | Common stock issued for employee benefit plans | Common stock issued for employee benefit plans | 3,221 | | | — | | | 28 | | | — | | | — | | | — | | | — | | | — | | | 28 | | Common stock issued for employee benefit plans | 3,221 | | | — | | | 28 | | | — | | | — | | | — | | | — | | | — | | | 28 | |
| Fair value of unvested equity awards in connection with acquisition | Fair value of unvested equity awards in connection with acquisition | — | | | — | | | 60 | | | — | | | — | | | — | | | — | | | — | | | 60 | | Fair value of unvested equity awards in connection with acquisition | — | | | — | | | 60 | | | — | | | — | | | — | | | — | | | — | | | 60 | |
| Common stock repurchases | Common stock repurchases | — | | | — | | | — | | | — | | | — | | | 846 | | | (71) | | | — | | | (71) | | Common stock repurchases | — | | | — | | | — | | | — | | | — | | | 846 | | | (71) | | | — | | | (71) | |
| Stock compensation expense | Stock compensation expense | — | | | — | | | 70 | | | — | | | — | | | — | | | — | | | — | | | 70 | | Stock compensation expense | — | | | — | | | 70 | | | — | | | — | | | — | | | — | | | — | | | 70 | |
| | Balance, March 31, 2022 | Balance, March 31, 2022 | 605,925 | | | $ | 1 | | | $ | 19,830 | | | $ | (485) | | | $ | 8,988 | | | 21,071 | | | $ | (1,165) | | | $ | 144 | | | $ | 27,313 | | Balance, March 31, 2022 | 605,925 | | | $ | 1 | | | $ | 19,830 | | | $ | (485) | | | $ | 8,988 | | | 21,071 | | | $ | (1,165) | | | $ | 144 | | | $ | 27,313 | |
| | Comprehensive Earnings: | | Comprehensive Earnings: | | | | | | | | | | | | | | | | | |
| Net (loss) | Net (loss) | — | | | — | | | — | | | — | | | (172) | | | — | | | — | | | (3) | | | (175) | | Net (loss) | — | | | — | | | — | | | — | | | (172) | | | — | | | — | | | (3) | | | (175) | |
| Other comprehensive loss, net of $(106) tax | Other comprehensive loss, net of $(106) tax | — | | | — | | | — | | | (428) | | | — | | | — | | | — | | | — | | | (428) | | Other comprehensive loss, net of $(106) tax | — | | | — | | | — | | | (428) | | | — | | | — | | | — | | | — | | | (428) | |
| | Common stock issued for employee benefit plans | Common stock issued for employee benefit plans | 519 | | | — | | | 10 | | | — | | | — | | | — | | | — | | | — | | | 10 | | Common stock issued for employee benefit plans | 519 | | | — | | | 10 | | | — | | | — | | | — | | | — | | | — | | | 10 | |
| Common stock repurchases | Common stock repurchases | — | | | — | | | — | | | — | | | — | | | 4,249 | | | (349) | | | — | | | (349) | | Common stock repurchases | — | | | — | | | — | | | — | | | — | | | 4,249 | | | (349) | | | — | | | (349) | |
| Stock compensation expense | Stock compensation expense | — | | | — | | | 59 | | | — | | | — | | | — | | | — | | | — | | | 59 | | Stock compensation expense | — | | | — | | | 59 | | | — | | | — | | | — | | | — | | | — | | | 59 | |
| | Balance, June 30, 2022 | Balance, June 30, 2022 | 606,444 | | | $ | 1 | | | $ | 19,899 | | | $ | (913) | | | $ | 8,816 | | | 25,320 | | | $ | (1,514) | | | $ | 141 | | | $ | 26,430 | | Balance, June 30, 2022 | 606,444 | | | $ | 1 | | | $ | 19,899 | | | $ | (913) | | | $ | 8,816 | | | 25,320 | | | $ | (1,514) | | | $ | 141 | | | $ | 26,430 | |
| Comprehensive Earnings: | | Comprehensive Earnings: | | | | | | | | | | | | | | | | | |
| Net earnings (loss) | | Net earnings (loss) | — | | | — | | | — | | | — | | | 738 | | | — | | | — | | | (2) | | | 736 | |
| Other comprehensive loss, net of $(120) tax | | Other comprehensive loss, net of $(120) tax | — | | | — | | | — | | | (481) | | | — | | | — | | | — | | | — | | | (481) | |
| | Common stock issued for employee benefit plans | | Common stock issued for employee benefit plans | 487 | | | — | | | 24 | | | — | | | — | | | — | | | — | | | — | | | 24 | |
| Common stock repurchases | | Common stock repurchases | — | | | — | | | (200) | | | — | | | — | | | 11,520 | | | (1,043) | | | — | | | (1,243) | |
| Stock compensation expense | | Stock compensation expense | — | | | — | | | 51 | | | — | | | — | | | — | | | — | | | — | | | 51 | |
| | Reclassification to redeemable | | Reclassification to redeemable | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 17 | | | 17 | |
| | Balance, September 30, 2022 | | Balance, September 30, 2022 | 606,931 | | | $ | 1 | | | $ | 19,774 | | | $ | (1,394) | | | $ | 9,554 | | | 36,840 | | | $ | (2,557) | | | $ | 156 | | | $ | 25,534 | |
The accompanying notes to the consolidated financial statements are an integral part of these statements.
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| | | | | | | | | | | |
| | Six Months Ended June 30, |
| | 2023 | | 2022 |
| Cash flows from operating activities: | | | |
| Net earnings | $ | 2,185 | | | $ | 681 | |
| Adjustments to reconcile net earnings to net cash provided by operating activities |
| Depreciation and amortization | 650 | | | 718 | |
| Stock compensation expense | 117 | | | 129 | |
| Impairment | 38 | | | 1,450 | |
| (Gain) loss on debt extinguishment | — | | | (16) | |
| (Gain) on acquisition | — | | | (2) | |
| Deferred income taxes | (160) | | | (417) | |
| (Gain) on divestiture | (172) | | | — | |
| | | |
| Other adjustments, net | 68 | | | 162 | |
| Changes in assets and liabilities | | | |
| Premium and trade receivables | (319) | | | (1,288) | |
| Other assets | (325) | | | (245) | |
| | | |
| Medical claims liabilities | 139 | | | 2,089 | |
| Unearned revenue | 1,895 | | | 75 | |
| Accounts payable and accrued expenses | 618 | | | 41 | |
| Other long-term liabilities | 2,081 | | | 1,058 | |
| Other operating activities, net | — | | | 70 | |
| Net cash provided by operating activities | 6,815 | | | 4,505 | |
| Cash flows from investing activities: | | | |
| Capital expenditures | (440) | | | (524) | |
| Purchases of investments | (3,199) | | | (3,114) | |
| Sales and maturities of investments | 2,293 | | | 2,005 | |
| Acquisitions, net of cash acquired | — | | | (1,512) | |
| Divestiture proceeds, net of divested cash | 669 | | | — | |
| | | |
| Net cash (used in) investing activities | (677) | | | (3,145) | |
| Cash flows from financing activities: | | | |
| Proceeds from long-term debt | 1,281 | | | 331 | |
| Payments and repurchases of long-term debt | (1,322) | | | (900) | |
| Common stock repurchases | (828) | | | (420) | |
| Proceeds from common stock issuances | 21 | | | 38 | |
| Payments for debt extinguishment | — | | | (27) | |
| Purchase of noncontrolling interest | (85) | | | — | |
| | | |
| Other financing activities, net | — | | | (6) | |
| Net cash (used in) financing activities | (933) | | | (984) | |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (7) | | | (9) | |
| Net increase in cash, cash equivalents, and restricted cash and cash equivalents | 5,198 | | | 367 | |
| | | |
Cash, cash equivalents, and restricted cash and cash equivalents, beginning of period | 12,330 | | | 13,214 | |
Cash, cash equivalents, and restricted cash and cash equivalents, end of period | $ | 17,528 | | | $ | 13,581 | |
| Supplemental disclosures of cash flow information: | | | |
| Interest paid | $ | 348 | | | $ | 327 | |
| Income taxes paid | $ | 592 | | | $ | 411 | |
| | | |
| | | |
| The following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents reported within the Consolidated Balance Sheets to the totals above: |
| June 30, |
| 2023 | | 2022 |
| Cash and cash equivalents | $ | 17,170 | | | $ | 13,435 | |
| Restricted cash and cash equivalents, included in restricted deposits | 358 | | | 146 | |
| Total cash, cash equivalents, and restricted cash and cash equivalents | $ | 17,528 | | | $ | 13,581 | |
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 |
| Cash flows from operating activities: | | | |
| Net earnings | $ | 2,660 | | | $ | 1,421 | |
| Adjustments to reconcile net earnings to net cash provided by operating activities | | | |
| Depreciation and amortization | 978 | | | 1,079 | |
| Stock compensation expense | 167 | | | 180 | |
| Impairment | 478 | | | 1,739 | |
| (Gain) loss on debt extinguishment | — | | | (26) | |
| | | |
| Deferred income taxes | 14 | | | (682) | |
| (Gain) loss on divestitures | (172) | | | (503) | |
| | | |
| Other adjustments, net | 158 | | | 164 | |
| Changes in assets and liabilities | | | |
| Premium and trade receivables | (2,329) | | | (1,274) | |
| Other assets | (103) | | | 152 | |
| | | |
| Medical claims liabilities | 401 | | | 1,976 | |
| Unearned revenue | 1,878 | | | 1,964 | |
| Accounts payable and accrued expenses | 3,127 | | | 686 | |
| Other long-term liabilities | 583 | | | 863 | |
| Other operating activities, net | (4) | | | 98 | |
| Net cash provided by operating activities | 7,836 | | | 7,837 | |
| Cash flows from investing activities: | | | |
| Capital expenditures | (576) | | | (771) | |
| Purchases of investments | (4,729) | | | (5,118) | |
| Sales and maturities of investments | 4,373 | | | 2,842 | |
| Acquisitions, net of cash acquired | — | | | (1,457) | |
| Divestiture proceeds, net of divested cash | 690 | | | 1,362 | |
| | | |
| Net cash (used in) investing activities | (242) | | | (3,142) | |
| Cash flows from financing activities: | | | |
| Proceeds from long-term debt | 2,170 | | | 357 | |
| Payments and repurchases of long-term debt | (1,970) | | | (1,202) | |
| Common stock repurchases | (1,602) | | | (1,663) | |
| Proceeds from common stock issuances | 32 | | | 62 | |
| Payments for debt extinguishment | — | | | (14) | |
| Purchase of noncontrolling interest | (87) | | | — | |
| | | |
| Other financing activities, net | — | | | (5) | |
| Net cash (used in) financing activities | (1,457) | | | (2,465) | |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 19 | | | (37) | |
| Net increase in cash, cash equivalents, and restricted cash and cash equivalents | 6,156 | | | 2,193 | |
| Cash and cash equivalents reclassified from (to) held for sale | (36) | | | (192) | |
Cash, cash equivalents, and restricted cash and cash equivalents, beginning of period | 12,330 | | | 13,214 | |
Cash, cash equivalents, and restricted cash and cash equivalents, end of period | $ | 18,450 | | | $ | 15,215 | |
| Supplemental disclosures of cash flow information: | | | |
| Interest paid | $ | 496 | | | $ | 462 | |
| Income taxes paid | $ | 759 | | | $ | 448 | |
| | | |
| | | |
| The following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents reported within the Consolidated Balance Sheets to the totals above: |
| September 30, |
| 2023 | | 2022 |
| Cash and cash equivalents | $ | 18,190 | | | $ | 14,987 | |
| Restricted cash and cash equivalents, included in restricted deposits | 260 | | | 228 | |
| Total cash, cash equivalents, and restricted cash and cash equivalents | $ | 18,450 | | | $ | 15,215 | |
The accompanying notes to the consolidated financial statements are an integral part of these statements.
CENTENE CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Operations
Basis of Presentation
The accompanying interim financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited financial statements included in the Form 10-K for the fiscal year ended December 31, 2022. The unaudited interim financial statements herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, footnote disclosures that would substantially duplicate the disclosures contained in the December 31, 2022 audited financial statements have been omitted from these interim financial statements, where appropriate. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of the interim periods presented.
Certain 2022 amounts in the consolidated financial statements and notes to the consolidated financial statements have been reclassified to conform to the 2023 presentation, including reclassifications related to the Company's new segment reporting structure as outlined below. These reclassifications have no effect on net earnings or stockholders' equity as previously reported.
Segment Reporting
In the first quarter of 2023, and in conjunction with the Company's updated strategic plan, executive leadership realignment, and corresponding 2023 divestitures, the Company revised the way it manages the business, evaluates performance, and allocates resources, resulting in an updated segment structure comprised of (1) a Medicaid segment, (2) a Medicare segment, (3) a Commercial segment, and (4) an Other segment.
The Medicaid, Medicare, and Commercial segments represent the government-sponsored or subsidized programs under which the Company offers managed healthcare services. Specifically, the Medicaid segment includes the Temporary Assistance for Needy Families (TANF) program, Medicaid Expansion programs, the Aged, Blind, or Disabled (ABD) program, the Children's Health Insurance Program (CHIP), Long-Term Services and Supports (LTSS), Foster Care, Medicare-Medicaid Plans (MMP), which cover beneficiaries who are dually eligible for Medicaid and Medicare, and other state-based programs. The Medicare segment includes Medicare Advantage, Medicare Supplement, Dual Eligible Special Needs Plans (D-SNPs), and Medicare Prescription Drug Plans (PDPs), also known as Medicare Part D. The Commercial segment includes the Health Insurance Marketplace product along with individual, small group, and large group commercial healthcarehealth insurance products. The Other segment includes the Company's pharmacy operations, vision and dental services, clinical healthcare, behavioral health, international operations, and corporate management companies, among others.
Accounting Guidance Not Yet Adopted
The Company has determined that there are no recently issued accounting pronouncements that will have a material impact on its consolidated financial position, results of operations, or cash flows.
2. Acquisitions and Divestitures
On January 5, 2023, the Company completed the divestiture of HealthSmart, its third-party health plan administration business.
On January 10, 2023, the Company signed and closed on a definitive agreement to divest Centurion, its prison healthcare business. During 2022, the Company recorded impairment charges related to goodwill and other current assets associated with the pending divestiture. During the second quarter of 2023, the Company recognized a $15 million gain on the divestiture of the Centurion business reflecting additional proceeds for contingent consideration, partially offset by net working capital adjustments. The gain is included in investment and other income onin the Consolidated Statements of Operations.
On January 20, 2023, the Company completed the divestiture of Magellan Specialty Health for approximately $646 million in cash and stock, including an estimated working capital adjustment, and recognized a pre-tax gain of $79 million. The stock consideration was subsequently sold in April 2023 for cash proceeds of $245 million. The Company could also receive up to an additional $150 million in cash and stock in 2024 based on certain 2023 performance metrics. The Company will recognize the appropriate amount of contingent consideration related to the additional $150 million when realized or realizable.
On June 13, 2023, the Company completed the divestiture of its majority stake in Apixio. The Company recognized a pre-tax gain of $91 million, or $63 million after-tax, which is included in investment and other income onin the Consolidated Statements of Operations.
During the second quarter of 2023, the Company recognized an additional $13 million expense related to the divestiture of its Spanish and Central European businesses, in addition to the previously recorded impairment charge of $163 million, or $140 million after-tax. The expense is included in investment and other income onin the Consolidated Statements of Operations.
Circle Health Group Divestiture
On August 28, 2023, the Company signed a definitive agreement to sell Circle Health Group (Circle Health), one of the U.K.'s largest independent hospital operators, which is included in the Other segment. As of September 30, 2023, the assets and liabilities of Circle Health were considered held for sale resulting in $3,744 million of assets held for sale in other current assets and $2,947 million of liabilities held for sale in accounts payable and accrued expenses in the Consolidated Balance Sheet. The majority of the held for sale assets were previously reported as other long-term assets, goodwill and property, software and equipment. The majority of the liabilities were previously reported as debt and other long-term liabilities.
During the third quarter of 2023, the Company recorded an impairment charge related to goodwill associated with the pending divestiture of $251 million, or $269 million after-tax.
In order to manage the foreign exchange risk on the sale price associated with the pending divestiture of Circle Health, in August 2023 the Company entered into a foreign currency swap agreement for a notional amount of $931 million, to sell £740 million. The swap agreement was formally designated and qualified as a cash flow hedge. The swap expires on March 28, 2024. The gain or loss due to changes in the fair value of the foreign currency swap is recorded in other comprehensive income until the Circle Health divestiture closes, at which time the gain or loss will be recorded in earnings to the same line in the Consolidated Statement of Operations as the gain or loss on sale. The fair value of the swap agreement as of September 30, 2023 was $27 million, which was recorded in other current assets in the Consolidated Balance Sheet.
