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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________________________________
FORM 10-Q
____________________________________________
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023

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)
Delaware42-1406317
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification Number)
7700 Forsyth Boulevard 
St. Louis,Missouri63105
(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 ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock $0.001 Par ValueCNCNew York Stock Exchange
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 (232.405 of this chapter) 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒
As of October 20, 2023, the registrant had 534,201 thousand shares of common stock outstanding.


CENTENE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
 PAGE
  
Part I
Financial Information
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Part II
Other Information
Item 1.
Item 1A.
Item 2.
Item 6.


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 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Part II, Item 1. "Legal Proceedings."

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;
•our ability to manage our information systems effectively;
•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;
•changes in senior management, loss of one or more key personnel or an inability to attract, hire, integrate and retain skilled personnel;
•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;
i
•changes in expected contract start dates;
•changes in provider, state, federal, foreign, and other contracts and delays in the timing of regulatory approval of contracts, including due to protests;
•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 terms of our contracts and 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, or accretion for acquisitions or dispositions, including due to the timing of regulatory approval for the pending sale of Circle Health Group (Circle Health);
•losses in our investment portfolio;
•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, other 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.


ii

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, 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):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
GAAP net earnings attributable to Centene$469 $738 $2,657 $1,415 
Amortization of acquired intangible assets180 211 542 609 
Acquisition and divestiture related expenses16 30 52 149 
Other adjustments (1)
472 (222)345 1,225 
Income tax effects of adjustments (2)
(55)(2)(190)(521)
Adjusted net earnings $1,082 $755 $3,406 $2,877 
GAAP diluted earnings per share (EPS) attributable to Centene$0.87 $1.27 $4.85 $2.41 
Amortization of acquired intangible assets0.33 0.36 0.99 1.04 
Acquisition and divestiture related expenses0.03 0.05 0.09 0.25 
Other adjustments (1)
0.87 (0.38)0.63 2.09 
Income tax effects of adjustments (2)
(0.10)— (0.35)(0.89)
Adjusted diluted EPS$2.00 $1.30 $6.21 $4.90 
(1) Other adjustments include the following pre-tax items:
2023:
(a) for the three months ended September 30, 2023: Circle Health impairment of $251 million, or $0.46 per share ($0.50 after-tax), Operose Health impairment of $142 million, or $0.26 per share ($0.24 after-tax), real estate impairments of $47 million, or $0.09 per share ($0.09 after-tax), severance costs due to a restructuring of $22 million, or $0.04 per share ($0.03 after-tax), and a reduction to the previously recorded gain on the sale of Magellan Rx of $10 million, or $0.02 per share ($0.00 after-tax);

(b) for the nine months ended September 30, 2023: Circle Health impairment of $251 million, or $0.46 per share ($0.49 after-tax), Operose Health impairment of $142 million, or $0.26 per share ($0.24 after-tax), real estate impairments of $92 million, or $0.17 per share ($0.15 after-tax), gain on the sale of Apixio of $91 million, or $0.17 per share ($0.12 after-tax), gain on the sale of Magellan Specialty Health of $79 million, or $0.14 per share ($0.12 after-tax), severance costs due to a restructuring of $22 million, or $0.04 per share ($0.03 after-tax), gain on the previously reported divestiture of Centurion of $15 million, or $0.03 per share ($0.02 after-tax), an additional loss on the divestiture of our Spanish and Central European businesses of $13 million, or $0.02 per share ($0.01 after-tax), and a reduction to the previously recorded gain on the sale of Magellan Rx of $10 million, or $0.02 per share ($0.00 after-tax).

iii
2022:
(a) for the three months ended September 30, 2022: gain on the sale of PANTHERx Rare (PANTHERx) of $490 million, or $0.84 per share ($0.65 after-tax), impairment of assets associated with the divestiture of our Spanish and Central European businesses of $165 million, or $0.28 per share ($0.23 after-tax), real estate impairments of $127 million, or $0.22 per share ($0.16 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 ($0.01 after-tax), gain on debt extinguishment related to the repurchases of senior notes of $10 million, or $0.02 per share ($0.01 after-tax), and an adjustment to the costs related to the PBM legal settlement of $1 million, or $0.00 per share ($0.00 after-tax);

