Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this filing. The discussion contains forward-looking statements that involve known and unknown risks and uncertainties.

EXECUTIVE OVERVIEW

General

We are a leading provider of government-sponsored healthcare. We provide access to quality healthcare for nearly 1 in 15 individuals nationwide through government-sponsored programs, including Medicaid, Medicare and the Health Insurance Marketplace. Our focus is on improving health and health care for low-income, complex populations.

Our results of operations depend on our ability to manage expenses associated with health benefits (including estimated costs incurred) and selling, general and administrative (SG&A) costs. We measure operating performance based upon two key ratios. The health benefits ratio (HBR) represents medical costs as a percentage of premium revenues, excluding premium tax revenues that are separately billed, and reflects the direct relationship between the premiums received and the medical services provided. The SG&A expense ratio represents SG&A costs as a percentage of premium and service revenues, excluding premium taxes separately billed.

Regulatory Trends and Uncertainties

The United States government, policymakers and healthcare experts continue to discuss and debate various elements of the United States healthcare model. We remain focused on the promise of delivering access to high-quality, affordable healthcare to all of our members and believe we are well positioned to meet the needs of the changing healthcare landscape.

In contrast to previous executive and legislative efforts to restrict or limit certain provisions of the Affordable Care Act (ACA), legislation and regulations at the federal level over the last few years have contained provisions aimed at leveraging Medicaid and the Health Insurance Marketplace to expand health insurance coverage and affordability to consumers. The American Rescue Plan Act (ARPA), enacted in March 2021, initially enhanced eligibility for the premium tax credit for enrollees in the Health Insurance Marketplace, which was extended through 2025 by the Inflation Reduction Act, enacted in August 2022.

In addition, newly finalized Centers for Medicare & Medicaid Services (CMS) regulations will require beneficiaries dually enrolled in Medicare and Medicaid who receive integrated care through Medicare Advantage Dual Eligible Special Needs Plans (D-SNPs) to have aligned enrollment with their Medicaid Managed Care Organization beginning in 2027, which may restrict our product offerings in some geographic service areas. We believe we are positioned well given our overlapping Medicaid and Medicare Advantage footprints and are committed to navigating evolving regulations.

The COVID-19 pandemic impacted and continues to affect our business as it relates to Medicaid eligibility changes. The Families First Coronavirus Response Act, enacted in March 2020, increased federal matching rates for state Medicaid programs with a requirement that states suspend Medicaid redeterminations throughout the public health emergency (PHE). As a result, since the onset of the PHE through March 2023, our Medicaid membership increased by 3.6 million members (excluding new states North Carolina and Delaware and various state product expansions or managed care organization changes). The Consolidated Appropriations Act, 2023, signed into law on December 29, 2022, delinked the Medicaid continuous coverage requirements from the PHE and, as a result, some states began Medicaid disenrollments on April 1, 2023. Per the Act and clarifying CMS guidance, redeterminations related to the PHE should conclude during the second quarter of 2024. Redeterminations in certain states may move at a slower pace due to CMS compliance action to pause and/or complete corrective action prior to disenrolling beneficiaries. Some states could see redeterminations extend past the second quarter of 2024 given CMS compliance actions.

We are actively engaged to help ensure individuals take the state agency requested action to confirm eligibility in their Medicaid coverage or find other appropriate coverage that is best for themselves and their families. Our Ambetter Health product covers the majority of our Medicaid states, and we believe we are among the best positioned in the healthcare market to enroll those transitioning coverage through redeterminations.

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We also closely monitor state legislation across our markets and are advocating for and seeing adoption of coverage expansions for Medicaid adult populations (e.g., North Carolina), postpartum, foster care, children, among others, as well as mitigating adverse legislation addressing pharmacy, prior authorization and other issues.

We have more than three decades of experience, spanning seven presidents from both sides of the aisle, in delivering high-quality healthcare services on behalf of states and the federal government to under-insured and uninsured families, commercial organizations and military families. This expertise has allowed us to deliver cost-effective services to our government partners and our members. With trends in the personalization of healthcare technology, we continue the use of data and analytics to optimize our business. We continue to believe we have both the capacity and capability to successfully navigate industry changes to the benefit of our members, customers, providers and shareholders.

