Item 1. Financial Statements.

84K characters. Original on sec.gov · Markdown

Item 1. Financial Statements.

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except shares in thousands and per share data in dollars)


	March 31, 2026		December 31, 2025
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	21,264	$	17,888
Premium and trade receivables	19,426		18,105
Short-term investments	2,477		2,432
Other current assets	1,822		1,945
Total current assets	44,989		40,370
Long-term investments	16,599		17,035
Restricted deposits	1,432		1,412
Property, software and equipment, net	2,090		2,037

Goodwill	10,835		10,835
Intangible assets, net	4,364		4,530
Other long-term assets	866		528
Total assets	$	81,175	$	76,747
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims liability	$	20,627	$	20,544
Accounts payable and accrued expenses	16,832		13,796
Return of premium payable	1,570		1,592
Unearned revenue	953		736
Current portion of long-term debt	63		50
Total current liabilities	40,045		36,718
Long-term debt	16,308		17,351
Deferred tax liability	744		833
Other long-term liabilities	2,551		1,789
Total liabilities	59,648		56,691
Commitments and contingencies
Redeemable noncontrolling interests	25		23
Stockholders' equity:
Preferred stock, $0.001 par value; authorized 10,000 shares; no shares issued or outstanding at March 31, 2026 and December 31, 2025	—		—
Common stock, $0.001 par value; authorized 800,000 shares; 625,477 issued and 493,771 outstanding at March 31, 2026, and 623,463 issued and 491,757 outstanding at December 31, 2025	1		1
Additional paid-in capital	20,823		20,777
Accumulated other comprehensive (loss)	(171)		(58)
Retained earnings	10,215		8,674
Treasury stock, at cost (131,706 and 131,706 shares, respectively)	(9,441)		(9,441)
Total Centene stockholders' equity	21,427		19,953
Nonredeemable noncontrolling interest	75		80
Total stockholders' equity	21,502		20,033
Total liabilities, redeemable noncontrolling interests and stockholders' equity	$	81,175	$	76,747

The accompanying notes to the consolidated financial statements are an integral part of these statements.

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except shares in thousands and per share data in dollars)

(Unaudited)


	Three Months Ended March 31,
	2026		2025
Revenues:
Premium	$	43,887	$	41,712
Service	768		777
Premium and service revenues	44,655		42,489
Premium tax	5,289		4,131
Total revenues	49,944		46,620
Expenses:
Medical costs	38,303		36,503
Cost of services	702		698
Selling, general and administrative expenses	3,397		3,353
Depreciation expense	134		142
Amortization of acquired intangible assets	166		173
Premium tax expense	5,381		4,217



Total operating expenses	48,083		45,086
Earnings from operations	1,861		1,534
Other income (expense):
Investment and other income	407		382
Debt extinguishment	(5)		—
Interest expense	(164)		(170)
Earnings before income tax	2,099		1,746
Income tax expense	560		432
Net earnings	1,539		1,314
(Earnings) loss attributable to noncontrolling interests	2		(3)
Net earnings attributable to Centene Corporation	$	1,541	$	1,311

Net earnings per common share attributable to Centene Corporation:
Basic earnings per common share	$	3.13	$	2.64
Diluted earnings per common share	$	3.11	$	2.63

Weighted average number of common shares outstanding:
Basic	492,069		496,214
Diluted	495,591		498,180

The accompanying notes to the consolidated financial statements are an integral part of these statements.

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)

(In millions, unaudited)


	Three Months Ended March 31,
	2026		2025
Net earnings	$	1,539	$	1,314
Change in unrealized gain (loss) on investments	(149)		216
Change in unrealized gain (loss) on investments, tax effect	35		(50)
Change in unrealized gain (loss) on investments, net of tax	(114)		166

Reclassification adjustment, net of tax	1		1


Other comprehensive earnings (loss)	(113)		167
Comprehensive earnings	1,426		1,481
Comprehensive (earnings) loss attributable to noncontrolling interests	2		(3)
Comprehensive earnings attributable to Centene Corporation	$	1,428	$	1,478

The accompanying notes to the consolidated financial statements are an integral part of these statements.