(b) for the nine months ended September 30, 2022: real estate impairments of $1,581 million, or $2.69 per share ($1.98 after-tax), gain on the sale of PANTHERx of $490 million, or $0.83 per share ($0.65 after-tax), impairment of assets associated with the divestiture of our Spanish and Central European businesses of $165 million, or $0.28 per share ($0.23 after-tax), gain on debt extinguishment of $23 million, or $0.04 per share ($0.03 after-tax), increase to the previously reported gain on the divestiture of 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 $5 million, or $0.01 per share ($0.01 after-tax).

(2) The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. In addition, the nine months ended September 30, 2023, include a one-time income tax benefit of $69 million, or $0.12 per share, resulting from the distribution of long-term stock awards to the estate of the Company's former CEO. The nine months ended September 30, 2022, also include an $18 million, or $0.03 per share, increase to the income tax benefit on the previously reported non-cash impairment of our equity method investment in RxAdvance.

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
GAAP selling, general and administrative expenses$3,048 $2,846 $9,075 $8,391 
Less:
Acquisition and divestiture related expenses16 28 52 149 
Restructuring costs22 — 22 — 
Costs related to the PBM legal settlement— 1 — 5 
Real estate optimization— 3 7 7 
Adjusted selling, general and administrative expenses$3,010 $2,814 $8,994 $8,230 
iv
PART I
FINANCIAL INFORMATION

Item 1. Financial Statements.
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except shares in thousands and per share data in dollars)
September 30, 2023December 31, 2022
(Unaudited)
ASSETS  
Current assets:  
Cash and cash equivalents$18,190 $12,074 
Premium and trade receivables15,503 13,272 
Short-term investments2,241 2,321 
Other current assets5,471 2,461 
Total current assets41,405 30,128 
Long-term investments15,234 14,684 
Restricted deposits1,343 1,217 
Property, software and equipment, net2,004 2,432 
Goodwill17,558 18,812 
Intangible assets, net6,277 6,911 
Other long-term assets560 2,686 
Total assets$84,381 $76,870 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY 
Current liabilities:  
Medical claims liability$17,141 $16,745 
Accounts payable and accrued expenses15,081 9,525 
Return of premium payable2,160 1,634 
Unearned revenue2,356 478 
Current portion of long-term debt113 82 
Total current liabilities36,851 28,464 
Long-term debt17,888 17,938 
Deferred tax liability577 615 
Other long-term liabilities3,649 5,616 
Total liabilities58,965 52,633 
Commitments and contingencies
Redeemable noncontrolling interests21 56 
Stockholders' equity:  
Preferred stock, $0.001 par value; authorized 10,000 shares; no shares issued or outstanding at September 30, 2023 and December 31, 2022
— — 
Common stock, $0.001 par value; authorized 800,000 shares; 614,956 issued and 534,596 outstanding at September 30, 2023, and 607,847 issued and 550,754 outstanding at December 31, 2022
1 1 
Additional paid-in capital20,243 20,060 
Accumulated other comprehensive (loss)(1,122)(1,132)
Retained earnings11,998 9,341 
Treasury stock, at cost (80,360 and 57,093 shares, respectively)
(5,825)(4,213)
Total Centene stockholders' equity25,295 24,057 
Nonredeemable noncontrolling interest100 124 
Total stockholders' equity25,395 24,181 
Total liabilities, redeemable noncontrolling interests and stockholders' equity$84,381 $76,870 
The accompanying notes to the consolidated financial statements are an integral part of these statements. 
1
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except shares in thousands and per share data in dollars)
(Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Revenues:
Premium$33,866 $31,848 $101,404 $95,247 
Service1,101 1,878 3,353 6,679 
Premium and service revenues34,967 33,726 104,757 101,926 
Premium tax3,075 2,139 9,782 7,060 
Total revenues38,042 35,865 114,539 108,986 
Expenses:  
Medical costs29,479 28,111 88,260 83,261 
Cost of services856 1,571 2,603 5,658 
Selling, general and administrative expenses3,048 2,846 9,075 8,391 
Depreciation expense148 150 436 470 
Amortization of acquired intangible assets180 211 542 609 
Premium tax expense3,156 2,211 10,021 7,258 
Impairment440 289 478 1,739 
Total operating expenses37,307 35,389 111,415 107,386 
Earnings from operations735 476 3,124 1,600 
Other income (expense):  
Investment and other income214 692 992 786 
Debt extinguishment— 10 — 26 
Interest expense(181)(169)(542)(491)
Earnings before income tax768 1,009 3,574 1,921 
Income tax expense293 269 914 500 
Net earnings475 740 2,660 1,421 
(Earnings) attributable to noncontrolling interests(6)(2)(3)(6)
Net earnings attributable to Centene Corporation$469 $738 $2,657 $1,415 