First Quarter 2024 Highlights

Our financial performance for the first quarter of 2024 is summarized as follows:

Managed care membership of 28.4 million, a decrease of 33 thousand members, or (0.1)% year-over-year.
Total revenues of $40.4 billion, representing 4% growth year-over-year.
Premium and service revenues of $36.3 billion, representing 4% growth year-over-year.
HBR of 87.1%, compared to 87.0% for the first quarter of 2023.
SG&A expense ratio of 8.9%, compared to 8.6% for the first quarter of 2023.
Adjusted SG&A expense ratio of 8.7%, compared to 8.5% for the first quarter of 2023.
Operating cash flows used cash of $456 million in the first quarter of 2024.
Diluted earnings per share (EPS) of $2.16, compared to $2.04 for the first quarter of 2023.
Adjusted diluted EPS of $2.26, compared to $2.11 for the first quarter of 2023.

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A reconciliation from GAAP diluted EPS to adjusted diluted EPS is highlighted below, and additional detail is provided above under the heading "Non-GAAP Financial Presentation":


	Three Months Ended March 31,
	2024		2023
GAAP diluted EPS attributable to Centene	$	2.16	$	2.04
Amortization of acquired intangible assets	0.32		0.33
Acquisition and divestiture related expenses	0.11		0.04
Other adjustments (1)	(0.18)		(0.09)
Income tax effects of adjustments (2)	(0.15)		(0.21)
Adjusted diluted EPS	$	2.26	$	2.11

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

2024:

(a) Net gain on the previously reported divestiture of Magellan Specialty Health due to the achievement of contingent consideration of $81 million, or $0.15 per share ($0.11 after-tax), net gain on the sale of property, subject to closing costs, of $24 million, or $0.04 per share ($0.03 after-tax), Health Net Federal Services asset impairment due to the 2024 final ruling on the TRICARE Managed Care Support Contracts of $14 million, or $0.03 per share ($0.02 after-tax), gain on the previously reported divestiture of Circle Health Group (Circle Health) of $10 million, or $0.02 per share ($0.10 after-tax), severance costs due to a restructuring of $9 million, or $0.01 per share ($0.01 after-tax) and gain on the previously reported divestiture of HealthSmart due to the finalization of working capital adjustments of $7 million, or $0.01 per share ($0.01 after-tax).

2023:

(a) Magellan Specialty Health divestiture gain of $79 million, or $0.14 per share ($0.12 after-tax) and real estate impairments of $26 million, or $0.05 per share ($0.04 after-tax).

(2) The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. The three months ended March 31, 2023, include a one-time income tax benefit of $69 million, or $0.13 per share, resulting from the distribution of long-term stock awards to the estate of the Company's former CEO.

We reference an adjusted SG&A expense ratio, defined as adjusted SG&A expenses, which excludes acquisition and divestiture related expenses and other items, divided by premium and service revenues. A reconciliation from GAAP SG&A to adjusted SG&A and additional detail is provided above under the heading "Non-GAAP Financial Presentation." We also reference effective tax rate on adjusted earnings, defined as GAAP income tax expense (benefit) excluding the income tax effects of adjustments to net earnings divided by adjusted earnings (loss) before income tax expense.

Current and Future Operating Drivers

The following items contributed to our results of operations as compared to the previous year:

Medicaid

In January 2024, our subsidiary, Nebraska Total Care, commenced the statewide Medicaid managed care contract to continue serving the state's Medicaid Managed Care Program, known as Heritage Health. The initial contract term is five years and includes the option for two subsequent, one-year renewals, for a potential total of seven years.
In January 2024, our California health plan commenced direct Medicaid contracts in 10 counties (Los Angeles, Sacramento, Amador, Calaveras, Inyo, Mono, San Joaquin, Stanislaus, Tulare and Tuolumne). In Los Angeles, a portion of the membership is subcontracted. Prior to January 2024, our California health plan previously served the state's Medicaid Managed Care population with contracts in 13 counties, including San Diego.
In January 2024, key coverage expansion provisions outlined in the 2022 year-end spending bill went into effect requiring states to provide 12 months of continuous coverage for children under Medicaid and the Children's Health Insurance Program (CHIP). The spending bill also made the state option to extend coverage for postpartum women for up to 12 months permanent.

