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Fidelis Care Acquisition | 12 Months Ended
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Dec. 31, 2018
Business Combinations [Abstract] |
Fidelis Care Acquisition | Fidelis Care Acquisition On July 1, 2018, the Company acquired substantially all of the assets of Fidelis Care for approximately $3,604 million of cash consideration, which includes a working capital adjustment. The purchase price continues to be subject to adjustments related to changes in working capital through June 2019. The acquisition consideration was funded through the issuance of 53.2 million shares of Centene common stock as further discussed in Note 11. Stockholders Equity and the issuance of long-term debt as further discussed in Note 10. Debt. The Fidelis Care acquisition expanded the Company's scale and presence to New York State. The acquisition of Fidelis Care was accounted for as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. Any necessary adjustments from preliminary estimates will be finalized within one year from the date of acquisition. Measurement period adjustments will be recorded in the period in which they are determined, as if they had been completed at the acquisition date. The Company has completed its valuation procedures on cash and cash equivalents, restricted deposits, and property, software and equipment, but the valuation of all remaining assets and liabilities has not been finalized. The Company has performed preliminary valuation procedures on all assets acquired and liabilities assumed and accordingly has recorded provisional amounts which are subject to adjustment. The Company is waiting on additional information related to certain liabilities and performing a detailed analysis on the valuation of premium and related receivables. The Company's preliminary allocation of the fair value of assets acquired and liabilities assumed as of the acquisition date of July 1, 2018 is as follows ($ in millions):
Assets acquired and liabilities assumed |  |
Cash and cash equivalents |  | $ | 2,001 |
Premium and related receivables |  | 508 |
Other current assets |  | 33 |
Restricted deposits |  | 495 |
Property, software and equipment |  | 48 |
Intangible assets (a) |  | 922 |
Other long-term assets |  | 1 |
Total assets acquired |  | 4,008 |
Medical claims liability |  | 1,204 |
Accounts payable and accrued expenses |  | 289 |
Return of premium payable |  | 124 |
Unearned revenue |  | 115 |
Other long-term liabilities |  | 299 |
Total liabilities assumed |  | 2,031 |
Total identifiable net assets |  | 1,977 |
Goodwill (b) |  | 1,627 |
Total assets acquired and liabilities assumed |  | $ | 3,604 |
The Company has made the following preliminary fair value adjustments based on information reviewed through December 31, 2018. Significant fair value adjustments are noted as follows:
(a) | The identifiable intangible assets acquired are to be measured at fair value as of the completion of the acquisition. The fair value of intangible assets is determined primarily using variations of the "income approach," which is based on the present value of the future after tax cash flows attributable to each identified intangible asset. Other valuation methods, including the market approach and cost approach, were also considered in estimating the fair value. The Company has estimated the fair value of intangible assets to be $922 million with a weighted average life of 13 years. The identifiable intangible assets include customer relationships, provider contracts, trade names and developed technology.
The fair values and weighted average useful lives for identifiable intangible assets acquired are as follows:
|  | Fair Value |  | Weighted Average Useful Life (in years)
Customer relationships |  | $ | 677 |  |  | 11
Trade name |  | 196 |  |  | 20
Provider contracts |  | 33 |  |  | 15
Developed technologies |  | 16 |  |  | 2
Total intangible assets acquired |  | $ | 922 |  |  | 13
(b) | The acquisition resulted in $1.6 billion of goodwill related primarily to synergies expected from the acquisition and the assembled workforce of Fidelis Care. All of the goodwill has been assigned to the Managed Care segment. The goodwill is deductible for income tax purposes.
Statement of Operations From the acquisition date through December 31, 2018, the Company's Consolidated Statements of Operations include total Fidelis Care revenues of $5,628 million. It is impracticable to determine the effect on net income resulting from the Fidelis Care acquisition for the year ended December 31, 2018, as the Company began immediately integrating Fidelis Care into its ongoing operations. Unaudited Pro Forma Financial Information The unaudited pro forma total revenues for the year ended December 31, 2018 were $65,792 million. It is impracticable for the Company to determine the pro forma earnings information for the year ended December 31, 2018 due to the nature of obtaining that information as the Company began immediately integrating Fidelis Care into its ongoing operations. The following table presents supplemental pro forma information for the year ended December 31, 2017 ($ in millions, except per share data):
|  | Year Ended December 31, 2017
Total revenues |  | $ | 58,275 |
Net earnings attributable to Centene Corporation |  | $ | 936 |
Diluted earnings per share |  | $ | 2.27 |
The pro forma results do not reflect any anticipated synergies, efficiencies, or other cost savings of the acquisition. Accordingly, the unaudited pro forma financial information is not indicative of the results if the acquisition had been completed on January 1, 2017 and is not a projection of future results. The unaudited pro forma financial information reflects the historical results of Centene and Fidelis Care adjusted as if the acquisition had occurred on January 1, 2017, primarily for the following:
• | Additional premium tax expense related to Fidelis Care no longer being a not-for-profit entity.
• | Additional Health Insurer Fee revenue in 2018 related to Fidelis Care as some of those revenues will be subject to the Health Insurer Fee following the first year of the closing of the Fidelis Care acquisition, absent a Health Insurer Fee moratorium.
• | Reduced Fidelis Care investment income to reflect lower investment balances and mix of investments associated with the acquired assets.
• | Interest expense associated with debt incurred to finance the transaction.
• | An adjustment to basic and diluted shares outstanding to reflect the shares issued by Centene to finance the transaction.
• | An adjustment to income tax expense to reflect the tax impact of the acquisition and Fidelis Care becoming subject to income tax.
• | Elimination of acquisition related costs.
Commitments As part of the regulatory approval process, in connection with the acquisition Fidelis Care, the Company entered into certain undertakings with the New York State Department of Health. These undertakings contain various commitments by the Company effective upon completion of the Fidelis Care acquisition. One of the undertakings includes a $340 million contribution by the Company to the State of New York to be paid over a five-year period for initiatives consistent with our mission of providing high quality healthcare to vulnerable populations within New York State. As a result of the closing of the Fidelis Care acquisition, the present value of the $340 million contribution to the State of New York, approximately $328 million, was expensed during 2018.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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