3. Short-term and Long-term Investments, Restricted Deposits
Short-term and long-term investments and restricted deposits by investment type consist of the following ($ in millions):
| | | | June 30, 2023 | | December 31, 2022 | | | September 30, 2023 | | December 31, 2022 |
| | | Amortized Cost | | Gross
Unrealized Gains | | Gross
Unrealized Losses | | Fair Value | | Amortized Cost | | Gross
Unrealized Gains | | Gross
Unrealized Losses | | Fair Value | | | Amortized Cost | | Gross
Unrealized Gains | | Gross
Unrealized Losses | | Fair Value | | Amortized Cost | | Gross
Unrealized Gains | | Gross
Unrealized Losses | | Fair Value |
| Debt securities: | Debt securities: | | | | | | | | | | | | | | | | Debt securities: | | | | | | | | | | | | | | | |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ | 465 | | | $ | — | | | $ | (15) | | | $ | 450 | | | $ | 695 | | | $ | — | | | $ | (16) | | | $ | 679 | | U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ | 421 | | | $ | — | | | $ | (13) | | | $ | 408 | | | $ | 695 | | | $ | — | | | $ | (16) | | | $ | 679 | |
| Corporate securities | Corporate securities | 10,578 | | | 13 | | | (724) | | | 9,867 | | | 10,127 | | | 12 | | | (778) | | | 9,361 | | Corporate securities | 9,922 | | | 2 | | | (750) | | | 9,174 | | | 10,127 | | | 12 | | | (778) | | | 9,361 | |
| Restricted certificates of deposit | Restricted certificates of deposit | 4 | | | — | | | — | | | 4 | | | 4 | | | — | | | — | | | 4 | | Restricted certificates of deposit | 4 | | | — | | | — | | | 4 | | | 4 | | | — | | | — | | | 4 | |
| Restricted cash equivalents | Restricted cash equivalents | 358 | | | — | | | — | | | 358 | | | 256 | | | — | | | — | | | 256 | | Restricted cash equivalents | 260 | | | — | | | — | | | 260 | | | 256 | | | — | | | — | | | 256 | |
| Short-term time deposits | Short-term time deposits | 419 | | | — | | | — | | | 419 | | | 204 | | | — | | | — | | | 204 | | Short-term time deposits | 470 | | | — | | | — | | | 470 | | | 204 | | | — | | | — | | | 204 | |
| Municipal securities | Municipal securities | 4,156 | | | 9 | | | (234) | | | 3,931 | | | 4,055 | | | 6 | | | (280) | | | 3,781 | | Municipal securities | 3,931 | | | 1 | | | (294) | | | 3,638 | | | 4,055 | | | 6 | | | (280) | | | 3,781 | |
| Asset-backed securities | Asset-backed securities | 1,507 | | | 1 | | | (60) | | | 1,448 | | | 1,396 | | | — | | | (70) | | | 1,326 | | Asset-backed securities | 1,633 | | | 2 | | | (52) | | | 1,583 | | | 1,396 | | | — | | | (70) | | | 1,326 | |
| Residential mortgage-backed securities | Residential mortgage-backed securities | 1,346 | | | 1 | | | (120) | | | 1,227 | | | 1,165 | | | 2 | | | (121) | | | 1,046 | | Residential mortgage-backed securities | 1,475 | | | — | | | (172) | | | 1,303 | | | 1,165 | | | 2 | | | (121) | | | 1,046 | |
| Commercial mortgage-backed securities | Commercial mortgage-backed securities | 1,081 | | | — | | | (100) | | | 981 | | | 961 | | | — | | | (99) | | | 862 | | Commercial mortgage-backed securities | 1,100 | | | — | | | (112) | | | 988 | | | 961 | | | — | | | (99) | | | 862 | |
| Equity securities | Equity securities | 2 | | | — | | | — | | | 2 | | | 5 | | | — | | | — | | | 5 | | Equity securities | 2 | | | — | | | — | | | 2 | | | 5 | | | — | | | — | | | 5 | |
| Private equity investments | Private equity investments | 805 | | | — | | | — | | | 805 | | | 529 | | | — | | | — | | | 529 | | Private equity investments | 810 | | | — | | | — | | | 810 | | | 529 | | | — | | | — | | | 529 | |
| Life insurance contracts | Life insurance contracts | 183 | | | — | | | — | | | 183 | | | 169 | | | — | | | — | | | 169 | | Life insurance contracts | 178 | | | — | | | — | | | 178 | | | 169 | | | — | | | — | | | 169 | |
| Total | Total | $ | 20,904 | | | $ | 24 | | | $ | (1,253) | | | $ | 19,675 | | | $ | 19,566 | | | $ | 20 | | | $ | (1,364) | | | $ | 18,222 | | Total | $ | 20,206 | | | $ | 5 | | | $ | (1,393) | | | $ | 18,818 | | | $ | 19,566 | | | $ | 20 | | | $ | (1,364) | | | $ | 18,222 | |
|
The Company's investments are debt securities classified as available-for-sale with the exception of equity securities, certain private equity investments, and life insurance contracts. Private equity investments include direct investments in private equity securities as well as private equity funds. The Company's investment policies are designed to provide liquidity, preserve capital, and maximize total return on invested assets with a focus on high credit quality securities. The Company limits the size of investment in any single issuer other than U.S. treasury securities and obligations of U.S. government corporations and agencies. As of JuneSeptember 30, 2023, 99% of the Company's investments in rated securities carry an investment grade rating by nationally recognized statistical rating organizations. At JuneSeptember 30, 2023, the Company held certificates of deposit, equity securities, private equity investments, and life insurance contracts, which did not carry a credit rating. Accrued interest income on available-for-sale debt securities was $149$144 million and $132 million at JuneSeptember 30, 2023 and December 31, 2022, respectively, and is included in other current assets onin the Consolidated Balance Sheets.
The Company's residential mortgage-backed securities are primarily issued by the Federal National Mortgage Association, Government National Mortgage Association, or Federal Home Loan Mortgage Corporation, which carry implicit or explicit guarantees of the U.S. government. The Company's commercial mortgage-backed securities are primarily senior tranches with a weighted average rating of AAAAA+ and a weighted average duration of 4 years at JuneSeptember 30, 2023.
The fair value of available-for-sale debt securities with gross unrealized losses by investment type and length of time that individual securities have been in a continuous unrealized loss position were as follows ($ in millions):
| | | | June 30, 2023 | | December 31, 2022 | | September 30, 2023 | | December 31, 2022 |
| | | Less Than 12 Months | | 12 Months or More | | Less Than 12 Months | | 12 Months or More | | Less Than 12 Months | | 12 Months or More | | Less Than 12 Months | | 12 Months or More |
| | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ | (3) | | | $ | 207 | | | $ | (12) | | | $ | 191 | | | $ | (5) | | | $ | 342 | | | $ | (11) | | | $ | 184 | | U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ | (1) | | | $ | 161 | | | $ | (12) | | | $ | 247 | | | $ | (5) | | | $ | 342 | | | $ | (11) | | | $ | 184 | |
| Corporate securities | Corporate securities | (73) | | | 2,942 | | | (651) | | | 6,049 | | | (340) | | | 5,368 | | | (438) | | | 3,400 | | Corporate securities | (76) | | | 2,470 | | | (674) | | | 6,393 | | | (340) | | | 5,368 | | | (438) | | | 3,400 | |
| Municipal securities | Municipal securities | (26) | | | 1,413 | | | (208) | | | 1,990 | | | (142) | | | 2,437 | | | (138) | | | 995 | | Municipal securities | (44) | | | 1,308 | | | (250) | | | 2,211 | | | (142) | | | 2,437 | | | (138) | | | 995 | |
| Asset-backed securities | Asset-backed securities | (8) | | | 431 | | | (52) | | | 949 | | | (29) | | | 786 | | | (41) | | | 486 | | Asset-backed securities | (7) | | | 486 | | | (45) | | | 946 | | | (29) | | | 786 | | | (41) | | | 486 | |
| Residential mortgage-backed securities | Residential mortgage-backed securities | (16) | | | 494 | | | (104) | | | 644 | | | (55) | | | 629 | | | (66) | | | 352 | | Residential mortgage-backed securities | (23) | | | 517 | | | (149) | | | 786 | | | (55) | | | 629 | | | (66) | | | 352 | |
| Commercial mortgage-backed securities | Commercial mortgage-backed securities | (8) | | | 224 | | | (92) | | | 736 | | | (49) | | | 513 | | | (50) | | | 330 | | Commercial mortgage-backed securities | (11) | | | 228 | | | (101) | | | 748 | | | (49) | | | 513 | | | (50) | | | 330 | |
| | Total | Total | $ | (134) | | | $ | 5,711 | | | $ | (1,119) | | | $ | 10,559 | | | $ | (620) | | | $ | 10,075 | | | $ | (744) | | | $ | 5,747 | | Total | $ | (162) | | | $ | 5,170 | | | $ | (1,231) | | | $ | 11,331 | | | $ | (620) | | | $ | 10,075 | | | $ | (744) | | | $ | 5,747 | |
As of JuneSeptember 30, 2023, the gross unrealized losses were generated from 6,3926,355 positions out of a total of 6,9106,604 positions. The change in fair value of available-for-sale debt securities is primarily a result of movement in interest rates subsequent to the purchase of the security.
For each security in an unrealized loss position, the Company assesses whether it intends to sell the security or if it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual, or regulatory purposes. If the security meets this criterion, the decline in fair value is recorded in earnings. The Company does not intend to sell these securities prior to maturity and it is not likely that the Company will be required to sell these securities prior to maturity; therefore, the Company did not record an impairment for these securities.
In addition, the Company monitors available-for-sale debt securities for credit losses. Certain investments have experienced a decline in fair value due to changes in credit quality, market interest rates, and/or general economic conditions. The Company recognizes an allowance when evidence demonstrates that the decline in fair value is credit related. Evidence of a credit relatedcredit-related loss may include rating agency actions, adverse conditions specifically related to the security, or failure of the issuer of the security to make scheduled payments.
The contractual maturities of short-term and long-term debt securities and restricted deposits are as follows ($ in millions):
| | | | June 30, 2023 | | December 31, 2022 | | September 30, 2023 | | December 31, 2022 |
| | | Investments | | Restricted Deposits | | Investments | | Restricted Deposits | | Investments | | Restricted Deposits | | Investments | | Restricted Deposits |
| | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| One year or less | One year or less | $ | 2,095 | | | $ | 2,064 | | | $ | 627 | | | $ | 625 | | | $ | 2,207 | | | $ | 2,179 | | | $ | 534 | | | $ | 532 | | One year or less | $ | 2,121 | | | $ | 2,091 | | | $ | 537 | | | $ | 534 | | | $ | 2,207 | | | $ | 2,179 | | | $ | 534 | | | $ | 532 | |
| One year through five years | One year through five years | 8,144 | | | 7,630 | | | 509 | | | 477 | | | 7,651 | | | 7,147 | | | 524 | | | 490 | | One year through five years | 7,421 | | | 6,906 | | | 531 | | | 496 | | | 7,651 | | | 7,147 | | | 524 | | | 490 | |
| Five years through ten years | Five years through ten years | 4,169 | | | 3,826 | | | 254 | | | 232 | | | 4,066 | | | 3,613 | | | 224 | | | 195 | | Five years through ten years | 3,931 | | | 3,501 | | | 312 | | | 282 | | | 4,066 | | | 3,613 | | | 224 | | | 195 | |
| Greater than ten years | Greater than ten years | 160 | | | 154 | | | 22 | | | 21 | | | 135 | | | 129 | | | — | | | — | | Greater than ten years | 123 | | | 113 | | | 32 | | | 31 | | | 135 | | | 129 | | | — | | | — | |
| Asset-backed securities | Asset-backed securities | 3,934 | | | 3,656 | | | — | | | — | | | 3,522 | | | 3,234 | | | — | | | — | | Asset-backed securities | 4,208 | | | 3,874 | | | — | | | — | | | 3,522 | | | 3,234 | | | — | | | — | |
| Total | Total | $ | 18,502 | | | $ | 17,330 | | | $ | 1,412 | | | $ | 1,355 | | | $ | 17,581 | | | $ | 16,302 | | | $ | 1,282 | | | $ | 1,217 | | Total | $ | 17,804 | | | $ | 16,485 | | | $ | 1,412 | | | $ | 1,343 | | | $ | 17,581 | | | $ | 16,302 | | | $ | 1,282 | | | $ | 1,217 | |
Actual maturities may differ from contractual maturities due to call or prepayment options. Equity securities, private equity investments, and life insurance contracts are excluded from the table above because they do not have a contractual maturity. The Company has an option to redeem at amortized cost substantially all of the securities included in the greater than ten years category listed above.above at amortized cost.
4. Fair Value Measurements
Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are categorized based upon observable or unobservable inputs used to estimate fair value. Level inputs are as follows:
| | | | | | | | |
| Level Input: | | Input Definition: |
| Level I | | Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. |
| | | |
| Level II | | Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date. |
| | | |
| Level III | | Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. |
The following table summarizes fair value measurements by level at JuneSeptember 30, 2023, for assets and liabilities measured at fair value on a recurring basis ($ in millions):
| | | | Level I | | Level II | | Level III | | Total | | Level I | | Level II | | Level III | | Total |
| Assets | Assets | | | | | | | | Assets | | | | | | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 17,170 | | | $ | — | | | $ | — | | | $ | 17,170 | | Cash and cash equivalents | $ | 18,190 | | | $ | — | | | $ | — | | | $ | 18,190 | |
| Investments: | Investments: | | | | | | | | Investments: | | | | | | | |
| U.S. Treasury securities and obligations of U.S. government corporations and agencies | U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ | 112 | | | $ | — | | | $ | — | | | $ | 112 | | U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ | 81 | | | $ | — | | | $ | — | | | $ | 81 | |
| Corporate securities | Corporate securities | — | | | 9,833 | | | — | | | 9,833 | | Corporate securities | — | | | 9,142 | | | — | | | 9,142 | |
| Municipal securities | Municipal securities | — | | | 3,310 | | | — | | | 3,310 | | Municipal securities | — | | | 2,918 | | | — | | | 2,918 | |
| Short-term time deposits | Short-term time deposits | — | | | 419 | | | — | | | 419 | | Short-term time deposits | — | | | 470 | | | — | | | 470 | |
| Asset-backed securities | Asset-backed securities | — | | | 1,448 | | | — | | | 1,448 | | Asset-backed securities | — | | | 1,583 | | | — | | | 1,583 | |
| Residential mortgage-backed securities | Residential mortgage-backed securities | — | | | 1,227 | | | — | | | 1,227 | | Residential mortgage-backed securities | — | | | 1,303 | | | — | | | 1,303 | |
| Commercial mortgage-backed securities | Commercial mortgage-backed securities | — | | | 981 | | | — | | | 981 | | Commercial mortgage-backed securities | — | | | 988 | | | — | | | 988 | |
| Equity securities | Equity securities | — | | | 2 | | | — | | | 2 | | Equity securities | — | | | 2 | | | — | | | 2 | |
| Total investments | Total investments | $ | 112 | | | $ | 17,220 | | | $ | — | | | $ | 17,332 | | Total investments | $ | 81 | | | $ | 16,406 | | | $ | — | | | $ | 16,487 | |
| Restricted deposits: | Restricted deposits: | | | | | | | | Restricted deposits: | | | | | | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 358 | | | $ | — | | | $ | — | | | $ | 358 | | Cash and cash equivalents | $ | 260 | | | $ | — | | | $ | — | | | $ | 260 | |
| U.S. Treasury securities and obligations of U.S. government corporations and agencies | U.S. Treasury securities and obligations of U.S. government corporations and agencies | 338 | | | — | | | — | | | 338 | | U.S. Treasury securities and obligations of U.S. government corporations and agencies | 327 | | | — | | | — | | | 327 | |
| Corporate securities | Corporate securities | — | | | 34 | | | — | | | 34 | | Corporate securities | — | | | 32 | | | — | | | 32 | |
| Certificates of deposit | Certificates of deposit | — | | | 4 | | | — | | | 4 | | Certificates of deposit | — | | | 4 | | | — | | | 4 | |
| Municipal securities | Municipal securities | — | | | 621 | | | — | | | 621 | | Municipal securities | — | | | 720 | | | — | | | 720 | |
| Total restricted deposits | Total restricted deposits | $ | 696 | | | $ | 659 | | | $ | — | | | $ | 1,355 | | Total restricted deposits | $ | 587 | | | $ | 756 | | | $ | — | | | $ | 1,343 | |
| Other current assets: | | Other current assets: | | | | | | | |
| Foreign currency swap agreement | | Foreign currency swap agreement | $ | — | | | $ | 27 | | | $ | — | | | $ | 27 | |
| Total assets at fair value | Total assets at fair value | $ | 17,978 | | | $ | 17,879 | | | $ | — | | | $ | 35,857 | | Total assets at fair value | $ | 18,858 | | | $ | 17,189 | | | $ | — | | | $ | 36,047 | |
|
The following table summarizes fair value measurements by level at December 31, 2022, for assets and liabilities measured at fair value on a recurring basis ($ in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| | Level I | | Level II | | Level III | | Total |
| Assets | | | | | | | |
| Cash and cash equivalents | $ | 12,074 | | | $ | — | | | $ | — | | | $ | 12,074 | |
| Investments: | | | | | | | |
| U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ | 366 | | | $ | 5 | | | $ | — | | | $ | 371 | |
| Corporate securities | — | | | 9,328 | | | — | | | 9,328 | |
| Municipal securities | — | | | 3,165 | | | — | | | 3,165 | |
| Short-term time deposits | — | | | 204 | | | — | | | 204 | |
| Asset backed securities | — | | | 1,326 | | | — | | | 1,326 | |
| Residential mortgage-backed securities | — | | | 1,046 | | | — | | | 1,046 | |
| Commercial mortgage-backed securities | — | | | 862 | | | — | | | 862 | |
| Equity securities | 3 | | | 2 | | | — | | | 5 | |
| Total investments | $ | 369 | | | $ | 15,938 | | | $ | — | | | $ | 16,307 | |
| Restricted deposits: | | | | | | | |
| Cash and cash equivalents | $ | 256 | | | $ | — | | | $ | — | | | $ | 256 | |
| U.S. Treasury securities and obligations of U.S. government corporations and agencies | 308 | | | — | | | — | | | 308 | |
| Corporate securities | — | | | 33 | | | — | | | 33 | |
| Certificates of deposit | — | | | 4 | | | — | | | 4 | |
| Municipal securities | — | | | 616 | | | — | | | 616 | |
| Total restricted deposits | $ | 564 | | | $ | 653 | | | $ | — | | | $ | 1,217 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total assets at fair value | $ | 13,007 | | | $ | 16,591 | | | $ | — | | | $ | 29,598 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The Company utilizes matrix-pricing services to estimate fair value for securities which are not actively traded on the measurement date. The Company designates these securities as Level II fair value measurements. In addition, the aggregate carrying amount of the Company's private equity investments and life insurance contracts, which approximates fair value, was $988 million and $698 million as of JuneSeptember 30, 2023 and December 31, 2022, respectively.
5. Goodwill and Intangible Assets
As discussed in Note 1. Organization and Operations, in the first quarter of 2023, the Company updated its segment structure. Prior year information has been adjusted to reflect the change in segment reporting.