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In December 2023, our subsidiaries, Carolina Complete Health and WellCare of North Carolina, began providing coverage under North Carolina's new Medicaid Expansion program.
In September 2023, our subsidiary, Superior HealthPlan (Superior), commenced a new, six-year contract awarded by the Texas Health and Human Services Commission to continue providing youth in foster care with healthcare coverage through the STAR Health Medicaid program. Superior has been the sole provider of STAR Health coverage since the program launched in 2008.
In April 2023, eligibility redeterminations related to the PHE began. We expect that these redeterminations will extend over a 14-month period, with the majority of states concluding in the second quarter of 2024. Eligibility suspensions from the onset of the PHE drove increased membership through March 2023, followed by decreases beginning in April 2023 and continuing through the first quarter of 2024. Per the Consolidated Appropriations Act, 2023 and clarifying CMS guidance, redeterminations related to the PHE should conclude during the second quarter of 2024, however some states could see redeterminations extend past the second quarter given CMS compliance actions.
In April 2023, the state of New York removed pharmacy services for certain of our managed care contracts in connection with the state's transition of pharmacy services to Medicaid fee-for-service.
In February 2023, our subsidiary, Buckeye Health Plan, commenced the Medicaid contract awarded by the Ohio Department of Medicaid to continue providing members with quality healthcare, coordinated services and benefits.

Medicare

Given our strong bid positioning, Medicare Prescription Drug Plan (PDP) membership increased 44% year-over-year.
Consistent with our strategic positioning and bid strategy, Medicare Advantage membership declined year-over-year.
The decrease in our Star quality ratings in the 2023 rating year, which CMS published in October 2022, adversely impacts our 2024 Medicare revenue. The decrease in Star quality ratings is driven by the expiration of certain disaster relief provisions as well as deterioration in select metrics. As a result of this expectation, we recorded a premium deficiency reserve of $250 million in the fourth quarter of 2023, which increased to $300 million in the first quarter of 2024 to reflect the seasonality of earnings, in connection with the 2024 Medicare Advantage business. Our leadership team launched a multi-year plan to build and improve quality across the enterprise with a strong focus on enhanced patient experience and access to care.

Commercial

In 2024, our Health Insurance Marketplace product, Ambetter Health expanded into Delaware. In total, the Marketplace plan is available across 29 states. Additionally, Marketplace membership increased year-over-year due to the expanded footprint, strong product positioning and open enrollment results, as well as overall market growth.

Other

In December 2023 and January 2024, we completed the divestitures of Operose Health Group (Operose Health) and Circle Health, respectively.
In June 2023, we completed the divestiture of Apixio. We maintain a close relationship with, and a minority interest in, the business.
In January 2023, we completed the divestitures of Magellan Specialty Health, Centurion and HealthSmart.

The benefits of successful execution of our Value Creation Plan have impacted our current results of operations and will continue to impact future results of operations, including the implementation of our new third-party pharmacy benefits management (PBM) contract, which commenced in January 2024.

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We expect the following items to impact our future results of operations:

