Greg Nersessian - Credit Suisse Josh Raskin - Lehman Brothers Scott Fidel - Deutsche Bank Carl Mcdonald - Oppenheimer John Rex - Bear Stearns Darren Miller - Goldman Sachs Bill Georges - JPMorgan Matt Perry - Wachovia Capital Markets Tom Carroll - Stifel Nicolaus

Good morning. My name is Jennifer, and I will be your conference operator today. At this time, I would like to welcome everyone to the Centene Corporation first quarter 2008 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions) Thank you. At this time I would like to turn the conference over to Mr. Ed Kroll, Senior Vice President of Finance and Investor Relations. You may begin your conference sir.

Thank you Jenifer and good morning everyone. Thank you for joining today’s call. You should all have a copy of the press release issued this morning. If you have not received it, please call Libby Abelt at 212-759-5665 and it will sent to you immediately. Michael Neidorff, Chairman and Chief Executive Officer of Centene, and Eric Slusser, Executive Vice President and Chief Financial Officer of Centene, will host this morning’s call. The call is expected to last about 45 minutes, and may also be accessed through our website at www.centene.com. A replay will be available shortly after this call’s completion also on our website or by dialing 800-642-1687 in the US and Canada, or 706-645-9291 from overseas and entering access code 41656800. Any remarks that Centene may make about future expectations, plans, and prospects, 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, including those discussed in Centene’s Form 10-Q dated today April 22, 2008, and 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. I also want to remind everybody once again that our 2008 Annual Investor day is in New York City on June 3, we hope to see you all there. With that I will turn the call over to our Chairman and CEO Michael Neidorff. Michael?

Thank you Ed. Good morning everyone and thank you for joining this morning's call. The start time of our earnings call today is 30 minutes earlier than usual for Centene. We changed it to avoid schedule conflicts and accommodate our stock holders, other investors and analysts. We expect to return to our usual day and time for the next quarterly report. I'll briefly review the highlights of the quarter and then turn the call over to Eric for his comments on the financials. Consistent with our policy over the last several quarters now, we have the members of our senior management team available to answer your questions. As we have indicated in our March 19th press release, higher than expected medical cost in Ohio ABD population and a heavy flu season across all of our markets adversely impacted our HBR in the first quarter, and we missed the low end of our $0.59 to $0.64 guiding range by $0.02. CDC reports coincide with ER and pharmacy cost consistent with a flu epidemic. But aside from these items, and an extended full risk enrollment ramp in South Carolina, our other markets and products performed generally inline with expectations. We are also encouraged that in March we did offset part of the $0.03 to $0.04 shortfall from January and February that we indicated was an issue in the March 19th release. The flu has subsided and should not affect our second quarter. Our primary focus for now is improving the margins on our existing book of business. Ohio ABD negatively impacted our performance in the first quarter; we are taken aggressive and appropriate actions in Ohio to improve the margins at our ABD population including exiting the northwest region and streamline our network in the Northeast. But I however want to make…

Thank you, Michael and good morning everyone. Before I recap the highlights of the 2008 first quarter, I would like to point out a change in our reporting format that is part of our ongoing effort to provide greater transparency in our financial reporting. Effective with this quarter’s results, we are reporting and guiding to a consolidated HBR, a change that many of you have requested and which should make your financial modeling of Centene more user-friendly. I would also like to remind you that the first quarter 2008 results include $20.8 million in revenue and $0.28 of diluted earnings per share for the retroactive 2007 rate increases and adjustments in Georgia. Revenue, net of premium taxes grew to $794 million, which represents 22.8% growth compared to the first quarter of 2007. This increase was primarily driven by overall membership growth in Texas, ABD growth in Ohio and previously announced rate increases including the $20.8 million of Georgia revenue recognized in the quarter as discussed previously. I reported consolidated health benefit rate ratio or HBR as we call it, was 83% for the 2008 first quarter compared to 84.6% in the 2007 first quarter and 85.4% in the 2007 fourth quarter. However, if you were to remove the $20.8 million of Georgia revenue recorded in this quarter from the HBR calculation, and put it in the appropriate quarters in 2007 that it related to, our HBR actually trended upward approximately 100 basis points compared to the 2007 fourth quarter. I will be using that increased trend as a basis for the remaining HBR discussion as it is more reflective of the first quarter medical cost trends. The increased medical cost in the first quarter resulted primarily from the continued under performance in our Ohio ABD markets particularly in the North…

(Operator Instructions) Your first question comes from Greg Nersessian with Credit Suisse.

