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Executives

Edmund E. Kroll, Jr. – Senior Vice President, Finance & Investor Relations

Michael F. Neidorff – Chairman & Chief Executive Officer

Eric R. Slusser – Executive Vice President & Chief Financial Officer

Mark W. Eggert – Executive Vice President, Health Plans

Jesse N. Hunter – Executive Vice President, Corporate Development

William N. Scheffel – Executive Vice President, Specialty Business Unit

Analysts

Thomas Carroll - Stifel Nicolaus & Co., Inc.

Greg Genova - Deutsche Bank Securities, Inc.

Brian Wright - Banc of America Securities

Greg Nersessian - Credit Suisse

Carl McDonald - Oppenheimer & Co., Inc.

Matt Perry - Wachovia Capital Markets

Joshua Raskin - Barclays Capital

John Rex - J.P. Morgan

[Chris Synphony] – Eagle Asset Management

Daryn Miller - Goldman Sachs

Centene Corporation (CNC) Financial Guidance Call December 19, 2008 8:30 AM ET

Operator

Good morning and thank you for holding. My name is Sherry and I will be your conference operator today. At this time, I would like to welcome everyone to the Centene 2000 financial guidance conference call. (Operator Instructions) At this time, I’ll turn the call over to

Mr. Ed Kroll. You may begin your conference.

Edmund E. Kroll, Jr.

Thank you operator and good morning everyone. I’m Ed Kroll, Senior Vice President, Finance, and Investor Relations at Centene Corporation and again thank you for joining our call today for our 2009 financial guidance. You should have a copy of the press release we issued this morning. If you’ve not received it, please call Libby Abelt at 212-759-5665 and one will be sent to you immediately.

Michael Neidorff, Chairman and Chief Executive Officer and Eric Slusser, Executive Vice President and Chief Financial Officer of Centene will host this morning’s call. The call is expected to last no more than 45 minutes and may be accessed through our website at Centene.com. After our prepared remarks, there will be a Question-and-Answer session but we ask that you refrain from any detailed modeling questions. You can ask those off-line after the call by contacting me directly.

A replay will be available shortly after this call’s completion on our website at Centene.com or by dialing 800-642-1687 in the U.S. and Canada and 706-645-9291 from abroad; the access code 74434480.

Any remarks that we make about future expectations, plans, prospects today constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors and we urge you to look at our Form 10-Q that we filed on October 28 of this year, 2008, and our other public SEC filings.

Centene anticipates that subsequent events and developments will cause its estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.

With that, I’d like to turn it over to our Chairman and CEO, Michael Neidorff.

Michael F. Neidorff

Good morning everyone and thank you for joining this morning’s call. I’d like to provide a few overview comments before I turn the call over to Eric, who will walk you through the details of Centene’s 2009 financial guidance. Our business model is designed to grow in both good and bad economic times. We believe that our 2009 guidance demonstrates this with a solid top-line growth, approximately 30 basis points of G&A improvement and HBR in our guided range.

Having said that, we are operating in unprecedented times that create uncertainty and make predictions more difficult so an abundance of conservatism is warranted. Two-thousand-and-eight has been a difficult year for the U.S. economy, but it is during these difficult times that states rely on Medicaid managed care companies to help stretch their budget dollars as far as possible. They are dependent on us to provide their Medicaid members with access to quality healthcare in the most cost effective manner.

We are dedicated to producing better health outcomes at lower costs and will continue to work closely with our state partners to help them solve their Medicaid budget problems. As we enter 2009, we will continue to execute on the implementation of our multi-line strategy; an integrated focus on Medicaid, the uninsured and our specialty segment. We will look at opportunities across the entire book of businesses including TANF, SCHIP and SSI; expansion of the external businesses of our specialty company operations; and new growth associated with our Celtic business unit.

We will selectively execute our RFP’s and other opportunities in existing and new states, as well as strategic acquisitions which meet our disciplined approach. Over the past seven years as a public company, Centene’s growth strategy has included opportunities within existing markets, acquisitions like the recent Celtic transaction, and start-ups new product opportunities like Texas Foster Care. We are both realistic and optimistic about the prospects of new coverage initiatives in the states where there’s 47 million uninsured Americans that Celtic gives us the opportunity to participate in with its individual coverage skills that compliment and enhance Centene’s Medicaid health plans.