Medicaid

In April 2024, the state of Florida announced its intent to award contracts to five health plans, including Centene's Florida subsidiary, Sunshine Health, as a result of the reprocurement of the Statewide Medicaid Managed Care program.
In April 2024, our subsidiary, Meridian in Michigan, was selected by the Michigan Department of Health and Human Services to continue to serve as a Medicaid health plan for the Comprehensive Health Care Program. The proposed Medicaid contracts are expected to begin on October 1, 2024, and run through September 30, 2029, with three, one-year optional extensions.
In April 2024, our subsidiary, Oklahoma Complete Health, commenced the statewide contracts to provide managed care for the SoonerSelect and SoonerSelect Children's Specialty Plan programs. The new contracts have a one-year term with five, one-year renewal options.
In January 2024, our subsidiary, NH Healthy Families, was selected by the New Hampshire Department of Health and Human Services to continue providing physical health, behavioral health and pharmacy services for New Hampshire's Medicaid managed care program, known as Medicaid Care Management. The contract is expected to begin in September 2024 for a five-year term.
In December 2023, our subsidiary, Arizona Complete Health, was selected by the Arizona Health Care Cost Containment System – Arizona's single state Medicaid agency – to provide managed care for the Arizona Long Term Care System (ALTCS). The program supports nearly 26,000 Arizonans who are elderly and/or have a physical disability (E/PD) with physical and behavioral healthcare, as well as provides pharmacy benefits. The new ALTCS-E/PD contract is anticipated to begin in October 2024, subject to the resolution of third-party protests, and is a three-year term, with four optional one-year extensions, for a total of seven possible contract years.
In July 2023, our subsidiary, Superior, announced it entered into a contract to continue to provide healthcare coverage to the aged, blind or disabled (ABD) population in the state's STAR+PLUS program. The contract is anticipated to begin in September 2024 for a six-year term with a maximum of three additional two-year extensions.
In August 2022, our subsidiary, Magnolia Health Plan (Magnolia), was awarded the Mississippi Division of Medicaid contract. Under the new contract, Magnolia will continue serving the state's Coordinated Care Organization Program, which will consist of the Mississippi Coordinated Access Network and the Mississippi CHIP. The contract is anticipated to begin in January 2025.
In August 2021, our subsidiaries, Carolina Complete Health and WellCare of North Carolina, were selected to coordinate physical and/or other health services with Local Management Entities/Managed Care Organizations under the state's new Tailored Plans. The Tailored Plans are integrated health plans designed for individuals with significant behavioral health needs and intellectual/developmental disabilities. The Tailored Plans are expected to begin on July 1, 2024.

Medicare

In October 2023, CMS issued 2024 Medicare Advantage Star Ratings on the Medicare Plan Finder. Based on the data, approximately 73% of membership is associated with contracts showing year-over-year unrounded score improvement, and approximately 87% of membership is associated with contracts rated 3.0 stars or better - compared to 53% in the prior year. While we have work to do to improve Star scores, this demonstrated the first step towards our multi-year goals.

Other

In June 2023, our subsidiary, Magellan Health, was awarded the Idaho Behavioral Health Plan contract. The contract is anticipated to begin in July 2024 for a four-year term.

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MEMBERSHIP

From March 31, 2023 to March 31, 2024, our managed care membership decreased by 33 thousand, or (0.1)%. The following table sets forth our membership by line of business:


		March 31, 2024	December 31, 2023	March 31, 2023
Traditional Medicaid (1)		11,750,000	12,754,000	14,521,100
High Acuity Medicaid (2)		1,547,600	1,718,000	1,801,200
Total Medicaid		13,297,600	14,472,000	16,322,300
Commercial Marketplace		4,348,800	3,900,100	3,093,600
Commercial Group		422,700	427,500	437,200
Total Commercial		4,771,500	4,327,600	3,530,800
Medicare (3)		1,146,800	1,284,200	1,343,800
Medicare PDP		6,438,900	4,617,800	4,459,300
Total at-risk membership		25,654,800	24,701,600	25,656,200
TRICARE eligibles		2,768,000	2,773,200	2,799,300
Total		28,422,800	27,474,800	28,455,500

(1)	Membership includes Temporary Assistance for Needy Families (TANF), Medicaid Expansion, Children's Health Insurance Program (CHIP), Foster Care, and Behavioral Health.
(2)	Membership includes Aged, Blind, or Disabled (ABD), Intellectual and Developmental Disabilities (IDD), Long-Term Services and Supports (LTSS) and Medicare-Medicaid Plans (MMP) Duals.
(3)	Membership includes Medicare Advantage and Medicare Supplement.

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RESULTS OF OPERATIONS

The following discussion and analysis is based on our Consolidated Statements of Operations, which reflect our results of operations for the three months ended March 31, 2024 and 2023, prepared in accordance with generally accepted accounting principles in the United States (GAAP).