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In millions, except shares in thousands and per share data in dollars)

(Unaudited)

Three Months Ended March 31, 2026


	Centene Stockholders' Equity
	Common Stock									Treasury Stock
	$0.001 Par Value Shares	Amt		Additional Paid-in Capital		Accumulated Other Comprehensive Earnings (Loss)		Retained Earnings		$0.001 Par Value Shares	Amt		Noncontrolling Interest		Total
Balance, December 31, 2025	623,463	$	1	$	20,777	$	(58)	$	8,674	131,706	$	(9,441)	$	80	$	20,033
Comprehensive Earnings (Loss):
Net earnings (loss)	—	—		—		—		1,541		—	—		(4)		1,537
Other comprehensive loss, net of $(35) tax	—	—		—		(113)		—		—	—		—		(113)
Common stock issued for employee benefit plans	2,880	—		9		—		—		—	—		—		9
Common stock repurchases	(866)	—		(30)		—		—		—	—		—		(30)
Stock compensation expense	—	—		67		—		—		—	—		—		67
Contribution to non-redeemable non-controlling interest	—	—		—		—		—		—	—		(1)		(1)
Balance, March 31, 2026	625,477	$	1	$	20,823	$	(171)	$	10,215	131,706	$	(9,441)	$	75	$	21,502

Three Months Ended March 31, 2025


	Centene Stockholders' Equity
	Common Stock									Treasury Stock
	$0.001 Par Value Shares	Amt		Additional Paid-in Capital		Accumulated Other Comprehensive Earnings (Loss)		Retained Earnings		$0.001 Par Value Shares	Amt		Noncontrolling Interest		Total
Balance, December 31, 2024	620,195	$	1	$	20,562	$	(504)	$	15,348	124,288	$	(8,997)	$	90	$	26,500
Comprehensive Earnings (Loss):
Net earnings	—	—		—		—		1,311		—	—		1		1,312
Other comprehensive earnings, net of $50 tax	—	—		—		167		—		—	—		—		167
Common stock issued for employee benefit plans	2,316	—		10		—		—		—	—		—		10
Common stock repurchases	—	—		—		—		—		705	(41)		—		(41)
Stock compensation expense	—	—		59		—		—		—	—		—		59
Balance, March 31, 2025	622,511	$	1	$	20,631	$	(337)	$	16,659	124,993	$	(9,038)	$	91	$	28,007

The accompanying notes to the consolidated financial statements are an integral part of these statements.

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions, unaudited)


	Three Months Ended March 31,
	2026		2025
Cash flows from operating activities:
Net earnings	$	1,539	$	1,314
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	300		314
Stock compensation expense	67		59

Loss on debt extinguishment	5		—

Deferred income taxes	(53)		(27)
Loss on divestitures	—		10


Changes in assets and liabilities
Premium and trade receivables	(1,353)		(2,684)
Other assets	(188)		(669)

Medical claims liabilities	95		1,603
Unearned revenue	217		208
Accounts payable and accrued expenses	2,905		563
Other long-term liabilities	849		814
Other operating activities, net	(17)		5
Net cash provided by operating activities	4,366		1,510
Cash flows from investing activities:
Capital expenditures	(200)		(135)
Purchases of investments	(987)		(1,630)
Sales and maturities of investments	1,276		1,236



Net cash provided by (used in) investing activities	89		(529)
Cash flows from financing activities:
Proceeds from long-term debt	—		750
Payments and repurchases of long-term debt	(1,046)		(958)

Common stock repurchases	(29)		(41)
Proceeds from common stock issuances	10		10



Other financing activities, net	2		(11)
Net cash (used in) financing activities	(1,063)		(250)

Net increase in cash, cash equivalents and restricted cash and cash equivalents	3,392		731
Cash and cash equivalents reclassified from held for sale	4		—
Cash, cash equivalents and restricted cash and cash equivalents, beginning of period	17,957		14,156
Cash, cash equivalents and restricted cash and cash equivalents, end of period	$	21,353	$	14,887
Supplemental disclosures of cash flow information:
Interest paid	$	146	$	129
Income tax net payments (refunds)	$	(19)	$	7


The following table provides a reconciliation of cash, cash equivalents and restricted cash and cash equivalents reported within the Consolidated Balance Sheets to the totals above:
	March 31,
	2026		2025
Cash and cash equivalents	$	21,264	$	14,815
Restricted cash and cash equivalents, included in restricted deposits	89		72
Total cash, cash equivalents and restricted cash and cash equivalents	$	21,353	$	14,887

The accompanying notes to the consolidated financial statements are an integral part of these statements.

CENTENE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Operations

Basis of Presentation

The accompanying interim financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The unaudited interim financial statements herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, footnote disclosures that would substantially duplicate the disclosures contained in the December 31, 2025 audited financial statements have been omitted from these interim financial statements, where appropriate. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of the interim periods presented.

Certain 2025 amounts in the consolidated financial statements and notes to the consolidated financial statements have been reclassified to conform to the 2026 presentation. These reclassifications have no effect on net earnings or stockholders' equity as previously reported.

