Centene Corporation

What they do

Centene operates state-based health plans selling government-sponsored and individual insurance, with local brands backed by a national managed care platform. It ran four segments in 2025: Medicaid, Medicare, Commercial and Other, covering TANF, Medicaid Expansion, ABD, CHIP, LTSS, Foster Care and MMP programs; Medicare Advantage, D-SNPs, PDP and Medicare Supplement; and Marketplace, individual and commercial group products. The Other segment holds specialty pharmacy, vision and dental, clinical healthcare and behavioral health operations. Membership totaled 27.6 million at December 31, 2025.

Revenue drivers

• Medicaid — Largest segment at 57% of 2025 external revenues; sells managed care to states for low-income, disabled and high-acuity populations across 56 programs. Second quarter 2026 premium and service revenue was $22.77 billion, up 5% year over year, with 12.11 million members.
• Commercial — 21% of 2025 external revenues, primarily the Health Insurance Marketplace plus individual, commercial group, ICHRA and off-exchange products. Second quarter 2026 revenue fell 7% to $9.36 billion as Marketplace membership dropped to 3.49 million from 5.86 million a year earlier.
• Medicare — 19% of 2025 external revenues, including Medicare Advantage, D-SNPs, PDP and Medicare Supplement; the company describes its Medicare Advantage book as one of the highest D-SNP concentrations among peers, and it is the largest stand-alone PDP provider. Second quarter 2026 revenue rose 17% to $11.06 billion, with PDP membership of 8.80 million.
• Other — 3% of 2025 external revenues, comprising specialty pharmacy, vision and dental, clinical healthcare, behavioral health and centralized services. Second quarter 2026 revenue was $1.20 billion, down 2%, and the company agreed in December 2025 to divest the remaining Magellan Health businesses.

Recent performance

Second quarter 2026 total revenues were $53.58 billion on premium and service revenues of $44.38 billion, up 4%. GAAP diluted EPS was $2.19 and adjusted diluted EPS was $2.51, with an 89.6% health benefits ratio and 7.0% SG&A expense ratio. Segment HBRs were 79.2% in Commercial, 89.5% in Medicare and 93.9% in Medicaid. Total at-risk membership was 25.89 million at June 30, 2026, down from 28.00 million a year earlier, reflecting Marketplace declines and the CMS transition of MMP duals into Medicare. Quarterly operating cash flow was $3.59 billion; full year 2025 net income was negative $6.67 billion.

Strategy

CEO Sarah M. London framed the quarter and raised guidance as milestones on a path to restoring profitability and increasing shareholder value, targeting industry-leading health outcomes with an industry-leading cost structure. The company is managing medical cost trend in Medicaid and has sold or agreed to divest non-core assets, including the remaining Magellan Health businesses. It continues to allocate capital to share repurchases, with $1.8 billion remaining under a $10.0 billion authorization as of June 30, 2026. On July 27, 2026, it committed to accept employee offers under a voluntary separation program expected to incur material charges.

Risks

• Medical cost and rate adequacy — Government program revenue is often based on bids submitted before the contract year, so actual costs above estimates raise the HBR and cut profit; late in the second quarter of 2025 an outside actuarial firm indicated materially higher Marketplace morbidity, forcing a significant reduction in expected 2025 net risk adjustment revenue.
• Medicaid cost trend — During 2025 Medicaid membership incurred higher than expected medical costs, including unanticipated increases in behavioral health, home health and high-cost drugs.
• Regulatory and funding changes — Rate cuts, insufficient rate changes or payment delays by government payors, and changes in federal or state law including the ACA, OBBBA, enhanced premium tax credits and program integrity initiatives could reduce membership or profitability.
• Membership and Marketplace exposure — Marketplace membership fell to 3.49 million at June 30, 2026 from 5.86 million a year earlier, and Commercial revenue declined 7%, leaving results sensitive to Marketplace pricing, risk adjustment and eligibility policy.

Outlook

Management increased 2026 guidance to GAAP diluted EPS greater than $3.11 and adjusted diluted EPS greater than $4.80. It attributed the increase to underlying business strength, including approximately $0.50 of non-recurring items in the Medicare and Commercial segments. Full year 2025 was a loss, so the guidance implies a return to profitability in 2026.