Summarized comparative financial data for the three months ended March 31, 2024 and 2023 is as follows ($ in millions, except per share data in dollars):


	Three Months Ended March 31,
	2024		2023		% Change
Premium	$	35,529	$	33,825	5	%
Service	808		1,127		(28)	%
Premium and service revenues	36,337		34,952		4	%
Premium tax	4,070		3,937		3	%
Total revenues	40,407		38,889		4	%
Medical costs	30,932		29,434		5	%
Cost of services	669		870		(23)	%
Selling, general and administrative expenses	3,218		3,011		7	%
Depreciation expense	135		142		(5)	%
Amortization of acquired intangible assets	173		183		(5)	%
Premium tax expense	4,161		4,011		4	%
Impairment	13		20		(35)	%

Earnings from operations	1,106		1,218		(9)	%
Investment and other income	545		353		54	%

Interest expense	(178)		(180)		1	%

Earnings before income tax	1,473		1,391		6	%
Income tax expense	315		261		21	%
Net earnings	1,158		1,130		2	%
Loss attributable to noncontrolling interests	5		—		n.m.
Net earnings attributable to Centene Corporation	$	1,163	$	1,130	3	%

Diluted earnings per common share attributable to Centene Corporation	$	2.16	$	2.04	6	%

n.m.: not meaningful

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Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Total Revenues

Total revenues increased 4% in the three months ended March 31, 2024, over the corresponding period in 2023, driven by membership growth in the Marketplace business due to strong product positioning as well as overall market growth, partially offset by recent divestitures in the Other segment and lower Medicaid membership primarily due to redeterminations.

Operating Expenses

Medical Costs/HBR

The HBR for the three months ended March 31, 2024, was 87.1%, compared to 87.0% in the same period in 2023. The increase is primarily driven by lower Medicare Advantage revenue resulting from the Star quality ratings impact discussed above and continued elevated utilization, as well as higher acuity in Medicaid primarily through the redetermination process as we continue to work with our state partners to match rates and acuity, partially offset by Commercial as our Marketplace product improved margin through strong 2024 product design and execution.

Cost of Services

Cost of services decreased by $201 million in the three months ended March 31, 2024, compared to the corresponding period in 2023. The decrease was driven by recent divestitures. The cost of service ratio for the three months ended March 31, 2024, was 82.8%, compared to 77.2% in the same period in 2023. The increase was driven by the divestiture of Circle Health, which operated at a lower cost of service ratio.

Selling, General & Administrative Expenses

The SG&A expense ratio was 8.9% for the first quarter of 2024, compared to 8.6% in the first quarter of 2023. The adjusted SG&A expense ratio was 8.7% for the first quarter of 2024, compared to 8.5% in the first quarter of 2023. The increases were driven by growth in the Marketplace business, which operates at a meaningfully higher SG&A ratio as compared to Medicaid, along with Medicare distribution costs. The increases were partially offset by ongoing SG&A reduction initiatives and the divestiture of Circle Health, which operated at a higher SG&A expense ratio. The SG&A expense ratio in the first quarter of 2024 was also impacted by higher acquisition and divestiture related costs in addition to severance costs due to a restructuring.

Impairment

During the first quarter of 2024, we recorded total impairment charges of $13 million, driven by Health Net Federal Services property, software and equipment related to the TRICARE Managed Care Support Contracts that was no longer recoverable following the 2024 final ruling. During the first quarter of 2023, we recorded impairment charges of $20 million related to the reduction of our real estate footprint consisting of leased and owned real estate assets and related fixed assets.

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Other Income (Expense)

The following table summarizes the components of other income (expense) for the three months ended March 31, ($ in millions):


	2024		2023
Investment and other income	$	545	$	353

Interest expense	(178)		(180)
Other income (expense), net	$	367	$	173

Investment and other income. Investment and other income increased by $192 million in the three months ended March 31, 2024, compared to the corresponding period in 2023. The three months ended March 31, 2024 included increased interest income on investments driven by higher interest rates and cash balances, an $81 million Magellan Specialty Health divestiture gain, $24 million net gain on the sale of property, subject to closing costs, $10 million Circle Health divestiture gain and $7 million HealthSmart divestiture gain. The three months ended March 31, 2023 included a $79 million Magellan Specialty Health divestiture gain.

Interest expense. Interest expense decreased by $2 million in the three months ended March 31, 2024, compared to the corresponding period in 2023.

