Financial Performance Highlights for Centene Corporation in 2024

Centene Corporation, a leading healthcare enterprise, reported strong financial results for the year ended December 31, 2024. The company’s total revenues increased by 6% to $163.1 billion, driven by membership growth in the Marketplace business and increased premium tax revenue, partially offset by lower Medicaid membership due to redeterminations and divestitures.

Membership Growth and Segment Performance

Centene’s total managed care membership increased by 1.1 million, or 4%, to 28.6 million members as of December 31, 2024. This growth was primarily driven by a 12% increase in Marketplace membership, which expanded to 29 states. However, the company’s Medicaid membership declined by 10% due to the Medicaid redetermination process, as states have substantially completed their unwinding processes as of December 2024.

The Medicaid segment reported a 1% increase in total revenues, but a 28% decrease in gross margin, as the company worked with states to match rates to the changes in acuity following the redetermination process. The Medicare segment saw a 3% increase in total revenues, but a 9% decrease in gross margin, primarily due to the impact of lower Star quality ratings on Medicare Advantage revenue. In contrast, the Commercial segment experienced a 36% increase in total revenues and a 52% increase in gross margin, driven by strong performance in the Marketplace business.

Operational Efficiency and Cost Management

Centene’s health benefits ratio (HBR), which represents medical costs as a percentage of premium revenues, increased to 88.3% in 2024 from 87.7% in 2023. This increase was primarily driven by higher acuity in Medicaid and the impact of lower Medicare Advantage Star quality ratings, partially offset by improved margin in the Marketplace business.

The company’s selling, general, and administrative (SG&A) expense ratio decreased to 8.5% in 2024 from 9.0% in 2023, reflecting the divestiture of Circle Health, which had a higher SG&A expense ratio, as well as lower Medicare SG&A and continued leveraging of expenses over higher revenues. The adjusted SG&A expense ratio, which excludes certain items, also decreased to 8.5% in 2024 from 8.9% in 2023.

Divestitures and Strategic Initiatives

Centene continued to optimize its portfolio through strategic divestitures in 2024 and 2023. Key divestitures included the sale of Operose Health, Circle Health, and Collaborative Health Systems, which generated gains and helped fund the company’s capital allocation initiatives, including stock repurchases.

The company also implemented a real estate optimization initiative in 2022 to evaluate future real estate needs and downsize its real estate footprint. This initiative resulted in impairment charges in 2023 and 2022, but no significant charges were recognized in 2024.

Centene’s capital allocation strategy included $3.0 billion in stock repurchases under its $10.0 billion repurchase program, which had $2.2 billion remaining as of December 31, 2024. The company also maintained a strong balance sheet, with a debt-to-capital ratio of 41.2% at the end of 2024, up from 40.7% at the end of 2023.

Regulatory and Industry Trends

The company continues to navigate the evolving healthcare landscape, including the impact of the COVID-19 pandemic on Medicaid eligibility changes and the implementation of new regulations. The American Rescue Plan Act (ARPA) and the Inflation Reduction Act (IRA) have introduced changes to the healthcare industry, such as the elimination of the Medicare Part D coverage gap and the capping of members’ annual out-of-pocket costs.

Centene is also preparing for the Centers for Medicare and Medicaid Services (CMS) regulations that will require beneficiaries dually enrolled in Medicare and Medicaid Managed Care Plans to receive integrated care through the company’s Medicare Advantage Dual Eligible Special Needs Plans (D-SNPs) beginning in 2030, with certain restrictions starting in 2027. The company believes it is well-positioned to navigate these regulatory changes given its overlapping Medicaid and Medicare Advantage footprints.

Outlook and Future Priorities

Looking ahead, Centene expects to continue its focus on operational efficiency, cost management, and strategic capital deployment. The company anticipates receiving net dividends of approximately $1.9 billion from its regulated subsidiaries in 2025 and spending approximately $700 million in capital expenditures primarily for system enhancements.

The company’s priorities for the future include:

1. Medicaid Segment: Centene will continue to work with its state partners to match rates to the changes in acuity following the Medicaid redetermination process.

2. Medicare Segment: The company will focus on improving its Star quality ratings to mitigate the impact on Medicare Advantage revenue.

3. Commercial Segment: Centene will aim to maintain the strong performance and growth momentum in its Marketplace business.

4. Operational Excellence: The company will target initiatives to improve productivity, efficiencies, and reduce organizational costs, as well as continue its real estate optimization efforts.

5. Capital Allocation: Centene will evaluate refinancing opportunities, portfolio optimization, and strategic stock repurchases to enhance shareholder value.

Overall, Centene’s strong financial performance in 2024, driven by its diversified business model and strategic initiatives, positions the company well to navigate the evolving healthcare landscape and continue delivering value to its members, providers, and shareholders.