Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-31826

Centene Corporation

(Exact name of registrant as specified in its charter)

Delaware						42-1406317
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)
7700 Forsyth Boulevard
St. Louis,			Missouri			63105
(Address of principal executive offices)						(Zip Code)

Registrant's telephone number, including area code: (314) 725-4477

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class			Trading Symbol(s)			Name of Each Exchange on Which Registered
Common Stock, $0.001 Par Value			CNC			New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☒			Accelerated filer			☐
Non-accelerated filer			☐			Smaller reporting company			☐
						Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statement of the registrant included in the filing reflect the correction of an error to the previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based upon the last reported sale price of the common stock on the New York Stock Exchange on June 30, 2022, was $49.2 billion.

As of February 17, 2023, the registrant had 551,264,559 shares of common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the registrant's 2023 annual meeting of stockholders are incorporated by reference in Part III, Items 10, 11, 12, 13 and 14.

CENTENE CORPORATION

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

									PAGE
Part I
Item 1.						Business			1
Item 1A.						Risk Factors			18
Item 1B.						Unresolved Staff Comments			33
Item 2.						Properties			33
Item 3.						Legal Proceedings			33
Item 4.						Mine Safety Disclosures			33
Part II
Item 5.						Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities			34
Item 6.						Reserved			36
Item 7.						Management's Discussion and Analysis of Financial Condition and Results of Operations			37
Item 7A.						Quantitative and Qualitative Disclosures About Market Risk			58
Item 8.						Financial Statements and Supplementary Data			59
Item 9.						Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			102
Item 9A.						Controls and Procedures			102
Item 9B.						Other Information			104
Item 9C.						Disclosure Regarding Foreign Jurisdictions that Prevent Implications			104
Part III
Item 10.						Directors, Executive Officers, and Corporate Governance			104
Item 11.						Executive Compensation			104
Item 12.						Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			105
Item 13.						Certain Relationships and Related Transactions, and Director Independence			105
Item 14.						Principal Accountant Fees and Services			105
Part IV
Item 15.						Exhibits and Financial Statement Schedules			105
Item 16.						Form 10-K Summary			110
Signatures									111

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

All statements, other than statements of current or historical fact, contained in this filing are forward-looking statements. Without limiting the foregoing, forward-looking statements often use words such as "believe," "anticipate," "plan," "expect," "estimate," "intend," "seek," "target," "goal," "may," "will," "would," "could," "should," "can," "continue," and other similar words or expressions (and the negative thereof). Centene Corporation and its subsidiaries (Centene, the Company, our or we) intends such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with these safe-harbor provisions. In particular, these statements include, without limitation, statements about our future operating or financial performance, market opportunity, value creation strategy, competition, expected activities in connection with completed and future acquisitions and dispositions, our investments, and the adequacy of our available cash resources. These statements may be found in the various sections of this filing, such as Part I, Item 1. "Business," Part I, Item IA "Risk Factors," Part I, Item 3. "Legal Proceedings," and Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations."

These forward-looking statements reflect our current views with respect to future events and are based on numerous assumptions and assessments made by us in light of our experience and perception of historical trends, current conditions, business strategies, operating environments, future developments, and other factors we believe appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties and are subject to change because they relate to events and depend on circumstances that will occur in the future, including economic, regulatory, competitive, and other factors that may cause our or our industry's actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions.