I just wanted to bridge the growth rates for the first quarter versus the full year. In the Georgia revenue, I think you mentioned the first quarter EPS growth was about 11.5% which would be just under 20% growth in EPS for the full year. How do we bridge the 2nd 3rd and 4th quarters? If we look at the separate components, there is obviously the non-reoccurrence of the flu, but there is also some Texas Foster Care start-up cost in 1Q and some other moving pieces in there. How do break that out what components of the accelerating earnings growth come from the non-reoccurrence of those issue that impacted 1Q?

Yeah, Greg this is Eric. As I mentioned in my discussion there, clearly in the flu season we don’t expect a reaccurance after the first quarter. There is that bridge. In the Ohio ABD we are taking those actions. We are exiting that Northwest region in July, so we still expect some performance concerns in the second quarter. We have taken that into account in our guidance that it will certainly lift us after the second quarter. You have the Texas Foster Care contract that you get a lift by the fact that we don’t have investment in Q1. After Q1, also you have the start-up of Foster Care, which is in our number starting in Q2. There is a higher lift from Foster Care in the third and fourth quarter. I mentioned the Ohio ABD exit, and we continue to stay on top of our G&A in those ratios. I talked about on our annual guidance call which are lower in Q3 and Q4. And finally you’ve got the Georgia rate increase and the Texas rate increase and those are the items the piece is that bridge you from Q1.

Okay. That’s helpful. Then you mentioned the lower investment income expectations for the year. Could you quantify, maybe what you’re expecting from investment income for the year?

Well, what I will do is I’ll quantify the change in guidance for the year, approximately $0.09 is attributable to the changes in the rates.

Okay. That looks like about half of it. Okay and then just a couple of quick ones then. Was the higher specialty services MLR in the quarter due to higher flu cost? On the pharmacy side could you just talk about the higher specialty MLR, and any change in your tax rate assumption for the year?

Yeah, that was specialty, which again supports a lot of our businesses. It was driven by flu cost, beyond that there was nothing else significant of the higher drivers along with the seasonality we get in the first quarter with all our businesses. Beyond those two things there is nothing else in that MLR. Our tax-rate, I believe was guided to an annual range of 38.5%, and we would still expect it to be in that 38% to 38.5% range. As I indicated, this quarter was due to one-time tax credits, we expect it to be at back up closer to guidance in the rest of the quarters.

Okay, great. Thank you.

Thank you.

Your next question comes from the line of Josh Raskin with Lehman Brothers.

Tell me about Northeast ABD in Ohio, how many lives is that the region?

Given me a second here, Northeast is about approximately 3,800.

Close to 4,000 just under it.

Perfect. Okay, thanks. And, then second I know, Greg was touching on this, and I know we go through this sort of every quarter, but just in first quarter $0.29 excluding Georgia, and then sort of a midpoint of $0.40 in the second quarter, and so obviously there is a decent ramp there, is there any way to quantify the amount? Just how much was Foster Care startup and other investments, how much was flu, is there a way to get there?

Well, I'll quantify one of the pieces, because in previous guidance, we said we had expected around $0.09 of investment in Q1. Our actual amount incurred was closer to $0.07. We would expect that to come down significantly in the second quarter as our only remaining start up cost. This will be the Florida build out which will continue, but it will moderate. So, we will have some but certainly not nearly the magnitude we have had in this quarter.