The following table summarizes the changes in goodwill by operating segment ($ in millions):
| | | | Medicaid | | Medicare | | Commercial | | Other | | Consolidated Total | | Medicaid | | Medicare | | Commercial | | Other | | Consolidated Total |
| Balance, December 31, 2021 | Balance, December 31, 2021 | $ | 10,194 | | | $ | 1,592 | | | $ | 5,424 | | | $ | 2,561 | | | $ | 19,771 | | Balance, December 31, 2021 | $ | 10,194 | | | $ | 1,592 | | | $ | 5,424 | | | $ | 2,561 | | | $ | 19,771 | |
| Acquisition and purchase accounting adjustments | Acquisition and purchase accounting adjustments | — | | | — | | | — | | | 1,077 | | | 1,077 | | Acquisition and purchase accounting adjustments | — | | | — | | | — | | | 1,077 | | | 1,077 | |
| Divestitures | Divestitures | — | | | — | | | — | | | (1,533) | | | (1,533) | | Divestitures | — | | | — | | | — | | | (1,533) | | | (1,533) | |
| Reallocation | Reallocation | 4 | | | — | | | — | | | (4) | | | — | | Reallocation | 4 | | | — | | | — | | | (4) | | | — | |
| Impairments | Impairments | — | | | — | | | — | | | (370) | | | (370) | | Impairments | — | | | — | | | — | | | (370) | | | (370) | |
| Translation impact | Translation impact | — | | | — | | | — | | | (133) | | | (133) | | Translation impact | — | | | — | | | — | | | (133) | | | (133) | |
| Balance, December 31, 2022 | Balance, December 31, 2022 | $ | 10,198 | | | $ | 1,592 | | | $ | 5,424 | | | $ | 1,598 | | | $ | 18,812 | | Balance, December 31, 2022 | $ | 10,198 | | | $ | 1,592 | | | $ | 5,424 | | | $ | 1,598 | | | $ | 18,812 | |
| Divestitures | Divestitures | — | | | — | | | — | | | (152) | | | (152) | | Divestitures | — | | | — | | | — | | | (933) | | | (933) | |
| | Impairments | | Impairments | — | | | — | | | — | | | (348) | | | (348) | |
| Translation impact | Translation impact | — | | | — | | | — | | | 56 | | | 56 | | Translation impact | — | | | — | | | — | | | 27 | | | 27 | |
| Balance, June 30, 2023 | $ | 10,198 | | | $ | 1,592 | | | $ | 5,424 | | | $ | 1,502 | | | $ | 18,716 | | |
| Balance, September 30, 2023 | | Balance, September 30, 2023 | $ | 10,198 | | | $ | 1,592 | | | $ | 5,424 | | | $ | 344 | | | $ | 17,558 | |
The decrease in the Other segment goodwill in 2023 was primarily driven by the pending divestiture of Circle Health, which resulted in held for sale accounting and an impairment of $251 million as discussed in Note 2. Acquisitions and Divestitures, and an impairment of the Company's Operose Health business based on market indicators of fair value.
6. Medical Claims Liability
As discussed in Note 1. Organization and Operations, in the first quarter of 2023, the Company updated its segment structure. Prior year information has been adjusted to reflect the change in segment reporting.
The following table summarizes the change in medical claims liability for the sixnine months ended JuneSeptember 30, 2023 ($ in millions):
| | | | Medicaid | | Medicare | | Commercial | | Other | | Consolidated Total | | Medicaid | | Medicare | | Commercial | | Other | | Consolidated Total |
| Balance, January 1, 2023 | Balance, January 1, 2023 | $ | 11,253 | | | $ | 3,431 | | | $ | 1,921 | | | $ | 140 | | | $ | 16,745 | | Balance, January 1, 2023 | $ | 11,253 | | | $ | 3,431 | | | $ | 1,921 | | | $ | 140 | | | $ | 16,745 | |
| Less: Reinsurance recoverable | Less: Reinsurance recoverable | 7 | | | — | | | 19 | | | — | | | 26 | | Less: Reinsurance recoverable | 7 | | | — | | | 19 | | | — | | | 26 | |
| Balance, January 1, 2023, net | Balance, January 1, 2023, net | 11,246 | | | 3,431 | | | 1,902 | | | 140 | | | 16,719 | | Balance, January 1, 2023, net | 11,246 | | | 3,431 | | | 1,902 | | | 140 | | | 16,719 | |
| | Incurred related to: | Incurred related to: | | Incurred related to: | |
| Current year | Current year | 40,622 | | | 10,083 | | | 8,857 | | | 773 | | | 60,335 | | Current year | 60,379 | | | 14,680 | | | 13,994 | | | 1,095 | | | 90,148 | |
| Prior years | Prior years | (1,153) | | | (191) | | | (208) | | | (2) | | | (1,554) | | Prior years | (1,303) | | | (326) | | | (256) | | | (3) | | | (1,888) | |
| Total incurred | Total incurred | 39,469 | | | 9,892 | | | 8,649 | | | 771 | | | 58,781 | | Total incurred | 59,076 | | | 14,354 | | | 13,738 | | | 1,092 | | | 88,260 | |
| Paid related to: | Paid related to: | | | | | | | | | | Paid related to: | | | | | | | | | |
| Current year | Current year | 31,837 | | | 7,726 | | | 6,751 | | | 656 | | | 46,970 | | Current year | 50,774 | | | 12,069 | | | 11,575 | | | 984 | | | 75,402 | |
| Prior years | Prior years | 7,890 | | | 2,357 | | | 1,282 | | | 137 | | | 11,666 | | Prior years | 8,517 | | | 2,452 | | | 1,376 | | | 136 | | | 12,481 | |
| Total paid | Total paid | 39,727 | | | 10,083 | | | 8,033 | | | 793 | | | 58,636 | | Total paid | 59,291 | | | 14,521 | | | 12,951 | | | 1,120 | | | 87,883 | |
| Balance, June 30, 2023, net | 10,988 | | | 3,240 | | | 2,518 | | | 118 | | | 16,864 | | |
| Balance, September 30, 2023, net | | Balance, September 30, 2023, net | 11,031 | | | 3,264 | | | 2,689 | | | 112 | | | 17,096 | |
| Plus: Reinsurance recoverable | Plus: Reinsurance recoverable | 5 | | | — | | | 15 | | | — | | | 20 | | Plus: Reinsurance recoverable | 4 | | | — | | | 41 | | | — | | | 45 | |
| Balance, June 30, 2023 | $ | 10,993 | | | $ | 3,240 | | | $ | 2,533 | | | $ | 118 | | | $ | 16,884 | | |
| Balance, September 30, 2023 | | Balance, September 30, 2023 | $ | 11,035 | | | $ | 3,264 | | | $ | 2,730 | | | $ | 112 | | | $ | 17,141 | |
The following table summarizes the change in medical claims liability for the sixnine months ended JuneSeptember 30, 2022 ($ in millions):
| | | | Medicaid | | Medicare | | Commercial | | Other | | Consolidated Total | | Medicaid | | Medicare | | Commercial | | Other | | Consolidated Total |
| Balance, January 1, 2022 | Balance, January 1, 2022 | $ | 9,845 | | | $ | 2,286 | | | $ | 2,014 | | | $ | 98 | | | $ | 14,243 | | Balance, January 1, 2022 | $ | 9,845 | | | $ | 2,286 | | | $ | 2,014 | | | $ | 98 | | | $ | 14,243 | |
| Less: Reinsurance recoverable | Less: Reinsurance recoverable | 23 | | | — | | | — | | | — | | | 23 | | Less: Reinsurance recoverable | 23 | | | — | | | — | | | — | | | 23 | |
| Balance, January 1, 2022, net | Balance, January 1, 2022, net | 9,822 | | | 2,286 | | | 2,014 | | | 98 | | | 14,220 | | Balance, January 1, 2022, net | 9,822 | | | 2,286 | | | 2,014 | | | 98 | | | 14,220 | |
| Acquisitions and divestitures | Acquisitions and divestitures | — | | | — | | | — | | | 249 | | | 249 | | Acquisitions and divestitures | — | | | — | | | — | | | 249 | | | 249 | |
| Incurred related to: | Incurred related to: | | Incurred related to: | |
| Current year | Current year | 37,803 | | | 9,918 | | | 7,001 | | | 1,457 | | | 56,179 | | Current year | 57,074 | | | 14,624 | | | 10,609 | | | 2,150 | | | 84,457 | |
| Prior years | Prior years | (770) | | | (46) | | | (198) | | | (15) | | | (1,029) | | Prior years | (966) | | | (22) | | | (193) | | | (15) | | | (1,196) | |
| Total incurred | Total incurred | 37,033 | | | 9,872 | | | 6,803 | | | 1,442 | | | 55,150 | | Total incurred | 56,108 | | | 14,602 | | | 10,416 | | | 2,135 | | | 83,261 | |
| Paid related to: | Paid related to: | | | | | | | | | | Paid related to: | | | | | | | | | |
| Current year | Current year | 29,007 | | | 6,977 | | | 5,475 | | | 1,427 | | | 42,886 | | Current year | 47,481 | | | 11,603 | | | 9,046 | | | 2,175 | | | 70,305 | |
| Prior years | Prior years | 6,808 | | | 1,784 | | | 1,489 | | | 80 | | | 10,161 | | Prior years | 7,343 | | | 1,963 | | | 1,580 | | | 82 | | | 10,968 | |
| Total paid | Total paid | 35,815 | | | 8,761 | | | 6,964 | | | 1,507 | | | 53,047 | | Total paid | 54,824 | | | 13,566 | | | 10,626 | | | 2,257 | | | 81,273 | |
| Balance, June 30, 2022, net | 11,040 | | | 3,397 | | | 1,853 | | | 282 | | | 16,572 | | |
| Balance, September 30, 2022, net | | Balance, September 30, 2022, net | 11,106 | | | 3,322 | | | 1,804 | | | 225 | | | 16,457 | |
| Plus: Reinsurance recoverable | Plus: Reinsurance recoverable | 9 | | | — | | | — | | | — | | | 9 | | Plus: Reinsurance recoverable | 8 | | | — | | | — | | | — | | | 8 | |
| Balance, June 30, 2022 | $ | 11,049 | | | $ | 3,397 | | | $ | 1,853 | | | $ | 282 | | | $ | 16,581 | | |
| Balance, September 30, 2022 | | Balance, September 30, 2022 | $ | 11,114 | | | $ | 3,322 | | | $ | 1,804 | | | $ | 225 | | | $ | 16,465 | |
Reinsurance recoverables related to medical claims are included in premium and trade receivables. Changes in estimates of incurred claims for prior years are primarily attributable to reserving under moderately adverse conditions. Additionally, as a result of development within "Incurred related to: Prior years," the Company recorded $341 million and $121 million as a reduction to premium revenue in the nine months ended September 30, 2023 and 2022, respectively, for minimum health benefits ratio (HBR) and other return of premium programs, the Company recorded $319 million and $48 million as a reduction to premium revenue in the six months ended June 30, 2023 and 2022, respectively.programs.
Incurred but not reported (IBNR) plus expected development on reported claims as of JuneSeptember 30, 2023 was $11,360$11,661 million. Total IBNR plus expected development on reported claims represents estimates for claims incurred but not reported, development on reported claims, and estimates for the costs necessary to process unpaid claims at the end of each period. The Company estimates its liability using actuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice. These actuarial methods consider factors such as historical data for payment patterns, cost trends, product mix, seasonality, utilization of healthcare services, and other relevant factors.
7. Affordable Care Act
The Affordable Care Act established risk spreading premium stabilization programs as well as a minimum annual medical loss ratio (MLR) and cost sharing reductions.
The Company's net receivables (payables) for each of the programs are as follows ($ in millions):
| | | June 30, 2023 | | December 31, 2022 | | September 30, 2023 | | December 31, 2022 |
| Risk adjustment receivable | Risk adjustment receivable | $ | 1,088 | | | $ | 838 | | Risk adjustment receivable | $ | 1,130 | | | $ | 838 | |
| Risk adjustment payable | Risk adjustment payable | (2,303) | | | (780) | | Risk adjustment payable | (2,312) | | | (780) | |
| Minimum medical loss ratio | Minimum medical loss ratio | (233) | | | (103) | | Minimum medical loss ratio | (90) | | | (103) | |
| Cost sharing reduction receivable | 2 | | | — | | |
| | Cost sharing reduction payable | Cost sharing reduction payable | (87) | | | (99) | | Cost sharing reduction payable | (104) | | | (99) | |
In June 2023, the Centers for Medicare and Medicaid Services (CMS) announced the final risk adjustment transfers for the 2022 benefit year. As a result of and subsequent to the announcement, the Company increased its risk adjustment net receivables by $240$244 million from December 31, 2022. After consideration of minimum MLR and other related impacts, the net pre-tax benefit recognized was approximately $196$198 million in the sixnine months ended JuneSeptember 30, 2023.
8. Debt
Debt consists of the following ($ in millions):
| | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 |
| $2,500 million 4.25% Senior Notes due December 15, 2027 | $ | 2,394 | | | $ | 2,393 | |
| $2,300 million 2.45% Senior Notes due July 15, 2028 | 2,303 | | | 2,303 | |
| $3,500 million 4.625% Senior Notes due December 15, 2029 | 3,277 | | | 3,277 | |
| $2,000 million 3.375% Senior Notes due February 15, 2030 | 2,000 | | | 2,000 | |
| $2,200 million 3.00% Senior Notes due October 15, 2030 | 2,200 | | | 2,200 | |
| $2,200 million 2.50% Senior Notes due March 1, 2031 | 2,200 | | | 2,200 | |
| $1,300 million 2.625% Senior Notes due August 1, 2031 | 1,300 | | | 1,300 | |
| | | |
| Total senior notes | 15,674 | | | 15,673 | |
| Term loan facility | 2,156 | | | 2,183 | |
| Revolving credit agreement | 61 | | | 58 | |
| Finance leases and other | 250 | | | 253 | |
| Debt issuance costs | (135) | | | (147) | |
| Total debt | 18,006 | | | 18,020 | |
| Less: current portion | (110) | | | (82) | |
| Long-term debt | $ | 17,896 | | | $ | 17,938 | |
| | | | | | | | | | | |
| | September 30, 2023 | | December 31, 2022 |
| $2,500 million 4.25% Senior Notes due December 15, 2027 | $ | 2,395 | | | $ | 2,393 | |
| $2,300 million 2.45% Senior Notes due July 15, 2028 | 2,303 | | | 2,303 | |
| $3,500 million 4.625% Senior Notes due December 15, 2029 | 3,277 | | | 3,277 | |
| $2,000 million 3.375% Senior Notes due February 15, 2030 | 2,000 | | | 2,000 | |
| $2,200 million 3.00% Senior Notes due October 15, 2030 | 2,200 | | | 2,200 | |
| $2,200 million 2.50% Senior Notes due March 1, 2031 | 2,200 | | | 2,200 | |
| $1,300 million 2.625% Senior Notes due August 1, 2031 | 1,300 | | | 1,300 | |
| | | |
| Total senior notes | 15,675 | | | 15,673 | |
| Term Loan Facility | 2,142 | | | 2,183 | |
| Revolving Credit Agreement | 309 | | | 58 | |
| Finance leases and other | 3 | | | 253 | |
| Debt issuance costs | (128) | | | (147) | |
| Total debt | 18,001 | | | 18,020 | |
| Less: current portion | (113) | | | (82) | |
| Long-term debt | $ | 17,888 | | | $ | 17,938 | |
In May 2023, the Company entered into a first amendment to the Company's Fourth Amended and Restated Credit Agreement. The amendment removed and replaced the interest rate benchmark based on the London Interbank Offered Rate (LIBOR) and related LIBOR-based mechanics applicable to U.S. dollar borrowings under the Amended and Restated Credit Agreement with an interest rate benchmark based on the Secured Overnight Financing Rate (SOFR) (including a customary credit spread adjustment) and related SOFR-based mechanics. Additionally, the amendment removed certain provisions which required the Company to make certain mandatory prepayments of the Term Loan.
9. Leases
The following table sets forth the right-of-use (ROU) assets and lease liabilities ($ in millions):
| | | | June 30, 2023 | | December 31, 2022 | | September 30, 2023 | | December 31, 2022 |
| Assets | Assets | | | | Assets | | | |
| | ROU assets (recorded within other long-term assets) | ROU assets (recorded within other long-term assets) | $ | 2,613 | | | $ | 2,554 | | ROU assets (recorded within other long-term assets) | $ | 430 | | | $ | 2,554 | |
| | Liabilities | Liabilities | | Liabilities | |
| Short-term (recorded within accounts payable and accrued expenses) | Short-term (recorded within accounts payable and accrued expenses) | $ | 176 | | | $ | 180 | | Short-term (recorded within accounts payable and accrued expenses) | $ | 170 | | | $ | 180 | |
| Long-term (recorded within other long-term liabilities) | Long-term (recorded within other long-term liabilities) | 3,171 | | | 3,133 | | Long-term (recorded within other long-term liabilities) | 936 | | | 3,133 | |
| Total lease liabilities | Total lease liabilities | $ | 3,347 | | | $ | 3,313 | | Total lease liabilities | $ | 1,106 | | | $ | 3,313 | |
The decrease in ROU assets and lease liabilities in 2023 was primarily driven by divestiture related activity as discussed in Note 2. Acquisitions and Divestitures. Specifically, as of September 30, 2023, Circle Health was considered held for sale and accordingly the associated ROU assets and lease liabilities were reclassified to other current assets and accounts payable and accrued expenses, respectively, in the Consolidated Balance Sheet.
Additionally, in conjunction with ongoing real estate optimization initiatives, the Company recognized $35 million and $37 million of ROU asset impairments for the three and nine months ended September 30, 2023, respectively. The remainder of the $85 million real estate optimization impairment charge for the nine months ended September 30, 2023 was related to property, software and equipment.
As of JuneSeptember 30, 2023, the weighted average remaining lease term for the Company was 21.020.3 years. The average remaining lease term of the Circle Health portfolio is 27.326.5 years. Excluding Circle Health, the Company's portfolio average remaining lease term is 8.48.3 years. The lease liabilities as of JuneSeptember 30, 2023, reflect a weighted average discount rate of 5.9%.5.8%, or 3.2% excluding Circle Health.
Excluding Circle Health, the Company had $51 million remaining in lease payments for 2023 as of September 30, 2023. Lease payments over the next five years and thereafter are as follows ($ in millions):
| | | | | | | | |
| | | Lease Payments |
| 2024 | | $ | 201 | |
| 2025 | | 176 | |
| 2026 | | 151 | |
| 2027 | | 133 | |
| 2028 | | 113 | |
| Thereafter | | 441 | |
| Total lease payments | | 1,215 | |
| Less: imputed interest | | (160) | |
| Total lease liabilities | | $ | 1,055 | |
10. Stockholders' Equity
The Company's Board of Directors has authorized a stock repurchase program of the Company's common stock from time to time on the open market or through privately negotiated transactions. In 2022, the Company's Board of Directors authorized increases under the program including $3,000 million in June 2022 and an additional $2,000 million in December 2022. With these increases, the Company is authorized to repurchase up to $6,000 million, inclusive of past authorizations. As of JuneSeptember 30, 2023, the Company had a remaining amount of $2,029$1,256 million available under the stock repurchase program. In JulyOctober 2023, the Company repurchased an additional 4.5 million397 thousand shares for $300$27 million.
