8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 24, 2006

CENTENE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation) 000-33395
(Commission file number) 42-1406317
(IRS Employer Identification No.)

7711 Carondelet Avenue, Suite 800, St. Louis, Missouri 63105
(Address of principal executive office and zip code)

Registrant’s telephone number, including area code: (314) 725-4477

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     On October 24, 2006, we issued a press release announcing our financial results for the third quarter ended September 30, 2006. The full text of the press release is included as Exhibit 99.1 to this report. The information contained in the website cited in the press release is not a part of this report.

     The information in this Form 8-K and exhibit 99.1 attached hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section. Nor shall such information or exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as expressly set forth by specific reference in such a filing.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

          (c) Exhibits

     The following exhibit relating to Item 2.02 shall be deemed to be furnished and not filed:

99.1 Press release of Centene Corporation issued October 24, 2006 as to financial results for the third quarter ended September 30, 2006.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 24, 2006	CENTENE CORPORATION
	By:	/s/ MICHAEL F. NEIDORFF
		Michael F. Neidorff
		Chairman and Chief Executive Officer

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press release* of Centene Corporation issued October 24, 2006 as to financial results for the third quarter ended September 30, 2006.

* The press release is being furnished pursuant to Item 2.02, and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange of 1934, as amended.

EX-99.1

Exhibit 99.1

N E W S R E L E A S E

Contact:	J. Per Brodin Chief Financial Officer (314) 725-4477
	Lisa M. Wilson Senior Vice President, Investor Relations (212) 759-3929

CENTENE CORPORATION REPORTS 2006 THIRD QUARTER RESULTS

ST. LOUIS, MISSOURI (October 24, 2006) — Centene Corporation (NYSE: CNC) today announced its financial results for the quarter ended September 30, 2006.

Third Quarter Summary

– Revenues of $631.2 million, a 57.6% increase over the 2005 third quarter.

– Loss from operations of $66.6 million, including a non-cash impairment charge related to the loss of the Kansas contract of $87.1 million pre-tax, or $1.96 per diluted share.

– Earnings from operations of $20.5 million, excluding the non-cash impairment charge, compared to $15.1 million in the 2005 third quarter.

– Loss per diluted share of $1.65. Earnings per diluted share of $0.31, excluding the non-cash impairment charge compared to $0.27 in the 2005 third quarter.

– Operating cash flows of $110.1 million.

– Quarter-end Medicaid Managed Care membership of 1.2 million.

– Membership growth of 38.0% over the 2005 third quarter.

– Health Benefits Ratio (HBR) for Centene’s Medicaid and SCHIP populations, which reflects medical costs as a percent of premium revenues, of 82.0%.

– Medicaid Managed Care G&A expense ratio of 12.1% and Specialty Services G&A ratio of 17.0%.

– Days in claims payable of 45.3.

Other Events

– Initiated operations in the Southwest region of Georgia, ending the quarter with 252,600 members state-wide.

– Commenced operations in the seven new counties awarded in the East Central market of Ohio.

Centene Corporation Reports Third Quarter 2006 Earnings October 24, 2006 / Page 2

– Started operations in the Corpus Christi market and expanded operations in the Austin and Lubbock markets of Texas.

– Awarded state-wide Medicaid managed care contract to manage a portion of eligible Hoosier Healthwise members through our Indiana subsidiary, Managed Health Services (MHS).

– Acquired managed vision business of OptiCare Health Systems, Inc. effective July 1.

– Commenced Arizona Long-Term Care contract effective October 1, 2006.

– Received preliminary notification of Ohio Medicaid ABD contract award in all four regions in which we submitted a bid.

Michael F. Neidorff, Centene’s Chairman and Chief Executive Officer, commented, “We believe that many of the initiatives that we implemented during the second quarter, including a back-to-basics approach and an evaluation of our medical management practices at a number of levels, have yielded results that indicate that we are back on the right track. We are pleased that our medical claims reserves that were recorded in the 2006 second quarter have developed appropriately and that our third quarter results are in line with our expectations. We continue to evaluate opportunities to implement additional processes and protective measures to help manage our cost trends.

“We are pleased with our membership and revenue growth for the quarter, particularly our strong membership in Georgia, where our subsidiary, Peach State Health Plan, Inc., ended the quarter with 252,600 members, ahead of our expectations. We are now operating in the Atlanta, Central and Southwest regions and we achieved strong membership there despite an overall decline in the total eligible membership in the State. We also experienced growth due to our market expansions in Ohio and Texas.

