Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The unaudited pro forma condensed combined statement of operations combines the historical consolidated statements of operations of Centene Corporation (Centene or the Company) and WellCare Health Plans, Inc. (WellCare) for the year ended December 31, 2019, after giving effect to the completion of Centene’s acquisition of all the issued and outstanding shares of WellCare (the WellCare Acquisition) (as described in Note 1) and the related financing, as if they occurred on January 1, 2019.

The unaudited pro forma condensed combined balance sheet as of December 31, 2019, combines the historical consolidated balance sheets of Centene and WellCare, giving effect to the acquisition as if it had occurred on December 31, 2019.

The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (i) directly attributable to the merger, (ii) factually supportable, and (iii) with respect to the statement of operations, expected to have a continuing impact on the combined results.

The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements. In addition, the unaudited pro forma condensed combined financial information was based on and should be read in conjunction with the following historical consolidated financial statements and accompanying notes:

 

The unaudited pro forma condensed combined financial information has been prepared by Centene using the acquisition method of accounting in accordance with U.S. generally accepted accounting principles. Centene has been treated as the acquirer in the merger for accounting purposes. The acquisition accounting is dependent upon certain valuation and other studies that have yet to progress to a stage where there is sufficient information for a definitive measurement.

 

Centene has commenced the necessary valuation and other studies required to complete the acquisition accounting and will finalize the acquisition accounting as soon as practicable within the required measurement period in accordance with ASC 805, but in no event later than one year following completion of the merger.

The unaudited pro forma condensed combined financial information has been presented for informational purposes only. The unaudited pro forma condensed combined financial information does not purport to represent the actual results of operations that Centene and WellCare would have achieved had the companies been combined during these periods and is not intended to project the future results of operations that the combined company may achieve after the merger. The unaudited pro forma condensed combined financial information does not reflect the realization of any cost savings following completion of the WellCare Acquisition or any related restructuring and integration charges to achieve those cost savings.

Immediately prior to the closing of the WellCare Acquisition, Anthem, Inc. acquired WellCare's Missouri Medicaid health plan, a WellCare Missouri Medicare Advantage health plan, and WellCare's Nebraska Medicaid health plan. CVS Health Corporation acquired portions of Centene's Illinois Medicaid and Medicare Advantage health plans as part of previously announced divestiture agreements. The unaudited pro forma financial information does not reflect these divestitures as the impact would be impracticable to quantify.

Centene management expects that the strategic and financial benefits of the WellCare Acquisition will result in certain cost savings opportunities. These cost savings have not been reflected in the accompanying unaudited pro forma condensed combined statement of operations. For a discussion of risks related to anticipated cost savings, see “Risk Factors—Factors that may affect Future Results and the Trading Price of Our Common Stock—“We may be unable to successfully integrate our business with WellCare and realize the anticipated benefits of the WellCare Acquisition” in Item 1A. of Part I of our Annual Report on Form 10-K for the year ended December 31, 2019.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2019

(In millions, except per share data in dollars and shares in thousands)

 

 

See the accompanying notes to the unaudited pro forma condensed combined financial statements, which are an integral part of this statement. The pro forma adjustments are explained in Note 6. Income Statement Pro Forma Adjustments.

(1)

Certain reclassifications have been made to conform to Centene’s financial statement presentation, including combining depreciation and amortization with selling, general and administrative expenses, reclassifying investment and other income from revenues to other income (expense), and combining equity in earnings of unconsolidated subsidiaries with investment and other income.

Unaudited Pro Forma Condensed Combined Balance Sheet

As of December 31, 2019

(In millions, except shares in thousands)

 

 

See the accompanying notes to the unaudited pro forma condensed combined financial statements, which are an integral part of this statement. The pro forma adjustments are explained in Note 7. Balance Sheet Pro Forma Adjustments.

 

(1)	On a historical basis, share information of the Company is as follows: 800,000 shares authorized; 421,508 shares issued and 415,048 outstanding. On a pro forma combined basis, share information is as follows: 800,000 shares authorized; 592,733 shares issued and 586,273 outstanding.

 

(2)

Certain reclassifications have been made to conform to Centene’s financial statement presentation, including combining various receivables into premium and trade receivables, combining various liabilities into accounts payable and accrued expenses and long-term liabilities, and including assets and liabilities of discontinued operations in the other assets and liabilities.

NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)

(UNAUDITED)

1.	Description of Transactions

On January 23, 2020, the Company acquired all of the issued and outstanding shares of WellCare Health Plans, Inc. (WellCare, and such acquisition, the WellCare Acquisition). The transaction is valued at approximately $19.6 billion, including the assumption of $1.95 billion of outstanding debt.

Total consideration for the acquisition was $17,605 million, consisting of Centene common shares valued at $11,431 million (based on Centene's stock price of $66.76 as of January 22, 2020), $6,079 million in cash, and $95 million related to the fair value of replacement equity awards associated with pre-combination service. Each WellCare share was converted into 3.38 of a validly issued, fully paid, non-assessable share of Centene common stock and $120.00 in cash. In total, 171 million shares of Centene common stock were issued to the WellCare stockholders. The cash portion of the acquisition consideration was funded through the issuance of long-term debt.