A new administration takes office next month and working with key allies in the Congress may seek expansion of SCHIP with increased federal support and also increased federal matching funds for states Medicaid budgets as part of the stimulus package. Both of these actions could benefit Centene as a Medicaid managed care focus company.

In 2009 and beyond, our internal focus will be to continue to enhance our systems infrastructure and internal operational processes such as medical management, provider contracting, claims processing and back office functions, thereby strengthening our overall foundation to support Centene’s next level of growth. We are proud of what our team has accomplished so far in 2008 and look forward to building on that success in 2009 and beyond.

Now I’d like to turn it over to Eric. Eric.

Eric R. Slusser

Thank you Michael and good morning everyone. Our press release issued this morning sets forth our 2009 financial guidance, which illustrates our expected ability to deliver continued growth at Centene. Please note that in our press release and in our comments on this call all amounts, comparisons and growth rate references between 2008 and 2009 exclude New Jersey from both years. This is due to our previously announced decision to exit from the New Jersey market.

Beginning with the fourth quarter of 2008, we will report financial results for our New Jersey health plan as discontinued operations in our financial statements. In addition, all discussion around amounts and growth have been calculated using a mid-point assumption of our guidance range for 2008 and 2009.

We also exclude for comparison purposes the $20.8 million of earnings and $0.28 of earnings per share benefit recorded in the first quarter of 2008 for the 2007 Georgia retroactive rate increase and the continuing operations investment loss of approximately

$4.5 million associated with the decline in the financial markets recorded in the third quarter of 2008.

Finally, in 2008 we recorded earnings from our Florida based investment in Access Health Solutions in other income as it was considered an equity method investment. It is our expectation that we will fully consolidate Access Health’s operations in 2009 and include those results in operating income.

We believe that highlighting these items for comparative purposes should give you a better sense of our growth and earnings in 2009 versus 2008 on a run rate basis. Our key growth drivers in 2009 include the continued expansion of our South Carolina market; the conversion of our Florida membership to an at-risk health plan and the subsequent growth of that business; and full year contributions from Texas Foster Care, Celtic and our new Arizona Acute Care contract.

We are guiding to 2009 top-line revenue growth net of premium taxes of approximately 14%. Our revenue guidance is a range of $3.65 billion to $3.775 billion and includes the previously mentioned initiatives as well as health plan rate increases in the low single digits, consistent with past experience. We currently have rates set for approximately 70% of our anticipated 2009 member months under existing, proposed, or newly signed contracts with our state customers.

We expect to operate within an HBR range of 82 to 84% in 2009, though at a modestly higher level than 2008. We think it is appropriate to be conservative on the HBR front given the uncertainty around state budgets in a difficult economic environment. However, we are countering the HBR pressures with our medical management processes and initiatives. We do expect our normal seasonal pattern for HBR with the hottest HBR occurring in the first quarter.

We continue to focus on leveraging our G&A spend through streamlining of the organization and processes and implementing systems enhancements. We are guiding to a 2009 G&A ratio range of 13 to 13.5%, an estimated 30 basis point improvement from 2008. This improvement offsets the previously mentioned modest HBR deterioration to drive margin improvement on a run rate basis.

Our 2009 EPS guidance of $1.82 to $1.94 reflects the typical seasonality in the 2009 first quarter. Improvements in earnings in the second through fourth quarters will reflect normal expectations about seasonality, growth of membership and the affect of premium rate increases. The mid-point of our EPS guidance implies growth of approximately 12% versus the mid-point of our anticipated 2008 run rate. While this is below our long term EPS growth rate target of 15 to 20%, we believe a conservative approach is warranted in 2009 for the following reasons.

First, we are operating in unprecedented financial times, making 2009 difficult to predict. Second, it is unknown what if any new federal programs will be implemented or cut by the new administration. Third, the extremely low interest rate environment resulting from Federal Reserve actions will diminish our investment yields in 2009. And finally, state budget pressures are well documented, but the ultimate effects are still unknown as we enter 2009.