“On September 1, 2006, we commenced operations in Texas in the Corpus Christi market caring for Medicaid and SCHIP members; we also began serving new Medicaid members in the Lubbock market and SCHIP members in Austin. In addition, our contract to provide managed care services for SSI recipients in the San Antonio and Corpus Christi markets will commence membership operations in January 2007. While we are still seeing higher than average

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Centene Corporation Reports Third Quarter 2006 Earnings October 24, 2006 / Page 3

utilization trends in Texas NICU, we expect this cost trend to moderate as the members transition from an unmanaged population into a managed care environment.

“Our Specialty Services segment has experienced year-over-year growth largely due to acquisitions, namely US Script, and to a lesser extent, Cardium and OptiCare. In addition, effective October 1, we began providing services in Yuma/LaPaz and Maricopa counties under our Arizona Long-Term Care contract.

“As we enter the fourth quarter, we look forward to making continued progress in our medical management and to capture future growth opportunities,” concluded Neidorff.

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Centene Corporation Reports Third Quarter 2006 Earnings October 24, 2006 / Page 4

The following table depicts membership in Centene’s managed care organizations by state at September 30, 2006 and 2005:

	2006		2005
Georgia		252,600		—
Indiana		198,100		176,300
Kansas		112,400		107,600
Missouri		32,200		37,300
New Jersey		59,100		50,900
Ohio		88,300		58,100
Texas		259,900		243,600
Wisconsin		167,100		173,900
TOTAL		1,169,700		847,700

The following table depicts membership in Centene’s managed care organizations by member category at September 30, 2006 and 2005:

	2006			2005
Medicaid		922,300			657,500
SCHIP		229,400			176,900
SSI		18,000	(a)		13,300	(b)
TOTAL		1,169,700			847,700

(a)	10,000 at-risk; 8,000 ASO
(b)	6,800 at-risk; 6,500 ASO

Statement of Operations

– For the 2006 third quarter, revenues increased 57.6% to $631.2 million from $400.6 million in the 2005 third quarter.

– The HBR for Centene’s Medicaid and SCHIP populations, which reflects medical costs as a percent of premium revenues, was 82.0% for the three months ending September 30, 2006, a decrease of 1.1% over the comparable 2005 period, which included $4.5 million

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Centene Corporation Reports Third Quarter 2006 Earnings October 24, 2006 / Page 5

	for settlement of a lawsuit with Aurora Health Care, Inc. (Aurora). This settlement increased the HBR by 1.2% for the three months ended September 30, 2005. The decrease for the three months ended September 30, 2006 is the result of premium rate increases in certain markets, an increase in maternal delivery revenue, and the effect of the 2005 Aurora settlement, offset by an 8.9% increase in average in-patient days and higher physician costs. The HBR for the three months ended September 30, 2006 did not include any overall adverse medical cost development related to prior periods.
–	General and administrative (G&A) expense as a percent of revenues for the Medicaid Managed Care segment was 12.1% in the third quarter of 2006 compared to 10.6% in the third quarter of 2005, primarily due to premium tax or similar assessments enacted in certain markets.
–	Non-cash intangible asset impairment charge of $87.1 million (pre-tax), $85.0 million (after-tax), or $1.96 per diluted share related to the Kansas Medicaid contract non-renewal notification.
–	Loss from operations of $66.6 million, including a non-cash impairment charge related to the loss of the Kansas contract of $87.1 million pre-tax, or $1.96 per diluted share.
–	Earnings from operations of $20.5 million, excluding the non-cash impairment charge, compared to $15.1 million in the 2005 third quarter.
–	Loss per diluted share of $1.65. Earnings per diluted share of $0.31, excluding the non-cash impairment charge compared to $0.27 in the 2005 third quarter.
–	For the nine months ended September 30, 2006, revenues increased 46.1% to $1,581.6 million from $1,082.6 million for the same period in the prior year. Medicaid Managed Care G&A expenses as a percent of revenues increased to 12.1% in the first nine months of 2006 compared to 10.6% in the first nine months of 2005. Earnings from operations, excluding the non-cash impairment charge, decreased to $39.4 million in the first nine months of 2006 from $58.8 million in the first nine months of 2005. Net earnings, excluding the non-cash impairment charge, were $27.5 million or $0.62 per diluted share in the first nine months of 2006.

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Centene Corporation Reports Third Quarter 2006 Earnings October 24, 2006 / Page 6

Balance Sheet and Cash Flow

At September 30, 2006, the Company had cash and investments of $440.1 million, including $411.1 million held by its regulated entities and $29.0 million held by its unregulated entities. Medical claims liabilities totaled $246.7 million, representing 45.3 days in claims payable.

