Among the collection of reasons Centene officials gave investors to be optimistic following the release of their second-quarter earnings on Tuesday: Their planned acquisition of rival WellCare appears to be pacing ahead of schedule.
“We’re seeing a lot of success with the states. They understand it. We’ve had good discussions with Justice. We understand their role and what they have to do and provided them all the material on an expeditious basis," Centene's CEO Michael Neidorff said during a conference call with analysts. "I want to cautiously let people know it’s going well enough it could close early. The sooner it closes and we get the companies integrated, the sooner we’re prepared to move ahead with some accelerated activity we have in mind."
His statements came as Centene revised its 2019 forecast after posting a 65% increase in profits in its second quarter. Centene reported earnings of $495 million for the quarter ending June 30, up 65% from $300 million in the same quarter in 2018.
In an announcement, the company cited its acquisition of Fidelis Care and growth in the health insurance marketplace business for a nearly 30% increase in revenues over last year's second quarter, reaching $18.4 billion this year. Last July, Centene closed its $3.75 billion acquisition of Fidelis Care, which added a substantial new presence on the New York exchange.
Officials also pointed to new programs in several states in 2018 and 2019, particularly Arkansas, New Mexico and Pennsylvania. These increases were partially offset by the health insurer fee moratorium in 2019. Managed care memberships reached 15 million, an increase of 2.2 million members, or 17%, over the same quarter in 2018.
"Our strong second-quarter results demonstrate Centene's favorable financial and operating momentum. Our pending WellCare acquisition will bolster and diversify our product offerings, significantly increase our scale and provide access to new markets—enhancing Centene's long-term growth outlook," Neidorff said in a release.
Last month, shareholders gave the OK to Centene’s planned WellCare purchase. The companies have previously said they are navigating regulatory approvals and plan to close the deal in the first half of 2020.
The $17 billion deal was first announced in late March, and if finalized will create one of the largest sponsors of government health plans in the nation. The combined companies would include 22 million members across all 50 states and a joint estimated revenue of $97 billion in 2019.
Neidorff said company officials feel comfortable they will close the deal in the first half of 2020, but it may be even earlier in the year than previously anticipated.
"But we’re going to be patient," Neidorff said during the call. "We’re not going to bite off more than we can chew We know how to integrate companies. We’ve demonstrated that. Anything that picks up that speed just puts us in a position to do something sooner."