Finally, to provide you with clarity on a few of our other operating metrics, we expect cash flow from operations to approximate 1.7 to 2.0 times net earnings; an effective tax rate of 38%; diluted shares of 44.8 million; days claims payable essentially unchanged from 2008 at approximately 49 days; and net investment and other income of approximately $2.6 million.

Before I wrap up, I would like to reaffirm our 2008 financial guidance in the previously announced ranges, excluding any one time charges and reclassifications associated with the sale of the New Jersey business. We will report full year 2008 earnings on February 10, 2009, with a conference call at 8:30 AM Eastern Time that same day.

Separately, Centene announced today approval to serve Florida Medicaid members on a full-risk basis in the Tampa Bay and Miami-Dade markets in the first quarter of 2009. Additionally, we announced that since we entered into the agreements with Amerigroup to sell assets in New Jersey and acquire assets in South Carolina, issues have arisen that have required the parties to discuss the satisfaction of certain closing items. We are in discussions to resolve these matters and it is our objective to close the transactions. Beyond those comments, we will not address any further questions on this call as it relates to this matter.

That concludes my comments and with that we can open up the call to any questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Thomas Carroll - Stifel Nicolaus & Co., Inc.

Thomas Carroll - Stifel Nicolaus & Co., Inc.

I guess I won’t ask about New Jersey then, given those last comments right there. Maybe just quickly on New Jersey, can you give us a sense of how that subsidiary has been operating in 2008? And then secondly, perhaps give us a sense of how the transition in Florida you know may work throughout the year, maybe on a quarterly basis?

Michael F. Neidorff

I’m going to ask Mark to respond to the first half and Jesse the second half. Mark.

Mark W. Eggert

I’m sorry, what was the first half?

Thomas Carroll - Stifel Nicolaus & Co., Inc.

First part of the question was really give us a sense of how the New Jersey subsidiary has been operating in 2008.

Mark W. Eggert

Well, you know during the year we’ve implemented a lot of improvements in New Jersey. A lot of those were related to core operational functions. We’ve done some re-contracting in the state. But it continues to be a challenging environment in New Jersey and at our membership level somewhat difficult to work on the network development side. So I would say, you know, it was not a bad year but the challenges remain throughout the year.

Michael F. Neidorff

Jesse?

Jesse N. Hunter

Okay. Thanks. With respect to the Florida conversion, we obviously talked about this for a period of time along our initial investment in Access Health, so we’re pleased to work with AHCA and the Medicaid Agency to get all the necessary approvals in place. So the way that the conversion will work is it will be a county-by-county approval process, you know, and the membership conversion will be subject to the typical member choice and other provisions as required by federal and state legislation.

So we will be undertaking that process as Eric indicated in the first quarter of 2009. It will focus in the Tampa and Miami-Dade markets. And we will continue to have geographic expansion through ’09 and continue to transition members throughout the course of 2009.

Thomas Carroll - Stifel Nicolaus & Co., Inc.

Will half the membership roll in on January 1?

Jesse N. Hunter

We’re not going to get into a specific discussion about how things roll over by quarter, but I think it’s fair to say that the membership that they have in the particular counties with respect to the Tampa and Dade markets that we referenced in first quarter, that’ll be the starting point. We will continue to do both contracting and regulatory approval efforts throughout the year on the balance of the membership.

Thomas Carroll - Stifel Nicolaus & Co., Inc.

Just to confirm, you’re still – you’re 49% owners to that, correct? That hasn’t changed?

Jesse N. Hunter

That’s correct.

Operator

Your next question comes from Greg Genova - Deutsche Bank Securities, Inc.

Greg Genova - Deutsche Bank Securities, Inc.

Maybe an update on Ohio and specifically in the Northeast region where you guys are the only contractors for ABD. Is there any update on what the state plans on doing with that or any other region?

Michael F. Neidorff

I think Mark’s the best one to answer that. Mark.

Mark W. Eggert

Yes, we anticipate that the state will be seeking to re-procure at least one or two additional plans in the Northeast region for ABD effective in April. We haven’t seen that yet but that’s our understanding. In the meantime, we feel that we’ve stabilized our operations there and that the product has been running in expected ranges.