A reconciliation of the Company’s change in days in claims payable from the immediately preceding quarter-end is presented below:

Days in claims payable, June 30, 2006	42.6
Increase in claims inventory	2.7
Increase for Georgia and Texas claims	0.3
Conversion of pharmacy benefits to U.S. Script	(0.3	)
Days in claims payable, September 30, 2006	45.3

Outlook

The table below depicts the Company’s revised guidance for the fourth quarter of 2006 and preliminary guidance for 2007:

	Q4				2007
	Low		High		Low		High
Revenue (in millions)	$	685.0	$	690.0	$	2,730	$	2,830
Earnings per diluted share	$	0.38	$	0.43	$	1.51	$	1.61

     J. Per Brodin, Centene’s Chief Financial Officer, stated, “The 2006 fourth quarter and 2007 guidance excludes any potential shut-down costs for our Kansas health plan that would be necessary if our efforts to retain the contract are unsuccessful. The 2007 guidance includes the estimated effect of initiating our Texas Star+ SSI operations effective January 1, 2007 and the Ohio Aged, Blind and Disabled preliminary award which is expected to transition throughout 2007.”

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Centene Corporation Reports Third Quarter 2006 Earnings October 24, 2006 / Page 7

Conference Call

As previously announced, the Company will host a conference call Tuesday, October 24, 2006, at 8:30 a.m. (Eastern Time) to review the financial results for the third quarter ended September 30, 2006, and to discuss its business outlook. Michael F. Neidorff and J. Per Brodin will host the conference call. Investors are invited to participate in the conference call by dialing 800-273-1254 in the U.S. and Canada, 706-679-8592 from abroad, or via a live Internet broadcast on the Company’s website at www.centene.com, under the Investor Relations section. A replay will be available for on-demand listening shortly after the completion of the call until 11:59 PM Eastern Time on November 7, 2006 at the aforementioned URL, or by dialing 800-642-1687 in the U.S. and Canada, or 706-645-9291 from abroad, and entering access code 6573810.

Financial Presentation

The Company is providing certain non-GAAP financial measures in this release as the Company believes that these figures are helpful in allowing individuals to more accurately assess the ongoing nature of the Company’s operations and measure the Company’s performance more consistently.

The non-GAAP information presented above in the third and fourth bullet under “Third Quarter Summary” and sixth through eighth bullets under “Statement of Operations” excludes the non-cash intangible asset impairment charge related to the Kansas contract non-renewal notification. This exclusion has been made in the non-GAAP financial measures as management believes that this charge is an unusual event.

The Company uses the presented non-GAAP financial measures internally to focus management on period-to-period changes in the Company’s core business. Therefore, the Company believes that this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

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Centene Corporation Reports Third Quarter 2006 Earnings October 24, 2006 / Page 8

About Centene Corporation

Centene Corporation is a leading multi-line healthcare enterprise that provides programs and related services to individuals receiving benefits under Medicaid, including Supplemental Security Income (SSI) and the State Children’s Health Insurance Program (SCHIP). The Company operates health plans in Georgia, Indiana, Kansas, Missouri, New Jersey, Ohio, Texas and Wisconsin. In addition, the Company contracts with other healthcare organizations to provide specialty services including behavioral health, disease management, managed vision, nurse triage, pharmacy benefits management and treatment compliance. Information regarding Centene is available via the Internet at www.centene.com.

The information provided in this press release contains forward-looking statements that relate to future events and future financial performance of Centene. Subsequent events and developments may cause the Company’s estimates to change. The Company disclaims any obligation to update this forward-looking financial information in the future. Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, regulatory, competitive and other factors that may cause Centene’s or its industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Actual results may differ from projections or estimates due to a variety of important factors, including Centene’s ability to accurately predict and effectively manage health benefits and other operating expenses, competition, changes in healthcare practices, changes in federal or state laws or regulations, inflation, provider contract changes, new technologies, reduction in provider payments by governmental payors, major epidemics, disasters and numerous other factors affecting the delivery and cost of healthcare. The expiration, cancellation or suspension of Centene’s Medicaid managed care contracts by state governments would also negatively affect Centene.

