• Fourth-Quarter Adjusted Diluted EPS: $0.80
• Full-Year 2024 Adjusted Diluted EPS: $7.17
• Fourth-Quarter Premium and Service Revenue: $36.3 billion
• Full-Year 2025 Revenue Guidance Increase: $4 billion
• Full-Year 2025 Adjusted Diluted EPS Guidance: Greater than $7.25
• Medicaid Membership: 13 million Americans
• Medicaid HBR (Health Benefits Ratio) Q4 2024: 93.4%
• Full-Year 2024 Medicaid HBR: 92.5%
• Medicare Enrollment Expectation for 2025: Low to mid-900,000
• Medicare Part D 2025 Revenue Expectation: Approximately $16 billion
• Marketplace Membership Peak Q1 2025: Slightly above 5 million members
• Adjusted SG&A Expense Ratio Q4 2024: 8.9%
• Cash Flow Provided by Operations Full-Year 2024: $154 million
• Share Repurchase Full-Year 2024: 42 million shares for $3 billion
• Debt to Adjusted EBITDA Year-End 2024: 2.9 times
• Medical Claims Liability Year-End 2024: $18.3 billion
• Days in Claims Payable Year-End 2024: 53 days

• Warning! GuruFocus has detected 5 Warning Signs with CNC.

Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Centene Corp (NYSE:CNC) reported strong fourth-quarter adjusted diluted EPS of $0.80 and full-year 2024 adjusted diluted EPS of $7.17, demonstrating the durability of its earnings power.
• The company increased its full-year 2025 revenue guidance by $4 billion, driven by better-than-expected results during the Medicare annual enrollment period and a program expansion in Medicaid.
• Centene Corp (NYSE:CNC) achieved a mid-4% composite rate adjustment for Medicaid, with expectations for a full-year 2025 composite rate adjustment of 3% to 4%, indicating strong negotiation with state partners.
• The Medicare segment showed significant improvement, with 55% of members associated with 3.5-star plans or better, up from 23% last year, reflecting enhanced operational precision.
• The Marketplace segment demonstrated strong performance, with January effectuated enrollment slightly stronger than expected, positioning the company for a peak membership above five million members in the first quarter of 2025.

Negative Points

• Centene Corp (NYSE:CNC) faced challenges with Medicaid redeterminations, which temporarily increased the Medicaid HBR to 92.5% for the full year 2024, impacting earnings power.
• Operating cash flow for the full year was only $154 million, affected by the timing of pharmacy rebate collections and the buildup of state premium payments receivable.
• The company is cautious about the potential impact of program integrity changes, such as failure-to-report processes, which could affect effectuated enrollment in the Marketplace segment.
• Centene Corp (NYSE:CNC) is still navigating the appeals process for Medicaid contracts in Texas and Georgia, which could impact future revenue and growth opportunities.
• Despite strong revenue growth, the company's EPS guidance for 2025 remains unchanged, indicating potential conservatism or challenges in translating revenue growth into earnings.

Q & A Highlights

Q: Can you provide insights into your expectations for total exchange market growth in 2025 and the subsidy verification process? A: CMS reported a 13% January-to-January enrollment growth. We focus on effectuated membership due to program integrity changes. The agent-of-record lock and failure-to-report processes may have a longer tail, impacting Q2. We are starting from a strong position but need a few more months to see where membership settles.

Q: What drove the prior-year development (PYD) increase in the quarter, and can you explain the Medicaid retros that didn't hit in Q4? A: The PYD increase was over $400 million, driven by a CSR settlement. The Medicaid retros were expected late in Q4 but didn't materialize. We are not counting on them for 2025, but any materialization would benefit 2025.

Q: How should we think about Medicaid rate assumptions for the rest of the year? A: We expect a full-year 2025 composite rate of 3% to 4%, with stronger rates in the 1-1 cohort. Conversations with state partners are constructive, and we are confident in achieving sufficient funding to support members.

Q: Can you discuss the seasonality expectations for 2025, particularly for Medicaid MLR? A: For Medicaid, we expect the back half of 2025 to be better than the front half. The front-half HBR of 2025 should be better than the back half of 2024. Overall, we anticipate a 60/40 earnings per share split between the first and second halves of the year.

Q: Can you clarify the impact of enhanced APTCs on ACA membership and the potential for buydowns? A: Without mitigation, the expiration of enhanced APTCs could lead to a 20% to 30% membership hit. Various scenarios are being considered, including different FPL caps and buydown implications. We are preparing for the next OE cycle and may file two sets of bids.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.