Josh, let me add here. Without getting into a lot of specifics, I think one of the key things as you think about all the expense we had around getting setup to take on the Foster is program. Now we have the revenue from that offsetting that. I indicated in my comments that the [tide] is certainly in our way in South Carolina. From the second half of the quarter, we expect to see that continue to improve and that’s going to offset the G&A. We're gearing for that. So, you have a series of things there plus the improvements in the not having a blue season. You add up those pieces and it becomes a very reasonable ramp on the 29…

That investment was more than half, so that’s helpful. Tell me about the Celtic acquisition, from a strategic stand point in terms of the ability to improve what may have been – was it just slightly underperforming asset? I am just curious what sort of the expertise that Centene brings, what sort of the synergy? Are we going to let the company run as is and hope that in terms of long-term future regulation change we're going to able to take advantage of new population?

I can’t be specific but there are opportunities. Where the states are trying to cover, Indiana is an example. They have a program that goes from 180% of the poverty level and they are then close to next year. It’s more of an individual indemnity type program like Celtic office, and we are going to see more and more states talking about that. As those become available we can avail ourselves of it. Where we should not go is before with that expertise, the underwriting, the whole adjudication, there is the whole system requirement for that. We see it putting us in a stronger position relative to the other 38 million uninsured. So that’s a strategic value of it. We say don’t expect a lot today, and in this year we said it's going to be neutral to this years earnings. But, it does not take very much of that new business to make it accretive and profitable. Anything else you want to add to that Jesse?

No.

Yeah. Does that help Josh?

Yeah, that’s perfect. Thank you. Operator Your next question comes from Scott Fidel with Deutsche Bank.

Thanks. Good morning. First question just around Ohio and can you actually quantify what the MLR was in the first quarter in that market or if you are not comfortable doing that maybe talk about what the sequential change was in the MLR from the fourth quarter?

Yeah, this is Eric. If you look in our press release, we still despite going through a consolidated HBR, we still disclose our SSI membership. HBR and – in there we’ve disclosed that HBR was 97.5%. I won’t get into the specifics of Ohio, but in those two regions, I will just tell you that it was north of 100% HBR, which is why we are taking the actions that we are.

It drove that 97.

Yeah, it drove the 97 high averages because of those two markets.

Okay, and then may be, just if you can touch on the CFC business, and may be an update on how things are tracked there relative to your expectations in Ohio?

For the first quarter, based on expectations, CFC performance was impacted by the same things, the flu, the seasonality, and if you look at the CDC stats, the region that Ohio was in, was one of the worst for flu season around the country. So, it was an HBR of higher than our expectations, but least today and based on the trends, we have seen where belief that that is all related to seasonality and flu and that it will be back second quarter more closer to our expectations.

I think Scott, even you consider the flu as Eric said, that was the CDC numbers, was episodic. We also had well within our normal ranges. They are little increased in the neonatal rate there. So, these are thing that can, we really view as more episodic as it suppose to a trend and expected to come back.

Okay. And then I had a follow-up question, just in terms of the deciding not to bid on the RFB in Florida Healthy Kids, maybe if you could just elaborate little bit on what you saw in those bids, particularly was it any specifics around level of competition or the pricing, or the benefit structures? Some color there please.

You will certainly not see this company do something because of competition. We feel we can be as competitive as anyone, but I will ask Jesse to talk about the specifics.

I will put those two, the Tennessee and Florida Healthy Kids. Florida Healthy Kids is really more of a timing issue. Obviously we are working through the regulatory approval process. There are some specific requirements for that bid. It will be premature for us to pursue that. That certainly you’re interested in participating in all products in all markets. We wouldn’t expect that to be the case in Florida going forward and that will be re-secured some point in future. As to Tennessee, we can spend awhile talking about that, but I'll try to keep it brief. Our experience on that was that you had to be at the low end of their actuarial price range in order to be competitive. We spend a lot of time in the market, particularly in the Western region. Our experience was that that market had historically well utilization based on all of our conversations with the state providers and other community leaders. We felt like the combination historically well utilization and some pressure on the hospital cost both with respect to methodology and the unit cost created an environment. We did not see the visibility achieving our target profit levels and other kind of deal keep performance metrics at the low end of the range. So based on that, we decided to allocate our resources to other opportunities that we think provide the better combination of probability and profitability.

It's not like we are lacking opportunities.

Right, okay, that's helpful. And then just one last quick follow-up, do you have an updated expectation for your enrollment for the full year in South Carolina?

