Centene Corp.'s fourth quarter earnings plunged 70 percent, as flu expenses hit the Medicaid coverage provider and it continued to struggle with costs from two of its state programs.
The St. Louis company said Tuesday that the flu added about 30 cents per share in medical costs during the quarter, as claims came in higher than what Centene experienced in 2011. Analysts have warned that this flu season was off to a quicker, more intense start than those in recent years.
The insurer also said higher costs in its Kentucky and Texas Medicaid programs affected results. Medicaid is the state and federally funded program that provides health coverage to poor and disabled people. States typically hire private insurers to administer the coverage, and that represents the largest slice of Centene's business.
Centene said last fall it was planning to end its contract to administer Medicaid in Kentucky, where costs have come in much higher than it expected.
Centene Chairman and CEO Michael F. Neidorff said in a statement on Tuesday that the company's exit from Kentucky will address the problems it has had in that state, and he believes the company has made progress on premium rates in Texas.
Overall, the insurer earned $9.1 million, or 17 cents per share, in the quarter that ended Dec. 31. That compares to earnings of $30.1 million, or 57 cents per share, in the 2011 quarter.
Premium and service revenue climbed 58 percent to $2.3 billion, helped by new membership added in Louisiana, Missouri and Washington and an expansion of Centene's Texas program.
Analysts surveyed by FactSet expected, on average, earnings of 33 cents per share on about $2.39 billion in revenue.
Goldman Sachs analyst Matthew Borsch said in a research note the insurer reported a "very messy" quarter that was widely anticipated.
Centene's enrollment soared 41 percent to about 2.6 million people compared to the 2011 quarter. Its medical costs also rose 68 percent to about $2.08 billion, and both general and administrative expenses and its premium tax jumped.
For the full year, Centene earned $1.86 billion, or 3 cents per share, on $8.24 billion in premium and service revenues.
In December, Centene had cut its 2012 forecast to earnings of between 10 cents and 20 cents per share due to the flu and its problems in Texas and Kentucky. The company also had cut its forecast last July and October after saying in April that it expected full year earnings of $2.64 to $2.84 per share.
On Tuesday, Centene said it still expects earnings of $2.60 to $2.90 per share for 2013.
Analysts forecast, on average, earnings of $2.65 per share.
The price of Centene shares climbed about 4 percent last year to close 2012 at $41, while the Standard & Poor's 500 index rose 13.4 percent. The shares had already climbed nearly 4 percent in 2013 to close at $42.54 on Monday.