Greg Genova - Deutsche Bank Securities, Inc.

And then maybe Eric, can you give an update on maybe the investment portfolio? You guys in the past have given figures on your exposure to certain troubled securities. Is there anything that you know different from the last time we spoke on the third quarter?

Eric R. Slusser

No, nothing has changed. The troubled securities really hasn’t been much of anything. No further any type of significant losses. We continue to maintain an investment portfolio in the A+ rated environments, particularly in the municipals area, but beyond that there’s no other significant exposure out there today.

Operator

Your next question comes from Brian Wright - Banc of America Securities.

Brian Wright - Banc of America Securities

Can you talk in aggregate about retention expectations for Access Health members? And just like in [deem] point as far as retention?

Jesse N. Hunter

Yes, Brian, I think it’s a little bit challenging to talk about that. I mean, I think you know our objective obviously is to convert as many of those members as we can and those efforts are primarily focused on, you know, matching up the provider networks, particularly focused on PCP and the medical [home]. So it’s going to be hard for us to give specific guidance on that because it is subject to the member choice provisions.

And just want to follow up with one of the prior questions for clarity. You know, we are 49% owner of Access Health but 100% owner of Sunshine’s To Health Clinic.

Brian Wright - Banc of America Securities

Is there a range that you can maybe help us out with? Is it, you know, 30 to 60%? Is it something better than that?

Michael F. Neidorff

I would say it’s better than that. It’s all a function of matching up your network, your physicians, and the contract people have done a good job there, Brian, in matching up physicians.

Brian Wright - Banc of America Securities

And then on you didn’t mention much as far as Celtic expectations as far as growth with that platform. Can you talk to that a little bit, please?

Jesse N. Hunter

Sure. This is Jesse again. Obviously there’s two pieces of Celtic growth that we’re focused on. One is on their existing business and we are seeing growth, particularly volume growth with respect to the Celtic business in 2009. But, you know, the primary opportunity is and I think Michael alluded to in his opening comments, is our ability to work to combine Centene and Celtic to participate in the state’s coverage initiatives. And we are very active with respect to that market right now and we have high expectations for our ability to participate in that in the future.

Brian Wright - Banc of America Securities

Would that business grow without any you know contracting initiatives with states?

Michael F. Neidorff

Yes. Sure. In fact, it’s kind of interesting the dynamics. Just to keep things in perspective, when in economic times in which we live, I expect some units to grow but you should also expect there’s going to be lower cost plans that you sell more of. And as people start to back themselves up with the catastrophic type coverage. So kind of build that into your thinking.

Brian Wright - Banc of America Securities

And then just one quick last one. I’ve got to try. You know you’re throwing it out there. New Jersey – can you give us a range on the loss in the fourth quarter on that or am I thinking incorrectly about that?

Michael F. Neidorff

I think what we’ve really said is New Jersey; the challenge area has been the total membership. Okay? And what it means and so we think there’s a it provides an opportunity somewhat to consolidate, have a larger membership and that’s really the –

Brian Wright - Banc of America Securities

So it’s not an issue that the LMR has massively spiked recently?

Michael F. Neidorff

Yes, I mean, you see the – [inaudible]

Brian Wright - Banc of America Securities

So nothing has changed from what we’ve seen in the SAT filings in there?

Michael F. Neidorff

This is Eric. I’ll just add a comment. You know, we’re in the process as I indicated in my comments that will be treated as discontinued operations. We’re in the process of reviewing all of that information and we’ll update you on our year-end earnings call and then on that call we will lay out the impacts of that as it’s separated from our continuing operations business.

Brian Wright - Banc of America Securities

Is that just an issue then of intangible write-downs then? I just want to get the accounting right. That’s all.

Michael F. Neidorff

Eric.

Eric R. Slusser

Well, the – as I said, I’m not sure what you mean by intangible write-off but we will be moving the transaction and all of New Jersey operations into a discontinued operation format. So when we give our earnings at year-end, the discontinued operations line below continuing operations will represent mostly the results of New Jersey for the year as we carve that out.

Brian Wright - Banc of America Securities

But will those results include a write-down of any intangibles?