The following represents the Company's share repurchase activity ($ in millions, shares in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 | | |
| | Shares | Cost | | Shares | Cost | | Shares | Cost | | Shares | Cost | | | |
| Share buybacks | 6,028 | | $ | 400 | | | 4,188 | | $ | 344 | | | 10,880 | | $ | 777 | | | 4,188 | | $ | 344 | | | | |
| Income tax withholding | 71 | | 5 | | | 61 | | 5 | | | 767 | | 51 | | | 907 | | 76 | | | | |
Total share repurchases (1) | 6,099 | | $ | 405 | | | 4,249 | | $ | 349 | | | 11,647 | | $ | 828 | | | 5,095 | | $ | 420 | | | | |
| | | | | | | | | | | | | | | |
| (1) | Excludes share repurchase excise tax of $3 million accrued as of June 30, 2023. | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 (2) | | 2023 | | 2022 (2) | | |
| | Shares | Cost | | Shares | Cost | | Shares | Cost | | Shares | Cost | | | |
| Share buybacks | 11,609 | | $ | 773 | | | 11,486 | | $ | 1,040 | | | 22,489 | | $ | 1,550 | | | 15,674 | | $ | 1,384 | | | | |
| Income tax withholding | 11 | | 1 | | | 34 | | 3 | | | 778 | | 52 | | | 941 | | 79 | | | | |
Total share repurchases (1) | 11,620 | | $ | 774 | | | 11,520 | | $ | 1,043 | | | 23,267 | | $ | 1,602 | | | 16,615 | | $ | 1,463 | | | | |
| | | | | | | | | | | | | | | |
| (1) | Excludes share repurchase excise tax of $10 million accrued as of September 30, 2023. | | | |
| (2) | Includes 8.6 million shares delivered as part of an accelerated share repurchase (ASR) agreement, representing 80% of the $1,000 million notional amount. Remaining shares were delivered in the fourth quarter of 2022 upon the settlement of the ASR. | | | |
Shares repurchased for income tax withholding are shares withheld in connection with employee stock plans to meet applicable tax withholding requirements. These shares are typically included in the Company's treasury stock.
11. Earnings Per Share
The following table sets forth the calculation of basic and diluted net earnings (loss) per common share ($ in millions, except per share data in dollars and shares in thousands):
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2023 | | 2022 | | 2023 | | 2022 | | | 2023 | | 2022 | | 2023 | | 2022 |
| | Earnings (loss) attributable to Centene Corporation | $ | 1,058 | | | $ | (172) | | | $ | 2,188 | | | $ | 677 | | |
| Earnings attributable to Centene Corporation | | Earnings attributable to Centene Corporation | $ | 469 | | | $ | 738 | | | $ | 2,657 | | | $ | 1,415 | |
| | Shares used in computing per share amounts: | Shares used in computing per share amounts: | | | Shares used in computing per share amounts: | | |
| Weighted average number of common shares outstanding | Weighted average number of common shares outstanding | 548,932 | | | 583,644 | | | 549,850 | | | 583,435 | | Weighted average number of common shares outstanding | 539,535 | | | 573,961 | | | 546,374 | | | 580,277 | |
Common stock equivalents (as determined by applying the treasury stock method) (1) | Common stock equivalents (as determined by applying the treasury stock method) (1) | 1,376 | | | — | | | 2,146 | | | 6,791 | | Common stock equivalents (as determined by applying the treasury stock method) (1) | 1,735 | | | 6,646 | | | 2,038 | | | 6,807 | |
| Weighted average number of common shares and potential dilutive common shares outstanding | Weighted average number of common shares and potential dilutive common shares outstanding | 550,308 | | | 583,644 | | | 551,996 | | | 590,226 | | Weighted average number of common shares and potential dilutive common shares outstanding | 541,270 | | | 580,607 | | | 548,412 | | | 587,084 | |
| | Net earnings (loss) per common share attributable to Centene Corporation: | | |
| Basic earnings (loss) per common share | $ | 1.93 | | | $ | (0.29) | | | $ | 3.98 | | | $ | 1.16 | | |
| Diluted earnings (loss) per common share | $ | 1.92 | | | $ | (0.29) | | | $ | 3.96 | | | $ | 1.15 | | |
| Net earnings per common share attributable to Centene Corporation: | | Net earnings per common share attributable to Centene Corporation: | |
| Basic earnings per common share | | Basic earnings per common share | $ | 0.87 | | | $ | 1.29 | | | $ | 4.86 | | | $ | 2.44 | |
| Diluted earnings per common share | | Diluted earnings per common share | $ | 0.87 | | | $ | 1.27 | | | $ | 4.85 | | | $ | 2.41 | |
| | (1) | (1) | The reduction in common stock equivalents is primarily driven by the distribution of long-term stock awards to the estate of the Company's former CEO during the first quarter of 2023, which were fully dilutive prior to their distribution. | (1) | The reduction in common stock equivalents is primarily driven by the distribution of long-term stock awards to the estate of the Company's former CEO during the first quarter of 2023, which were fully dilutive prior to their distribution. |
The calculation of diluted earnings per common share for the three months ended JuneSeptember 30, 2023 and 2022 excludes 2 million1,313 thousand shares and 152 thousand shares, respectively, related to anti-dilutive stock options, restricted stock, and restricted stock units. The calculation of diluted (loss) per common share for the three months ended June 30, 2022 excludes 6 million shares related to anti-dilutive stock equivalents due to the net loss for the quarter.
The calculation of diluted earnings per common share for the sixnine months ended JuneSeptember 30, 2023 and 2022 excludes 2 million1,383 thousand shares and 226193 thousand shares, respectively, related to anti-dilutive stock options, restricted stock, and restricted stock units.
12. Segment Information
In the first quarter of 2023, and in conjunction with the Company's updated strategic plan, executive leadership realignment, and corresponding 2023 divestitures, the Company revised the way it manages the business, evaluates performance, and allocates resources, resulting in an updated segment structure comprised of (1) a Medicaid segment, (2) a Medicare segment, (3) a Commercial segment and (4) an Other segment. Prior year information has been adjusted to reflect the change in segment reporting.
The Medicaid, Medicare, and Commercial segments represent the government-sponsored or subsidized programs under which the Company offers managed healthcare services. The Other segment includes the Company's pharmacy operations, vision and dental services, clinical healthcare, behavioral health, international operations, and corporate management companies, among others.
Factors used in determining the reportable business segments include the nature of operating activities, the existence of separate senior management teams, and the type of information presented to the Company's chief operating decision-maker to evaluate all results of operations. The Company does not report total assets by segment since this is not a metric used to allocate resources or evaluate segment performance.
Segment information for the three months ended JuneSeptember 30, 2023, is as follows ($ in millions):
| | | | Medicaid | | Medicare | | Commercial | | Other/Eliminations | | | Consolidated Total | | | Medicaid | | Medicare | | Commercial | | Other/Eliminations | | | Consolidated Total |
| Premium | Premium | $ | 21,895 | | | $ | 5,665 | | | $ | 5,734 | | | $ | 419 | | | | $ | 33,713 | | Premium | $ | 21,619 | | | $ | 5,430 | | | $ | 6,451 | | | $ | 366 | | | | $ | 33,866 | |
| Service | Service | — | | | — | | | — | | | 1,125 | | | | 1,125 | | Service | — | | | — | | | 2 | | | 1,099 | | | | 1,101 | |
| Premium and service revenues | Premium and service revenues | 21,895 | | | 5,665 | | | 5,734 | | | 1,544 | | | | 34,838 | | Premium and service revenues | 21,619 | | | 5,430 | | | 6,453 | | | 1,465 | | | | 34,967 | |
| Premium tax | Premium tax | 2,770 | | | — | | | — | | | — | | | | 2,770 | | Premium tax | 3,075 | | | — | | | — | | | — | | | | 3,075 | |
| Total external revenues | Total external revenues | 24,665 | | | 5,665 | | | 5,734 | | | 1,544 | | | | 37,608 | | Total external revenues | 24,694 | | | 5,430 | | | 6,453 | | | 1,465 | | | | 38,042 | |
| Internal revenues | Internal revenues | — | | | — | | | — | | | 3,789 | | | | 3,789 | | Internal revenues | — | | | — | | | — | | | 3,978 | | | | 3,978 | |
| Eliminations | Eliminations | — | | | — | | | — | | | (3,789) | | | | (3,789) | | Eliminations | — | | | — | | | — | | | (3,978) | | | | (3,978) | |
| Total revenues | Total revenues | $ | 24,665 | | | $ | 5,665 | | | $ | 5,734 | | | $ | 1,544 | | | | $ | 37,608 | | Total revenues | $ | 24,694 | | | $ | 5,430 | | | $ | 6,453 | | | $ | 1,465 | | | | $ | 38,042 | |
| | Medical costs | Medical costs | $ | 19,459 | | | $ | 4,884 | | | $ | 4,644 | | | $ | 360 | | | | $ | 29,347 | | Medical costs | $ | 19,607 | | | $ | 4,462 | | | $ | 5,089 | | | $ | 321 | | | | $ | 29,479 | |
| | Cost of services | Cost of services | $ | 2 | | | $ | — | | | $ | — | | | $ | 875 | | | | $ | 877 | | Cost of services | $ | — | | | $ | — | | | $ | — | | | $ | 856 | | | | $ | 856 | |
| Gross margin (1) | Gross margin (1) | $ | 2,434 | | | $ | 781 | | | $ | 1,090 | | | $ | 309 | | | | $ | 4,614 | | Gross margin (1) | $ | 2,012 | | | $ | 968 | | | $ | 1,364 | | | $ | 288 | | | | $ | 4,632 | |
| | (1) | (1) | Gross margin represents premium and service revenues less medical costs and cost of services. | (1) | Gross margin represents premium and service revenues less medical costs and cost of services. |
Segment information for the three months ended JuneSeptember 30, 2022, is as follows ($ in millions):
| | | | Medicaid | | Medicare | | Commercial | | Other/Eliminations | | | Consolidated Total | | | Medicaid | | Medicare | | Commercial | | Other/Eliminations | | | Consolidated Total |
| Premium | Premium | $ | 20,488 | | | $ | 5,639 | | | $ | 4,554 | | | $ | 829 | | | | $ | 31,510 | | Premium | $ | 21,154 | | | $ | 5,639 | | | $ | 4,291 | | | $ | 764 | | | | $ | 31,848 | |
| Service | Service | (1) | | | — | | | 1 | | | 2,458 | | | | 2,458 | | Service | — | | | — | | | 1 | | | 1,877 | | | | 1,878 | |
| Premium and service revenues | Premium and service revenues | 20,487 | | | 5,639 | | | 4,555 | | | 3,287 | | | | 33,968 | | Premium and service revenues | 21,154 | | | 5,639 | | | 4,292 | | | 2,641 | | | | 33,726 | |
| Premium tax | Premium tax | 1,968 | | | — | | | — | | | — | | | | 1,968 | | Premium tax | 2,139 | | | — | | | — | | | — | | | | 2,139 | |
| Total external revenues | Total external revenues | 22,455 | | | 5,639 | | | 4,555 | | | 3,287 | | | | 35,936 | | Total external revenues | 23,293 | | | 5,639 | | | 4,292 | | | 2,641 | | | | 35,865 | |
| Internal revenues | Internal revenues | — | | | — | | | — | | | 5,986 | | | | 5,986 | | Internal revenues | — | | | — | | | — | | | 6,420 | | | | 6,420 | |
| Eliminations | Eliminations | — | | | — | | | — | | | (5,986) | | | | (5,986) | | Eliminations | — | | | — | | | — | | | (6,420) | | | | (6,420) | |
| Total revenues | Total revenues | $ | 22,455 | | | $ | 5,639 | | | $ | 4,555 | | | $ | 3,287 | | | | $ | 35,936 | | Total revenues | $ | 23,293 | | | $ | 5,639 | | | $ | 4,292 | | | $ | 2,641 | | | | $ | 35,865 | |
| | Medical costs | Medical costs | $ | 18,258 | | | $ | 4,826 | | | $ | 3,529 | | | $ | 699 | | | | $ | 27,312 | | Medical costs | $ | 19,075 | | | $ | 4,730 | | | $ | 3,613 | | | $ | 693 | | | | $ | 28,111 | |
| | Cost of services | Cost of services | $ | — | | | $ | — | | | $ | — | | | $ | 2,099 | | | | $ | 2,099 | | Cost of services | $ | — | | | $ | — | | | $ | — | | | $ | 1,571 | | | | $ | 1,571 | |
| Gross margin (1) | Gross margin (1) | $ | 2,229 | | | $ | 813 | | | $ | 1,026 | | | $ | 489 | | | | $ | 4,557 | | Gross margin (1) | $ | 2,079 | | | $ | 909 | | | $ | 679 | | | $ | 377 | | | | $ | 4,044 | |
| | (1) | (1) | Gross margin represents premium and service revenues less medical costs and cost of services. | (1) | Gross margin represents premium and service revenues less medical costs and cost of services. |
Segment information for the sixnine months ended JuneSeptember 30, 2023, is as follows ($ in millions):
| | | | Medicaid | | Medicare | | Commercial | | Other/Eliminations | | | Consolidated Total | | | Medicaid | | Medicare | | Commercial | | Other/Eliminations | | | Consolidated Total |
| Premium | Premium | $ | 44,122 | | | $ | 11,541 | | | $ | 10,986 | | | $ | 889 | | | | $ | 67,538 | | Premium | $ | 65,741 | | | $ | 16,971 | | | $ | 17,437 | | | $ | 1,255 | | | | $ | 101,404 | |
| Service | Service | — | | | — | | | — | | | 2,252 | | | | 2,252 | | Service | — | | | — | | | 2 | | | 3,351 | | | | 3,353 | |
| Premium and service revenues | Premium and service revenues | 44,122 | | | 11,541 | | | 10,986 | | | 3,141 | | | | 69,790 | | Premium and service revenues | 65,741 | | | 16,971 | | | 17,439 | | | 4,606 | | | | 104,757 | |
| Premium tax | Premium tax | 6,707 | | | — | | | — | | | — | | | | 6,707 | | Premium tax | 9,782 | | | — | | | — | | | — | | | | 9,782 | |
| Total external revenues | Total external revenues | 50,829 | | | 11,541 | | | 10,986 | | | 3,141 | | | | 76,497 | | Total external revenues | 75,523 | | | 16,971 | | | 17,439 | | | 4,606 | | | | 114,539 | |
| Internal revenues | Internal revenues | — | | | — | | | — | | | 7,656 | | | | 7,656 | | Internal revenues | — | | | — | | | — | | | 11,634 | | | | 11,634 | |
| Eliminations | Eliminations | — | | | — | | | — | | | (7,656) | | | | (7,656) | | Eliminations | — | | | — | | | — | | | (11,634) | | | | (11,634) | |
| Total revenues | Total revenues | $ | 50,829 | | | $ | 11,541 | | | $ | 10,986 | | | $ | 3,141 | | | | $ | 76,497 | | Total revenues | $ | 75,523 | | | $ | 16,971 | | | $ | 17,439 | | | $ | 4,606 | | | | $ | 114,539 | |
| | Medical costs | Medical costs | $ | 39,469 | | | $ | 9,892 | | | $ | 8,649 | | | $ | 771 | | | | $ | 58,781 | | Medical costs | $ | 59,076 | | | $ | 14,354 | | | $ | 13,738 | | | $ | 1,092 | | | | $ | 88,260 | |
| | Cost of services | Cost of services | $ | 2 | | | $ | — | | | $ | — | | | $ | 1,745 | | | | $ | 1,747 | | Cost of services | $ | 2 | | | $ | — | | | $ | — | | | $ | 2,601 | | | | $ | 2,603 | |
| Gross margin (1) | Gross margin (1) | $ | 4,651 | | | $ | 1,649 | | | $ | 2,337 | | | $ | 625 | | | | $ | 9,262 | | Gross margin (1) | $ | 6,663 | | | $ | 2,617 | | | $ | 3,701 | | | $ | 913 | | | | $ | 13,894 | |
| | (1) | (1) | Gross margin represents premium and service revenues less medical costs and cost of services. | (1) | Gross margin represents premium and service revenues less medical costs and cost of services. |
Segment information for the sixnine months ended JuneSeptember 30, 2022, is as follows ($ in millions):
| | | | Medicaid | | Medicare | | Commercial | | Other/Eliminations | | | Consolidated Total | | | Medicaid | | Medicare | | Commercial | | Other/Eliminations | | | Consolidated Total |
| Premium | Premium | $ | 41,609 | | | $ | 11,396 | | | $ | 8,686 | | | $ | 1,708 | | | | $ | 63,399 | | Premium | $ | 62,763 | | | $ | 17,035 | | | $ | 12,977 | | | $ | 2,472 | | | | $ | 95,247 | |
| Service | Service | (1) | | | — | | | 1 | | | 4,801 | | | | 4,801 | | Service | (1) | | | — | | | 2 | | | 6,678 | | | | 6,679 | |
| Premium and service revenues | Premium and service revenues | 41,608 | | | 11,396 | | | 8,687 | | | 6,509 | | | | 68,200 | | Premium and service revenues | 62,762 | | | 17,035 | | | 12,979 | | | 9,150 | | | | 101,926 | |
| Premium tax | Premium tax | 4,921 | | | — | | | — | | | — | | | | 4,921 | | Premium tax | 7,060 | | | — | | | — | | | — | | | | 7,060 | |
| Total external revenues | Total external revenues | 46,529 | | | 11,396 | | | 8,687 | | | 6,509 | | | | 73,121 | | Total external revenues | 69,822 | | | 17,035 | | | 12,979 | | | 9,150 | | | | 108,986 | |
| Internal revenues | Internal revenues | — | | | — | | | — | | | 12,436 | | | | 12,436 | | Internal revenues | — | | | — | | | — | | | 18,856 | | | | 18,856 | |
| Eliminations | Eliminations | — | | | — | | | — | | | (12,436) | | | | (12,436) | | Eliminations | — | | | — | | | — | | | (18,856) | | | | (18,856) | |
| Total revenues | Total revenues | $ | 46,529 | | | $ | 11,396 | | | $ | 8,687 | | | $ | 6,509 | | | | $ | 73,121 | | Total revenues | $ | 69,822 | | | $ | 17,035 | | | $ | 12,979 | | | $ | 9,150 | | | | $ | 108,986 | |
| | Medical costs | Medical costs | $ | 37,033 | | | $ | 9,872 | | | $ | 6,803 | | | $ | 1,442 | | | | $ | 55,150 | | Medical costs | $ | 56,108 | | | $ | 14,602 | | | $ | 10,416 | | | $ | 2,135 | | | | $ | 83,261 | |
| | Cost of services | Cost of services | $ | — | | | $ | — | | | $ | — | | | $ | 4,087 | | | | $ | 4,087 | | Cost of services | $ | — | | | $ | — | | | $ | — | | | $ | 5,658 | | | | $ | 5,658 | |
| Gross margin (1) | Gross margin (1) | $ | 4,575 | | | $ | 1,524 | | | $ | 1,884 | | | $ | 980 | | | | $ | 8,963 | | Gross margin (1) | $ | 6,654 | | | $ | 2,433 | | | $ | 2,563 | | | $ | 1,357 | | | | $ | 13,007 | |
| | (1) | (1) | Gross margin represents premium and service revenues less medical costs and cost of services. | (1) | Gross margin represents premium and service revenues less medical costs and cost of services. |
13. Contingencies
Overview
The Company is routinely subjected to legal and regulatory proceedings in the normal course of business. These matters can include, without limitation:
•periodic compliance and other reviews and investigations by various federal and state regulatory agencies with respect to requirements applicable to the Company's business, including, without limitation, those related to payment of out-of-network claims, submissions to CMS related to risk adjustment payments, or the False Claims Act, the calculation of minimum MLR and rebates related thereto, submissions to state agencies related to payments or state false claims acts, pre-authorization penalties, timely review of grievances and appeals, timely and accurate payment of claims, cybersecurity issues, including those related to the Company's or the Company's third party vendors' information systems, and the Health Insurance Portability and Accountability Act of 1996 and other federal and state fraud, waste and abuse laws;
•litigation arising out of general business activities, such as tax matters, disputes related to healthcare benefits coverage or reimbursement, putative securities class actions, and medical malpractice, privacy, real estate, intellectual property and employment-related claims; and
•disputes regarding reinsurance arrangements, claims arising out of the acquisition or divestiture of various assets, class actions, and claims relating to the performance of contractual and non-contractual obligations to providers, members, employer groups and others, including, but not limited to, the alleged failure to properly pay claims and challenges to the manner in which the Company processes claims, claims related to network adequacy and claims alleging that the Company has engaged in unfair business practices.
