Condensed Financial Information of Registrant

Centene Corporation (Parent Company Only)

Condensed Balance Sheets

(In millions, except share data)



	December 31,
	2014			2013
ASSETS
Current assets:
Cash and cash equivalents	$	3		$	3
Short term investments, at fair value (amortized cost $8 and $6, respectively)	8			6
Other current assets	378			125
Total current assets	389			134
Long term investments, at fair value (amortized cost $10 and $8, respectively)	10			8
Investment in subsidiaries	2,296			1,667
Other long term assets	38			32
Total assets	$	2,733		$	1,841

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities	$	24		$	5
Long term debt	815			591
Other long term liabilities	3			2
Total liabilities	842			598

Redeemable noncontrolling interest	148			—

Stockholders' equity:
Common stock, $.001 par value; authorized 200,000,000 shares; 124,274,864 issued and 118,433,416 outstanding at December 31, 2014, and 117,346,430 issued and 110,638,478 outstanding at December 31, 2013	—			—
Additional paid-in capital	840			594
Accumulated other comprehensive loss	(1		)	(3		)
Retained earnings	1,003			732
Treasury stock, at cost (5,841,448 and 6,707,952 shares, respectively)	(98		)	(89		)
Total Centene stockholders' equity	1,744			1,234
Noncontrolling interest	(1		)	9
Total stockholders' equity	1,743			1,243
Total liabilities and stockholders' equity	$	2,733		$	1,841

See notes to condensed financial information of registrant.

Centene Corporation (Parent Company Only)

Condensed Statements of Operations

(In millions, except share data)



	Year Ended December 31,
	2014			2013			2012
Expenses:
General and administrative expenses	$	3		$	4		$	4
Other income (expense):
Investment and other income	1			1			20
Interest expense	(30		)	(23		)	(16		)
Earnings (loss) before income taxes	(32		)	(26		)	—
Income tax benefit	(8		)	(15		)	(10		)
Net earnings (loss) before equity in subsidiaries	(24		)	(11		)	10
Equity in earnings from subsidiaries	285			173			66
Net earnings	261			162			76
(Earnings) loss attributable to noncontrolling interests	7			(1		)	13
Net earnings attributable to Centene	268			161			89

Net earnings per share from continuing operations:
Basic earnings per common share	$	2.30		$	1.49		$	0.86
Diluted earnings per common share	$	2.23		$	1.43		$	0.83
Weighted average number of shares outstanding:
Basic	116,345,764			108,253,090			103,018,732
Diluted	120,360,212			112,494,346			107,428,750

See notes to condensed financial information of registrant.

Centene Corporation (Parent Company Only)

Condensed Statements of Cash Flows

(In millions)



	Year Ended December 31,
	2014			2013			2012
Cash flows from operating activities:
Cash provided by operating activities	$	317		$	302		$	328
Cash flows from investing activities:
Net dividends from and capital contributions to subsidiaries	(384		)	(417		)	(540		)
Purchase of investments	(32		)	(12		)	(7		)
Sales and maturities of investments	14			10			30
Acquisitions	(137		)	(67		)	—
Net cash used in investing activities	(539		)	(486		)	(517		)
Cash flows from financing activities:
Proceeds from borrowings	1,875			180			400
Payment of long term debt	(1,650		)	(30		)	(215		)
Proceeds from exercise of stock options	8			9			16
Proceeds from stock offering	—			15			—
Common stock repurchases	(29		)	(20		)	(13		)
Debt issue costs	(7		)	(3		)	(4		)
Contributions from noncontrolling interest	6			8			1
Purchase of noncontrolling interest	—			—			(14		)
Excess tax benefits from stock compensation	19			6			11
Net cash provided by financing activities	222			165			182
Net increase (decrease) in cash and cash equivalents	—			(19		)	(7		)
Cash and cash equivalents, beginning of period	3			22			29
Cash and cash equivalents, end of period	$	3		$	3		$	22

See notes to condensed financial information of registrant.

Notes to Condensed Financial Information of Registrant

Note A - Basis of Presentation and Significant Accounting Policies

The parent company only financial statements should be read in conjunction with Centene Corporation's audited consolidated financial statements and the notes to consolidated financial statements included in this Form 10-K.

The parent company's investment in subsidiaries is stated at cost plus equity in undistributed earnings of the subsidiaries. The parent company's share of net income of its unconsolidated subsidiaries is included in income using the equity method of accounting. Certain unrestricted subsidiaries receive monthly management fees from our restricted subsidiaries. The management and service fees received by our unrestricted subsidiaries are associated with all of the functions required to manage the restricted subsidiaries including but not limited to salaries and wages for all personnel, rent, utilities, medical management, provider contracting, compliance, member services, claims processing, information technology, cash management, finance and accounting, and other services. The management fees are based on a percentage of the restricted subsidiaries revenue.

Due to our centralized cash management function, all cash flows generated by our unrestricted subsidiaries, including management fees, are transferred to the parent company, primarily to repay borrowings on the parent company's revolving credit facility. The parent company may also utilize the cash flow to make acquisitions, fund capital contributions to subsidiaries and fund its operations. During the years ended December 31, 2014, 2013 and 2012, cash flows received by the parent from unrestricted subsidiaries was $341 million, $313 million, and $318 million and was included in cash flows from operating activities.

Certain amounts presented in the parent company only financial statements are eliminated in the consolidated financial statements of Centene Corporation.

Note B - Dividends

During 2014, 2013 and 2012, the Registrant received dividends from its subsidiaries totaling $54 million, $21 million and $29 million, respectively.

Note C - Other Current Assets

The parent company's other current assets include $359 million and $113 million of federal and state income tax receivables as of December 31, 2014 and 2013, respectively, primarily due to tax sharing agreements with its subsidiaries.