Recent Accounting Guidance Not Yet Adopted

In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03 – Income Statement – Reporting Comprehensive Income: Disaggregation of Income Statement Expenses which expands disclosures about specific expense categories presented on the face of the Statement of Operations. The standard update is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Company is currently evaluating the effect of the new disclosure requirements.

In September 2025, the FASB issued ASU 2025-06 – Intangibles – Goodwill and Other – Internal-Use Software. The standard update modernizes and clarifies the threshold for when an entity is required to start capitalizing software costs by removing stage-based and linear capitalization rules and is based on when (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. The standard update is effective for fiscal years and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this standard update.

In December 2025, the FASB issued ASU 2025-11 – Interim Reporting – Narrow-Scope Improvements which clarifies interim disclosure requirements and the applicability of Topic 270. The objective of the standard update is to provide clarity about current interim requirements. The amendments in this standard update also include a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The standard update is effective for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this standard update.

2. Acquisitions and Divestitures

Magellan Health

In December 2025, the Company signed a definitive agreement to sell the remaining Magellan Health businesses, which is included in the Other segment. As of March 31, 2026, the assets and liabilities of Magellan Health were considered held for sale resulting in $299 million of assets held for sale in other current assets and $299 million of liabilities held for sale in accounts payable and accrued expenses in the Consolidated Balance Sheet. The majority of the held for sale assets were previously reported as cash and cash equivalents, premium and trade receivables, property, software and equipment and intangible assets. The majority of the liabilities were previously reported as medical claims liabilities and accounts payable and accrued expenses.

As a result of the definitive agreement, in 2025, the Company recorded impairment charges associated with the pending divestiture totaling $513 million, or $389 million after-tax.

3. Sale of Accounts Receivable

The Company has receivables from the Centers for Medicare and Medicaid Services (CMS) for Part D risk-sharing programs attributable to the 2025 plan year that are expected to be paid by CMS within a year after the plan year closes.

In February 2026, the Company entered into a master receivable purchase agreement (the February 2026 Receivable Purchase Agreement). Under the February 2026 Receivable Purchase Agreement, the Company may, from time to time, offer up to the full amount of its 2025 plan year stand-alone Part D risk-sharing programs receivables to the purchaser. The purchaser is not obligated to purchase any receivables unless it elects to accept a purchase request submitted by the Company. The maximum outstanding purchase amount permitted under the agreement is $4,250 million.

Receivables sold under the February 2026 Receivable Purchase Agreement represent eligible amounts arising from prescription drug events that have been estimated to be included in the CMS settlement for the 2025 plan year. The purchase price for each purchased receivable portion equals the net estimated invoice amount of such portion minus the discount, which is determined by reference to the Secured Overnight Financing Rate (SOFR) plus a spread. The Company acts as a servicer for the transferred receivables. As of March 31, 2026, the Company did not record a servicing asset or liability related to its retained responsibility, based on its assessment of the servicing fee, market values for similar transactions, and its cost of servicing the receivables sold. The February 2026 Receivable Purchase Agreement is without recourse for credit losses related to the financial condition of CMS.

The Company accounts for the transfer of all or any portion of this receivable as a sale of accounts receivable in accordance with FASB Accounting Standards Codification (ASC) 860. Accordingly, receivables (or portions thereof) sold are derecognized from the Consolidated Balance Sheets at the time of sale. The difference between the balance of the receivables (or portion thereof) sold and cash proceeds received is recorded as a loss on sale of receivables and included in selling, general and administrative expenses in the Consolidated Statements of Operations. The cash proceeds and associated loss on sale of receivables are recorded as operating cash flows.

During March 2026, the Company sold a participating interest of $1,000 million of 2025 plan year stand-alone Part D risk-sharing programs receivables and received net cash proceeds of $970 million. This transfer of a participating interest in the receivable under the February 2026 Receivable Purchase Agreement resulted in a pre-tax loss on sale of receivables of $30 million. The proceeds from the sale were used for the partial redemption of the Company's Senior Notes due December 15, 2027.

As of March 31, 2026, there were $3,024 million of 2025 plan year stand-alone Part D risk-sharing programs receivables outstanding eligible for the February 2026 Receivable Purchase Agreement, which continue to be recognized in the Consolidated Balance Sheets. As of March 31, 2026, the remaining outstanding purchase amount permitted was $3,250 million.