We have not commented on that. We only we said at this point is that we expect to see the conversion start to move ahead and we had a 29 counties now, Jesse.

We have previously said earlier this year that we expected in the range of 15,000 to 20,000 of the members from the medical home to convert to full-risk. We still feel comfortable with that range and we expect that to happen in second quarter, and we also expect to continue to participate in their role out of Medicaid Managed Care state wide.

I think of the other aspects when you look at the history of state and their rule out plans. I’m not sure it has been right now except for us to ensure new plan forward and build our cost structures around what might be.

And just one another thing to add and survey, as a reminder if that is not the South Carolina the state roll out is not an ’08 item. So, that’s going to continue to roll out into 2009.

Okay. Thank you.

Thank you.

Your next question comes from Carl Mcdonald with Oppenheimer.

Thank you. First question, just if there is anyway to give us a sense of how much of the increase medical costs in the first quarter was flu related versus Ohio ABD related?

Yeah, as I said in the message that makes it very hard to quantify that number and surely to quantify you just don’t have to review every case in the quarter. We have done quite a bit of work. In looking at it and I just hesitate to quantify something that’s it’s really just estimated, but we do know that from looking at all the statistics and sampling a variety of cases that it did have a significant impact.

And so the ABD lot of it is flu related and when you have a chronic illness and Mary you want to comment, that your chronic illness. You had a flu epidemic it that much worse in that population.

It’s safe to say, I mean based on the comments around the 100% plus loss ratio in ABD and the seasonality you talked about in the first quarter that more than half of it though would have been Ohio relative to the flu.

I think related to flu seasonality would be safe to say that.

Okay. And, then second question was you mentioned the Georgia rate increase. Can you, any early estimate in terms of where you think that rate increase will fall on January 1?

I will ask Mark Eggert to comment on that.

Thank you Michael. We are currently in discussions with the state right now over the rate increase. The state has indicated there will be a rate increase effective July1 and they are working hard to actually have it in place by that date, although they are making new commitments. In terms of the size of the rate increase, we don’t really have visibility into that yet.

We expect low single digit type rate increases in all our markets.

Okay thank you.

Your next question comes from the line of John Rex with Bear Stearns.

Yeah just on Texas Foster Care, I want to get an update on your views. You look at the remaining three quarters of the year and your updated view that that will still be a positive contributor. What kind of expectations would be able to get operating margins in line with traditional Medicaid business? I just want to see if you had any update on that.

Yeah John this is Eric. Yeah, especially obviously it's ramping this quarter. We expect some moderate margin in the second quarter, but in the third and fourth quarter we do expect a return in line and I know there has been questions on this in the past and one of the things that may help you bridge this is – this was a little different process than going into most markets in there. Our team worked very close with the state on this and in most markets, as you know when you enter into a business the state is putt it out to the companies like us at a full risk and when they do that there is usually a reduction in the rates, so that the state can save money. The good thing about Texas Foster Care is the rates were built around the historical performance, and when we agreed and settled on final rates there was no reduction in those rates. So, that gives us comfortability that we are going to achieve that consistent margin what we would expect, with other businesses.

And, when you look at the population actually even when you are bidding that, how much of the care occurs, may be out of network, as that population seems to move around quite a bit, sometimes out of state, even for week period of the time. Is that very significant out of network component and how do you approached that piece?

I am going to have Mark Eggert, respond to that.

Thanks Eric. The network built in Texas for Foster Care was very extensive and was watched very closely by the state. So, we feel we have a very good and very adequate network in Texas and actually don’t anticipate lot of out of network care.

And state wide, our network is state wide. So, we do have a state wide network, so if they move around.

Is there much that occurs out of state for brief periods, if somebody’s kids sometimes end up out of state for a few months at a time?

We haven’t seen that yet. I mean, we're only three weeks into it.

Okay. Okay, great thanks.

Your next question comes from the line of Darren Miller with Goldman Sachs.

Morning, thank you. Can you guys provide some more color regarding the timing on the Arizona bid?

Jesse?