Net earnings per common share attributable to Centene Corporation:
Basic earnings per common share$0.87 $1.29 $4.86 $2.44 
Diluted earnings per common share$0.87 $1.27 $4.85 $2.41 

Weighted average number of common shares outstanding:
Basic539,535 573,961 546,374 580,277 
Diluted541,270 580,607 548,412 587,084 

The accompanying notes to the consolidated financial statements are an integral part of these statements.
2
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
(In millions)
(Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Net earnings$475 $740 $2,660 $1,421 
Change in unrealized gain (loss) on investments(235)(503)(124)(1,664)
Change in unrealized gain (loss) on investments, tax effect56 120 29 397 
Change in unrealized gain (loss) on investments, net of tax(179)(383)(95)(1,267)
Reclassification adjustment, net of tax57 3 61 12 
Foreign currency translation adjustments, net of tax(22)(101)24 (216)
Net unrealized gain on cash flow hedge, net of tax20 — 20 — 
Other comprehensive earnings (loss)(124)(481)10 (1,471)
Comprehensive earnings (loss)351 259 2,670 (50)
Comprehensive (earnings) attributable to noncontrolling interests(6)(2)(3)(6)
Comprehensive earnings (loss) attributable to Centene Corporation$345 $257 $2,667 $(56)

The accompanying notes to the consolidated financial statements are an integral part of these statements.
3
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In millions, except shares in thousands and per share data in dollars)
(Unaudited)
Three and Nine Months Ended September 30, 2023
 Centene Stockholders' Equity  
 Common Stock   Treasury Stock  
 
$0.001 Par Value Shares
AmtAdditional Paid-in CapitalAccumulated Other Comprehensive
Earnings (Loss)		Retained Earnings
$0.001 Par Value Shares
AmtNoncontrolling
Interest		Total
Balance, December 31, 2022607,847 $1 $20,060 $(1,132)$9,341 57,093 $(4,213)$124 $24,181 
Comprehensive Earnings:         
Net earnings— — — — 1,130 — — — 1,130 
Other comprehensive earnings, net of $61 tax
— — — 217 — — — — 217 
Common stock issued for employee benefit plans6,508 — 12 — — — — — 12 
Common stock repurchases— — — — — 5,548 (423)— (423)
Stock compensation expense— — 61 — — — — — 61 
Purchase of redeemable noncontrolling interest— — (12)— — — — — (12)
Balance, March 31, 2023614,355 $1 $20,121 $(915)$10,471 62,641 $(4,636)$124 $25,166 
Comprehensive Earnings:         
Net earnings (loss)— — — — 1,058 — — (3)1,055 
Other comprehensive loss, net of $(34) tax
— — — (83)— — — — (83)
Common stock issued for employee benefit plans388 — 9 — — — — — 9 
Common stock repurchases— — — — — 6,099 (408)— (408)
Stock compensation expense— — 56 — — — — — 56 
Purchase of non-redeemable noncontrolling interests— — (3)— — — — (24)(27)
Balance, June 30, 2023614,743 $1 $20,183 $(998)$11,529 68,740 $(5,044)$97 $25,768 
Comprehensive Earnings:
Net earnings— — — — 469 — — 3 472 
Other comprehensive loss, net of $(34) tax
— — — (124)— — — — (124)
Common stock issued for employee benefit plans213 — 11 — — — — — 11 
Common stock repurchases— — — — — 11,620 (781)— (781)
Stock compensation expense— — 50 — — — — — 50 
Purchase of non-redeemable noncontrolling interests— — (1)— — — — — (1)
Balance, September 30, 2023614,956 $1 $20,243 $(1,122)$11,998 80,360 $(5,825)$100 $25,395 
4
Three and Nine Months Ended September 30, 2022
 Centene Stockholders' Equity  
 Common Stock   Treasury Stock  
 