Eric R. Slusser

They will include as I indicated on the call any costs we have related to exit activities that we’re required to record in the fourth quarter will be recorded in the fourth quarter, so we will look at all assets, leases, etc. and activities, any exit costs that we have to record under GAAP and record those at that time. And we’re still reviewing that information.

Operator

Your next question comes from Greg Nersessian - Credit Suisse.

Greg Nersessian - Credit Suisse

My first question was on the admin fees lends to a modeling question. Is it fair to still think about kind of the 3Q number as the appropriate admin service fees number for next year? I’m just trying to figure out would that be impacted at all by the transition of the Florida membership from any sort of risk? And also should we think of the cost of services ratio as a percentage of those admin fees as remaining roughly consistent next year?

Michael F. Neidorff

Eric?

Eric R. Slusser

The – when you say admin services, I assume you’re talking about general and administrative costs, and that –

Greg Nersessian - Credit Suisse

No, no, no – I mean the admin fees. The fee based revenue. I think most of it is from the PBM and there was a step down this year from like $80 million to $75 million, wondering what the appropriate run rate is there?

Michael F. Neidorff

Let me have Bill make a comment on it. Bill Scheffel.

William N. Scheffel

Yes. I think the Access numbers are not included in there. They’re included in other income expense for our membership. And then the other ratios that you talked about, I think that those will be similar to what you saw in Q3.

Greg Nersessian - Credit Suisse

And then could you just update us on a couple of state specific things? I guess just one; just any updated commentary you can give us on rates Ohio, Wisconsin, Indiana you know renew 1/1. Any detail you can give us there? And then also Foster Care, if you could give us an update on the progress there, any changes to how that’s matured over the first six or eight months?

Michael F. Neidorff

I’ll let Mark comment on Foster Care and the rates that we have made it a practice to talk about rates on our earnings calls, and we’ve given you the updates that we have to this point. But Mark do you want to add anything to that or the Foster Care or others?

Mark W. Eggert

Yes, there’s not a lot to add. I would say Foster Care has run over the past 8.5 months about where we expected and it appears to be going into 2009 in line with our expectations.

Michael F. Neidorff

And the rates in Ohio, they’re what they are.

Greg Nersessian - Credit Suisse

Well, one of your competitors has suggested rates in the mid-single digit range. Is that about right? And then Wisconsin and Indiana, any color there?

Michael F. Neidorff

Eric, you know what we’ve disclosed on that historically.

Eric R. Slusser

Yes. In Ohio that’s probably a fair assumption. At this point, Ohio rates we have agreed to them and we’re waiting on finalization from the state, but that is a fair assumption based on where we’re at. Indiana has been finalized and is in the 2% range, and Wisconsin is in process but not finalized and probably will be in the 1% range.

Operator

Your next question comes from Carl McDonald - Oppenheimer & Co., Inc.

Carl McDonald - Oppenheimer & Co., Inc.

Just on the rate question, you said 70% of the member [months] are known at this point. What are the major ones we’re still waiting for other than Texas at the end of the year?

Eric R. Slusser

You would have Texas at the end of the year from September 1 on and Georgia from July 1 on are the biggest. Also our acute care business, which is a small impact, is later in the year. But really the biggest is Texas and Georgia.

Carl McDonald - Oppenheimer & Co., Inc.

And then second question is just from high levels, we think about the various states, the puts and takes for ’09 because as you said in the past Ohio should be better in 2009, getting rid of the unprofitable New Jersey will help, Georgia’s probably going to be worse without that one-time benefit. So any other major sort of puts and takes we should think about as you construct the ’09 guidance?

Michael F. Neidorff

I think what we’ve done is we’ve put a plan together. We just as we said we’ve used an abundance of conservatism and tried to consider the puts and takes, and I don’t think there’s a lot I’d want to add to it at this point in time.

Operator

Your next question comes from Matt Perry - Wachovia Capital Markets.

Matt Perry - Wachovia Capital Markets

First question, just wondering if you’re willing to provide your outlook on what GAAP EPS guidance for 2009?

Michael F. Neidorff

Eric.