2.	Basis of Presentation

The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting and was based on the historical financial statements of Centene and WellCare. The acquisition method of accounting is based on ASC 805 and uses the fair value concepts defined in ASC 820, Fair Value Measurements.

ASC 805 requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. ASC 820 defines the term “fair value” and sets forth the valuation requirements for any asset or liability measured at fair value, expands related disclosure requirements and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures. Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” This is an exit price concept for the valuation of the asset or liability. In addition, market participants are assumed to be buyers and sellers in the principal (or the most advantageous) market for the asset or liability. Fair value measurements for an asset assume the highest and best use by these market participants. As a result of these standards, Centene may be required to record the fair value of assets which are not intended to be used or sold and/or to value assets at fair value measures that do not reflect Centene’s intended use of those assets. Many of these fair value measurements can be highly subjective, and it is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.

 

Under the acquisition method of accounting, the assets acquired and liabilities assumed will be recorded, as of completion of the merger, primarily at their respective fair values and added to those of Centene. Financial statements and reported results of operations of Centene issued after completion of the merger will reflect these values, but will not be retroactively restated to reflect the historical financial position or results of operations of WellCare.

Under ASC 805, acquisition-related transaction costs (e.g., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred but are accounted for as expenses in the periods in which the costs are incurred. Total acquisition-related transaction costs expected to be incurred by Centene and WellCare are estimated to be approximately $425 million, of which $109 million had been incurred as of December 31, 2019 and include fees related to a bridge financing commitment agreement. Those costs are reflected in the unaudited pro forma condensed combined balance sheet as an increase to accrued expenses and other current liabilities, with the related tax benefits reflected as an increase in other current assets and the after tax impact presented as a decrease to retained earnings.

 

The unaudited pro forma condensed combined financial statements do not reflect the anticipated benefits, including synergies, cost savings, innovation and operational efficiencies. Although Centene projects that annual net cost savings of approximately $500 million will result by the second year following the merger, there can be no assurance that these cost savings will be achieved. The unaudited pro forma condensed combined financial statements do not reflect projected pretax restructuring and integration charges associated with the projected cost savings. Such restructuring and integration charges will be expensed in the appropriate accounting periods after completion of the merger.

3.	Accounting Policies

Centene has performed an initial review of WellCare's accounting policies and has not identified any material differences other than the reclassifications detailed in Pro Forma Adjustments that would have a material impact on the unaudited pro forma condensed combined statement of operations. Centene will continue to review WellCare’s accounting policies and as a result of that review, may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements.

4.	Consideration Transferred

The following is a summary of consideration transferred to effect the acquisition of WellCare:

 

 

(a) As further described in Note 1. Description of Transactions, RSU and PSU awards granted to WellCare employees were not settled upon completion of the merger, and instead were converted into replacement awards issued by Centene using the stock award exchange ratio. The portion of the replacement awards attributable to post-combination services will be recorded as compensation expense in Centene’s post-merger financial statements.

5.	Estimate of Assets to be Acquired and Liabilities to be Assumed

The following is a preliminary estimate of the assets to be acquired and the liabilities to be assumed by Centene in the merger, reconciled to the total consideration transferred ($ in millions):

 

		As of December 31, 2019
Assets to be Acquired and Liabilities to be Assumed:
Net book value of net assets acquired		$	4,895
Less historical:
Goodwill			(2,265	)
Intangible assets			(825	)
WellCare historical debt issuance costs			(20	)
Capitalized internal-use software			(178	)
Deferred tax assets on outstanding equity awards and other deferred tax adjustments			(21	)
Deferred tax liabilities on historical internal-use software and other			64
Deferred tax liabilities on historical intangible assets			202
Adjusted book value of net assets to be acquired		$	1,852
Goodwill (a)			10,546
Identified intangible assets (b)			7,000
Deferred tax liabilities (c)			(1,685	)
Fair value adjustment to debt (d)			(108	)
Property, software and equipment (e)			—
Consideration transferred		$	17,605

 

The fair value of identifiable intangible assets is determined primarily using variations of the “income approach,” which is based on the present value of the future after-tax cash flows attributable to each identified intangible asset. Other valuation methods, including the market approach and cost approach, are also considered in estimating the fair value. Under the Hart-Scott-Rodino Antitrust Improvements Act and other relevant laws and regulations, there were significant limitations on Centene’s ability to obtain specific information about the WellCare intangible assets prior to completion of the merger. Due to the recent timing of the acquisition, the Company has performed limited valuation procedures, and the valuation of all assets and liabilities assumed is not yet complete.