Among other things, these matters may result in awards of damages, fines or penalties, which could be substantial, and/or could require changes to the Company's business. The Company intends to vigorously defend itself against legal and regulatory proceedings to which it is currently a party; however, these proceedings are subject to many uncertainties. In some of the cases pending against the Company, substantial non-economic or punitive damages are being sought.
The Company records reserves and accrues costs for certain legal proceedings and regulatory matters to the extent that it determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While such reserves and accrued costs reflect the Company's best estimate of the probable loss for such matters, the recorded amounts may differ materially from the actual amount of any such losses. In some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and regulatory proceedings, which may be exacerbated by various factors, including but not limited to, they may involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; involve a large number of parties, claimants or regulatory bodies; are in the early stages of the proceedings; involve a number of separate proceedings and/or a wide range of potential outcomes; or result in a change of business practices.
As of the date of this report, amounts accrued for legal proceedings and regulatory matters were not material, except for the reserve estimate as described below with respect to claims or potential claims involving services provided by Envolve Pharmacy Solutions, Inc. (Envolve), as the Company's pharmacy benefits management (PBM) subsidiary. It is possible that in a particular quarter or annual period the Company's financial condition, results of operations, cash flow and/or liquidity could be materially adversely affected by an ultimate unfavorable resolution of or development in legal and/or regulatory proceedings, including as described below. Except for the discussion below, the Company believes that the ultimate outcome of any of the regulatory and legal proceedings that are currently pending against it should not have a material adverse effect on financial condition, results of operations, cash flow, or liquidity.
California
On October 20, 2015, the Company's California subsidiary, Health Net of California, Inc. (Health Net California), was named as a defendant in a California taxpayer action filed in Los Angeles County Superior Court, captioned as Michael D. Myers v. State Board of Equalization, Dave Jones, Insurance Commissioner of the State of California, Betty T. Yee, Controller of the State of California, et al., Los Angeles Superior Court Case No. BS158655. This action is brought under a California statute that permits an individual taxpayer to sue a governmental agency when the taxpayer believes the agency has failed to enforce governing law. Plaintiff contends that Health Net California, a California licensed Health Care Service Plan (HCSP), is an "insurer" for purposes of taxation despite acknowledging it is not an "insurer" under regulatory law. Under California law, "insurers" must pay a gross premiums tax (GPT), calculated as 2.35% on gross premiums. As a licensed HCSP, Health Net California has paid the California Corporate Franchise Tax (CFT), the tax generally paid by California businesses. Plaintiff contends that Health Net California must pay the GPT rather than the CFT. Plaintiff seeks a writ of mandate directing the California taxing agencies to collect the GPT, and seeks an order requiring Health Net California to pay GPT, interest and penalties for a period dating to eight years prior to the October 2015 filing of the complaint. This lawsuit is being coordinated with similar lawsuits filed against other entities (collectively, Related Actions). In March 2018, the Court overruled the Company's demurrer seeking to dismiss the complaint and denied the Company's motion to strike allegations seeking retroactive relief. In August 2018, the trial court stayed all the Related Actions pending determination of a writ of mandate by the California Court of Appeals in two of the Related Actions. In March 2019, the California Court of Appeals denied the writ of mandate. The defendants in those Related Actions sought review by the California Supreme Court, which declined to review the matter. Upon the return of the matter to the Los Angeles County Superior Court, motions for summary judgment were scheduled. Health Net California's motion for summary judgment was heard by the Court in March 2020. In March 2020, the Court granted Health Net California's motion for summary judgment. In April 2023, the California Court of Appeals affirmed the grant of summary judgment in Health Net California's favor. In June 2023, plaintiff filed a petition for review with the California Supreme Court, which was denied in July 2023.Accellion
Beginning in April 2021, several lawsuits have been filed against the Company and its subsidiaries, alleging that the defendants failed to prevent Health Net members' personal and health data from being exposed in connection with a data breach involving Accellion's File Transfer Appliance. The Company denies any wrongdoing, and at a mediation in September 2021, the Company reached a settlement with plaintiffs in three of the pending class actions which, if approved by court, should resolve most or all of the pending litigation related to this matter. In addition, claims related to these lawsuits are anticipated to be covered in part by the Company's insurance carrier. As a result, while these matters are subject to many uncertainties, the Company does not believe that an adverse outcome in these matters is likely to have a materially adverse impact on the Company's financial condition, results of operations and cash flows.
Pharmacy Benefits Management Matters
On March 11, 2021, the State of Ohio filed a civil action against the Company and the Company's subsidiaries, Buckeye Health Plan Community Solutions, Inc. and Envolve, in Franklin County Court of Common Pleas, captioned as Ohio Department of Medicaid, et al. v. Centene Corporation, et al. The complaint alleged breaches of contract with the Ohio Department of Medicaid relating to the provision of PBM services and violations of Ohio law relating to such contracts, including among other things, by (i) seeking payment for services already reimbursed, (ii) not accurately disclosing to the Ohio Department of Medicaid the true cost of the PBM services and (iii) inflating dispensing fees for prescription drugs. The plaintiffs sought an undisclosed sum of money in damages, penalties, and possible termination of the contract with Buckeye Health Plan. The Company has reached a no-fault settlement with the Ohio Attorney General regarding this matter and the complaint was dismissed.
The Company has reached no-fault settlement agreements with the Attorneys General in other states to resolve claims and/or allegations made by those states related to services previously provided by Envolve. Additionally, the Company is in discussions to bring final resolution to similar concerns in other affected states. Consistent with those discussions, the Company recorded a reserve estimate of $1,250 million in the second quarter of 2021 related to this issue, inclusive of the above settlements and rebates that the Company determined in the course of the matter are payable across products. Additional claims, reviews or investigations relating to the Company's historical PBM business across products may be brought by other states, the federal government, or shareholder litigants, and there is no guarantee the Company will have the ability to settle such claims with other states within the reserve estimate the Company has recorded and on other acceptable terms, or at all. This matter is subject to many uncertainties, and an adverse outcome in this matter could have an adverse impact on the Company's financial condition, results of operations and cash flows.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this filing. The discussion contains forward-looking statements that involve known and unknown risks and uncertainties.
EXECUTIVE OVERVIEW
General
We are a leading healthcare enterprise, committed to helping people live healthier lives, with an established expertise in lower-income and medically complex populations. We provide access to high-quality healthcare, innovative programs, and a wide range of health solutions that help families and individuals get well, stay well, and be well. We believe that our local approach enables us to provide accessible, quality, culturally sensitive healthcare coverage to our communities.
Results of operations depend on our ability to manage expenses associated with health benefits (including estimated costs incurred) and selling, general and administrative (SG&A) costs. We measure operating performance based upon two key ratios. The health benefits ratio (HBR) represents medical costs as a percentage of premium revenues, excluding premium tax revenues that are separately billed, and reflects the direct relationship between the premiums received and the medical services provided. The SG&A expense ratio represents SG&A costs as a percentage of premium and service revenues, excluding premium taxes separately billed.
Value Creation Plan
We established our Value Creation Plan to drive margin expansion by leveraging our scale and generating sustainable, profitable growth. In addition to creating shareholder value, this plan is an ongoing effort to modernize and improve how we work in order to propel our organization to new levels of success and elevate the member and provider experiences. During the sixnine months ended JuneSeptember 30, 2023, we completed the following key milestones in our Value Creation Plan:
•Completed the divestitures of Magellan Specialty Health, Centurion our(our prison healthcare business,business), HealthSmart our(our third-party health plan administration business,business), and our majority stake in Apixio. In addition, in the third quarter of 2023, we entered into a definitive agreement to sell Circle Health Group (Circle Health).
•Completed $777 million$1.6 billion of common stock repurchases through our stock repurchase program, which were funded through divestiture proceeds and free cash flow generated from operations. In JulyOctober 2023, we completed an additional $300$27 million of common stock repurchases.
•Completed operating model changes initiated in 2022, including streamlining call center management and utilization management.
•Initiated standardization of our pharmacy operating model.model and completed an RFP for pharmacy benefits management (PBM) services.
•Launched our cloud-based, next-gen clinical population health platform.
Segments Update
In the first quarter of 2023, and in conjunction with our updated strategic plan, executive leadership realignment, and corresponding 2023 divestitures, we revised the way we manage the business, evaluate performance, and allocate resources, resulting in an updated segment structure comprised of (1) a Medicaid segment, (2) a Medicare segment, (3) a Commercial segment and (4) an Other segment. We began reporting under this new segment structure in 2023. Prior year information has been adjusted to reflect the change in segment reporting.
Regulatory Trends and Uncertainties
The United States government, policymakers, and healthcare experts continue to discuss and debate various elements of the United States healthcare model. We remain focused on the promise of delivering access to high-quality, affordable healthcare to all of our members and believe we are well positioned to meet the needs of the changing healthcare landscape.
In contrast to previous executive and legislative efforts to restrict or limit certain provisions of the Affordable Care Act (ACA), legislation and regulations at the federal level over the last few years have contained provisions aimed at leveraging Medicaid and the Health Insurance Marketplace to expand health insurance coverage and affordability to consumers. The American Rescue Plan Act (ARPA), enacted in March 2021, initially enhanced eligibility for the advance premium tax credit for enrollees in the Health Insurance Marketplace, which was extended through the 2025 tax year by the Inflation Reduction Act, enacted in August 2022.
In addition, federal regulators for the Centers for Medicare & Medicaid Services (CMS) have finalized some regulations enhancing opportunities for beneficiaries dually enrolled in Medicare and Medicaid to receive integrated care through Medicare Advantage (MA) Dual Eligible Special Needs Plans (D-SNPs). Centene is positioned well given our overlapping Medicaid and MA footprints.
The COVID-19 pandemic has impacted and continues to affect our business as it relates to Medicaid eligibility changes and vaccines and treatments. The Families First Coronavirus Response Act, enacted in March 2020, increased federal matching rates for state Medicaid programs with a requirement that states suspend Medicaid redeterminations throughout the public health emergency (PHE). As a result, since the onset of the PHE through March 2023, our Medicaid membership increased by 3.6 million members (excluding new states North Carolina and Delaware and various state product expansions or managed care organization changes). The Consolidated Appropriations Act, 2023, signed into law on December 29, 2022, delinked the Medicaid continuous coverage requirements from the PHE and, as a result, some states began Medicaid disenrollments on April 1, 2023. Per the Act and clarifying CMS guidance, redeterminations related to the PHE should be initiated within 12 months, by March 31, 2024, and conclude during the second quarter of 2024. Redeterminations in certain states may move at a slower pace due to CMS compliance action to pause and/or complete corrective action prior to disenrolling beneficiaries. Some states could see redeterminations extend past the second quarter of 2024 given CMS compliance actions.
We are taking decisive actionactively engaged to help ensure individuals take the state agency requested action to confirm eligibility in their Medicaid coverage or find other appropriate coverage that is best for themselves and their families. Our Ambetter Health product covers the majority of our Medicaid states, and we believe we are among the best positioned in the healthcare market to captureenroll those transitioning coverage through redeterminations. Although Medicaid continuous coverage requirements were decoupled from the PHE, we are working to address provisions that were tied to the end of the PHE which expired on May 11, 2023, including COVID costs related to vaccines and treatments, coverage requirements, and various other payment structures and electronic prescribing of controlled substances.structures.
We also closely monitor state legislation across our markets and are advocating for and seeing adoption of coverage expansions for Medicaid adult populations (e.g. North Carolina), postpartum, foster care, children, among others, as well as mitigating adverse legislation addressing pharmacy, prior authorization, and other issues.
We have more than three decades of experience, spanning seven presidents from both sides of the aisle, in delivering high-quality healthcare services on behalf of states and the federal government to under-insured and uninsured families, commercial organizations, and military families. This expertise has allowed us to deliver cost-effective services to our government partners and our members. With healthcare experts maintaining a focus on personalizedtrends in the personalization of healthcare technology, we continue the use of data and analytics to make strategic decisions to accelerate the development of new software platforms and analytical capabilities.optimize our business. We continue to believe we have both the capacity and capability to successfully navigate industry changes to the benefit of our members, customers, providers, and shareholders.
SecondThird Quarter 2023 Highlights
Our financial performance for the secondthird quarter of 2023 is summarized as follows:
•Managed care membership of 28.428 million, an increase of 2.01.2 million members, or 7%5% year-over-year.
•Total revenues of $37.6$38.0 billion, representing 5%6% growth year-over-year.
•Premium and service revenues of $34.8$35.0 billion, representing 3%4% growth year-over-year.
•HBR of 87.0%, compared to 86.7%88.3% for the secondthird quarter of 2022.
•SG&A expense ratio of 8.7%, compared to 8.2%8.4% for the secondthird quarter of 2022.
•Adjusted SG&A expense ratio of 8.6%, compared to 8.2%8.3% for the secondthird quarter of 2022.
•Operating cash flows of $2.5$1.0 billion for the secondthird quarter of 2023.
•Diluted earnings per share (EPS) of $1.92,$0.87, compared to diluted loss per share of $(0.29)$1.27 for the secondthird quarter of 2022. The diluted loss per share in 2022 was driven by the pre-tax real estate impairment charge of $1.45 billion ($1.80 per share after-tax), related to the reduction in our real estate footprint.
•Adjusted diluted EPS of $2.10,$2.00, compared to $1.77$1.30 for the secondthird quarter of 2022.
A reconciliation from GAAP diluted earnings (loss)EPS to adjusted diluted EPS is highlighted below, and additional detail is provided above under the heading "Non-GAAP Financial Presentation":
| | | Three Months Ended June 30, | | | Three Months Ended September 30, | |
| | 2023 | | 2022 | | | 2023 | | 2022 | |
| GAAP diluted earnings (loss) per share attributable to Centene | $ | 1.92 | | | $ | (0.29) | | | |
| GAAP diluted EPS attributable to Centene | | GAAP diluted EPS attributable to Centene | $ | 0.87 | | | $ | 1.27 | | |
| Amortization of acquired intangible assets | Amortization of acquired intangible assets | 0.33 | | | 0.34 | | | Amortization of acquired intangible assets | 0.33 | | | 0.36 | | |
| Acquisition and divestiture related expenses | Acquisition and divestiture related expenses | 0.02 | | | 0.04 | | | Acquisition and divestiture related expenses | 0.03 | | | 0.05 | | |
Other adjustments (1) | Other adjustments (1) | (0.13) | | | 2.45 | | | Other adjustments (1) | 0.87 | | | (0.38) | | |
Income tax effects of adjustments (2) | Income tax effects of adjustments (2) | (0.04) | | | (0.77) | | | Income tax effects of adjustments (2) | (0.10) | | | — | | |
| Adjusted diluted EPS | Adjusted diluted EPS | $ | 2.10 | | | $ | 1.77 | | | Adjusted diluted EPS | $ | 2.00 | | | $ | 1.30 | | |
(1) Other adjustments include the following pre-tax items:
2023:
(a) Circle Health impairment of $251 million, or $0.46 per share ($0.50 after-tax), Operose Health impairment of $142 million, or $0.26 per share ($0.24 after-tax), real estate impairments of $47 million, or $0.09 per share ($0.09 after-tax), severance costs due to a restructuring of $22 million, or $0.04 per share ($0.03 after-tax), and a reduction to the previously recorded gain on the sale of ApixioMagellan Rx of $91 million, or $0.16 per share ($0.11 after-tax), gain on the previously reported divestiture of Centurion of $15$10 million, or $0.02 per share ($0.010.00 after-tax).
2022:
(b) gain on the sale of PANTHERx Rare (PANTHERx) of $490 million, or $0.84 per share ($0.65 after-tax), an additional loss onimpairment of assets associated with the divestiture of our Spanish and Central European businesses of $13$165 million, or $0.02$0.28 per share ($0.010.23 after-tax), and real estate impairments of $19$127 million, or $0.03$0.22 per share ($0.02 after-tax).
2022:
(b) real estate impairments of $1,454 million, or $2.46 per share ($1.800.16 after-tax), increase to the previously reported gain on debt extinguishmentthe divestiture of U.S. Medical Management (USMM) due to the finalization of working capital adjustments of $13 million, or $0.02 per share ($0.01 after-tax), gain on debt extinguishment related to the repurchases of senior notes of $10 million, or $0.02 per share ($0.01 after-tax), and an adjustment to the costs related to the pharmacy benefits management (PBM)PBM legal settlement of $4$1 million, or $0.01$0.00 per share ($0.010.00 after-tax).
(2) The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. The three months ended June 30, 2022, also include an $18 million, or $0.03 per share, increase to the income tax benefit on the previously reported non-cash impairment of our equity method investment in RxAdvance.