[Tables Follow]

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Centene Corporation Reports Third Quarter 2006 Earnings October 24, 2006 / Page 9

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

	September 30,			December 31,
	2006			2005
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	200,480		$	147,358
Premium and related receivables, net of allowances of $125 and $343, respectively		86,108			44,108
Short-term investments, at fair value (amortized cost $67,679 and $56,863, respectively)		67,392			56,700
Other current assets		20,776			24,439
Total current assets		374,756			272,605
Long-term investments, at fair value (amortized cost $148,415 and $126,039, respectively)		146,666			123,661
Restricted deposits, at fair value (amortized cost $25,691 and $22,821, respectively)		25,565			22,555
Property, software and equipment, net		103,175			67,199
Goodwill		136,519			157,278
Other intangible assets, net		14,949			17,368
Other assets		12,211			7,364
Total assets	$	813,841		$	668,030
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims liabilities	$	246,669		$	170,514
Accounts payable and accrued expenses		67,957			29,790
Unearned revenue		18,597			13,648
Current portion of long-term debt and notes payable		1,032			699
Total current liabilities		334,255			214,651
Long-term debt		168,429			92,448
Other liabilities		5,252			8,883
Total liabilities		507,936			315,982
Stockholders’ equity:
Common stock, $.001 par value; authorized 100,000,000 shares; issued and outstanding 43,168,505 and 42,988,230 shares, respectively		44			43
Additional paid-in capital		202,760			191,840
Accumulated other comprehensive income:
Unrealized loss on investments, net of tax		(1,356	)		(1,754	)
Retained earnings		104,457			161,919
Total stockholders’ equity		305,905			352,048
Total liabilities and stockholders’ equity	$	813,841		$	668,030

See notes to consolidated financial statements.

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Centene Corporation Reports Third Quarter 2006 Earnings October 24, 2006 / Page 10

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
	(Unaudited)						(Unaudited)
Revenues:
Premium	$	610,661		$	395,667		$	1,522,302		$	1,075,027
Service		20,588			4,975			59,318			7,619
Total revenues		631,249			400,642			1,581,620			1,082,646
Expenses:
Medical costs		501,350			331,050			1,263,251			881,021
Cost of services		15,373			2,002			45,278			3,573
General and administrative expenses		93,991			52,450			233,654			139,274
Impairment loss		87,091			—			87,091			—
Total operating expenses		697,805			385,502			1,629,274			1,023,868
Earnings (loss) from operations		(66,556	)		15,140			(47,654	)		58,778
Other income (expense):
Investment and other income		4,625			2,818			12,056			7,461
Interest expense		(3,082	)		(1,190	)		(7,536	)		(2,386	)
Earnings (loss) before income taxes		(65,013	)		16,768			(43,134	)		63,853
Income tax expense		6,180			4,662			14,328			22,087
Net earnings (loss)	$	(71,193	)	$	12,106		$	(57,462	)	$	41,766
Earnings (loss) per share:
Basic earnings (loss) per common share	$	(1.65	)	$	0.28		$	(1.33	)	$	0.99
Diluted earnings (loss) per common share	$	(1.65	)	$	0.27		$	(1.33	)	$	0.93
Weighted average number of shares outstanding:
Basic		43,219,053			42,582,129			43,126,062			42,120,149
Diluted		43,219,053			45,278,328			43,126,062			45,078,852

See notes to consolidated financial statements.

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CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	Nine Months Ended
	September 30,
	2006			2005
	(Unaudited)
Cash flows from operating activities:
Net earnings (loss)	$	(57,462	)	$	41,766
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities —
Depreciation and amortization		15,286			9,658
Excess tax benefits from stock compensation		—			4,511
Stock compensation expense		11,168			3,557
Impairment loss		87,091			—
Loss on sale of investments		33			58
Deferred income taxes		(4,493	)		(3,567	)
Changes in assets and liabilities —
Premium and related receivables		(34,209	)		(9,396	)
Other current assets		2,705			(1,990	)
Other assets		(455	)		(1,380	)
Medical claims liabilities		74,367			(17,091	)
Unearned revenue		4,816			5,892
Accounts payable and accrued expenses		25,929			11,798
Other operating activities		(221	)		1,096
Net cash provided by operating activities		124,555			44,912
Cash flows from investing activities:
Purchase of property, software and equipment		(39,494	)		(16,837	)
Purchase of investments		(235,501	)		(108,630	)
Sales and maturities of investments		200,155			129,095
Acquisitions, net of cash acquired		(66,921	)		(55,410	)
Net cash used in investing activities		(141,761	)		(51,782	)
Cash flows from financing activities:
Proceeds from exercise of stock options		4,594			3,925
Proceeds from borrowings		83,359			45,000
Payment of long-term debt and notes payable		(12,505	)		(4,323	)
Excess tax benefits from stock compensation		2,094			—
Common stock repurchases		(7,214	)		—
Other financing activities		—			(413	)
Net cash provided by financing activities		70,328			44,189
Net increase in cash and cash equivalents		53,122			37,319
Cash and cash equivalents, beginning of period		147,358			84,105
Cash and cash equivalents, end of period	$	200,480		$	121,424
Interest paid	$	7,582		$	2,184
Income taxes paid	$	5,223		$	19,658
Supplemental schedule of non-cash financing activities:
Common stock issued for acquisitions	$	—		$	8,991

See notes to consolidated financial statements.

