Centene (CNC) Q2 2024 earnings summary

Executive summary

• Adjusted diluted EPS for Q2 2024 was $2.42, up 15% year-over-year, with GAAP diluted EPS at $2.16, driven by strong Marketplace execution and offset by Medicaid redetermination pressures.

• Marketplace membership grew 34% year-over-year, delivering robust performance and margin expansion, while Medicaid membership declined due to redeterminations.

• Total managed care membership reached 28.5 million, with total revenues for Q2 2024 at $39.8 billion, a 6% increase year-over-year.

• Medicaid experienced higher medical expense due to increased acuity post-redeterminations, but rate adjustments and leadership transitions are underway to address this.

• Medicare segment performed in line with expectations, focusing on Star Ratings progress and strategic market exits.

Financial highlights

• Q2 2024 premium and service revenue reached $36.0 billion, up 3% year-over-year; premium tax revenue rose 39% to $3.9 billion.

• Net earnings attributable to Centene were $1.15 billion for Q2 2024, up 8% year-over-year.

• Cash flow from operations was $2.2 billion in Q2; $851 million deployed for share repurchases in H1 2024.

• Consolidated HBR was 87.6% for Q2 and 87.3% year-to-date, reflecting higher Medicaid acuity and Medicare Star rating impacts.

• SG&A expense ratio improved to 8.0% from 8.7% in Q2 2023, aided by divestitures and risk adjustment revenue.

Outlook and guidance

• 2024 adjusted diluted EPS guidance floor reaffirmed at greater than $6.80; premium and service revenue guidance raised by $5 billion to $141–$143 billion.

• Total revenue guidance updated to $155.0–$157.0 billion; HBR expected at the high end of prior range, around 87.9%.

• Expect Medicaid HBR improvement in H2 2024 due to 4%+ composite rate increases impacting about half of Medicaid premium.

• 2025 tailwinds include Medicaid HBR improvement, Marketplace growth, and absence of Medicare PDR; headwinds include annualization of redetermination impacts and non-repeat of 2024 Marketplace risk adjustment benefit.

• Formal 2025 guidance to be provided at investor day in December.