Eric R. Slusser

Yes. I mean, an updated as I said the GAAP our range that we stated on the third quarter of $1.87 to $1.92 still holds true as we’ve reaffirmed in the press release this morning, so obviously that’s net of any impact that comes out of the New Jersey transaction.

Matt Perry - Wachovia Capital Markets

But for 2009, though?

Eric R. Slusser

Oh, 2009? Well, as I said all of our stuff that we talked about, I took you through the current year range, taken out the impacts of Georgia and back the effects of the loss on investment, you know, you have to look at everything. It’d be in the mid-point of our ranges.

Matt Perry - Wachovia Capital Markets

Well, I guess in a way what I’m asking and maybe you just you know you’re not willing to talk about it yet is what the impact of – what will the discontinued operations line look like as a on an earnings basis, net income basis in 2009?

Eric R. Slusser

We’re not ready to talk about that yet.

Matt Perry - Wachovia Capital Markets

And then just want to clarify, you know, the expectation of a stimulus bill that would include some relief to states in January, 2009, is that included in your ’09 guidance?

Michael F. Neidorff

I think what we’ve tried to say is there’s a lot of ups, downs, puts, costs, every way you want to look at it, a mixture within this, and we’ve tried to factor them all in, Matt, at some different levels. And I’m not going to get any more specific than that. What we’ve done is we’ve said what are all the positives, what are the things that provide more opportunity, how do we balance them to come up with a financial plan and guidance that has conservatism in it but very achievable? And that’s what we sit here and look at.

Matt Perry - Wachovia Capital Markets

Just lastly and maybe I misheard this so I just wanted to clarify another point of ’09 guidance. Investment and other income, what was that line item for 2009?

Eric R. Slusser

Yes, I believe $2.6 million is what I stated in my discussion earlier. And remember again the Access numbers were in there in ’08 and they will not be in there in ’09 because that business will be consolidated in operating income. So that will have an impact year-over-year for comparison purposes.

Matt Perry - Wachovia Capital Markets

And if we were to just spike out just the investment income, what will that look like in ’09 versus ’08?

Eric R. Slusser

Probably in the range of around $20 million, subject to what happens with further interest rate changes.

Michael F. Neidorff

Yes, it’s going to be just a little north of the $20, but I think $20’s a good number.

Operator

Your next question comes from Joshua Raskin - Barclays Capital.

Joshua Raskin - Barclays Capital

I’ll try to ask the last question on New Jersey as the first one. If New Jersey, if the transactions don’t occur with Amerigroup, you know and I’m not asking you to sort of reply on whether that will or will not happen, I obviously understand you’re motive to complete the transactions, but if that does fall through does the EPS guidance for ’09 go up or down?

Michael F. Neidorff

I have to stick with what we said earlier that with just not to make any additional comments on New Jersey.

Joshua Raskin - Barclays Capital

So we don’t know if that’s a risk or an opportunity if the transaction doesn’t occur? Should we just sort of think of it as an unknown?

Michael F. Neidorff

Yes, I think the point is it’s still discontinued operations so if it occurs it has a direct impact on our numbers.

Joshua Raskin - Barclays Capital

I’m sorry, the investment income you think is $20 million, slightly north potentially in 2008 and going to $2.6 million in 2009?

Eric R. Slusser

No, the lower number’s the net, Josh [inaudible] of interest expense in ’09.

Joshua Raskin - Barclays Capital

I’m sorry. So can we get the – I guess what is the impact of lower investment income? I guess is there a way to just break out investment income in ’08 versus investment income in ’09?

Michael F. Neidorff

Eric, do we have detail at this point?

Eric R. Slusser

Yes. Hang on just a second. Let me look at it. But just to correct you, the $20 million number we gave was the ’09 number not the ’08 number. And the net number is obviously the remaining item. It nets out with Access being out of there is interest expense. So the way you can look at it is right now about every quarter basis point change is equal to about $1 million of earnings impact, if you’re trying to model the impact of interest income.

Joshua Raskin - Barclays Capital

I guess I’m just trying to see how much is earnings up because obviously net investment or investment income is a big drag and that you know you could argue if that’s operations or not. But –

Eric R. Slusser

So I guess to help you out here it’s pretty well flat year-over-year.