4. Short-term and Long-term Investments, Restricted Deposits

Short-term and long-term investments and restricted deposits by investment type consist of the following ($ in millions):


	March 31, 2026								December 31, 2025
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	532	$	1	$	(1)	$	532	$	533	$	3	$	(1)	$	535
Corporate securities	10,676		89		(173)		10,592		10,642		166		(146)		10,662
Restricted certificates of deposit	1		—		—		1		1		—		—		1
Restricted cash equivalents	89		—		—		89		69		—		—		69
Short-term time deposits	68		—		—		68		205		—		—		205
Municipal securities	3,736		25		(72)		3,689		3,790		37		(69)		3,758
Asset-backed securities	1,612		13		(13)		1,612		1,656		20		(10)		1,666
Residential mortgage-backed securities	1,764		14		(75)		1,703		1,763		21		(70)		1,714
Commercial mortgage-backed securities	1,140		6		(31)		1,115		1,156		9		(29)		1,136
Equity securities	1		—		—		1		1		—		—		1
Private equity investments	896		—		—		896		915		—		—		915
Life insurance contracts	210		—		—		210		217		—		—		217
Total	$	20,725	$	148	$	(365)	$	20,508	$	20,948	$	256	$	(325)	$	20,879

The Company's investments are debt securities classified as available-for-sale with the exception of equity securities, certain private equity investments and life insurance contracts. Private equity investments include direct investments in private equity securities as well as private equity funds. The Company's investment policies are designed to provide liquidity, preserve capital and maximize total return on invested assets with a focus on high credit quality securities. The Company limits the size of investment in any single issuer other than U.S. treasury securities and obligations of U.S. government corporations and agencies. As of March 31, 2026, 99% of the Company's investments in rated securities carry an investment grade rating by nationally recognized statistical rating organizations. At March 31, 2026, the Company held certificates of deposit, equity securities, private equity investments and life insurance contracts, which did not carry a credit rating. Accrued interest income on available-for-sale debt securities was $174 million and $180 million at March 31, 2026 and December 31, 2025, respectively, and is included in other current assets in the Consolidated Balance Sheets.

The Company's residential mortgage-backed securities are primarily issued by the Federal National Mortgage Association, Government National Mortgage Association or Federal Home Loan Mortgage Corporation, which carry implicit or explicit guarantees of the U.S. government. The Company's commercial mortgage-backed securities are primarily senior tranches with a weighted average rating of AA+ and a weighted average duration of 3 years at March 31, 2026.

The fair value of available-for-sale debt securities with gross unrealized losses by investment type and length of time that individual securities have been in a continuous unrealized loss position were as follows ($ in millions):


	March 31, 2026								December 31, 2025
	Less Than 12 Months				12 Months or More				Less Than 12 Months				12 Months or More
	Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	(1)	$	203	$	—	$	28	$	—	$	88	$	(1)	$	43
Corporate securities	(20)		2,130		(153)		2,933		(2)		464		(144)		3,226
Municipal securities	(4)		582		(68)		1,431		(1)		241		(68)		1,550
Asset-backed securities	(3)		307		(10)		159		(2)		114		(8)		180
Residential mortgage-backed securities	(3)		267		(72)		618		—		120		(70)		687
Commercial mortgage-backed securities	(2)		235		(29)		457		—		156		(29)		480

Total	$	(33)	$	3,724	$	(332)	$	5,626	$	(5)	$	1,183	$	(320)	$	6,166

As of March 31, 2026, the gross unrealized losses were generated from 3,831 positions out of a total of 6,224 positions. The change in fair value of available-for-sale debt securities is primarily a result of movement in interest rates subsequent to the purchase of the security.

For each security in an unrealized loss position, the Company assesses whether it intends to sell the security or if it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If the security meets this criterion, the decline in fair value is recorded in earnings. The Company does not intend to sell these securities prior to maturity and it is not likely that the Company will be required to sell these securities prior to maturity; therefore, the Company did not record an impairment for these securities.

In addition, the Company monitors available-for-sale debt securities for credit losses. Certain investments have experienced a decline in fair value due to changes in credit quality, market interest rates and/or general economic conditions. The Company recognizes an allowance when evidence demonstrates that the decline in fair value is credit related. Evidence of a credit-related loss may include rating agency actions, adverse conditions specifically related to the security or failure of the issuer of the security to make scheduled payments.

The contractual maturities of short-term and long-term debt securities and restricted deposits are as follows ($ in millions):


	March 31, 2026								December 31, 2025
	Investments				Restricted Deposits				Investments				Restricted Deposits
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	2,231	$	2,217	$	466	$	465	$	2,201	$	2,190	$	464	$	464
One year through five years	7,211		7,109		611		600		7,266		7,219		574		566
Five years through ten years	4,058		4,057		348		349		4,198		4,252		334		339
Greater than ten years	159		156		18		18		160		157		43		43
Asset-backed securities	4,516		4,430		—		—		4,575		4,516		—		—
Total	$	18,175	$	17,969	$	1,443	$	1,432	$	18,400	$	18,334	$	1,415	$	1,412

Actual maturities may differ from contractual maturities due to call or prepayment options. Equity securities, private equity investments and life insurance contracts are excluded from the table above because they do not have a contractual maturity. The Company has an option to redeem substantially all of the securities included in the greater than ten years category listed above at amortized cost.