$0.001 Par Value Shares
AmtAdditional Paid-in CapitalAccumulated Other Comprehensive
Earnings (Loss)		Retained Earnings
$0.001 Par Value Shares
AmtNoncontrolling
Interest		Total
Balance, December 31, 2021602,704 $1 $19,672 $77 $8,139 20,225 $(1,094)$145 $26,940 
Comprehensive Earnings:         
Net earnings (loss)— — — — 849 — — (1)848 
Other comprehensive loss, net of $(171) tax
— — — (562)— — — — (562)
Common stock issued for employee benefit plans3,221 — 28 — — — — — 28 
Fair value of unvested equity awards in connection with acquisition— — 60 — — — — — 60 
Common stock repurchases— — — — — 846 (71)— (71)
Stock compensation expense— — 70 — — — — — 70 
Balance, March 31, 2022605,925 $1 $19,830 $(485)$8,988 21,071 $(1,165)$144 $27,313 
Comprehensive Earnings:         
Net (loss)— — — — (172)— — (3)(175)
Other comprehensive loss, net of $(106) tax
— — — (428)— — — — (428)
Common stock issued for employee benefit plans519 — 10 — — — — — 10 
Common stock repurchases— — — — — 4,249 (349)— (349)
Stock compensation expense— — 59 — — — — — 59 
Balance, June 30, 2022606,444 $1 $19,899 $(913)$8,816 25,320 $(1,514)$141 $26,430 
Comprehensive Earnings:
Net earnings (loss)— — — — 738 — — (2)736 
Other comprehensive loss, net of $(120) tax
— — — (481)— — — — (481)
Common stock issued for employee benefit plans487 — 24 — — — — — 24 
Common stock repurchases— — (200)— — 11,520 (1,043)— (1,243)
Stock compensation expense— — 51 — — — — — 51 
Reclassification to redeemable— — — — — — — 17 17 
Balance, September 30, 2022606,931 $1 $19,774 $(1,394)$9,554 36,840 $(2,557)$156 $25,534 

The accompanying notes to the consolidated financial statements are an integral part of these statements.
5
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

 Nine Months Ended September 30,
 20232022
Cash flows from operating activities:  
Net earnings$2,660 $1,421 
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization978 1,079 
Stock compensation expense167 180 
Impairment478 1,739 
(Gain) loss on debt extinguishment— (26)
Deferred income taxes14 (682)
(Gain) loss on divestitures(172)(503)
Other adjustments, net158 164 
Changes in assets and liabilities  
Premium and trade receivables(2,329)(1,274)
Other assets(103)152 
Medical claims liabilities401 1,976 
Unearned revenue1,878 1,964 
Accounts payable and accrued expenses3,127 686 
Other long-term liabilities583 863 
Other operating activities, net(4)98 
Net cash provided by operating activities7,836 7,837 
Cash flows from investing activities:  
Capital expenditures(576)(771)
Purchases of investments(4,729)(5,118)
Sales and maturities of investments4,373 2,842 
Acquisitions, net of cash acquired— (1,457)
Divestiture proceeds, net of divested cash690 1,362 
Net cash (used in) investing activities(242)(3,142)
Cash flows from financing activities:  
Proceeds from long-term debt2,170 357 
Payments and repurchases of long-term debt(1,970)(1,202)
Common stock repurchases(1,602)(1,663)
Proceeds from common stock issuances32 62 
Payments for debt extinguishment— (14)
Purchase of noncontrolling interest(87)— 
Other financing activities, net— (5)
Net cash (used in) financing activities(1,457)(2,465)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash19 (37)
Net increase in cash, cash equivalents, and restricted cash and cash equivalents6,156 2,193 
Cash and cash equivalents reclassified from (to) held for sale(36)(192)
Cash, cash equivalents, and restricted cash and cash equivalents, beginning of period
12,330 13,214 
Cash, cash equivalents, and restricted cash and cash equivalents, end of period
$18,450 $15,215 
Supplemental disclosures of cash flow information:  
Interest paid$496 $462 
Income taxes paid$759 $448 
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:
September 30,
20232022
Cash and cash equivalents$18,190 $14,987 
Restricted cash and cash equivalents, included in restricted deposits260 228 
Total cash, cash equivalents, and restricted cash and cash equivalents$18,450 $15,215 