The Company has estimated the preliminary fair value of intangibles to be $7.0 billion with a weighted average life of 13 years. The Company expects the identifiable intangible assets to include purchased contract rights, trade names, provider contracts, and developed technology. For purposes of these pro forma condensed combined financial statements, the fair value of WellCare’s identifiable intangible assets and their weighted-average useful lives have been estimated as follows ($ in millions):

 

 

These preliminary estimates of fair value and weighted-average useful life will likely be different from the final acquisition accounting, and the difference could have a material impact on the accompanying unaudited pro forma condensed combined financial statements. As previously discussed, due to the timing of the WellCare Acquisition, the Company has only performed limited valuation procedures, and the intangible valuation is incomplete. Once Centene has sufficiently reviewed information about WellCare’s intangible assets, additional insight will be gained that could impact (i) the estimated total value assigned to intangible assets, (ii) the estimated allocation of value between finite-lived and indefinite-lived intangible assets and/or (iii) the estimated useful lives of intangible assets. The estimated intangible asset values and their useful lives could be impacted by a variety of factors that may become known to Centene upon completion of valuation procedures. These factors include, but are not limited to, changes in the regulatory, legislative, legal, technological and competitive environments. Increased knowledge about these and/or other elements could result in a change to the estimated fair value of the identifiable WellCare intangible assets and/or to the estimated weighted-average useful lives from what Centene has assumed in these unaudited pro forma condensed combined financial statements. The combined effect of any such changes could then also result in a significant increase or decrease to Centene’s estimate of associated amortization expense.

 

Estimated fair value of identifiable intangible assets to be acquired		$	7,000
Estimated fair value adjustment of debt to be assumed			(108	)
Total estimated fair value adjustments of assets to be acquired and liabilities to be assumed		$	6,892
Deferred taxes associated with the estimated fair value adjustments of assets to be acquired and liabilities to be assumed, at approximately 24.5% (*)		$	1,685

(*)

Centene assumed a 24.5% approximate tax rate when estimating the deferred tax aspects of the acquisition.

 

6.	Income Statement Pro Forma Adjustments

This note should be read in conjunction with Note 1. Description of Transactions; Note 2. Basis of Presentation; and Note 4. Consideration Transferred; and Note 5. Estimate of Assets to be Acquired and Liabilities to be Assumed. Adjustments included in the column under the heading “Pro Forma Adjustments” represent the following ($ in millions):

Centene and WellCare Pro Forma Adjustments:

 

 

 

 

(1) Elimination reflected within SG&A as WellCare’s historical intangible expense is presented within that line item.

(2) Assumes an estimated $7 billion of finite-lived intangibles and a weighted average amortization period of 13 years (Refer to Note 5. Estimate of Assets to be Acquired and Liabilities to be Assumed).

 

 

Centene estimates additional interest expense of approximately $283 million for the year ended December 31, 2019, associated with interest on the New Senior Notes, the amortization of related debt issuance costs, and the amortization of the estimated fair value adjustment’s to WellCare’s debt which was assumed by Centene at closing:

 

In addition, Centene assumed WellCare would become subject to IRS Regulation 162(m)(6) beginning in 2019, with estimated increased income tax expense of $11 million for the year ended December 31, 2019.

 

		Year Ended December 31, 2019
Centene weighted average shares used to compute basic earnings per share			413,487
Centene common stock issued in connection with the per share common stock consideration for the WellCare Acquisition			171,225
Pro Forma weighted average basic shares outstanding			584,712
Diluted effect of Centene's outstanding equity awards			6,922
Dilutive effect of WellCare's outstanding stock-based awards outstanding as of January 1, 2019, converted at the exchange ratio			1,146
Pro forma weighted average shares dilutive shares outstanding			592,780

 

7.	Balance Sheet Pro Forma Adjustments

This note should be read in conjunction with Note 1. Description of Transactions; Note 2. Basis of Presentation; Note 4. Consideration Transferred; and Note 5. Estimate of Assets to be Acquired and Liabilities to be Assumed. Adjustments included in the column under the heading “Pro Forma Adjustments” represent the following ($ in millions):

 

Eliminate WellCare’s historical goodwill		$	(2,265	)
Estimated transaction goodwill			10,546
Total		$	8,281

 

 

Eliminate WellCare’s historical intangible assets		$	(825	)
Estimated fair value of intangible assets acquired			7,000
Total		$	6,175

(e)

To eliminate WellCare’s historical debt issuance costs and to adjust WellCare's debt to fair value, as follows:

 

Eliminate historical debt issuance costs of WellCare		$	20
Estimated fair value increase to WellCare’s debt assumed			108
Total		$	128

 

 

Eliminate WellCare’s deferred tax liability on intangible assets		$	(202	)
Eliminate WellCare’s deferred tax liability on internal-use software and other deferred balances			(64	)
Eliminate WellCare’s deferred tax asset on outstanding equity awards			21
Estimated transaction deferred tax liability on identifiable intangible assets			1,711
Estimated transaction deferred tax asset for fair value increase to assumed debt			(26	)
Total		$	1,440

 

 

Eliminate WellCare’s historical common stock and additional paid-in capital		$	(2,036	)
Issuance of Centene common stock			11,431
Estimated fair value of replacement equity awards attributable to pre-combination service			95
Total		$	9,490