5. Fair Value Measurements

Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are categorized based upon observable or unobservable inputs used to estimate fair value. Level inputs are as follows:


Level Input:						Input Definition:
Level I						Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level II						Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date.

Level III						Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The following table summarizes fair value measurements by level at March 31, 2026, for assets and liabilities measured at fair value on a recurring basis ($ in millions):


	Level I		Level II		Level III		Total
Assets
Cash and cash equivalents	$	21,264	$	—	$	—	$	21,264
Investments:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	53	$	—	$	—	$	53
Corporate securities	—		10,558		—		10,558
Municipal securities	—		2,860		—		2,860
Short-term time deposits	—		68		—		68
Asset-backed securities	—		1,612		—		1,612
Residential mortgage-backed securities	—		1,703		—		1,703
Commercial mortgage-backed securities	—		1,115		—		1,115
Equity securities	—		1		—		1
Total investments	$	53	$	17,917	$	—	$	17,970
Restricted deposits:
Cash and cash equivalents	$	89	$	—	$	—	$	89
U.S. Treasury securities and obligations of U.S. government corporations and agencies	479		—		—		479
Corporate securities	—		34		—		34
Certificates of deposit	—		1		—		1
Municipal securities	—		829		—		829
Total restricted deposits	$	568	$	864	$	—	$	1,432


Total assets at fair value	$	21,885	$	18,781	$	—	$	40,666

The following table summarizes fair value measurements by level at December 31, 2025, for assets and liabilities measured at fair value on a recurring basis ($ in millions):


	Level I		Level II		Level III		Total
Assets
Cash and cash equivalents	$	17,888	$	—	$	—	$	17,888
Investments:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	55	$	—	$	—	$	55
Corporate securities	—		10,652		—		10,652
Municipal securities	—		2,906		—		2,906
Short-term time deposits	—		205		—		205
Asset-backed securities	—		1,666		—		1,666
Residential mortgage-backed securities	—		1,714		—		1,714
Commercial mortgage-backed securities	—		1,136		—		1,136
Equity securities	—		1		—		1
Total investments	$	55	$	18,280	$	—	$	18,335
Restricted deposits:
Cash and cash equivalents	$	69	$	—	$	—	$	69
U.S. Treasury securities and obligations of U.S. government corporations and agencies	480		—		—		480
Corporate securities	—		10		—		10
Certificates of deposit	—		1		—		1
Municipal securities	—		852		—		852
Total restricted deposits	$	549	$	863	$	—	$	1,412



Total assets at fair value	$	18,492	$	19,143	$	—	$	37,635

The Company utilizes matrix-pricing services to estimate fair value for securities which are not actively traded on the measurement date. The Company designates these securities as Level II fair value measurements. In addition, the aggregate carrying amount of the Company's private equity investments and life insurance contracts, which approximates fair value, was $1,106 million and $1,132 million as of March 31, 2026 and December 31, 2025, respectively.

6. Medical Claims Liability

The following table summarizes the change in medical claims liability for the three months ended March 31, 2026 ($ in millions):


	Medicaid		Medicare		Commercial		Other		Consolidated Total
Balance, January 1, 2026	$	10,375	$	4,401	$	5,683	$	85	$	20,544
Less: Reinsurance recoverable	16		—		60		—		76
Balance, January 1, 2026, net	10,359		4,401		5,623		85		20,468

Incurred related to:
Current year	22,608		9,013		7,490		386		39,497
Prior years	(653)		(241)		(292)		(8)		(1,194)
Total incurred	21,955		8,772		7,198		378		38,303
Paid related to:
Current year	14,092		6,397		4,521		358		25,368
Prior years	6,820		2,710		3,252		76		12,858
Total paid	20,912		9,107		7,773		434		38,226

Balance, March 31, 2026, net	11,402		4,066		5,048		29		20,545
Plus: Reinsurance recoverable	14				68				82
Balance, March 31, 2026	$	11,416	$	4,066	$	5,116	$	29	$	20,627

The following table summarizes the change in medical claims liability for the three months ended March 31, 2025 ($ in millions):