The accompanying notes to the consolidated financial statements are an integral part of these statements.
6
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 Form 10-K for the fiscal year ended December 31, 2022. The unaudited interim financial statements herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, footnote disclosures that would substantially duplicate the disclosures contained in the December 31, 2022 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 2022 amounts in the consolidated financial statements and notes to the consolidated financial statements have been reclassified to conform to the 2023 presentation, including reclassifications related to the Company's new segment reporting structure as outlined below. These reclassifications have no effect on net earnings or stockholders' equity as previously reported.

Segment Reporting

In the first quarter of 2023, and in conjunction with the Company's updated strategic plan, executive leadership realignment, and corresponding 2023 divestitures, the Company revised the way it manages the business, evaluates performance, and allocates resources, resulting in an updated segment structure comprised of (1) a Medicaid segment, (2) a Medicare segment, (3) a Commercial segment, and (4) an Other segment.

The Medicaid, Medicare, and Commercial segments represent the government-sponsored or subsidized programs under which the Company offers managed healthcare services. Specifically, the Medicaid segment includes the Temporary Assistance for Needy Families (TANF) program, Medicaid Expansion programs, the Aged, Blind, or Disabled (ABD) program, the Children's Health Insurance Program (CHIP), Long-Term Services and Supports (LTSS), Foster Care, Medicare-Medicaid Plans (MMP), which cover beneficiaries who are dually eligible for Medicaid and Medicare, and other state-based programs. The Medicare segment includes Medicare Advantage, Medicare Supplement, Dual Eligible Special Needs Plans (D-SNPs), and Medicare Prescription Drug Plans (PDPs), also known as Medicare Part D. The Commercial segment includes the Health Insurance Marketplace product along with individual, small group, and large group commercial health insurance products. The Other segment includes the Company's pharmacy operations, vision and dental services, clinical healthcare, behavioral health, international operations, and corporate management companies, among others.

Accounting Guidance Not Yet Adopted

The Company has determined that there are no recently issued accounting pronouncements that will have a material impact on its consolidated financial position, results of operations, or cash flows.
7

2. Acquisitions and Divestitures

On January 5, 2023, the Company completed the divestiture of HealthSmart, its third-party health plan administration business.

On January 10, 2023, the Company signed and closed on a definitive agreement to divest Centurion, its prison healthcare business. During 2022, the Company recorded impairment charges related to goodwill and other current assets associated with the divestiture. During the second quarter of 2023, the Company recognized a $15 million gain on the divestiture of the Centurion business reflecting additional proceeds for contingent consideration, partially offset by net working capital adjustments. The gain is included in investment and other income in the Consolidated Statements of Operations.

On January 20, 2023, the Company completed the divestiture of Magellan Specialty Health for approximately $646 million in cash and stock, including an estimated working capital adjustment, and recognized a pre-tax gain of $79 million. The stock consideration was subsequently sold in April 2023 for cash proceeds of $245 million. The Company could also receive up to an additional $150 million in cash and stock in 2024 based on certain 2023 performance metrics. The Company will recognize the appropriate amount of contingent consideration related to the additional $150 million when realized or realizable.