Joshua Raskin - Barclays Capital

Okay. So you guys have an assumption of investment income being flat year-over-year. And then obviously take out Access and the net and the interest expense.

Eric R. Slusser

Yes, and interest expense will be slightly up in ’09 because of the Celtic transaction and the borrowings related to that.

Joshua Raskin - Barclays Capital

And then just on New Jersey – I’m sorry, it’s not on New Jersey. On Florida, do you have a revenue expectation in terms of a contribution?

Michael F. Neidorff

I’m sorry, could you repeat that?

Joshua Raskin - Barclays Capital

For Florida as you transition to risk as we think about ’09, obviously there was no revenue booked, it was in the other line for ’08, the other income line. So what would the revenue contribution be for 2009?

Michael F. Neidorff

Well, we’ve given you our consolidated revenue range, without starting to get specific at this point market by market. So it’s within that range on revenue that we gave you earlier today.

Joshua Raskin - Barclays Capital

I guess last question, just same store sort of organic membership are you making an expectation change based on the economy or what should we think about it sort of same store membership?

Michael F. Neidorff

I think we see no dramatic change. We don’t see any real dramatic change in it. It’s like the [apathy] account if they start driving more business our way. So we see a very balanced approach to it.

Joshua Raskin - Barclays Capital

So your guidance is relatively conservative that the economy’s not going to drive a big difference at this point?

Michael F. Neidorff

Yes.

Operator

Your next question comes from John Rex - J.P. Morgan.

John Rex - J.P. Morgan

I just want to come in kind of a high level and it’s kind of back to your commentary characterization to guidance with abundant conservatism, so where do you point us to where you think are kind of the elements that have the most conservatism?

I ask this because it seems like on the revenue side, if you have a visibility on 70% of your member months that you kind of got that, and you’re talking to low single-digit rate increases in the UA which is kind of normal time rate increases for Medicaid, so it wouldn’t seem like it’s on the revenue line where there would be the conservatism. So can you point me to maybe prioritize for me in terms of where you think the lines are that reflect the most conservatism?

Michael F. Neidorff

Yes, I really don’t want to get into a lot of detail. We just commented that though you could have some membership or stronger membership you could see relatively flat [additions] as an example of what it could be. There’s the investment income. There’s the HBR we said is in the range and could be drifting up a little bit. So I mean we’re applying it across the board and saying let’s be conservative in how we look at this, not expect any wholesale improvements, wholesale growth. It’s kind of steady as she goes. And that’s really about as much as I want to say about it right now.

John Rex - J.P. Morgan

I guess it was kind of my take, it does look kind of steady the as she goes, it doesn’t look like an extra dose of conservatism on it because revenues kind of are there where one would expect; HBR you know up maybe 50 bips or so from where you’re running in ’08. And so I was just trying to find kind of just management’s view as to where that extra dose of conservatism was.

Michael F. Neidorff

I think as we look at some of the overall growth opportunities there could be some conservatism; the HBR we have programs in place; the G&A we continue to work through the systems. I mean, I think we’ve looked at it in [more] places.

John Rex - J.P. Morgan

And then can you tell me what interest rate you’re using for ’09 kind of versus your average yield in ’08?

Michael F. Neidorff

Eric, do you have that handy?

Eric R. Slusser

Yes. About 2%.

John Rex - J.P. Morgan

Two percent in ’09 and what was your yield in ’08?

Eric R. Slusser

Just net just slightly north of that a little bit. I mean if you remember most of the biggest Fed rate cuts came right in the first quarter, so the year has been low overall. So like I said just slightly north of that for ’08.

John Rex - J.P. Morgan

Can you maybe characterize like – so you were like maybe 2.5% in ’08 average yield?

Eric R. Slusser

I would say that would approximate it.

John Rex - J.P. Morgan

Is there anything in investment income you’re running through ’08 that goes – so you said you flat investment income ’08, ’09 overall? Sorry. That was your response earlier to question where you talked about the $20 million ’09.

Eric R. Slusser

Yes.

John Rex - J.P. Morgan

And you said that flat with ’08? And so you were pulling out what elements from ’08?