	Medicaid		Medicare		Commercial		Other		Consolidated Total
Balance, January 1, 2025	$	10,299	$	3,358	$	4,463	$	188	$	18,308
Less: Reinsurance recoverable	18		—		47		—		65
Balance, January 1, 2025, net	10,281		3,358		4,416		188		18,243

Incurred related to:
Current year	21,419		7,553		7,972		514		37,458
Prior years	(576)		(176)		(365)		(16)		(1,133)
Total incurred	20,843		7,377		7,607		498		36,325
Paid related to:
Current year	12,996		5,243		4,731		359		23,329
Prior years	6,849		1,923		2,648		150		11,570
Total paid	19,845		7,166		7,379		509		34,899
Plus: Premium deficiency reserve	—		178		—		—		178
Balance, March 31, 2025, net	11,279		3,747		4,644		177		19,847
Plus: Reinsurance recoverable	18		—		46		—		64
Balance, March 31, 2025	$	11,297	$	3,747	$	4,690	$	177	$	19,911

Reinsurance recoverables related to medical claims are included in premium and trade receivables. Changes in estimates of incurred claims for prior years are primarily attributable to reserving under moderately adverse conditions. Additionally, as a result of development within "Incurred related to: Prior years," the Company recorded $21 million and $34 million as a reduction to premium revenue in the three months ended March 31, 2026 and 2025, respectively, for minimum medical loss ratio (MLR) and other return of premium programs.

Incurred but not reported (IBNR) plus expected development on reported claims as of March 31, 2026 was $13,510 million. Total IBNR plus expected development on reported claims represents estimates for claims incurred but not reported, development on reported claims and estimates for the costs necessary to process unpaid claims at the end of each period. The Company estimates its liability using actuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice. These actuarial methods consider factors such as historical data for payment patterns, cost trends, product mix, seasonality, utilization of healthcare services and other relevant factors.

The Company reviews actual and anticipated experience compared to the assumptions used to establish medical costs. The Company establishes premium deficiency reserves if actual and anticipated experience indicates that existing policy liabilities together with the present value of future gross premiums will not be sufficient to cover the present value of future benefits, settlement and maintenance costs. For purposes of determining premium deficiencies, contracts are grouped in a manner consistent with the method of acquiring, servicing and measuring the profitability of such contracts and expected investment income is excluded. In December 2024, the Company recorded a premium deficiency reserve of $92 million related to the 2025 Medicare Advantage contract year, which was increased to $270 million in the first quarter of 2025 based on the progression of earnings during the year (with higher earnings at the beginning of the year and lower at the end of the year, given cost sharing progression), including anticipated impacts of the Inflation Reduction Act to the Part D benefit within the Company's Medicare Advantage business. As of March 2026, the Company did not record a premium deficiency reserve related to the 2026 Medicare Advantage contract year.

7. Affordable Care Act

The Affordable Care Act established risk spreading premium stabilization programs as well as a minimum annual MLR and cost sharing reductions.

The Company's net receivables (payables) for each of the programs are as follows ($ in millions):


	March 31, 2026		December 31, 2025
Risk adjustment receivable	$	1,721	$	1,449
Risk adjustment payable	(2,681)		(2,087)
Minimum medical loss ratio	(285)		(294)
Cost sharing reduction receivable	15		13
Cost sharing reduction payable	(15)		(15)

8. Debt

Debt consists of the following ($ in millions):


	March 31, 2026		December 31, 2025
$2,500 million 4.25% Senior Notes due December 15, 2027	$	1,185	$	2,211
$2,300 million 2.45% Senior Notes due July 15, 2028	2,301		2,302
$3,500 million 4.625% Senior Notes due December 15, 2029	3,277		3,277
$2,000 million 3.375% Senior Notes due February 15, 2030	2,000		2,000
$2,200 million 3.00% Senior Notes due October 15, 2030	2,200		2,200
$2,200 million 2.50% Senior Notes due March 1, 2031	2,200		2,200
$1,300 million 2.625% Senior Notes due August 1, 2031	1,300		1,300

Total senior notes	14,463		15,490
Term Loan Facility	1,988		2,000


Debt issuance costs	(80)		(89)
Total debt	16,371		17,401
Less: current portion	(63)		(50)
Long-term debt	$	16,308	$	17,351

Senior Notes

During the three months ended March 31, 2026, the Company repurchased $1,029 million of its par value Senior Notes due 2027 through the Company's senior note debt repurchase program. The Company recognized a $5 million pre-tax loss on the repurchase of the notes, including the impact of unamortized debt discount and issuance costs.