On June 13, 2023, the Company completed the divestiture of its majority stake in Apixio. The Company recognized a pre-tax gain of $91 million, or $63 million after-tax, which is included in investment and other income in the Consolidated Statements of Operations.

During the second quarter of 2023, the Company recognized an additional $13 million expense related to the divestiture of its Spanish and Central European businesses, in addition to the previously recorded impairment charge of $163 million, or $140 million after-tax. The expense is included in investment and other income in the Consolidated Statements of Operations.

Circle Health Group Divestiture

On August 28, 2023, the Company signed a definitive agreement to sell Circle Health Group (Circle Health), one of the U.K.'s largest independent hospital operators, which is included in the Other segment. As of September 30, 2023, the assets and liabilities of Circle Health were considered held for sale resulting in $3,744 million of assets held for sale in other current assets and $2,947 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 other long-term assets, goodwill and property, software and equipment. The majority of the liabilities were previously reported as debt and other long-term liabilities.

During the third quarter of 2023, the Company recorded an impairment charge related to goodwill associated with the pending divestiture of $251 million, or $269 million after-tax.

In order to manage the foreign exchange risk on the sale price associated with the pending divestiture of Circle Health, in August 2023 the Company entered into a foreign currency swap agreement for a notional amount of $931 million, to sell £740 million. The swap agreement was formally designated and qualified as a cash flow hedge. The swap expires on March 28, 2024. The gain or loss due to changes in the fair value of the foreign currency swap is recorded in other comprehensive income until the Circle Health divestiture closes, at which time the gain or loss will be recorded in earnings to the same line in the Consolidated Statement of Operations as the gain or loss on sale. The fair value of the swap agreement as of September 30, 2023 was $27 million, which was recorded in other current assets in the Consolidated Balance Sheet.

8
3. 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):
 September 30, 2023December 31, 2022
 Amortized CostGross
Unrealized Gains		Gross
Unrealized Losses		Fair ValueAmortized CostGross
Unrealized Gains		Gross
Unrealized Losses		Fair Value
Debt securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies
$421 $— $(13)$408 $695 $— $(16)$679 
Corporate securities9,922 2 (750)9,174 10,127 12 (778)9,361 
Restricted certificates of deposit
4 — — 4 4 — — 4 
Restricted cash equivalents
260 — — 260 256 — — 256 
Short-term time deposits
470 — — 470 204 — — 204 
Municipal securities3,931 1 (294)3,638 4,055 6 (280)3,781 
Asset-backed securities1,633 2 (52)1,583 1,396 — (70)1,326 
Residential mortgage-backed securities1,475 — (172)1,303 1,165 2 (121)1,046 
Commercial mortgage-backed securities
1,100 — (112)988 961 — (99)862 
Equity securities2 — — 2 5 — — 5 
Private equity investments
810 — — 810 529 — — 529 
Life insurance contracts
178 — — 178 169 — — 169 
Total$20,206 $5 $(1,393)$18,818 $19,566 $20 $(1,364)$18,222 

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 September 30, 2023, 99% of the Company's investments in rated securities carry an investment grade rating by nationally recognized statistical rating organizations. At September 30, 2023, 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 $144 million and $132 million at September 30, 2023 and December 31, 2022, 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 4 years at September 30, 2023.

9
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):
 September 30, 2023December 31, 2022
 Less Than 12 Months12 Months or MoreLess Than 12 Months12 Months or More
 Unrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair Value
U.S. Treasury securities and obligations of
U.S. government corporations and agencies
$(1)$161 $(12)$247 $(5)$342 $(11)$184 
Corporate securities(76)2,470 (674)6,393 (340)5,368 (438)3,400 
Municipal securities(44)1,308 (250)2,211 (142)2,437 (138)995 
Asset-backed securities(7)486 (45)946 (29)786 (41)486 
Residential mortgage-backed securities(23)517 (149)786 (55)629 (66)352 
Commercial mortgage-backed securities(11)228 (101)748 (49)513 (50)330 
Total$(162)$5,170 $(1,231)$11,331 $(620)$10,075