Centene says it does not have network for Aetna's assets

[July 27, 2016]  By Amrutha Penumudi

(Reuters) - Centene Corp's chief executive said the mid-cap health insurer did not have the network for the Medicare Advantage assets Aetna Inc or other large managed care companies are looking to sell as part of the industry-wide consolidation.

Centene and WellCare Health Plans Inc were reported to have made competing offers for the insurance plans that Aetna may sell to seek clearance for its acquisition of Humana Inc.

"If there's any one thing that Centene is recognized for is that it has not participated and will not participate in bidding and auctions. So anything that indicates that would have to be considered a rumor," CEO Michael Neidorff said on a post-earnings conference call on Tuesday.

Neidorff said Centene's target customers for Medicare Advantage plans were seniors from lower socio-economic background and that businesses from Aetna, Humana and the others served customers who were at a higher level.

"That's not our business and we would not build a network for it. So I guess somebody was spreading some rumors," he said.

Centene's shares fell 13.3 percent to $65.16 despite the company reporting a better-than-expected quarterly profit and increasing its forecast for full-year earnings.

Last week, U.S. antitrust officials sued to block the unprecedented consolidation in the national health insurance market, filing a lawsuit against Anthem Inc's proposed purchase of Cigna Corp and Aetna's planned buy of Humana.

EARNINGS BEAT

On an adjusted basis, Centene earned $1.29 per share in the second quarter ended June 30, beating the average analyst estimate of $1.09, according to Thomson Reuters I/B/E/S.

The results were helped by lower medical costs and an increase in Medicare and commercial customers from Centene's acquisition of Health Net.

Centene set aside a reserve of $300 million related to Health Net's operations. This reserve did not impact results given the nuances of accounting, but analysts said investors could grow frustrated over Health Net's performance, which has been below expectations so far.

The company raised its full-year earnings forecast range to $2.65-$3.00 per share from $2.45-$2.80.

Centene's health benefits ratio, or the amount it spends on medical claims compared with its income from premiums, improved to 86.6 percent from 89.1 percent.

The ratio, watched closely by investors for increased medical costs and usage, improved largely due to a higher mix of commercial and Medicare patients who have lower expenses.

The company's revenue nearly doubled to $10.90 billion. Analysts on average had expected $10.79 billion.

(Reporting by Amrutha Penumudi in Bengaluru; Editing by Maju Samuel)

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