Income Tax Expense

For the three months ended March 31, 2024, we recorded income tax expense of $315 million on pre-tax earnings of $1.5 billion, or an effective tax rate of 21.4%. The effective tax rate for the first quarter of 2024 reflects tax effects of the Circle Health divestiture. For the first quarter of 2024, our effective tax rate on adjusted earnings was 24.6%.

For the three months ended March 31, 2023, we recorded an income tax expense of $261 million on pre-tax earnings of $1.4 billion, or an effective tax rate of 18.8%. The effective tax rate for the first quarter of 2023 reflects the tax effects of the distribution of long-term stock awards to the estate of the Company's former CEO as well as the Magellan Specialty Health gain. For the first quarter of 2023, our effective tax rate on adjusted earnings was 24.3%.

Segment Results

The following table summarizes our consolidated operating results by segment for the three months ended March 31, ($ in millions):


		2024		2023		% Change
Total Revenues
Medicaid		$	25,530	$	26,164	(2)	%
Medicare		5,935		5,876		1	%
Commercial		7,751		5,252		48	%
Other		1,191		1,597		(25)	%
Consolidated total		$	40,407	$	38,889	4	%
Gross Margin (1)
Medicaid		$	1,944	$	2,217	(12)	%
Medicare		546		868		(37)	%
Commercial		2,071		1,247		66	%
Other		175		316		(45)	%
Consolidated total		$	4,736	$	4,648	2	%

(1)	Gross margin represents premium and service revenues less medical costs and cost of services.

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Medicaid

Total revenues decreased 2% in the three months ended March 31, 2024, compared to the corresponding period in 2023. Gross margin decreased $273 million in the three months ended March 31, 2024, compared to the corresponding period in 2023. The decrease in total revenues was driven by lower membership largely due to redeterminations. Gross margin decreased due to lower overall membership as a result of the redetermination process, coupled with higher acuity as we continue to work with our state partners to match rates to the changes in acuity.

Medicare

Total revenues increased 1% in the three months ended March 31, 2024, compared to the corresponding period in 2023 driven by increased PDP membership of 44%, partially offset by lower Medicare Advantage revenue resulting from the Star quality ratings impact discussed above. Gross margin decreased $322 million in the three months ended March 31, 2024, compared to the corresponding period in 2023, driven by lower Medicare Advantage revenue and continued elevated utilization.

Commercial

Total revenues increased 48% in the three months ended March 31, 2024, compared to the corresponding period in 2023. Gross margin increased $824 million in the three months ended March 31, 2024, compared to the corresponding period in 2023. Increases were primarily driven by 41% membership growth in the Marketplace business along with improved margin through strong 2024 product design and execution.

Other

Total revenues decreased 25% in the three months ended March 31, 2024, compared to the corresponding period in 2023. Gross margin decreased $141 million in the three months ended March 31, 2024, compared to the corresponding period in 2023. Decreases were primarily due to recent divestitures.

LIQUIDITY AND CAPITAL RESOURCES

Shown below is a condensed schedule of cash flows used in the discussion of liquidity and capital resources ($ in millions).


	Three Months Ended March 31,
	2024		2023
Net cash (used in) provided by operating activities	$	(456)	$	4,269
Net cash provided by (used in) investing activities	852		(253)
Net cash provided by (used in) financing activities	23		(183)
Effect of exchange rate changes on cash and cash equivalents	6		2
Net increase in cash, cash equivalents and restricted cash and cash equivalents	$	425	$	3,835

Cash Flows (Used in) Provided by Operating Activities

Normal operations are funded primarily through operating cash flows and borrowings under our Revolving Credit Facility. Operating activities used cash of $456 million in the three months ended March 31, 2024, compared to providing cash of $4.3 billion in the comparable period in 2023.

Cash flows used in operations for the three months ended March 31, 2024 were driven by net earnings, more than offset by timing of experience rebate payments, a delay in premium payments from one of our state partners subsequently received in April 2024 and pharmacy rebate remittance timing as we transitioned to the new third-party PBM, which commenced in January 2024.

Cash flows provided by operations for the three months ended March 31, 2023 were primarily driven by net earnings, increases in unearned revenue and accounts payable due to the early receipt of payments from CMS of approximately $2.8 billion and timing of pass through payments, partially offset by a delay in premium payments from one of our state partners.