All forward-looking statements included in this filing are based on information available to us on the date of this filing. Except as may be otherwise required by law, we undertake no obligation to update or revise the forward-looking statements included in this filing, whether as a result of new information, future events, or otherwise, after the date of this filing. You should not place undue reliance on any forward-looking statements, as actual results may differ materially from projections, estimates, or other forward-looking statements due to a variety of important factors, variables, and events including, but not limited to:

• our ability to design and price products that are competitive and/or actuarially sound including but not limited to any impacts resulting from Medicaid redeterminations;

• our ability to maintain or achieve improvement in the Centers for Medicare and Medicaid Services (CMS) Star ratings and maintain or achieve improvement in other quality scores in each case that can impact revenue and future growth;

• our ability to accurately predict and effectively manage health benefits and other operating expenses and reserves, including fluctuations in medical utilization rates;

• competition, including our ability to reprocure our contracts and grow organically;

• the timing and extent of benefits from our value creation strategy, including the possibility that the benefits received may be lower than expected, may not occur, or will not be realized within the expected time periods;

• disruption, unexpected costs, or similar risks from business transactions, including acquisitions, divestitures, and changes in our relationships with third parties;

• impairments to real estate, investments, goodwill, and intangible assets;

• the risk that the election of new directors, changes in senior management, and any inability to retain key personnel may create uncertainty or negatively impact our ability to execute quickly and effectively;

• membership and revenue declines or unexpected trends;

• rate cuts or other payment reductions or delays by governmental payors and other risks and uncertainties affecting our government businesses;

• changes in healthcare practices, new technologies, and advances in medicine;

• increased healthcare costs;

• inflation;

• changes in economic, political, or market conditions;

• changes in federal or state laws or regulations, including changes with respect to income tax reform or government healthcare programs as well as changes with respect to the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act (collectively referred to as the ACA) and any regulations enacted thereunder;

• tax matters;

• disasters or major epidemics;

• changes in expected contract start dates;

• provider, state, federal, foreign, and other contract changes and timing of regulatory approval of contracts;

• the expiration, suspension, or termination of our contracts with federal or state governments (including, but not limited to, Medicaid, Medicare, TRICARE, or other customers);

• the difficulty of predicting the timing or outcome of legal or regulatory proceedings or matters, including, but not limited to, our ability to resolve claims and/or allegations made by states with regard to past practices, including at Centene Pharmacy Services (formerly Envolve Pharmacy Solutions, Inc. (Envolve)), as our pharmacy benefits manager (PBM) subsidiary, within the reserve estimate we previously recorded and on other acceptable terms, or at all, or whether additional claims, reviews or investigations will be brought by states, the federal government or shareholder litigants, or government investigations;

• challenges to our contract awards;

• cyber-attacks or other privacy or data security incidents;

• the exertion of management's time and our resources, and other expenses incurred and business changes required in connection with complying with the undertakings in connection with any regulatory, governmental, or third party consents or approvals for acquisitions or dispositions;

• any changes in expected closing dates, estimated purchase price, and accretion for acquisitions or dispositions;

• restrictions and limitations in connection with our indebtedness;

• a downgrade of the credit rating of our indebtedness;

• the availability of debt and equity financing on terms that are favorable to us; and

• foreign currency fluctuations.

This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain other factors that may affect our business operations, financial condition, and results of operations, in our filings with the Securities and Exchange Commission (SEC), including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Due to these important factors and risks, we cannot give assurances with respect to our future performance, including without limitation our ability to maintain adequate premium levels or our ability to control our future medical and selling, general and administrative costs.

SUMMARY OF RISK FACTORS

Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects. These risks include, but are not limited to, the following, all of which are more fully described in Part 1, Item 1A "Risk Factors". This summary should be read in conjunction with the Risk Factors section and should not be relied upon as an exhaustive summary of the material risks facing our business.

• Failure to accurately estimate and price our medical expenses or effectively manage our medical costs or related administrative costs could have a material adverse effect on our business;

• Our Medicare programs are subject to a variety of unique risks that could adversely impact our financial results;

• Risk-adjustment payment systems make our revenue and results of operations more difficult to estimate and could result in retroactive adjustments that have a material adverse effect on our business;

• Any failure to adequately price products offered or any reduction in products offered for Medicare Advantage and in the Health Insurance Marketplace may have a material adverse effect on our business;

• We derive a portion of our cash flow and gross margin from our prescription drug plan (PDP) operations, for which we submit annual bids for participation. The results of our bids could have a material adverse effect on our business;