Current and Future Operating Drivers
The following items contributed to our results of operations as compared to the previous year:
Medicaid
•In September 2023, our subsidiary, Superior HealthPlan (Superior), commenced a new, six-year contract awarded by the Texas Health and Human Services Commission to continue providing youth in foster care with healthcare coverage through the STAR Health Medicaid program. Superior has been the sole provider of STAR Health coverage since the program launched in 2008.
•In April 2023, eligibility redeterminations related to the PHE began. We expect that these redeterminations will extend over a 14-month period, and concludewith the majority concluding in the second quarter of 2024. Eligibility suspensions from the onset of the PHE have drivendrove increased membership.membership through March 2023.
•In April 2023, the state of New York removed pharmacy services for certain of our managed care contracts in connection with the state's transition of pharmacy services to Medicaid fee-for-service.
•In February 2023, our subsidiary, Buckeye Health Plan, commenced the Medicaid contract awarded by the Ohio Department of Medicaid to continue servicing members with quality healthcare, coordinated services, and benefits.
•In January 2023, our subsidiary, Delaware First Health, commenced its contract for the statewide Medicaid managed care programs.
•In January 2023, our subsidiary, Louisiana Healthcare Connections, commenced the Medicaid contract awarded by the Louisiana Department of Health to continue administering quality, integrated healthcare services to members across the state.
•In January 2023, our subsidiary, Managed Health Services, commenced the contract awarded by the Indiana Department of Administration to continue serving Hoosier Healthwise and Health Indiana Plan members with Medicaid and Medicaid alternative managed care and care coordination services.
•In October 2022, the state of Ohio removed pharmacy services in connection with the state's transition from managed care to a single PBM.
•In July 2022, our subsidiary, Home State Health, commenced the MO HealthNet Managed Care General Plan and Specialty Plan contracts. Under the General Plan, Home State Health continues to serve multiple MO HealthNet programs including Children's Health Insurance members and the state's newly implemented Medicaid expansion population, across all regions of Missouri. Additionally, as the sole provider of the newly awarded Specialty Plan, Home State Health now serves approximately 53,10049,300 foster children and children receiving adoption subsidy assistance.
Medicare
•Medicare membership declined year-over-year due to lower enrollment during both the annual and open enrollment period.periods.
Commercial
•In 2023, our Health Insurance Marketplace product, Ambetter Health, expanded into Alabama and extended its footprint by more than 60 counties across 12 existing states. In total, the Marketplace plan is available in more than 1,500 counties across 28 states. Additionally, Marketplace membership increased year-over-year due to the expanded footprint, strong product positioning and open enrollment results, as well as overall market growth.
Other
•In June 2023, we completed the divestiture of Apixio, repositioning the business with a financial partner that can continue to invest in it. We maintain a close relationship with, and a minority interest in, the business.
•In January 2023, we completed the divestitures of Magellan Specialty Health, Centurion our(our prison healthcare business,business), and HealthSmart our(our third-party health plan administration business.business).
•In December 2022, we completed the divestiture of Magellan Rx, which was part of the Magellan Health, Inc. (Magellan) business acquired in January 2022.
•In November 2022, we completed the divestiture of our ownership stakes in our Spanish and Central European businesses, including Ribera Salud, Torrejón Salud, and Pro Diagnostics Group.
•In July 2022, we completed the divestiture of PANTHERx Rare (PANTHERx).
We expect the following items to impact our future results of operations:
Medicaid
•In July 2023, our subsidiary, Superior, HealthPlan (Superior), announced it entered into a contract to continue to provide healthcare coverage to the aged, blind, or disabled (ABD) population in the state's STAR+PLUS program. The contract is anticipated to begin in September 2024 for a six-year term with a maximum of three additional two-year extensions.
•In June 2023, our subsidiary, Oklahoma Complete Health, was selected by the Oklahoma Health Care Authority for statewide contracts to provide managed care for the SoonerSelect and SoonerSelect Children's Specialty Plan programs. The contracts are anticipated to begin in April 2024 for a one-year term with five, one-year renewal options.
•In March 2023, the state of North Carolina passed legislation for Medicaid Expansion, presenting a growth opportunityExpansion. We expect the program to commence in our existing market.December 2023.
•In December 2022, the federal government's year-end spending bill was passed, outliningincluding key coverage expansion provisions, includingexpansions for Medicaid and the Children's Health Insurance Program (CHIP) coverage.. The provision requiresprovisions require states to provide 12 months of continuous coverage for children under Medicaid and CHIP effective January 2024 and made the state option to extend coverage for postpartum women for up to 12 months permanent.
•In December 2022, our subsidiary, Health Net of California, was selected by the California Department of Health Care Services for direct Medicaid contracts in 10 counties, including Los Angeles (in which a portion will be subcontracted). The contracts are anticipated to begin in January 2024.
•In September 2022, our subsidiary, Nebraska Total Care, was awarded the Nebraska Department of Health and Human Services statewide Medicaid managed care contract. Under the new contract, Nebraska Total Care will continue serving the state's Medicaid Managed Care Program, known as Heritage Health. The new contract term is five years and includes the option for two, one-year renewals. The contract is anticipated to begin in January 2024, subject to the resolution of third-party protests.
•In September 2022, our subsidiary, Superior, was awarded a new, six-year contract by the Texas Health and Human Services Commission to continue providing youth in foster care with healthcare coverage through the STAR Health Medicaid program. Superior has been the sole provider of STAR Health coverage since the program launched in 2008. The contract is anticipated to begin in September 2023.
•In August 2022, our subsidiary, Magnolia Health Plan (Magnolia), was awarded the Mississippi Division of Medicaid contract. Under the new contract, Magnolia will continue serving the state's Coordinated Care Organization Program, which will consist of the Mississippi Coordinated Access Network and the Mississippi CHIP. The contract is anticipated to begin in July 2024, subject to the resolution of third-party protests.
•In August 2021, our subsidiaries, Carolina Complete Health and WellCare of North Carolina, were selected to coordinate physical and/or other health services with Local Management Entities/Managed Care Organizations under the state's new Tailored Plans. The Tailored Plans are integrated health plans designed for individuals with significant behavioral health needs and intellectual/developmental disabilities. The North Carolina Department of Health and Human Services has delayed the implementation of the Tailored Plans which isare expected to commence at a date still to be determined.no later than July 2024.
Medicare
•In October 2023, CMS issued 2024 Medicare Advantage Star Ratings on the Medicare Plan Finder. Based on the data, approximately 73% of membership is associated with contracts showing year-over-year unrounded score improvement, and approximately 87% of membership is associated with contracts rated 3.0 stars or better - compared to 53% in the prior year. While we have work to do to improve star scores, this demonstrates the first step towards our multi-year goals.
•We expect that the decrease in Star quality ratings in the 2023 rating year, which CMS published in October 2022, will adversely impact our 2024 Medicare revenue. The decrease in Star quality ratings is driven by the expiration of certain disaster relief provisions as well as deterioration in select metrics. Over the past year, our leadership team launched a multi-year plan to build and improve quality across the enterprise with a strong focus on enhanced patient experience and access to care.
Other
•In August 2023, Centene signed a definitive agreement to sell Circle Health Group, one of the U.K.'s largest independent hospital operators. The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the first quarter of 2024.
•We continue to execute on Value Creation Plan initiatives including the award of the new PBM contract commencing in 2024, portfolio review, real estate optimization, stock and debt repurchases, along with an ongoing focus on quality improvement actions. We expect these actions will drive future margin expansion, create shareholder value, and improve the experience for our members and providers.
MEMBERSHIP
From JuneSeptember 30, 2022 to JuneSeptember 30, 2023, we increased our managed care membership by 2.01.2 million, or 7%5%. The following table sets forth our membership by line of business:
| | | | June 30, 2023 | | December 31, 2022 | | June 30, 2022 | | | September 30, 2023 | | December 31, 2022 | | September 30, 2022 |
Traditional Medicaid (1) | Traditional Medicaid (1) | 14,260,400 | | | 14,264,800 | | | 13,758,000 | | Traditional Medicaid (1) | 13,470,900 | | | 14,264,800 | | | 14,000,100 | |
High Acuity Medicaid (2) | High Acuity Medicaid (2) | 1,799,200 | | | 1,710,000 | | | 1,688,000 | | High Acuity Medicaid (2) | 1,769,600 | | | 1,710,000 | | | 1,698,100 | |
Total Medicaid (4) | Total Medicaid (4) | 16,059,600 | | | 15,974,800 | | | 15,446,000 | | Total Medicaid (4) | 15,240,500 | | | 15,974,800 | | | 15,698,200 | |
| Commercial Marketplace | Commercial Marketplace | 3,295,200 | | | 2,076,100 | | | 2,033,300 | | Commercial Marketplace | 3,681,600 | | | 2,076,100 | | | 2,087,800 | |
| Commercial Group | Commercial Group | 435,000 | | | 441,100 | | | 448,700 | | Commercial Group | 424,200 | | | 441,100 | | | 439,800 | |
| Total Commercial | Total Commercial | 3,730,200 | | | 2,517,200 | | | 2,482,000 | | Total Commercial | 4,105,800 | | | 2,517,200 | | | 2,527,600 | |
Medicare (3) (4) | Medicare (3) (4) | 1,329,000 | | | 1,511,100 | | | 1,483,900 | | Medicare (3) (4) | 1,310,600 | | | 1,511,100 | | | 1,517,900 | |
| Medicare PDP | Medicare PDP | 4,493,700 | | | 4,226,000 | | | 4,165,500 | | Medicare PDP | 4,539,800 | | | 4,226,000 | | | 4,186,200 | |
| Total at-risk membership | Total at-risk membership | 25,612,500 | | | 24,229,100 | | | 23,577,400 | | Total at-risk membership | 25,196,700 | | | 24,229,100 | | | 23,929,900 | |
| TRICARE eligibles | TRICARE eligibles | 2,799,300 | | | 2,832,300 | | | 2,862,400 | | TRICARE eligibles | 2,773,200 | | | 2,832,300 | | | 2,832,300 | |
| Total | Total | 28,411,800 | | | 27,061,400 | | | 26,439,800 | | Total | 27,969,900 | | | 27,061,400 | | | 26,762,200 | |
| | (1) | (1) | Membership includes Temporary Assistance for Needy Families (TANF), Medicaid Expansion, Children's Health Insurance Program (CHIP), Foster Care, and Behavioral Health. | (1) | Membership includes Temporary Assistance for Needy Families (TANF), Medicaid Expansion, Children's Health Insurance Program (CHIP), Foster Care, and Behavioral Health. |
| (2) | (2) | Membership includes Aged, Blind, or Disabled (ABD), Intellectual and Developmental Disabilities (IDD), Long-Term Services and Supports (LTSS), and Medicare-Medicaid Plans (MMP) Duals. | (2) | Membership includes Aged, Blind, or Disabled (ABD), Intellectual and Developmental Disabilities (IDD), Long-Term Services and Supports (LTSS), and Medicare-Medicaid Plans (MMP) Duals. |
| (3) | (3) | Membership includes Medicare Advantage and Medicare Supplement. | (3) | Membership includes Medicare Advantage and Medicare Supplement. |
| (4) | (4) | Membership includes 1,329,100, 1,291,300, and 1,252,600 Dual Eligible Special Needs Plans (D-SNP) beneficiaries for the periods ending June 30, 2023, December 31, 2022, and June 30, 2022, respectively. | (4) | Membership includes 1,311,500, 1,291,300, and 1,285,600 Dual Eligible Special Needs Plans (D-SNP) beneficiaries for the periods ending September 30, 2023, December 31, 2022, and September 30, 2022, respectively. |
RESULTS OF OPERATIONS
The following discussion and analysis is based on our Consolidated Statements of Operations, which reflect our results of operations for the three and sixnine months ended JuneSeptember 30, 2023 and 2022, prepared in accordance with generally accepted accounting principles in the United States (GAAP).
Summarized comparative financial data for the three and sixnine months ended JuneSeptember 30, 2023 and 2022 is as follows ($ in millions, except per share data in dollars):
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2023 | | 2022 | | % Change | | 2023 | | 2022 | | % Change | | 2023 | | 2022 | | % Change | | 2023 | | 2022 | | % Change |
| Premium | Premium | $ | 33,713 | | | $ | 31,510 | | | 7 | % | | $ | 67,538 | | | $ | 63,399 | | | 7 | % | Premium | $ | 33,866 | | | $ | 31,848 | | | 6 | % | | $ | 101,404 | | | $ | 95,247 | | | 6 | % |
| Service | Service | 1,125 | | | 2,458 | | | (54) | % | | 2,252 | | | 4,801 | | | (53) | % | Service | 1,101 | | | 1,878 | | | (41) | % | | 3,353 | | | 6,679 | | | (50) | % |
| Premium and service revenues | Premium and service revenues | 34,838 | | | 33,968 | | | 3 | % | | 69,790 | | | 68,200 | | | 2 | % | Premium and service revenues | 34,967 | | | 33,726 | | | 4 | % | | 104,757 | | | 101,926 | | | 3 | % |
| Premium tax | Premium tax | 2,770 | | | 1,968 | | | 41 | % | | 6,707 | | | 4,921 | | | 36 | % | Premium tax | 3,075 | | | 2,139 | | | 44 | % | | 9,782 | | | 7,060 | | | 39 | % |
| Total revenues | Total revenues | 37,608 | | | 35,936 | | | 5 | % | | 76,497 | | | 73,121 | | | 5 | % | Total revenues | 38,042 | | | 35,865 | | | 6 | % | | 114,539 | | | 108,986 | | | 5 | % |
| Medical costs | Medical costs | 29,347 | | | 27,312 | | | 7 | % | | 58,781 | | | 55,150 | | | 7 | % | Medical costs | 29,479 | | | 28,111 | | | 5 | % | | 88,260 | | | 83,261 | | | 6 | % |
| Cost of services | Cost of services | 877 | | | 2,099 | | | (58) | % | | 1,747 | | | 4,087 | | | (57) | % | Cost of services | 856 | | | 1,571 | | | (46) | % | | 2,603 | | | 5,658 | | | (54) | % |
| Selling, general and administrative expenses | Selling, general and administrative expenses | 3,016 | | | 2,800 | | | 8 | % | | 6,027 | | | 5,545 | | | 9 | % | Selling, general and administrative expenses | 3,048 | | | 2,846 | | | 7 | % | | 9,075 | | | 8,391 | | | 8 | % |
| Depreciation expense | Depreciation expense | 146 | | | 164 | | | (11) | % | | 288 | | | 320 | | | (10) | % | Depreciation expense | 148 | | | 150 | | | (1) | % | | 436 | | | 470 | | | (7) | % |
| Amortization of acquired intangible assets | Amortization of acquired intangible assets | 179 | | | 199 | | | (10) | % | | 362 | | | 398 | | | (9) | % | Amortization of acquired intangible assets | 180 | | | 211 | | | (15) | % | | 542 | | | 609 | | | (11) | % |
| Premium tax expense | Premium tax expense | 2,854 | | | 2,041 | | | 40 | % | | 6,865 | | | 5,047 | | | 36 | % | Premium tax expense | 3,156 | | | 2,211 | | | 43 | % | | 10,021 | | | 7,258 | | | 38 | % |
| Impairment | Impairment | 18 | | | 1,450 | | | (99) | % | | 38 | | | 1,450 | | | (97) | % | Impairment | 440 | | | 289 | | | 52 | % | | 478 | | | 1,739 | | | (73) | % |
| | Earnings (loss) from operations | 1,171 | | | (129) | | | n.m. | | 2,389 | | | 1,124 | | | 113 | % | |
| Earnings from operations | | Earnings from operations | 735 | | | 476 | | | 54 | % | | 3,124 | | | 1,600 | | | 95 | % |
| Investment and other income | Investment and other income | 425 | | | 42 | | | n.m. | | 778 | | | 94 | | | n.m. | Investment and other income | 214 | | | 692 | | | (69) | % | | 992 | | | 786 | | | 26 | % |
| Debt extinguishment | Debt extinguishment | — | | | 13 | | | n.m. | | — | | | 16 | | | n.m. | Debt extinguishment | — | | | 10 | | | n.m. | | — | | | 26 | | | n.m. |
| Interest expense | Interest expense | (181) | | | (162) | | | (12) | % | | (361) | | | (322) | | | (12) | % | Interest expense | (181) | | | (169) | | | (7) | % | | (542) | | | (491) | | | (10) | % |
| | Earnings (loss) before income tax | 1,415 | | | (236) | | | n.m. | | 2,806 | | | 912 | | | 208 | % | |
| Income tax expense (benefit) | 360 | | | (65) | | | n.m. | | 621 | | | 231 | | | 169 | % | |
| Net earnings (loss) | 1,055 | | | (171) | | | n.m. | | 2,185 | | | 681 | | | 221 | % | |
| (Earnings) loss attributable to noncontrolling interests | 3 | | | (1) | | | n.m. | | 3 | | | (4) | | | 175 | % | |
| Net earnings (loss) attributable to Centene Corporation | $ | 1,058 | | | $ | (172) | | | n.m. | | $ | 2,188 | | | $ | 677 | | | 223 | % | |
| Diluted earnings (loss) per common share attributable to Centene Corporation | $ | 1.92 | | | $ | (0.29) | | | n.m. | | $ | 3.96 | | | $ | 1.15 | | | 244 | % | |
| Earnings before income tax | | Earnings before income tax | 768 | | | 1,009 | | | (24) | % | | 3,574 | | | 1,921 | | | 86 | % |
| Income tax expense | | Income tax expense | 293 | | | 269 | | | 9 | % | | 914 | | | 500 | | | 83 | % |
| Net earnings | | Net earnings | 475 | | | 740 | | | (36) | % | | 2,660 | | | 1,421 | | | 87 | % |
| (Earnings) attributable to noncontrolling interests | | (Earnings) attributable to noncontrolling interests | (6) | | | (2) | | | n.m. | | (3) | | | (6) | | | 50 | % |
| Net earnings attributable to Centene Corporation | | Net earnings attributable to Centene Corporation | $ | 469 | | | $ | 738 | | | (36) | % | | $ | 2,657 | | | $ | 1,415 | | | 88 | % |
| | Diluted earnings per common share attributable to Centene Corporation | | Diluted earnings per common share attributable to Centene Corporation | $ | 0.87 | | | $ | 1.27 | | | (31) | % | | $ | 4.85 | | | $ | 2.41 | | | 101 | % |
| | n.m.: not meaningful | n.m.: not meaningful | | n.m.: not meaningful | |
Three Months Ended JuneSeptember 30, 2023 Compared to Three Months Ended JuneSeptember 30, 2022
Total Revenues
The following table sets forth supplemental revenue information for the three months ended JuneSeptember 30, ($ in millions):
| | | 2023 | | 2022 | | % Change | | 2023 | | 2022 | | % Change |
| Medicaid | Medicaid | $ | 24,665 | | | $ | 22,455 | | | 10 | % | Medicaid | $ | 24,694 | | | $ | 23,293 | | | 6 | % |
| Commercial | Commercial | 5,734 | | | 4,555 | | | 26 | % | Commercial | 6,453 | | | 4,292 | | | 50 | % |
Medicare (1) | Medicare (1) | 5,665 | | | 5,639 | | | n.m. | Medicare (1) | 5,430 | | | 5,639 | | | (4) | % |
| Other | Other | 1,544 | | | 3,287 | | | (53) | % | Other | 1,465 | | | 2,641 | | | (45) | % |
| Total Revenues | $ | 37,608 | | | $ | 35,936 | | | 5 | % | |
| Total revenues | | Total revenues | $ | 38,042 | | | $ | 35,865 | | | 6 | % |
| | (1) | (1) | Medicare includes Medicare Advantage, Medicare Supplement, D-SNPs, and Medicare Prescription Drug Plan (PDP). | (1) | Medicare includes Medicare Advantage, Medicare Supplement, D-SNPs, and Medicare Prescription Drug Plan (PDP). |
| | n.m.: not meaningful | |
Total revenues increased 5%6% in the three months ended JuneSeptember 30, 2023, over the corresponding period in 2022, driven by membership growth in the Marketplace business due to strong product positioning and open enrollment results as well as overall market growth; Medicaidgrowth. The revenue growth primarily due to the impact of membership growth during the public health emergency,was partially offset by reductions as eligibility redeterminations began in the second quarter of 2023; and increased Medicaid premium tax revenue. The decrease in Other revenue was driven by recent divestitures.