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Cash Flows Provided by (Used in) Investing Activities

Investing activities provided cash of $852 million in the three months ended March 31, 2024, and used cash of $253 million in the comparable period in 2023. Cash flows provided by investing activities in the first quarter of 2024 primarily consisted of divestiture proceeds.

In the first quarter of 2023, cash flows used in investing activities primarily consisted of net additions to the investment portfolio of our regulated subsidiaries (including transfers from cash and cash equivalents to long-term investments) and capital expenditures, partially offset by divestiture proceeds.

We spent $151 million and $225 million in the three months ended March 31, 2024 and 2023, respectively, on capital expenditures the majority of which was driven by system enhancements and computer hardware.

As of March 31, 2024, our investment portfolio consisted primarily of fixed-income securities with an average duration of 3.4 years. We had unregulated cash and investments of $1.0 billion at March 31, 2024, compared to $1.0 billion at December 31, 2023.

Cash Flows Provided by (Used in) Financing Activities

Financing activities provided cash of $23 million in the three months ended March 31, 2024, compared to using cash of $183 million in the comparable period in 2023. Financing activities in 2024 were driven by net increases in debt of $163 million, partially offset by stock repurchases of $151 million, which included $51 million under the stock repurchase program and $100 million of repurchases related to income tax withholding upon the vesting of previously awarded stock grants.

Financing activities in the three months ended March 31, 2023 were driven by stock repurchases of $423 million, partially offset by increased borrowings on our Revolving Credit Facility.

Liquidity Metrics

We have a stock repurchase program authorizing us to repurchase common stock from time to time on the open market or through privately negotiated transactions. In 2023, the Company's Board of Directors authorized up to a cumulative total of $10 billion of repurchases under the program.

During the first quarter of 2024, we repurchased 681 thousand shares of common stock for $51 million under the stock repurchase program. We have approximately $5.2 billion remaining under the program for repurchases as of March 31, 2024. No duration has been placed on the repurchase program. We reserve the right to discontinue the repurchase program at any time. Refer to Note 8. Stockholders' Equity for further information on stock repurchases.

As of March 31, 2024, we had an aggregate principal amount of $15.7 billion of senior notes issued and outstanding. The indentures governing our various maturities of senior notes contain restrictive covenants. As of March 31, 2024, we were in compliance with all covenants.

As part of our capital allocation strategy, we may decide to repurchase debt or raise capital through the issuance of debt in the form of senior notes. In 2022, the Company's Board of Directors also authorized a $1.0 billion senior note debt repurchase program. No repurchases were made during the quarter ended March 31, 2024. As of March 31, 2024, there was $700 million available under the senior note debt repurchase program.

The credit agreement underlying our Revolving Credit Facility and Term Loan Facility contains customary covenants as well as financial covenants including a minimum fixed charge coverage ratio and a maximum debt-to-EBITDA ratio. Our maximum debt-to-EBITDA ratio under the credit agreement may not exceed 4.0 to 1.0. As of March 31, 2024, we had $350 million of borrowings outstanding under our Revolving Credit Facility, $2.1 billion of borrowings under our Term Loan Facility, and we were in compliance with all covenants. As of March 31, 2024, there were no limitations on the availability of our Revolving Credit Facility as a result of the debt-to-EBITDA ratio.

We had outstanding letters of credit of $152 million as of March 31, 2024, which were not part of our Revolving Credit Facility. The letters of credit bore weighted interest of 0.7% as of March 31, 2024. In addition, we had outstanding surety bonds of $855 million as of March 31, 2024.

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At March 31, 2024, our debt to capital ratio, defined as total debt divided by the sum of total debt and total equity, was 40.0%, compared to 40.7% at December 31, 2023. The debt to capital ratio decrease was driven by net earnings, partially offset by year-to-date stock repurchases. We utilize the debt to capital ratio as a measure, among others, of our leverage and financial flexibility.

At March 31, 2024, we had working capital, defined as current assets less current liabilities, of $5.7 billion, compared to $4.0 billion at December 31, 2023. We manage our short-term and long-term investments aiming to ensure a sufficient portion of the portfolio is highly liquid and can be sold to fund short-term requirements as needed.