Yeah, the bids were the final bids, I guess [a day for] reviewed at the end of last week and we expect to have an announcement at the end of May.

Great. And your current enrollment in South Carolina on a risk basis?

At the end of..

Yeah, I mean what we had, and we think reported for Q2, I mean we don’t have that I wasn’t there, it was 2,000 numbers.

Yeah, about 2000.

At the end of Q1

Great. And then when we think about your decision to exit one region in Ohio and then to kind of go through some different strategies in the other region, can you kind of walk us through how you come to those decisions of what you exit and what you actually decide to stand.

I only met with the provider group. We talked about the rates of your small component of that, and we talked about the medical management criteria. We had to start to implement to reduce the length of stays. You look at the average of the stay, where it’s appropriately medically managed versus other. If you can't get the policies right, not just rates, we would be left with no choice but to exit. In other markets, we would approve in some of the hospitals. We've achieved the medical management. We're looking for in terms of concurrent review, case management, et, cetera, so we though that we would be able to, we should work at the Northeast to correct as a whole series of criteria. Mark and I spent quite a bit of time up there and personally work for that past month.

And, I'd just add to that as I pointed out in my previous discussion that we will continue to monitor all those markets and again take action accordingly. We have opportunities to do other things with those markets and again the performance has to improve, if it doesn't, we'll continue to take action.

Great, one last question. Your overall HBR 82% to 84%, how would that compare to prior guidance if you to have provided that metric?

Probably up – it’s likely due to the first quarter results, but not remarkably different. We think based on our previous guidance we would have still fall in that range just to maybe a slightly lower mark.

That mean the numbers I saw say we will be within that range.

Yeah.

And it’s a consistent range.

Great, thank you.

Your next question comes from the line of Bill Georges with JPMorgan.

Thanks. Good morning.

Good morning.

I just was wondering if you could try to help us out how the sequential improvement in [MOR] from first to second quarter. First of all is it safe to assume that the impact of the flu will update entirely by the second quarter?

Yes. We know it peaked we gave in the and according to the CDC in the East, North, Central region, where Indiana and Ohio was constant market are the once that were [hard at it] we are seeing and decide.

Okay. And then I guess in terms of the timing of the Ohio exit it looks like you are essentially going to be responsible for that membership through the rest of the second quarter?

That’s correct in the one, but we have also implemented the enhanced medical management that we would expect to get some mitigation there as well.

Is it fair to frame the sequential improvement in MOR from one to two queue then in the 75 to 100 basis point range is that good ballpark?

That I’d say that’s probably a little aggressive given the continued Ohio -- again we clearly can see that the first quarter was due to flu seasonality, but that population has been problematic in the fourth quarter, where we did not have seasonality and flu. So, as Michael pointed out, as I’ve pointed out we are taking significant medical management steps to reduce the impacts from that, but a 100 basis points might be a little on the aggressive side based on what we are expecting.

Okay.

But the important thing is we are trying to, and particularly in the North East and other parts of our – and everywhere we have SSI, it doing things that is sustainable for (Inaudible), we really want to see it come down on a sustained basis, because that gives us all confidence, it can be maintained.

Okay. And if I could just ask one quick follow up, there has been a pretty substantial level of press reports lately discussing states funding pressure. I’m wondering what are you seeing in the states that you are operating. I mean, most notably in California where obviously you guys do not operate, but are you seeing any issues in terms of funding issues going forward?

No, I think what you are going to see obviously with properties, values and property taxes, and things coming down. It puts the states under pressure. But the way that they manage those costs is with managed care. So the states in which we are operating in, while I think there is pressure on us, but we have to continue to demonstrate that we are a lower cost producer and have to strive to do that. And, I believe that it provides more of an opportunity than a risk to us, longer term.

Okay, great. Thank you.

Your next question comes from the line of Matt Perry with Wachovia Capital Markets.

HI, just a couple of questions, and one a little bit of a follow-up on the prior question. As you are talking to your state government partners about the rate increases you would anticipate to get in mid year ’08, or third quarter ’08, I mean, it sounds like you are not anticipating kind of any change relative to history and that you still think low-to-mid single digit rate increases, even though the state budgets in some of these markets might be pressured, am I interpreting that correctly?

