Centene Corporation (CNC)

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Centene Corp. (CNC)

Q4 2008 Earnings Call

February 10, 2009; 08:30 am ET


Michael Neidorff - Chairman & Chief Executive Officer

Eric Slusser - Executive Vice President & Chief Financial Officer

Ed Kroll - Senior Vice President of Finance & Investor Relations


Daryn Miller - Goldman Sachs

Greg Genova - Deutsche Bank

Joshua Raskin - Barclays

Greg Nersessian - Credit Suisse

Tom Carroll - Stifel Nicolaus



Good morning. My name is Tim and I’ll be your conference operator today. At this time I’d like to welcome everyone to the CNC 2008, fourth quarter and year end financial results. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

I will now turn the call over to Ed Kroll, Senior Vice President of Finance and Investor Relations for Centene Corp. Sir, you may begin.

Ed Kroll

Thank you and good morning everyone. I’m Ed Kroll, Senior Vice President of Finance and Investor Relations at Centene. Thank you for joining us on today’s fourth quarter earnings call. Michael Neidorff, Chairman and Chief Executive Officer; and Eric Slusser, Executive Vice President and Chief Financial Officer of Centene, will host this morning’s call.

The call is expected to last about 45 minutes and may be accessed through our website at www.centene.com. A replay will be available shortly after this call’s completion, also on our website at www.centene.com or by dialing 800-642-1687 in the United States and Canada and 706-645-9291 from all other countries and for both, you enter access code 81401888.

Any remarks that Centene may make about future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor Provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements, as a result of various important factors, including those discussed in Centene’s Form 10-Q dated October 28, 2008 and other public SEC filings.

Centene anticipates that subsequent events and developments will cause its estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.

With that, I’d like to turn the call over to our Chairman and CEO, Michael Neidorff.

Michael Neidorff

Thank you, Ed. Good morning everyone and thank you for joining Centene’s fourth quarter and full year 2008 earnings call. I will briefly review some of the highlights of the fourth quarter and then turn the call over to Eric, who will walk you through the financial results.

Before I comment on what I feel was another solid quarter, I would like to reflect on the new era that the 2008 financial crisis ushered in and what this global realignment in finance and business structure means for Centene. One, we must be balance sheet managers and continue to be balance sheet managers. Liquidity and capital adequacy are prerequisites for the success of any business at any time as measured by our RBC levels, debt to total cap and days claims payable.

Secondly, our relationship with suppliers, i.e. providers, will require collaboration and we will only work with those who effectively balance quality and cost effectiveness. Thirdly, we will be selective in our pursuit of new opportunities. Fourth, we will seek or attempt to err on the side of conservators; and finally, we value systems enhancements that will enable us to be more efficient.

We believe that Centene is well positioned to help their citizens maintain access to quality healthcare services in these difficult times, when state budgets are a very sensitive and critical issue. States are more reliant than ever on Medicaid managed care companies, to help them stretch their budget dollars as far as possible. They are dependent on us to provide their Medicaid beneficiaries with access to quality care in the most equality and cost effective manner.

We believe that Centene’s unique multi-line strategy with our specialty companies and breadth of products gives us a compelling, competitive advantage. For example with Celtic as part of the Centene family, we now have the opportunity to work with states in designing coverage solutions for uninsured individuals and families that do not qualify for traditional government sponsored Medicaid. Celtic's individual coverage, skill set will complement and enhance Centene’s Medicaid healthcare expertise and should lead to product innovation and flexibility to meet the diverse needs of different states.

The US House of Representatives recently passed an $118 billion stimulus bill, including $87 billion in state Medicaid funds for two years, with additional funding for states based on their unemployment levels. The senate is currently working on a stimulus bill that also includes an F-map increase that is very similar to the house’s version.

While it’s too early to gauge the impact and timing of the federal stimulus bill in specific states, its passage serves as a state Medicaid budget stabilizer. On February 4, President Obama signed the Children’s Health Insurance Reauthorization Act of 2009. This expands to 7 million children currently covered under the SCHIP program, by approximately 4 million additional children, including legal immigrants.

We look forward to helping our state customers utilize these critically, needed new resources in an effective and efficient manner. We have already anticipated in our guidance as previously given to you, these numbers.

Now, back to our fourth quarter results; 2008 has been a very good year for Centene as we continue to execute on our strategic initiatives and provide quality care to our members. Our continued company-wide disciplined approach to managing the business has led to a significant HBR in G&A improvement this year. The fourth quarter and full year results we achieved in 2008 gives us confidence that we have laid the groundwork to produce a more predictable profit stream going forward as we look to achieve our future financial targets.

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