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Centene Corporation Reports Third Quarter 2006 Earnings October 24, 2006 / Page 12

CENTENE CORPORATION

SUPPLEMENTAL FINANCIAL DATA

	Q3			Q2			Q1			Q4
	2006			2006			2006			2005
MEMBERSHIP
Medicaid Managed Care:
Georgia		252,600			216,000			—			—
Indiana		198,100			193,000			193,000			193,300
Kansas		112,400			117,100			118,200			113,300
Missouri		32,200			32,900			34,500			36,000
New Jersey		59,100			59,000			57,500			56,500
Ohio		88,300			73,100			59,000			58,700
Texas		259,900			235,800			237,500			242,000
Wisconsin		167,100			174,600			175,100			172,100
TOTAL		1,169,700			1,101,500			874,800			871,900
Medicaid		922,300			863,500			683,700			681,100
SCHIP		229,400			221,600			175,300			175,900
SSI		18,000			16,400			15,800			14,900
TOTAL		1,169,700			1,101,500			874,800			871,900
Specialty Services(a):
Arizona		94,500			93,600			92,300			94,700
Kansas		37,500			39,400			39,200			38,800
TOTAL		132,000			133,000			131,500			133,500
(a)Includes behavioral health contracts only.
REVENUE PER MEMBER(b)	$	169.98		$	159.33		$	157.17		$	152.48
CLAIMS(b)
Period-end inventory		233,500			186,200			229,800			255,000
Average inventory		188,600			150,100			175,200			153,500
Period-end inventory per member		0.20			0.17			0.26			0.29
(b)Revenue per member and claims information are presented for the Medicaid Managed Care segment.
DAYS IN CLAIMS PAYABLE(c)		45.3			42.6			43.0			45.4
(c) Days in Claims Payable is a calculation of Medical Claims Liabilities at the end of the period divided by average claims expense per calendar day for such period.
CASH AND INVESTMENTS (in millions)
Regulated	$	411.1		$	323.9		$	314.0		$	322.6
Unregulated		29.0			25.5			25.8			27.7
TOTAL	$	440.1		$	349.4		$	339.8		$	350.3
ANNUALIZED RETURN ON EQUITY(d)		(83.8	)%		5.4	%		9.8	%		16.2	%
(d)Annualized Return on Equity is calculated as follows: (net income for quarter x 4) divided by ((beginning of period equity + end of period equity) divided by 2).

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Centene Corporation Reports Third Quarter 2006 Earnings October 24, 2006 / Page 13

HEALTH BENEFITS RATIO BY CATEGORY:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
Medicaid and SCHIP		82.0	%		83.1	%		82.8	%		81.6	%
SSI		84.1			96.2			86.2			92.6
Specialty Services		82.9			87.2			83.5			88.7

GENERAL AND ADMINISTRATIVE EXPENSE RATIO BY BUSINESS SEGMENT:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
Medicaid Managed Care		12.1	%		10.6	%		12.1	%		10.6	%
Specialty Services		17.0			30.2			18.3			38.9

MEDICAL CLAIMS LIABILITIES
(In thousands)

Four rolling quarters of the changes in medical claims liabilities are summarized as follows:

Balance, September 30, 2005	$	148,889
Acquisitions		1,788
Incurred related to:
Current period		1,618,282
Prior period		(9,144	)
Total incurred		1,609,138
Paid related to:
Current period		1,374,777
Prior period		138,369
Total paid		1,513,146
Balance, September 30, 2006	$	246,669

Centene’s claims reserving process utilizes a consistent actuarial methodology to estimate Centene’s ultimate liability. Any reduction in the “Incurred related to: Prior period” claims may be offset as Centene actuarially determines “Incurred related to: Current period.” As such, only in the absence of a consistent reserving methodology would favorable development of prior period claims liability estimates reduce medical costs. Centene believes it has consistently applied its claims reserving methodology in each of the periods presented.

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