• Our encounter data may be inaccurate or incomplete, which could have a material adverse effect on our business and ability to bid for, and continue to participate in, certain programs;

• If we are not successful in procuring new government contracts or renewing existing government contracts, or if we receive an adverse finding or review resulting from an audit or investigation, our business may be adversely affected;

• Our business could be materially adversely affected by the effects of widespread public health pandemics, such as COVID-19;

• Ineffectiveness of state-operated systems and subcontractors could adversely affect our business;

• Execution of our value creation strategy may create disruptions in our business;

• If state regulators do not approve payments of dividends and distributions by our subsidiaries to us, we may not have sufficient funds to implement our business strategy;

• We derive a significant portion of our premium revenues from operations in a number of states, and our business could be materially affected by a decrease in premium revenues or profitability in any one of those states;

• Competition may limit our ability to increase penetration of the markets that we serve;

• If we are unable to maintain relationships with our provider networks, our profitability may be harmed;

• If we or our third-party vendors are unable to integrate and manage information systems effectively, our operations could be disrupted;

• A failure in or breach of our operational or security systems or infrastructure, or those of third parties with which we do business, including as a result of cyber-attacks, could have a material adverse effect on our business;

• We may be unable to attract, retain or effectively manage the succession of key personnel;

• An impairment charge with respect to our real estate portfolio, recorded goodwill, and intangible assets could have a material impact on our results of operations;

• Reductions in funding, changes to eligibility requirements for government-sponsored healthcare programs in which we participate, and any inability on our part to effectively adapt to changes to these programs could have a material adverse effect on our business;

• Significant changes or judicial challenges to the ACA could materially and adversely affect our business;

• Our business activities are highly regulated and new laws or regulations or changes in existing laws or regulations or their enforcement or application could force us to change how we operate and could harm our business;

• Our pharmacy services face regulatory and other risks and uncertainties which could materially and adversely affect our business;

• We have been and may from time to time become involved in costly and time-consuming litigation and other regulatory proceedings, which require significant attention from our management and could adversely affect our business;

• If we fail to comply with applicable privacy, security, and data laws, regulations, and standards, including with respect to third-party service providers that utilize sensitive personal information on our behalf, our business could be materially and adversely affected;

• If we fail to comply with the extensive federal and state fraud, waste and abuse laws, our business could be materially and adversely affected;

• We might be adversely impacted by tax legislation or challenges to our tax positions;

• Our investment portfolio may suffer losses which could materially and adversely affect our results of operations or liquidity;

• Adverse credit market conditions may have a material adverse effect on our liquidity or our ability to obtain credit on acceptable terms;

• We have substantial indebtedness outstanding and may incur additional indebtedness in the future. Such indebtedness could reduce our agility and may adversely affect our financial condition;

• Phasing out of London Interbank Offered Rate (LIBOR) may increase our interest expense or affect the value of the financial obligations to be held or issued by us that are linked to LIBOR, which may adversely affect our financial condition;

• Mergers and acquisitions may not perform as expected and we may not realize the savings expected from divestitures, which may cause the market price of our common stock to decline;

• We may be unable to successfully integrate our existing business with acquired businesses and realize the anticipated benefits of such acquisitions; and

• Our business and results of operations may be materially adversely affected if we fail to manage and complete divestitures.

Non-GAAP Financial Presentation

The Company is providing certain non-GAAP financial measures in this report as the Company believes that these figures are helpful in allowing investors to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently across periods. The Company uses the presented non-GAAP financial measures internally in evaluating the Company's performance and for planning purposes, by allowing management to focus on period-to-period changes in the Company's core business operations, and in determining employee incentive compensation. Therefore, the Company believes that this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Specifically, the Company believes the presentation of non-GAAP financial information that excludes amortization of acquired intangible assets and acquisition and divestiture related expenses, as well as other items, allows investors to develop a more meaningful understanding of the Company's core performance over time.