Eric R. Slusser

I’m not pulling out any elements from ’08 other than we talked about the Access number that’s in there so that will be in other and won’t be there in ’09.

John Rex - J.P. Morgan

So when you say others – I’m just looking at your investment income line in – so you had the hit in 3Q and so you’re obviously including that hit, that one-time hit when you talk to that $20 million then. I see. You’re including the $5 million in one-time hit in the 3Q when you talk to the flat. Is that right?

Eric R. Slusser

Yes.

Operator

Your next question comes from [Chris Synphony] – Eagle Asset Management.

Chris Synphony – Eagle Asset Management

I just was wondering there was an announcement made I think about a week, week-and-a-half ago by Governor Crist in Florida announcing and I believe it was ten vendors that were going to provide a variety of healthcare plans to the under or uninsured and while they mentioned certain vendors they didn’t mention all of them and I was wondering if [Cel-Tech] was one of those.

Michael F. Neidorff

No. We had looked at it and various models we would participate in and we decided not to.

Chris Synphony – Eagle Asset Management

Do you think that that process for the states is something that is going to repeat itself as we move into 2009 and what was it about Florida that you didn’t like that you –

Michael F. Neidorff

Let me rephrase that. Okay? When we looked at it we put in the plans that we thought would work best and it was not consistent with what they were looking for at that point in time.

Operator

Your next question comes from Daryn Miller - Goldman Sachs.

Daryn Miller - Goldman Sachs

Can you talk a little bit about how an [F-map] increase would flow down to you guys? Would that impact rates that are already established? And then also looking back to 2003 where we saw an F-map increase, how did that actually play out?

Michael F. Neidorff

Eric do you have some information on that at hand? I don’t have any on it.

Eric R. Slusser

No, I mean it’s just too early because we don’t know what’s going to happen at the federal level and given the comments we made about the unknowns at the state budget levels, their deficits, today we don’t know how that money will be used.

Michael F. Neidorff

I think what’s important is we’ll help our state customers and things that help the states overcome their budget deficit gives them various opportunities to work with companies like ourselves, whether it be new products, additional products, rates, I mean there’s just a whole spectrum of things that I would not want to get into any more detail this early.

Eric R. Slusser

Daryn, if you’re characterizing 2003 I think the main impact back then was rate stability. Because it bolstered the budgets of the states.

Daryn Miller - Goldman Sachs

Can you maybe just walk through what a scenario could possibly look like just so I understand the mechanics of it? I mean, is this F-map increase as a higher federal percentage? Does that – would that potentially impact existing rates or would that only come through in terms of new rates the states are establishing?

Eric R. Slusser

I’m sorry. We had a little trouble hearing you, Daryn. Just recap that quickly for us. Sorry.

Daryn Miller - Goldman Sachs

So you know quickly, I mean two points here. One is would this benefit existing rates that have already been established? And then two, when the F-map increases is this an issue where the state governments can say okay, we’re either going to pay less to Medicaid because we now have a higher federal component and will allocate dollars to other places? You know, is that a viable scenario?

Michael F. Neidorff

I think what we have to look at is you’ve got a new administration coming in. And money made available to F-map and others may or may not have some hooks on it in terms of how they want to see it spent, where they want to see it spent. We know that various people in Congress are looking at the opportunity to massively overhaul some of this and use some of that money to do that, so I think we would be probably trudging on the unknown until they announce how they intend to use it and what hooks they’re going to put on it, if any.

Daryn Miller - Goldman Sachs

And then one last question. Can you just comment maybe on how you’re fourth quarter enrollment is turning versus your expectations?

Michael F. Neidorff

Well, we tend not to give guidance on that. We’ll be reporting on that February 10. We did reaffirm the overall guidance we had given for the year.

Operator

At this time there are no further questions in queue.

Michael F. Neidorff

I’d like to thank everybody for participating and wish everyone the most blessed of holidays and a safe holiday season. We look forward to February 10 and our year-end earnings call. Thank you.

Operator

This concludes today’s conference call. You may now disconnect and thank you for using the conferencing services.

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Source: Centene Corporation 2009 Financial Guidance Call Transcript
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