Operating Expenses
Medical Costs/HBR
The HBR for the three months ended JuneSeptember 30, 2023, was 87.0%, compared to 86.7%88.3% in the same period in 2022. 2023 included the impact of strongThe decrease is primarily attributed to growth in the Marketplace membership, including continued growth subsequent to the annual enrollment period. Intra-year growth hasbusiness, which runs at a higherlower HBR due to partial year risk adjustment. In addition, the base measurement period of the second quarter of 2022 was impacted by favorable 2021 risk adjustment.and strong performance from pricing discipline and execution.
Cost of Services
Cost of services decreased by $1.2 billion$715 million in the three months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022. The cost of service ratio for the three months ended JuneSeptember 30, 2023, was 78.0%77.7%, compared to 85.4%83.7% in the same period in 2022. The decreases were driven by recent divestitures.
Selling, General & Administrative Expenses
The SG&A expense ratio was 8.7% for the secondthird quarter of 2023, compared to 8.2%8.4% in the secondthird quarter of 2022. The adjusted SG&A expense ratio was 8.6% for the secondthird quarter of 2023, compared to 8.2%8.3% in the secondthird quarter of 2022. The increases were driven by growth in the Marketplace business, which operates at a meaningfully higher SG&A ratio as compared to Medicaid.
Impairment
During the secondthird quarter of 2023, we recorded total impairment charges of $440 million, including a $251 million charge related to assets associated with the pending divestiture of Circle Health, a $142 million charge related to assets associated with our Operose Health business based on market indicators of fair value, and additional impairments of $47 million related to our ongoing real estate optimization initiatives.
During the third quarter of 2022, we recorded antotal impairment charges of $289 million, including a $165 million charge related to assets associated with the divestiture of $1.45 billionour Spanish and Central European businesses and $124 million related to the reduction of our real estate footprint consisting of leased and owned real estate assets and related fixed assets. Additional impairments of $18 million were recorded during the second quarter of 2023 related to our ongoing real estate optimization initiatives.
Other Income (Expense)
The following table summarizes the components of other income (expense) for the three months ended JuneSeptember 30, ($ in millions):
| | | | 2023 | | 2022 | | 2023 | | 2022 |
| Investment and other income | Investment and other income | $ | 425 | | | $ | 42 | | Investment and other income | $ | 214 | | | $ | 692 | |
| Debt extinguishment | Debt extinguishment | — | | | 13 | | Debt extinguishment | — | | | 10 | |
| Interest expense | Interest expense | (181) | | | (162) | | Interest expense | (181) | | | (169) | |
| Other income (expense), net | Other income (expense), net | $ | 244 | | | $ | (107) | | Other income (expense), net | $ | 33 | | | $ | 533 | |
Investment and other income. Investment and other income increaseddecreased by $383$478 million in the three months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022, driven by2022. The three months ended September 30, 2023 included a $75 million realized loss on the sale of investments from rebalancing a portion of our portfolio with a focus on higher interest rates on larger investment balances, the $91rate investments. The three months ended September 30, 2022 included a $490 million gain on the sale of Apixio and the $15 million gain on the sale of Centurion, partially offset by an additional loss on the sale of our Spanish and Central European businesses of $13 million.PANTHERx.
Debt extinguishment. During the secondthird quarter of 2022, we recognizedrepurchased $83 million of our 4.25% Senior Notes due 2027 and $176 million of our 4.625% Senior Notes due 2029 through our debt repurchase program, resulting in a $13 million pre-tax gain on the extinguishment of debt related to the refinancing of debt for our Circle Health subsidiary.$10 million.
Interest expense. Interest expense increased by $19$12 million in the three months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022. The increase was driven by higher interest rates on variable rate debt.
Income Tax Expense
For the three months ended JuneSeptember 30, 2023, we recorded income tax expense of $360$293 million on pre-tax earnings of $1.4 billion,$768 million, or an effective tax rate of 25.4%38.2%. The effective tax rate for the third quarter of 2023 reflects the tax effects of impairments as well as the pending divestiture of Circle Health. For the secondthird quarter of 2023, our effective tax rate on adjusted earnings was 24.9%24.2%.
For the three months ended JuneSeptember 30, 2022, we recorded an income tax benefitexpense of $65$269 million on pre-tax lossearnings of $236 million,$1.0 billion, or an effective tax rate of 27.7%26.6%. For the secondthird quarter of 2022, our effective tax rate on adjusted earnings was 27.1%26.3%.
Segment Results
The following table summarizes our consolidated operating results by segment for the three months ended JuneSeptember 30, ($ in millions):
| | | | 2023 | | 2022 | | % Change | | | 2023 | | 2022 | | % Change |
| Total Revenues | Total Revenues | | | | | | Total Revenues | | | | | |
| Medicaid | Medicaid | $ | 24,665 | | | $ | 22,455 | | | 10 | % | Medicaid | $ | 24,694 | | | $ | 23,293 | | | 6 | % |
| Medicare | Medicare | 5,665 | | | 5,639 | | | n.m. | Medicare | 5,430 | | | 5,639 | | | (4) | % |
| Commercial | Commercial | 5,734 | | | 4,555 | | | 26 | % | Commercial | 6,453 | | | 4,292 | | | 50 | % |
| Other | Other | 1,544 | | | 3,287 | | | (53) | % | Other | 1,465 | | | 2,641 | | | (45) | % |
| Consolidated Total | $ | 37,608 | | | $ | 35,936 | | | 5 | % | |
| Consolidated total | | Consolidated total | $ | 38,042 | | | $ | 35,865 | | | 6 | % |
Gross Margin (1) | Gross Margin (1) | | | | | | Gross Margin (1) | | | | | |
| Medicaid | Medicaid | $ | 2,434 | | | $ | 2,229 | | | 9 | % | Medicaid | $ | 2,012 | | | $ | 2,079 | | | (3) | % |
| Medicare | Medicare | 781 | | | 813 | | | (4) | % | Medicare | 968 | | | 909 | | | 6 | % |
| Commercial | Commercial | 1,090 | | | 1,026 | | | 6 | % | Commercial | 1,364 | | | 679 | | | 101 | % |
| Other | Other | 309 | | | 489 | | | (37) | % | Other | 288 | | | 377 | | | (24) | % |
| Consolidated Total | $ | 4,614 | | | $ | 4,557 | | | 1 | % | |
| Consolidated total | | Consolidated total | $ | 4,632 | | | $ | 4,044 | | | 15 | % |
| | (1) | (1) | Gross margin represents premium and service revenues less medical costs and cost of services. | (1) | Gross margin represents premium and service revenues less medical costs and cost of services. |
| | n.m.: not meaningful | |
Medicaid
Total revenues increased 10%6% in the three months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022. Gross margin decreased $67 million in the three months ended September 30, 2023, compared to the corresponding period in 2022, driven by an increase in total revenue, offset by a retroactive rate decrease from one state.
Medicare
Total revenues decreased 4% in the three months ended September 30, 2023, compared to the corresponding period in 2022 driven by lower membership. Gross margin increased $59 million in the three months ended September 30, 2023, compared to the corresponding period in 2022, driven by product offerings designed to improve HBR.
Commercial
Total revenues increased 50% in the three months ended September 30, 2023, compared to the corresponding period in 2022. Gross margin increased $205$685 million in the three months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022. The increasesIncreases were primarily due to the impact ofdriven by 76% membership growth during the public health emergency, partially offset by reductions as eligibility redeterminations began in the second quarter of 2023.Marketplace business, resulting from strong product positioning and overall market growth.
MedicareOther
Total revenues were flatdecreased 45% in the three months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022. Gross margin decreased $32$89 million in the three months ended June 30, 2023, compared to the corresponding period in 2022, driven by higher outpatient trend.
Commercial
Total revenues increased 26% in the three months ended June 30, 2023, compared to the corresponding period in 2022, primarily driven by 62% membership growth in the Marketplace business, resulting from strong product positioning, open enrollment results, and overall market growth. Gross margin increased $64 million in the three months ended June 30, 2023, compared to the corresponding period in 2022. 2023 included the impact of strong growth in Marketplace membership, including continued growth subsequent to the annual enrollment period. Intra-year growth has a higher HBR due to partial year risk adjustment. In addition, the base measurement period of the second quarter of 2022 was impacted by favorable 2021 risk adjustment.
Other
Total revenues decreased 53% in the three months ended June 30, 2023, compared to the corresponding period in 2022. Gross margin decreased $180 million in the three months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022. Decreases were primarily due to recent divestitures.
SixNine Months Ended JuneSeptember 30, 2023 Compared to SixNine Months Ended JuneSeptember 30, 2022
Total Revenues
The following table sets forth supplemental revenue information for the sixnine months ended JuneSeptember 30, ($ in millions):
| | | 2023 | | 2022 | | % Change | | 2023 | | 2022 | | % Change |
| Medicaid | Medicaid | $ | 50,829 | | | $ | 46,529 | | | 9 | % | Medicaid | $ | 75,523 | | | $ | 69,822 | | | 8 | % |
| Commercial | Commercial | 10,986 | | | 8,687 | | | 26 | % | Commercial | 17,439 | | | 12,979 | | | 34 | % |
Medicare (1) | Medicare (1) | 11,541 | | | 11,396 | | | 1 | % | Medicare (1) | 16,971 | | | 17,035 | | | n.m. |
| Other | Other | 3,141 | | | 6,509 | | | (52) | % | Other | 4,606 | | | 9,150 | | | (50) | % |
| Total Revenues | $ | 76,497 | | | $ | 73,121 | | | 5 | % | |
| Total revenues | | Total revenues | $ | 114,539 | | | $ | 108,986 | | | 5 | % |
| | (1) | (1) | Medicare includes Medicare Advantage, Medicare Supplement, D-SNPs, and Medicare PDP. | (1) | Medicare includes Medicare Advantage, Medicare Supplement, D-SNPs, and Medicare PDP. |
| | | n.m.: not meaningful |
|
Total revenues increased 5% in the sixnine months ended JuneSeptember 30, 2023, over the corresponding period in 2022 driven by 62%76% membership growth in the Marketplace business due to strong product positioning and open enrollment results as well as overall market growth; Medicaidgrowth. The revenue growth primarily due to the impact of membership growth during the public health emergency,was partially offset by reductions as eligibility redeterminations began in the second quarter of 2023; and increased Medicaid premium tax revenue. The decrease in Other revenue was driven by recent divestitures.
Operating Expenses
Medical Costs/HBR
The HBR for the sixnine months ended JuneSeptember 30, 2023 was 87.0%, compared to 87.0%87.4% in the same period in 2022. The decrease is primarily attributed to growth in the Marketplace business, which runs at a lower HBR and strong performance from pricing discipline and execution.
Cost of Services
Cost of services decreased by $2.3$3.1 billion in the sixnine months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022. The cost of service ratio for the sixnine months ended JuneSeptember 30, 2023 was 77.6%, compared to 85.1%84.7% in the same period in 2022. The decreases were driven by recent divestitures.
Selling, General & Administrative Expenses
The SG&A expense ratio for the sixnine months ended JuneSeptember 30, 2023 was 8.6%8.7%, compared to 8.1%8.2% for the corresponding period in 2022. The adjusted SG&A expense ratio for the sixnine months ended JuneSeptember 30, 2023 was 8.6%, compared to 7.9%8.1% for the sixnine months ended JuneSeptember 30, 2022. The increases were driven by growth in the Marketplace business, which operates at a meaningfully higher SG&A ratio as compared to Medicaid.
Impairment
During the second quarternine months ended September 30, 2023 we recorded total impairment charges of $478 million, including a $251 million charge related to assets associated with the pending divestiture of Circle Health, a $142 million charge related to assets associated with our Operose Health business based on market indicators of fair value, and additional impairments of $85 million related to our ongoing real estate optimization initiatives.
During the nine months ended September 30, 2022, we recorded antotal impairment chargecharges of $1.45$1.7 billion, primarily driven by $1.6 billion related to the reduction of our real estate footprint consisting of leased and owned real estate assets and related fixed assets. Additional impairments of $38 million were recorded during the sixThe nine months ended JuneSeptember 30, 20232022 also included a $165 million charge related to assets associated with the divestiture of our ongoing real estate optimization initiatives.Spanish and Central European businesses.
Other Income (Expense)
The following table summarizes the components of other income (expense) for the sixnine months ended JuneSeptember 30, ($ in millions):
| | | | 2023 | | 2022 | | 2023 | | 2022 |
| Investment and other income | Investment and other income | $ | 778 | | | $ | 94 | | Investment and other income | $ | 992 | | | $ | 786 | |
| Debt extinguishment | Debt extinguishment | — | | | 16 | | Debt extinguishment | — | | | 26 | |
| Interest expense | Interest expense | (361) | | | (322) | | Interest expense | (542) | | | (491) | |
| Other income (expense), net | Other income (expense), net | $ | 417 | | | $ | (212) | | Other income (expense), net | $ | 450 | | | $ | 321 | |
Investment and other income. Investment and other income increased by $684$206 million in the sixnine months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022, driven by higher interest rates on larger investment balances, thea $91 million gain on the sale of Apixio, thea $79 million gain on the sale of Magellan Specialty Health, and thea $15 million gain on the sale of Centurion, partially offset by a $75 million realized loss on the sale of investments from rebalancing a portion of our portfolio with a focus on higher interest rate investments, an additional loss on the sale of our Spanish and Central European businesses of $13 million.million, and a $10 million reduction to the previously recorded gain on the sale of Magellan Rx. The nine months ended September 30, 2022 included a $490 million gain on the sale of PANTHERx.
Debt extinguishment. During the secondthird quarter of 2022, we repurchased $83 million of our 4.25% Senior Notes due 2027 and $176 million of our 4.625% Senior Notes due 2029 through our debt repurchase program, resulting in a gain on extinguishment of $10 million. In May 2022, we recognized a $13 million pre-tax gain on the extinguishment of debt related to the refinancing of debt for our Circle Health subsidiary. The 2022 debt extinguishment also includes an immaterial gain related to the redemption of Magellan's outstanding Senior Notes in January 2022.
Interest expense. Interest expense increased by $39$51 million in the sixnine months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022. The increase was driven by higher interest rates on variable rate debt.
Income Tax Expense
For the sixnine months ended JuneSeptember 30, 2023, we recorded income tax expense of $621$914 million on pre-tax earnings of $2.8$3.6 billion, or an effective tax rate of 22.1%25.6%. The effective tax rate for 2023 reflects the tax effects of the distribution of long-term stock awards to the estate of the Company's former CEO, divestiture gains, impairments as well as the pending divestiture gains.of Circle Health. For the sixnine months ended JuneSeptember 30, 2023, our effective tax rate on adjusted earnings was 24.6%24.5%.
For the sixnine months ended JuneSeptember 30, 2022, we recorded income tax expense of $231$500 million on pre-tax earnings of $912 million,$1.9 billion, or an effective tax rate of 25.3%26.0%. For the nine months ended September 30, 2022, our effective tax rate on adjusted earnings was 26.2%.
Segment Results
The following table summarizes our consolidated operating results by segment for the sixnine months ended JuneSeptember 30, ($ in millions):
| | | | 2023 | | 2022 | | % Change | | | 2023 | | 2022 | | % Change |
| Total Revenues | Total Revenues | | | | | | Total Revenues | | | | | |
| Medicaid | Medicaid | $ | 50,829 | | | $ | 46,529 | | | 9 | % | Medicaid | $ | 75,523 | | | $ | 69,822 | | | 8 | % |
| Medicare | Medicare | 11,541 | | | 11,396 | | | 1 | % | Medicare | 16,971 | | | 17,035 | | | n.m. |
| Commercial | Commercial | 10,986 | | | 8,687 | | | 26 | % | Commercial | 17,439 | | | 12,979 | | | 34 | % |
| Other | Other | 3,141 | | | 6,509 | | | (52) | % | Other | 4,606 | | | 9,150 | | | (50) | % |
| Consolidated Total | $ | 76,497 | | | $ | 73,121 | | | 5 | % | |
| Consolidated total | | Consolidated total | $ | 114,539 | | | $ | 108,986 | | | 5 | % |
Gross Margin (1) | Gross Margin (1) | | | | | | Gross Margin (1) | | | | | |
| Medicaid | Medicaid | $ | 4,651 | | | $ | 4,575 | | | 2 | % | Medicaid | $ | 6,663 | | | $ | 6,654 | | | n.m. |
| Medicare | Medicare | 1,649 | | | 1,524 | | | 8 | % | Medicare | 2,617 | | | 2,433 | | | 8 | % |
| Commercial | Commercial | 2,337 | | | 1,884 | | | 24 | % | Commercial | 3,701 | | | 2,563 | | | 44 | % |
| Other | Other | 625 | | | 980 | | | (36) | % | Other | 913 | | | 1,357 | | | (33) | % |
| Consolidated Total | $ | 9,262 | | | $ | 8,963 | | | 3 | % | |
| Consolidated total | | Consolidated total | $ | 13,894 | | | $ | 13,007 | | | 7 | % |
| | (1) | (1) | Gross margin represents premium and service revenues less medical costs and cost of services. | (1) | Gross margin represents premium and service revenues less medical costs and cost of services. |
| | | n.m.: not meaningful |
Medicaid
Total revenues increased 9%8% in the sixnine months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022. Gross margin increased $76$9 million in the sixnine months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022. The2022 primarily driven by net rate increases, were primarily due to the impact of membership growth during the public health emergency, partially offset by reductions as eligibility redeterminations began in the second quarter of 2023.higher utilization.