The tables below provide reconciliations of non-GAAP items ($ in millions, except per share data):

			Year Ended December 31,
			2022						2021						2020
GAAP net earnings attributable to Centene			$	1,202					$	1,347					$	1,808
Amortization of acquired intangible assets			817						770						719
Acquisition and divestiture related expenses			213						185						602
Other adjustments (1)			1,540						1,275						29
Income tax effects of adjustments (2)			(410)						(537)						(262)
Adjusted net earnings			$	3,362					$	3,040					$	2,896
GAAP diluted earnings per share (EPS) attributable to Centene			$	2.07					$	2.28					$	3.12
Amortization of acquired intangible assets			1.40						1.31						1.24
Acquisition and divestiture related expenses			0.36						0.31						1.04
Other adjustments (1)			2.65						2.16						0.05
Income tax effects of adjustments (2)			(0.70)						(0.91)						(0.45)
Adjusted Diluted EPS			$	5.78					$	5.15					$	5.00

(1) Other adjustments include the following pre-tax items:

2022:

(a) real estate impairments of $1,642 million, or $2.82 per share ($2.08 after-tax); PANTHERx Rare (PANTHERx) divestiture gain of $490 million, or $0.84 per share ($0.65 after-tax); impairments of assets associated with the divestitures of our Spanish and Central European, Centurion, and HealthSmart businesses of $458 million, or $0.78 per share ($0.60 after-tax); Magellan Rx divestiture gain of $269 million, or $0.46 per share ($0.17 after-tax); Health Net Federal Services asset impairment of $233 million, or $0.40 per share ($0.39 after-tax); gain on debt extinguishment of $27 million, or $0.04 per share ($0.03 after-tax); increase to the previously reported gain on the divestiture of U.S. Medical Management (USMM) due to the finalization of working capital adjustments of $13 million, or $0.02 per share ($0.02 after-tax); and costs related to the PBM legal settlement of $6 million, or $0.01 per share ($0.00 after-tax).

2021:

(b) PBM legal settlement expense of $1,264 million, or $2.14 per share ($1.76 after-tax); gain related to the acquisition of the remaining 60% interest of Circle Health of $309 million, or $0.52 per share ($0.52 after-tax); impairment of our equity method investment in RxAdvance of $229 million, or $0.39 per share ($0.32 after-tax); gain related to the divestiture of USMM of $150 million, or $0.25 per share ($0.23 after-tax); debt extinguishment costs of $125 million, or $0.21 per share ($0.16 after-tax); reduction to the previously reported gain on divestiture of certain products of our Illinois health plan of $62 million, or $0.10 per share ($0.08 after-tax); and severance costs due to a restructuring of $54 million, or $0.09 per share ($0.06 after-tax).

i

2020:

(c) gain related to the divestiture of certain products of our Illinois health plan of $104 million, or $0.18 per share ($0.10 after-tax); impairment of $72 million, or $0.12 per share ($0.10 after-tax); and debt extinguishment costs of $61 million, or $0.11 per share ($0.07 after-tax).

(2) The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. In addition, the year ended December 31, 2022, includes tax expense of $107 million, or $0.18 per share, related to the Magellan Specialty Health divestiture and a $15 million, or $0.03 per share, tax benefit related to the RxAdvance impairment.

			Year Ended December 31,
			2022						2021						2020
GAAP selling, general and administrative expenses			$	11,589					$	9,601					$	9,380
Less:
Acquisition and divestiture related expenses			202						157						580
Restructuring costs			—						54						—
Costs related to the PBM legal settlement			6						14						—
Real estate optimization			15						—						—
Adjusted selling, general and administrative expenses			$	11,366					$	9,376					$	8,800
Note: Beginning in 2022, we have included a separate line item for depreciation expense on the Consolidated Statements of Operations, which was previously included in selling, general and administrative (SG&A) expenses. Prior period SG&A expenses have been conformed to the current presentation.

ii

PART I