Centene Corporation · NYSE:CNC
Centene — Investor Day (December 2021)
48 slides from Centene's investor day presentation, Dec 10, 2021
Slide 1: 2022 Financial Guidance and Investor Day
2022 Financial Guidance and Investor Day December 10, 2021
Slide 2: Welcome
Welcome Michael Neidorff Chairman and Chief Executive Officer
Slide 3: Introduction
Introduction Jennifer Gilligan Senior Vice President, Finance and Investor Relations
Slide 4: Forward-Looking Statements
Forward-Looking Statements All statements, other than statements of current or historical fact, contained in this presentation are forward- litigation in connection with the Magellan Acquisition may affect the timing or occurrence of the Magellan looking statements. Without limiting the foregoing, f
Slide 5: Question & Answer Session Chat
Question & Answer Session Chat Enter questions through the chat function on your screen 5
Slide 6: Agenda
Agenda 8:30 AM Welcome Michael Neidorff 8:35 AM Introduction Jennifer Gilligan 8:40 AM Strategic Priorities Sarah London 8:45 AM 2022 Financial Guidance Drew Asher 8:55 AM Core Business Update Brent Layton 9:05 AM Value Creation Roadmap Sarah London & Drew Asher 9:20 AM Closing Remarks Sarah London
Slide 7: Strategic Priorities
Strategic Priorities Sarah London Vice Chairman
Slide 8: Centene is at an Important & Exciting Inflection Point
Centene is at an #1 Important & Exciting Medicaid Managed Care Inflection Point Organization #1 Strong Growth in Medicare Marketplace Tremendous Opportunity Carrier Advantage to Harness True Potential, Leveraging Centene’s Size and Scale 26.5 $125B+ million 2021 Projected members Revenue1 #24 on For
Slide 9: Investor Day – Key Takeaways
Investor Day – Key Takeaways Clear Strategic Value Creation Portfolio Review - Plan For Next Growth Focus on Plan to Drive All Non-Core Chapter of Core Product Lines Increased Assets Centene Profitability Reviewing Material Share Strategic Repurchases in 2024 EPS Targets Alternatives for 2022 & Beyo
Slide 10: Centene, the Way Forward
Centene, the Way Forward Focus on Growing Value Creation Position for Long-Term Success Core Businesses Plan • Unrivaled member experience • Innovative value-based • Medicaid • Margin expansion partnerships • Medicare • Sustainable • Growth in membership • Commercial profitable growth • Enhanced pro
Slide 11: 2022 Financial Guidance
2022 Financial Drew Asher Executive Vice President Guidance and Chief Financial Officer
Slide 12: 2021 Guidance Update
2021 Guidance Update October & November Utilization Observations • COVID costs down from Q3 • Non-COVID utilization in line with expectations USMM Sale Completed December 6 • Plan to use proceeds for immediate share repurchase 2021 Guidance Reaffirmed • Total Revenue of $125.2B - $126.4B • HBR of 87
Slide 13: Committed to Enhanced Transparency
Committed to Enhanced Transparency More HBR More SG&A Visibility Visibility & Guidance Detail Product level disclosures will include Breaking out depreciation expense on Medicaid, Commercial and Medicare the face of the Income Statement separately from SG&A expenses Disclosure of quarterly HBR to be
Slide 14: Selected 2022 Assumptions
Assume Medicaid Redeterminations commence May 1st Marketplace margin expansion, making progress towards long-term targeted pretax range of 5%-7.5% Selected 2022 Full year Medicaid net composite rate adjustment of 1.3%; COVID era risk corridors to be sunset primarily by June 30, Assumptions 2022 Stro
Slide 15: Total 2022 Revenue Guidance
Total 2022 Revenue Guidance ($ In Billions) YOY Growth 9% (5% Ex. Magellan)1 $4.4 $2.0 $0.6 $0.8 $1.3 $135.9 $5.6 $3.0 – $137.9 Medicaid $125.2 Growth, Other – Incl. North Medicaid Medicaid Growth, $126.4 Carolina Redeterminations Pharmacy Medicare/PDP Net of Circle Health (Full Year) (5/1-12/31) Ca