We are anticipating lower single digit rate increases. Now, we also know that they all have a fee for service component in their market and they do not raise those fees to positions in the [VRG's] or hospitals etcetera. at a faster rate than the desired rates of anything they keep them constrained to some degree. We will see when we’ve got some growth from that. So, I think you are going to see that they will implement programs to keep the cost in line with the rate increases as well, and of course we have to continue to demonstrate our ability, but they are more willing to look at the preferred drug list, the (PDR’s) and look at it as a policies and practices that are cost containment. So, we have what, we used to talk about our margin protection program and that’s where we ask for policies and practices that protect the margins as an alternative. Those are the kinds of things we continue to work on.

Would you expect or anticipate that states might make the kind of recertification or enrollment process? I don’t want to say more of a challenge, but do you think they may try to hold enrollment inline or allow some attrition to save money in their programs?

We've, we have seen historically. I think you know that answer. We have seen historically, where states will change enrollment process from month-to-month to try and save. You saw (inaudible), so I mean you see that all the time. There is always something, and our trick is to try and stay on top of it and mitigate it, but that's the business win. Sure they are going, some stage it was going to, state will say, we changed this enrollment and these people will, until they realize that these people are still worthy ER, and yeah they are going to be covering some of those expenses through other programs. So sure, I would not be surprised. I could not sit here and say you won't see somebody try that.

Right and then just one final question. In Texas, I think you received kind of a large rate increase, but partly due to a law suite that increased payment to providers, and I'm wondering, since that rate increase took effect, whether you've seen any change in margins in that business, I mean in that market either positively or negatively. In other words, have you seen an increase in utilization due to this increase in provider payments or is it kind of business as usual for Centene?

I will ask Eric to add to it, but everything I've looked at in our metrics and as we reported its business as usual.

Yeah, I agree. I mean, that action was strictly just to pass through them, so it went into their unit cost, but we're not seeing any material changes in utilization or activity as a result of it. It's like I said, Michael said business is usual and normal.

Okay, great. Thank you.

(Operator Instructions). Your next question comes from the line of Tom Carroll with Stifel Nicolaus.

Hi, good morning. A quick question on the flu season again given that it was such a unique season this year. Is there anyway you could provide us with some type of admits per thousands statistics that illustrates how the flu impacted hospitalizations this year?

I am going to ask Mary to participate this, but I think admit is one thing but there is also ER utilization, the ambulatory care side of thing, the pharmacy side of thing, so it’s – Mary you may want to comment closely on the admit.

Sure.

What I would say at least, I think one of the best indicators we can look at is that Tamiflu, which is the gold standard and antiviral medication. For example in our Georgia market, utilization was at 121% Q1 2008 versus Q1 2007. So, I think that gives you a good indicator of what we were seeing.

Yeah, okay, I was just thinking that hospitalization and hospitals are the biggest part of the medical dollar, there are no admissions number that you can may be provide us?

You know, it's a very complicated number because those patients can be admitted under a number of (Inaudible).

Right, yeah okay, I see. Just related to that, do you feel like you’ve captured appropriate reserving estimates for run out claims related to the flu?

Yes.

Okay, a clear answer. And then, quickly in Ohio, does your new guidance include any cost that perhaps would be incurred if you were to further limit your exposure in the state? So, if you pull out of somewhere else given continued medical cost deterioration?

Yeah, we

Thinking about that at all?

We feel that we’ve captured it, because clearly if the trend continues we believe that the savings we’ll achieve from exiting will cover the cost related to it.

Okay, great. Thank you.

At this time there are no further questions. I would now like to turn the call conference back to Mr. Neidorff for closing remarks.

I want to thank you for participating in this call. We look forward to talking to you at the end of Q2.

And, don’t forget our investor day on June 3 in New York City.

Looking forward to that as well and those of you have, sometime we have an annual meeting coming up at 10 ‘o clock, 10 to 11, Eastern and that will be webcast as well. Thank you so much for participating. Good bye.

This concludes today’s conference call, you may now disconnect.