Senior Note Debt Repurchase Program

In June 2022, the Company's Board of Directors authorized a $1,000 million senior note debt repurchase program in preparation for future debt reductions as part of the Company's strategic initiatives. In February 2026, the Company's Board of Directors authorized an increase under the program of $1,000 million. With this increase, as of February 2026, there was $1,484 million available under the senior note debt repurchase program.

During the three months ended March 31, 2026, the Company repurchased $1,029 million of its par value Senior Notes due 2027, as described above. As of March 31, 2026, there was $484 million available under the senior note debt repurchase program.

9. Earnings Per Share

The following table sets forth the calculation of basic and diluted net earnings per common share ($ in millions, except per share data in dollars and shares in thousands):


	Three Months Ended March 31,
	2026		2025

Earnings attributable to Centene Corporation	$	1,541	$	1,311

Shares used in computing per share amounts:
Weighted average number of common shares outstanding	492,069		496,214
Common stock equivalents (as determined by applying the treasury stock method)	3,522		1,966
Weighted average number of common shares and potential dilutive common shares outstanding	495,591		498,180

Net earnings per common share attributable to Centene Corporation:
Basic earnings per common share	$	3.13	$	2.64
Diluted earnings per common share	$	3.11	$	2.63

The calculation of diluted earnings per common share for the three months ended March 31, 2026 and 2025 excludes 3,566 thousand shares and 2,380 thousand shares, respectively, related to anti-dilutive stock options and restricted stock units.

10. Segment Information

The Company operates in four segments: (1) a Medicaid segment, (2) a Medicare segment, (3) a Commercial segment and (4) an Other segment. The Medicaid, Medicare and Commercial segments primarily represent the government-sponsored or subsidized programs under which the Company offers managed healthcare services. The Other segment includes the Company's pharmacy operations, vision and dental services, clinical healthcare, behavioral health, and corporate management company, among others.

Factors used in determining the reportable business segments include the nature of operating activities, the existence of separate senior management teams and the type of information presented to the Company's chief operating decision-maker (CODM) to evaluate all results of operations. The Company's CODM is its Chief Executive Officer. The Company's CODM focuses primarily on each segment's ability to generate sufficient revenues and manage expenses associated with health benefits and cost of services (including estimated costs incurred). As such, the CODM measures operating performance at the segment level based on gross margin, including evaluation of budget to actual variances, to determine the allocation of financial and capital resources for each segment. The Company does not report total assets by segment since this is not a metric used by the Company's CODM to allocate resources or evaluate segment performance.

Segment information for the three months ended March 31, 2026, is as follows ($ in millions):


		Medicaid		Medicare		Commercial		Other/Eliminations		Consolidated Total
Premium		$	23,573	$	10,326	$	9,555	$	433	$	43,887
Service		23		—		1		744		768
Premium and service revenues		23,596		10,326		9,556		1,177		44,655
Premium tax		5,289		—		—		—		5,289
Total external revenues		28,885		10,326		9,556		1,177		49,944
Internal revenues		—		—		—		4,146		4,146
Eliminations		—		—		—		(4,146)		(4,146)
Total revenues		$	28,885	$	10,326	$	9,556	$	1,177	$	49,944

Medical costs		$	21,955	$	8,772	$	7,198	$	378	$	38,303
Cost of services		23		—		—		679		702
Other operating expenses (1)										9,078
Other income (expense) (2)										238
Earnings before income tax										$	2,099

Segment gross margin (3)		$	1,618	$	1,554	$	2,358	$	120	$	5,650

(1)	Other operating expenses include selling, general and administrative expenses, depreciation, amortization, premium tax expense and impairment.
(2)	Other income (expense) includes investment and other income, debt extinguishment and interest expense.
(3)	Segment gross margin represents premium and service revenues less medical costs and cost of services.

Segment information for the three months ended March 31, 2025, is as follows ($ in millions):


		Medicaid		Medicare		Commercial		Other/Eliminations		Consolidated Total
Premium		$	22,275	$	8,759	$	10,148	$	530	$	41,712
Service		24		—		1		752		777
Premium and service revenues		22,299		8,759		10,149		1,282		42,489
Premium tax		4,131		—		—		—		4,131
Total external revenues		26,430		8,759		10,149		1,282		46,620
Internal revenues		—		—		—		4,164		4,164
Eliminations		—		—		—		(4,164)		(4,164)
Total revenues		$	26,430	$	8,759	$	10,149	$	1,282	$	46,620

Medical costs		$	20,843	$	7,555	$	7,607	$	498	$	36,503
Cost of services		24		—		—		674		698
Other operating expenses (1)										7,885
Other income (expense) (2)										212
Earnings before income tax										$	1,746

Segment gross margin (3)		$	1,432	$	1,204	$	2,542	$	110	$	5,288

(1)	Other operating expenses include selling, general and administrative expenses, depreciation, amortization, premium tax expense and impairment.
(2)	Other income (expense) includes investment and other income, debt extinguishment and interest expense.
(3)	Segment gross margin represents premium and service revenues less medical costs and cost of services.