Slide 16: 2022 HBR Guidance
2022 HBR Guidance ~+90 bps ~(70) bps ~(5) bps ~(5) bps 87.6% 87.6% – – 88.0% Medicaid, 88.2% Including Marketplace Magellan Pharmacy Margin Impact on Mix Carve-Outs Expansion Medicare of HBR 2021 2022 Guidance Guidance 16
Slide 17: 2022 Adjusted SG&A Guidance
2022 Adjusted SG&A Guidance ~(50) bps ~+20 bps ~(15) bps ~+10 bps 8.2% 7.7% 7.8% – – – 8.6% Depreciation Separating 8.1% Circle 8.3% from SG&A Health Magellan on Income Annualized Impact on Leverage on Statement mix on SG&A SG&A Core Business 2021 2021 2022 Guidance Guidance Guidance Excluding Depre
Slide 18: 2022 Guidance
2022 Guidance Low High Total Revenues $135.9 $137.9 GAAP Diluted EPS $4.07 $4.23 Adjusted Diluted EPS(1) $5.30 $5.50 HBR 87.6% 88.2% SG&A Expense Ratio(2) 7.9% 8.4% Adjusted SG&A Expense Ratio(3) 7.8% 8.3% Effective Tax Rate 25.5% 26.5% Adj. Effective Tax Rate(1) 25.0% 26.0% Diluted Shares (in milli
Slide 19: Additional 2022 Metrics
Additional 2022 Metrics Premium and Service Revenues of 1 $129.8 billion to $131.8 billion Cost of Services expense ratio of 84.8% 2 to 85.3% Investment and Other Income of $324 3 million to $344 million 4 Interest Expense of $643 million to $663 million 5 Capital expenditures of approximately $1 bi
Slide 20: Core Business Update
Core Business Brent Layton President and Update Chief Operating Officer
Slide 21: Centene Core Products
Centene Core Products Medicaid Commercial 1 Medicare 1.2M Medicare 14.8M Members 2.6M Members Advantage Members 67% of Revenue 13% of Revenue 4.1M PDP Members 14% of Revenue2 Note: Data as of 9/30/21 1 Includes Marketplace and Commercial membership and revenue 21 2 Includes Medicare Advantage, PDP a
Slide 22: 2022 Footprint
2022 Footprint Medicare PDP (All 50 States) Medicaid Only Medicare Only Medicare and Marketplace Medicaid and Medicare Medicare, Medicaid, and Marketplace Centene Headquarters HI AK 22
Slide 23: Medicaid
Medicaid CENTENE
Slide 24: Medicaid Growth and Expansion
Medicaid Growth and Expansion Ohio Nevada Arizona Reprocurement Reprocurement Reprocurement Lorem ipsum dolor sit Lorem ipsum dolor sit Populations: TANF, CHIP, Populations: TANF, CHIP, Populations: SMI Expansion, ABD (non-dual), amet, consectetur amet, consectetur Expansion Awarded: November 15, 20
Slide 25: Next Phase of Growth and Value Creation
Next Phase of Growth and Value Creation Medicaid Medicare 80% Members in Value Based Arrangements 92% Members in Value Based Arrangements Members in Upside and Members in Upside and 25% Downside Value Based 37% Downside Value Based Arrangements Arrangements Year-over-Year increase in total Year-over
Slide 26: 2022 Medicaid Footprint
2022 Medicaid Footprint 29 States 14.8M Members HI AK 26
Slide 27: Marketplace
Marketplace CENTENE
Slide 28: 2022 Ambetter Footprint
2022 Ambetter Footprint 27 States 5 New states: LA,KY,NJ, NE,OK 274 1,480 Counties New counties across 13 states Existing Counties New Counties Coverage in 49% 3 New of U.S. Ambetter Counties Products
Slide 29: Ambetter Response: New Product Offerings
Ambetter Response: New Product Offerings Ambetter Ambetter Ambetter Value Select Virtual Access HMO Clinic Model Tailored Networks Online, Easily Accessible Medical Home 29
Slide 30: Medicare
Medicare CENTENE
Slide 31: 2022 Wellcare Footprint
2022 Wellcare Footprint 36 States 3 New states: MA, NE, OK 1,575 Counties 327 New counties Existing State New Market 31
Slide 32: 2022 and Beyond
Products prepared for sustainable and profitable growth 2022 and Streamlining of our operations Beyond Continue to execute strategies to create value 32
Slide 33: Value Creation Roadmap
Value Creation Roadmap CENTENE
Slide 34: Value Creation Office
Value Creation Office Sarah London Brent Layton Drew Asher Harnessing all parts of our enterprise to drive value 34
Slide 35: Clear Execution Strategy