Medicare
Total revenues increased 1%were flat in the sixnine months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022. Gross margin increased $125$184 million in the sixnine months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022 driven primarily by product offerings designed to improve HBR.
Commercial
Total revenues increased 34% in the nine months ended September 30, 2023, compared to the corresponding period in 2022. Gross margin increased $1.1 billion in the nine months ended September 30, 2023, compared to the corresponding period in 2022. Increases were primarily driven by bid positioning, partially offset by higher outpatient trend in the second quarter of 2023.
Commercial
Total revenues increased 26% in the six months ended June 30, 2023, compared to the corresponding period in 2022. Gross margin increased $453 million in the six months ended June 30, 2023, compared to the corresponding period in 2022. Increases were primarily driven by 62%76% membership growth in the Marketplace business, resulting from strong product positioning open enrollment results, and overall market growth.
Other
Total revenues decreased 52%50% in the sixnine months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022. Gross margin decreased $355$444 million in the sixnine months ended JuneSeptember 30, 2023, compared to the corresponding period in 2022. Decreases were primarily due to recent divestitures.
LIQUIDITY AND CAPITAL RESOURCES
Shown below is a condensed schedule of cash flows used in the discussion of liquidity and capital resources ($ in millions).
| | | | Six Months Ended June 30, | | Nine Months Ended September 30, |
| | | 2023 | | 2022 | | 2023 | | 2022 |
| Net cash provided by operating activities | Net cash provided by operating activities | $ | 6,815 | | | $ | 4,505 | | Net cash provided by operating activities | $ | 7,836 | | | $ | 7,837 | |
| Net cash (used in) investing activities | Net cash (used in) investing activities | (677) | | | (3,145) | | Net cash (used in) investing activities | (242) | | | (3,142) | |
| Net cash (used in) financing activities | Net cash (used in) financing activities | (933) | | | (984) | | Net cash (used in) financing activities | (1,457) | | | (2,465) | |
| Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | (7) | | | (9) | | Effect of exchange rate changes on cash and cash equivalents | 19 | | | (37) | |
| Net increase in cash, cash equivalents, and restricted cash and cash equivalents | Net increase in cash, cash equivalents, and restricted cash and cash equivalents | $ | 5,198 | | | $ | 367 | | Net increase in cash, cash equivalents, and restricted cash and cash equivalents | $ | 6,156 | | | $ | 2,193 | |
Cash Flows Provided by Operating Activities
Normal operations are funded primarily through operating cash flows and borrowings under our revolving credit facility. Operating activities provided cash of $6.8$7.8 billion in the sixnine months ended JuneSeptember 30, 2023, compared to $4.5$7.8 billion in the comparable period in 2022. Cash flows provided by operations in 2023 were driven by net earnings and increases in unearned revenue and accounts payable driven by the early receipt of payments from CMS.
Cash flows provided by operations in 2022 were primarily driven by net earnings before the non-cash real estate impairment charge, and an increase in medical claims liabilities, partiallyand increases in unearned revenue and accounts payable due to timingthe early receipt of state-directed payments.payments from CMS.
Cash Flows Used in Investing Activities
Investing activities used cash of $677$242 million in the sixnine months ended JuneSeptember 30, 2023, and $3.1 billion in the comparable period in 2022. Cash flows used in investing activities in 2023 primarily consisted of net additions to the investment portfolio of our regulated subsidiaries (including transfers from cash and cash equivalents to long-term investments) and capital expenditures, partially offset by divestiture proceeds.
In 2022, cash flows used in investing activities primarily related to our acquisition of Magellan and net additions to the investment portfolio of our regulated subsidiaries (including transfers from cash and cash equivalents to long-term investments). and our acquisition of Magellan, partially offset by our PANTHERx divestiture proceeds.
We spent $440$576 million and $524$771 million in the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively, on capital expenditures the majority of which iswas driven by system enhancements and computer hardware.
As of JuneSeptember 30, 2023, our investment portfolio consisted primarily of fixed-income securities with an average duration of 3.43.5 years. We had unregulated cash and investments of $1.0 billion at JuneSeptember 30, 2023, compared to $1.4 billion at December 31, 2022.
Cash Flows Used in Financing Activities
Financing activities used cash of $933 million$1.5 billion in the sixnine months ended JuneSeptember 30, 2023, compared to using cash of $984 million$2.5 billion in the comparable period in 2022. Financing activities in 2023 were driven by stock repurchases of $828 million.$1.6 billion.
Financing activities in 2022 were driven by stock repurchases of $1.6 billion through our stock repurchase program, the redemption of Magellan's outstanding debt of $535 million acquired in the transaction using Magellan's cash on hand, and stocksenior note debt repurchases of $420$259 million.
Liquidity Metrics
We have a stock repurchase program authorizing us to repurchase common stock from time to time on the open market or through privately negotiated transactions. In 2022, the Company's Board of Directors authorized up to a cumulative total of $6.0 billion of repurchases under the program.
During the quarter, we repurchased 6.011.6 million shares of common stock for $400$773 million under the stock repurchase program. We have approximately $2.0$1.3 billion remaining under the program for repurchases as of JuneSeptember 30, 2023. No duration has been placed on the repurchase program. We reserve the right to discontinue the repurchase program at any time. Refer to Note 10. Stockholders' Equity for further information on stock repurchases.
As of JuneSeptember 30, 2023, we had an aggregate principal amount of $15.7 billion of senior notes issued and outstanding. The indentures governing our various maturities of senior notes contain restrictive covenants. As of JuneSeptember 30, 2023, we were in compliance with all covenants.
As part of our capital allocation strategy, we may decide to repurchase debt or raise capital through the issuance of debt in the form of senior notes. In June 2022, the Company's Board of Directors also authorized a new $1.0 billion senior note debt repurchase program. No repurchases were made during the quarter ended JuneSeptember 30, 2023. As of JuneSeptember 30, 2023, there was $700 million available under the senior note debt repurchase program.
The credit agreement underlying our Revolving Credit Facility and Term Loan Facility contains customary covenants as well as financial covenants including a minimum fixed charge coverage ratio and a maximum debt-to-EBITDA ratio. Our maximum debt-to-EBITDA ratio under the credit agreement may not exceed 4.0 to 1.0. As of JuneSeptember 30, 2023, we had $61$309 million of borrowings outstanding under our Revolving Credit Facility, $2.2$2.1 billion of borrowings under our Term Loan Facility, and we were in compliance with all covenants. As of JuneSeptember 30, 2023, there were no limitations on the availability of our Revolving Credit Facility as a result of the debt-to-EBITDA ratio.
We had outstanding letters of credit of $164$212 million as of JuneSeptember 30, 2023, which were not part of our revolving credit facility. The letters of credit bore weighted interest of 0.7% as of JuneSeptember 30, 2023. In addition, we had outstanding surety bonds of $888$892 million as of JuneSeptember 30, 2023.
At JuneSeptember 30, 2023, our debt to capital ratio, defined as total debt divided by the sum of total debt and total equity, was 41.1%41.5%, compared to 42.7% at December 31, 2022. The debt to capital ratio decrease was driven by net earnings partially offset by year-to-date stock repurchases in the quarter.repurchases. We utilize the debt to capital ratio as a measure, among others, of our leverage and financial flexibility.
At JuneSeptember 30, 2023, we had working capital, defined as current assets less current liabilities, of $3.6$4.6 billion, compared to $1.7 billion at December 31, 2022. We manage our short-term and long-term investments with the goal of ensuring that a sufficient portion is held in investments that are highly liquid and can be sold to fund short-term requirements as needed.
2023 Expectations
During the remainder of 2023, we expect to receive net dividends from our insurance subsidiaries of approximately $1.2 billion$340 million and spend approximately $400$180 million in additional capital expenditures. In JulyOctober 2023, we made additional purchases of $300$27 million through our stock repurchase program.
Based on our operating plan, we expect that our available cash, cash equivalents and investments, cash from our operations and cash available under our Revolving Credit Facility will be sufficient to finance our general operations and capital expenditures for at least 12 months from the date of this filing. While we are currently in a strong liquidity position and believe we have adequate access to capital, we may elect to increase borrowings on our Revolving Credit Facility. Our long-term liquidity position is stable, with our senior notes maturing between December 2027 and August 2031, and our Revolving Credit Facility maturing in August 2026. From time to time we may elect to raise additional funds for working capital and other purposes, either through issuance of debt or equity, the sale of investment securities or otherwise, as appropriate. In addition, we may strategically pursue refinancing or redemption opportunities to extend maturities and/or improve terms of our indebtedness if we believe such opportunities are favorable to us.
We intend to continue to evaluate strategic actions in connection with our Value Creation Plan, targeting initiatives to improve productivity, efficiencies and reduced organizational costs, as well as capital deployment activities, including stock repurchases, portfolio optimization and the evaluation of refinancing opportunities. In addition to creating shareholder value, this plan encompasses a larger organizational mission to enhance our member and provider experience, improve outcomes for our members, and to initiate new ways of doing business that make Centene a great partner in all aspects of our operations.
REGULATORY CAPITAL AND DIVIDEND RESTRICTIONS
Our operations are conducted through our subsidiaries. As managed care organizations, most of our subsidiaries are subject to state regulations and other requirements that, among other things, require the maintenance of minimum levels of statutory capital, as defined by each state, and restrict the timing, payment and amount of dividends and other distributions that may be paid to us. Generally, the amount of dividend distributions that may be paid by a regulated subsidiary without prior approval by state regulatory authorities is limited based on the entity's level of statutory net income and statutory capital and surplus.
Our regulated subsidiaries are required to maintain minimum capital requirements prescribed by various regulatory authorities in each of the states in which we operate. During the sixnine months ended JuneSeptember 30, 2023, we received dividends of $1.1$1.8 billion from and made $151$261 million of capital contributions to our regulated subsidiaries. For our subsidiaries that file with the National Association of Insurance Commissioners (NAIC), the aggregate risk-based capital (RBC) level as of December 31, 2022, which was the most recent date for which reporting was required, was in excess of 350% of the Authorized Control Level. We intend to continue to maintain an aggregate RBC level in excess of 350% of the Authorized Control Level during 2023.
Under the California Knox-Keene Health Care Service Plan Act of 1975, as amended (Knox-Keene), certain of our California subsidiaries must comply with tangible net equity (TNE) requirements. Under these Knox-Keene TNE requirements, actual net worth less certain unsecured receivables and intangible assets must be more than the greater of (i) a fixed minimum amount, (ii) a minimum amount based on premiums or (iii) a minimum amount based on healthcare expenditures, excluding capitated amounts.
Under the New York State Department of Health Codes, Rules and Regulations Title 10, Part 98, our New York subsidiary must comply with contingent reserve requirements. Under these requirements, net worth based upon admitted assets must equal or exceed a minimum amount based on annual net premium income.
The NAIC has adopted rules which set minimum RBC requirements for insurance companies, managed care organizations and other entities bearing risk for healthcare coverage. As of JuneSeptember 30, 2023, each of our health plans was in compliance with the RBC requirements enacted in those states.
As a result of the above requirements and other regulatory requirements, certain of our subsidiaries are subject to restrictions on their ability to make dividend payments, loans or other transfers of cash to their parent companies. Such restrictions, unless amended or waived or unless regulatory approval is granted, limit the use of any cash generated by these subsidiaries to pay our obligations. The maximum amount of dividends that can be paid by our insurance company subsidiaries without prior approval of the applicable state insurance departments is subject to restrictions relating to statutory surplus, statutory income and unassigned surplus.
CRITICAL ACCOUNTING ESTIMATES
Please see "Critical Accounting Estimates in Item 7 - Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2022 Annual Report on Form 10-K for a description of our Critical Accounting Estimates.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
INVESTMENTS AND DEBT
As of JuneSeptember 30, 2023, we had short-term investments of $2.2 billion and long-term investments of $17.5$16.6 billion, including restricted deposits of $1.4$1.3 billion. The short-term investments generally consist of highly liquid securities with maturities between three and 12 months. The long-term investments consist of municipal, corporate and U.S. Treasury securities, government sponsoredgovernment-sponsored obligations, life insurance contracts, asset-backed securities, and equity securities, and have maturities greater than one year. Restricted deposits consist of investments required by various state statutes to be deposited or pledged to state agencies. Due to the nature of the states' requirements, these investments are classified as long-term regardless of the contractual maturity date. Substantially all of our investments are subject to interest rate risk and will decrease in value if market rates increase. Assuming a hypothetical and immediate 1% increase in market interest rates at JuneSeptember 30, 2023, the fair value of our fixed income investments would decrease by approximately $616$601 million.
We have a foreign currency swap for a notional amount of $931 million with a creditworthy financial institution to manage foreign exchange risk related to the pending Circle Health divestiture. As a result, the fair value of the swap varies with foreign exchange rate fluctuations. Assuming a 1% increase in the Great British Pound to US Dollar foreign exchange rate at September 30, 2023, the fair value of our swap would decrease by approximately $9 million. An increase in the US Dollar to Great British Pound foreign exchange rate decreases the fair value of the swap and conversely, a decrease in the foreign currency exchange rate increases the value. We do not hold or issue any derivative instruments for trading or speculative purposes.
For a discussion of the interest rate risk that our investments are subject to, refer to our 10-K for the fiscal year ended December 31, 2022, Part 1, Item 1A, "Risk Factors – Our investment portfolio may suffer losses which could materially and adversely affect our results of operations or liquidity."
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures - We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
In connection with the filing of this Form 10-Q, management evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of JuneSeptember 30, 2023. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of JuneSeptember 30, 2023.
Changes in Internal Control Over Financial Reporting - No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended JuneSeptember 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
A description of the legal proceedings to which the Company and its subsidiaries are a party is contained in Note 13. Contingencies to the consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q, and is incorporated herein by reference.
Item 1A. Risk Factors.
There have been no material changes to the risk factors disclosed in our 2022 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities, and Use of Proceeds.Proceeds, and Issuer Purchases of Equity Securities
In November 2005, the Company's Board of Directors announced a stock repurchase program, which was most recently been increased in December 2022. The Company is authorized to repurchase up to $6.0 billion, inclusive of past authorizations.
The stock repurchase program is effected primarily through regular open-market purchases (which may include repurchase plans designed to comply with Rule 10b5-1 and accelerated share repurchases), the amounts and timing of which are subject to ourthe Company's discretion as part of ourits capital allocation strategy, and may be based upon general market conditions and the prevailing price and trading volumes of ourits common stock. No duration has been placed on the repurchase program. We reserveThe Company reserves the right to discontinue the repurchase program at any time.
| Issuer Purchases of Equity Securities Second Quarter 2023 (Shares in thousands) | |
Issuer Purchases of Equity Securities Third Quarter 2023 (Shares in thousands) | | Issuer Purchases of Equity Securities Third Quarter 2023 (Shares in thousands) |
| Period | Period | | Total Number of Shares Purchased (1) | | Average Price Paid per Share (2) | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ($ in millions) (3) | Period | | Total Number of Shares Purchased (1) | | Average Price Paid per Share (2) | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ($ in millions) (3) |
| April 1, 2023 - April 30, 2023 | | 3,025 | | | $ | 66.77 | | | 2,994 | | | $ | 2,229 | | |
| May 1, 2023 - May 31, 2023 | | 12 | | | 67.34 | | | — | | | 2,229 | | |
| June 1, 2023 - June 30, 2023 | | 3,062 | | | 65.93 | | | 3,034 | | | 2,029 | | |
| July 1, 2023 - July 31, 2023 | | July 1, 2023 - July 31, 2023 | | 4,549 | | | $ | 66.02 | | | 4,545 | | | $ | 1,729 | |
| August 1, 2023 - August 31, 2023 | | August 1, 2023 - August 31, 2023 | | 2,986 | | | 67.05 | | | 2,984 | | | 1,529 | |
| September 1, 2023 - September 30, 2023 | | September 1, 2023 - September 30, 2023 | | 4,085 | | | 66.88 | | | 4,080 | | | 1,256 | |
| Total | Total | | 6,099 | | | $ | 66.36 | | | 6,028 | | | $ | 2,029 | | Total | | 11,620 | | | $ | 66.59 | | | 11,609 | | | $ | 1,256 | |
| | (1) | (1) | Includes 71 thousand shares relinquished to the Company by certain employees for payment of taxes. | (1) | Includes 11 thousand shares relinquished to the Company by certain employees for payment of taxes. |
| (2) | (2) | Average price paid per share excludes share repurchase excise tax of $3 million accrued as of June 30, 2023. | (2) | Average price paid per share excludes accrued share repurchase excise tax of $7 million. |
| (3) | (3) | A remaining amount of approximately $2.0 billion is available under the stock repurchase program as of June 30, 2023. | (3) | A remaining amount of approximately $1.3 billion is available under the stock repurchase program as of September 30, 2023. |
Item 6. Exhibits.
| | | | | | | | | | | |
| EXHIBIT NUMBER | |
DESCRIPTION |
| | | |
10.1 | * | |
| | | |
10.2 | | |
| | | |
| 31.1 | | |
| | | |
| 31.2 | | |
| | | |
| 32.1 | | |
| | | |
| 32.2 | | |
| | | |
| 101 | | The following materials from the Centene Corporation Quarterly Report on Form 10-Q for the quarter ended JuneSeptember 30, 2023, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Earnings (Loss); (iv) the Consolidated Statements of Stockholders' Equity; (v) the Consolidated Statements of Cash Flows and (vi) related notes. |
| | | |
| 104 | | Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101. |
| | | |
* Indicates a management contract or compensatory plan or arrangement. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized as of July 28,October 24, 2023.
| | | | | | | | |
| | CENTENE CORPORATION |
| | | |
| | By: | /s/ SARAH M. LONDON |
| | Chief Executive Officer
(principal executive officer) |
| | | | | | | | |
| | By: | /s/ ANDREW L. ASHER |
| | Executive Vice President, Chief Financial Officer
(principal financial officer) |
| | | | | | | | |
| | By: | /s/ KATIE N. CASSO |
| | Senior Vice President, Corporate Controller and Chief Accounting Officer
(principal accounting officer) |
| | |