11. Contingencies

The Company is routinely subjected to legal and regulatory proceedings in the normal course of business. These matters can include, without limitation:

periodic compliance and other reviews and investigations by various federal and state regulatory agencies with respect to requirements applicable to the Company's business, including, without limitation, those related to payment of claims, compliance with the CMS Medicare and Marketplace regulations, including risk adjustment, prior authorizations and broker compensation, compliance with the False Claims Act, the calculation of minimum MLR and rebates related thereto, submissions to state agencies related to payments or state false claims acts, pre-authorization penalties, timely review of grievances and appeals, timely and accurate payment of claims, provider directory accuracy, network adequacy, cybersecurity issues, including those related to the Company's or the Company's third-party vendors' information systems, and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and other federal and state fraud, waste and abuse laws;
litigation arising out of general business activities, such as tax matters, disputes related to healthcare benefits coverage or reimbursement, putative securities class actions, and medical malpractice, privacy, real estate, intellectual property, vendor disputes and employment-related claims; and
disputes regarding reinsurance arrangements, claims arising out of the acquisition or divestiture of various assets, class actions, and claims relating to the performance of contractual and non-contractual obligations to providers, members, employer groups, vendors and others, including, but not limited to, the alleged failure to properly pay claims and challenges to the manner in which the Company processes claims, claims related to network adequacy, and claims alleging that the Company has engaged in unfair business practices.

Among other things, these matters may result in corrective action plans, awards of damages, fines, or penalties, which could be substantial, and/or could require changes to the Company's business and cause reputational harm. The Company intends to vigorously defend itself against legal and regulatory proceedings to which it is currently a party; however, these proceedings are subject to many uncertainties. In some cases pending against the Company, substantial non-economic or punitive damages are being sought.

The Company records reserves and accrues costs for certain legal proceedings and regulatory matters to the extent that it determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While such reserves and accrued costs reflect the Company's best estimate of the probable loss for such matters, the recorded amounts may differ materially from the actual amount of any such losses. In some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and regulatory proceedings, which may be exacerbated by various factors, including but not limited to, they may involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; involve a large number of parties, claimants or regulatory bodies; are in the early stages of the proceedings; involve a number of separate proceedings and/or a wide range of potential outcomes; or result in a change of business practices.

As of the date of this report, amounts accrued for legal proceedings and regulatory matters were not material. Except for the matters discussed below, the Company believes that the ultimate outcome of any of the regulatory and legal proceedings that are currently pending against it should not have a material adverse effect on financial condition, results of operations, cash flow or liquidity. However, it is possible that in a particular quarter or annual period the Company's financial condition, results of operations, cash flow, and/or liquidity could be materially adversely affected by an ultimate unfavorable resolution of or development in legal and/or regulatory proceedings.

Federal Securities Class Action and Derivative Lawsuits

On July 9, 2025, a putative federal securities class action, Brock Lunstrum v. Centene Corp., et al. (the Securities Action), was filed against the Company and certain of its executives in the U.S. District Court for the Southern District of New York. The plaintiffs in the lawsuits allege that the Company made false and misleading statements with respect to the Company's 2025 earnings guidance in violation of federal securities laws. Five related derivative lawsuits were subsequently filed — Franchi v. London, et al. (filed July 31, 2025), Keippel v. London, et al. (filed August 14, 2025), and Shipon v. London, et al. (filed August 26, 2025) in the Southern District of New York, and Nante v. London, et al. (filed September 30, 2025) in the Eastern District of Missouri and Rosenbaum v. London, et. al, (filed January 30, 2026) in the District of Delaware (together, the Derivative Actions) — against the Company, as nominal defendant, members of the board of directors, and certain officers. The plaintiffs in the Derivative Actions allege that the individual defendants breached their fiduciary duties and committed other alleged misconduct in connection with the statements at issue in the Securities Action. The Company denies any wrongdoing and is vigorously defending itself against the claims in the Securities Action and Derivative Actions. Nevertheless, these matters are subject to many uncertainties and the Company cannot predict how long these lawsuits will last, whether additional litigation will be filed with similar claims, or what the ultimate outcome will be, and an adverse outcome in any of these matters could potentially have a materially adverse impact on the Company's financial position and results of operations, cash flow or liquidity.

Previous: Cover and table of contents · Next: Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.