2024 Expectations

During the remainder of 2024, we expect to receive net dividends from our insurance subsidiaries of approximately $2.9 billion and spend approximately $450 million in additional capital expenditures. In April 2024, we made additional purchases of $200 million through our stock repurchase program.

Based on our operating plan, we expect that our available cash, cash equivalents and investments, cash from our operations and cash available under our Revolving Credit Facility will be sufficient to finance our general operations and capital expenditures for at least 12 months from the date of this filing. While we are currently in a strong liquidity position and believe we have adequate access to capital, we may elect to increase borrowings on our Revolving Credit Facility, which matures in August 2026. Additionally, our senior notes mature between December 2027 and August 2031. From time to time, we may elect to raise additional funds for working capital and other purposes, either through issuance of debt or equity, the sale of investment securities or otherwise, as appropriate. In addition, we may strategically pursue refinancing or redemption opportunities to extend maturities and/or improve terms of our indebtedness if we believe such opportunities are favorable to us.

We intend to continue to target initiatives to improve productivity, efficiencies and reduced organizational costs, as well as capital deployment activities, including stock repurchases, portfolio optimization and the evaluation of refinancing opportunities. In addition to creating shareholder value, these actions encompass a larger organizational mission to enhance our member and provider experience, improve outcomes for our members and innovate to ensure that Centene is a great partner in all aspects of our operations.

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REGULATORY CAPITAL AND DIVIDEND RESTRICTIONS

Our operations are conducted through our subsidiaries. As managed care organizations, most of our subsidiaries are subject to state regulations and other requirements that, among other things, require the maintenance of minimum levels of statutory capital, as defined by each state, and restrict the timing, payment and amount of dividends and other distributions that may be paid to us. Generally, the amount of dividend distributions that may be paid by a regulated subsidiary without prior approval by state regulatory authorities is limited based on the entity's level of statutory net income and statutory capital and surplus.

Our regulated subsidiaries are required to maintain minimum capital requirements prescribed by various regulatory authorities in each of the states in which we operate. During the three months ended March 31, 2024, we received dividends of $151 million from and made $149 million of capital contributions to our regulated subsidiaries. For our subsidiaries that file with the National Association of Insurance Commissioners (NAIC), the aggregate risk-based capital (RBC) level as of December 31, 2023, which was the most recent date for which reporting was required, was in excess of 350% of the Authorized Control Level. We intend to continue to maintain an aggregate RBC level in excess of 350% of the Authorized Control Level during 2024.

Under the California Knox-Keene Health Care Service Plan Act of 1975, as amended (Knox-Keene), certain of our California subsidiaries must comply with tangible net equity (TNE) requirements. Under these Knox-Keene TNE requirements, actual net worth less certain unsecured receivables and intangible assets must be more than the greater of (i) a fixed minimum amount, (ii) a minimum amount based on premiums or (iii) a minimum amount based on healthcare expenditures, excluding capitated amounts.

Under the New York State Department of Health Codes, Rules and Regulations Title 10, Part 98, our New York subsidiary must comply with contingent reserve requirements. Under these requirements, net worth based upon admitted assets must equal or exceed a minimum amount based on annual net premium income.

The NAIC has adopted rules which set minimum RBC requirements for insurance companies, managed care organizations and other entities bearing risk for healthcare coverage. As of March 31, 2024, each of our health plans was in compliance with the RBC requirements enacted in those states.

As a result of the above requirements and other regulatory requirements, certain of our subsidiaries are subject to restrictions on their ability to make dividend payments, loans or other transfers of cash to their parent companies. Such restrictions, unless amended or waived or unless regulatory approval is granted, limit the use of any cash generated by these subsidiaries to pay our obligations. The maximum amount of dividends that can be paid by our insurance company subsidiaries without prior approval of the applicable state insurance departments is subject to restrictions relating to statutory surplus, statutory income and unassigned surplus.

CRITICAL ACCOUNTING ESTIMATES

Please see "Critical Accounting Estimates in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2023 Annual Report on Form 10-K for a description of our Critical Accounting Estimates.

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