Quantifying the Value Creation Plan Clear Financial Execution + Management Strategy Framework 35
Slide 36: Value Creation: Multiple Levers to Drive Margin & EPS Growth
Value Creation: Multiple Levers to Drive Margin & EPS Growth SG&A Expense Gross Margin Strategic Use Annual Savings Annual Improvement of Capital ~$700M ~$500M • Share buyback • Portfolio rationalization & divestitures • Centralize certain functions • Bid discipline • Debt paydown • Organizational m
Slide 37: Value Creation: Multiple Levers to Drive Margin & EPS Growth
Value Creation: Multiple Levers to Drive Margin & EPS Growth Total Adj. EPS Impact $7.50 to ~$2.00 $5.40 $0.10 to $0.35 $7.75 2024 Target Targeted 2024 2022 Other net organic impacts Adjusted Value Creation Guidance by 2024 (not captured in Diluted EPS annual value Midpoint the ~$2.00) 37
Slide 38: Value Creation: Measuring Progress in 2022
Value Creation: Measuring Progress in 2022 Award Launch Tool PBM Begin Phase 2 Pharmacy to Streamline Contract Standardization Platform Provider Strategically Deployment for 2024 Initiate of Utilization Consolidation Engagement Price of Share Standardization Mgmt. (#1) Mgmt. 2023 Automated Repurchas
Slide 39: Pharmacy Opportunities
Pharmacy Opportunities • Comprehensive process to address our $35 billion annual pharmacy spend • Consolidating to single PBM platform for all Centene Health Plans • Transform Envolve into an Enterprise Center of Excellence for our health plans and drive standardization across clinical protocols and
Slide 40: Utilization Management Opportunities
Utilization Management Opportunities • Primary focus on standardization and centralization to improve quality and productivity standards • Created Enterprise Shared Services Function to serve all three major product lines - Medicare transition completed - Marketplace next - Medicaid targeted for 202
Slide 41: Portfolio Optimization Review Framework
Portfolio Optimization Review Framework Value Creation is the Focus of Every Group at Centene, including M&A Key Question – Is it Non-Core? Financial Strategic Best Owner • How does it compare to our • Does it fit with our strategy? • Are we the best owner? target margins? • Is it one of the top are
Slide 42: U.S. Medical Management (USMM) Transaction
U.S. Medical Management (USMM) Transaction USMM has outperformed in numerous value-based care initiatives and consistently delivered lower costs, better health outcomes, and higher patient satisfaction ratings. We are confident this transaction will best position USMM to expand its reach and impact
Slide 43: Reviewing Strategic Alternatives: International Business
Reviewing Strategic Alternatives: International Business $2+ billion • Largest operator of independent hospitals in • Serves both government programs and private pay in revenue the U.K. patients • 50 hospitals • 10 hospitals • 1,900 beds • 1,650 beds • Two-thirds of international • 71 primary care a
Slide 44: Clear Pathway Forward
Clear Pathway Forward Members First Members first approach, consistently enhancing member experience and providing the highest quality care at low cost Growing Core Businesses Well positioned as the leader in the most attractive part of managed care: government- sponsored healthcare - Medicaid, Medi
Slide 45: Question & Answer Session Chat
Question & Answer Session Chat Enter questions through the chat function on your screen 45
Slide 46: Thank You!
Thank You!
Slide 47: Appendix
Appendix CENTENE : orporation
Slide 48: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Included in this presentation are certain non-GAAP measures. The Company cannot provide a reconciliation of these items Management believes that non-GAAP financial measures without unreasonable effort. As such, they have been provide information that is useful to