Good morning. And welcome to the HealthSpring ConferenceCall to review its financial results for the Third Quarter and Nine Monthsended September 30, 2007. The financial results were issued yesterday after theclose of market trading. If you did not receive a copy of the press release, you mayfind a copy under the Investor Relations tab on the HealthSpring website, www.healthspring.com. Before we begin, HealthSpring wishes to express that somestatements made in this call will be forward-looking statements, as defined inthe Private Securities Litigation Reform Act of 1995. Actual performance of the company may differ from thatprojected in such statements. Investors should refer to statements regularlyfiled by the company with the Securities and Exchange Commission for adiscussion of those factors that could affect the company's operations and theforward-looking statements made in this call. The information being provided today is as of this date onlyand HealthSpring expressly disclaims any obligation to release publicly anyupdates or revisions to these forward-looking statements to reflect any changesand expectations. In addition, certain non-GAAP financial measures maybecovered in this presentation. These non-GAAP measures are reconciled to themost comparable GAAP measures in the press release or on the company's website. At this time, I'll turn the call over to Mr. Herbert Fritch,Chairman, President and Chief Executive Officer of HealthSpring. Please goahead, sir.

Thank you, operator. We are pleased to report solid thirdquarter results and positive developments in our business that support well for2008 and beyond. On the strength of these results and developments we are also pleasedto increase earnings guidance for the full year 2007. On the membership front we continued to grow during lock-inbut at a slower rate than last year. We believe the main reason for the reducedpace is the increase in special needs plans competitors in a number of ourmarkets. We intend to counter this competitive effect in 2008 byintroducing Chronic Care and Institutionalized Special Needs plans in all ofour existing markets and believe we'll be in better position during the lock-inperiod next year. The membership in the PDP product continues to be a brightspot as we benefit from our national expansion in 2007 and from being belowregional benchmarks in 29 of 34 regions. As of September 30, 2007, we had128,127 PDP members and that number continued to grow to 134,802 in ourNovember 2007 plan payment report. We are looking forward to future growth in PDP membershipduring 2008. Our 2008 bids remained below benchmarks in all of our -- in all 29of our current regions and we're also below the benchmark in California. Theregion with the largest number of dual-eligibles and one where some of thelarger incumbent plans were displaced. Based on our bids, CMS preliminary estimates that are PDPsare eligible for an auto-assignment of approximately 117,000 additional membersas of January 1, 2008. A caution however, that prior experience suggests asubstantial percentage of these new auto-assignments will select another PDP inthe two to four months following this initial assignment. On the medical expense side, we finished the quarter withMedicare MLRs of 81.8% and 81.9% excluding the PDP component. Although higherthan our initial target of 80%, we have seen enough…

Thanks, Herb. Prior to discussing our third quarter resultsI'd like to remind everyone of the update we made to our second quarter numberssubsequent to our last earnings release call we held with you back in August. As reported in our second quarter earnings release anddiscussed with you on our call in August, we received preliminary notificationfrom CMS in July regarding a retroactive rate adjustment amount for 2006. We have referred to this payment at the end the year for theprior year payment. At the time of our earnings release we were reviewing andanalyzing the preliminary retroactive rate adjustment information with anexpectation of recognizing additional premium revenue in the third quarterended September 30, 2007, upon the completion of our analysis. As noted in an 8-K filing on August 9th and our secondquarter 10-Q filed on August 14th, we completed our analysis priorto filing the 10-Q for the second quarter and gave effect to the retroactiverate adjustment in our second quarter results filed with the SEC. This adjustment resulted in the following changes to ourpreviously discussed press release numbers. One, Medicare premiums increased by$15.5 million, two, Medicare medical expense increased by $3.6 million, three,Medicare MLR improved from 81.9% to 79.3%, and diluted earnings per shareincreased by $0.14. Moving to the current quarter, we reported third quarter netincome of $22.4 million or $0.39 per diluted share, compared to a prior yearreported EPS of $0.54. The prior year third quarter results include afor-the-year in-the-year retroactive risk adjustment payment of $12.3 millionor $0.12 per share after providing risk sharing and income tax expenses. No similar payments were recorded in the 2007 third quarterbecause we are accruing for-the-year in-the-year payment in 2007. Significantfactors impacting third quarter 2007 results were one, a 13.6% year-over-yearand a 1.1% sequential growth in our Medicare Advantage membership, two, a 45.2%year-over-year and…

Thank you, sir. (Operator Instructions) We go first toJustin Lake of UBS.

Thanks, good morning.

Good morning, Just.

Good morning.

A couple of questions. First and I know -- I know it's alittle early to talk about '08 independent firms, but just, I am sure, now thatwe've started marketing. I'd be curious to hear your thoughts on how you see thesituation shaping up, especially around commission structures. And your thoughts around how impressed people are being for2008 and also around benefit.

Well, I think it's slightly more competitive, I guess is theway I'd put it. I mean it certainly hasn't decreased in terms of the number ofcompetitors. There are more SNIP plans and special products. And I think,in some markets commissions are flat and some others are being bid up a littlebit.

Okay. So flat to up, I know you particularly in Alabama anda little bit in Tennessee, compete with United Healthcare on the HMO product. And they're going to have an AARP offering out in 2008 foran HMO. I'm just curious how you think the impact of that might be for yourbusiness.

Yes. It's really had to say. We're certainly seeing a lot ofadvertising for it. Pure speculation on my part, but I think ours has a prettyloyal following that currently is mostly in our supplements that Unitedunderwrites. I expect that's where a lot of their members are going tocome from would be my guess.

Right. And just finally, a question around medical costs.You took down your -- looks like the third quarter, if you ex out this Part Dreconciliation showed some stability from a medical cost standpoint versus theissue the issue you saw in the first half of the year. As you think out to the fourth quarter. And you did takedown your guidance for the full year. I'm just curious as to how much of thatdo you think is just the impact of Leon versus further improvement in medicalcosts in '07? And then, have you had a chance to kind of really sit backand think about how much -- how much your bid for '08 were able to reflectthose higher costs in 2010 as in the first half of '07. And how you think itrejected of MLR might progress.

Justin, I'll take part of that and let Herb take the rest.With respect to Leon and you can back into the other math. I mean we've gotLeon loaded in at the target 80% in the fourth quarter.

Okay. So that would account for some of the benefit, but notall.

The rest would be trend. And I'll let Herb go from there.

Yes. I don't think, Justin much has changed on the bidcomponent compared to what we've discussed in the past. We didn't get all ofthe costs increase on the MAPD into our bids. If there is any new news, I guess it's that similarly on thePDP bids not similarly in the opposite direction. We've had actually betterexperience this year than we anticipated and that better experience didn't getreflected in our bids for 2008 either. Justin Lake – UBS: Got it. Thanks a lot.

Thank you. We go next to Michael Yuan, Bank of America.

Hi. Thank you. A question on, Leon. I know some of thefinancing has changed since your initial assumption of the LIBOR 200 or LIBOR250 and it slow little earlier. Do you still expect that to add $0.15 nextyear?

You know, we're going to get -- give very detailed guidanceon 2008 in January, but as we sit and work through all the intricacies of thatand refine our calculations we still think we'll see at least $0.15 from that.

Great. And then just on the re-contracting in Tennessee,what percentage can you actually re-contract. And how long do you think thatwill take to complete?

The re-contracting has largely been around our physicianengagement models, organizing doctor groups and getting them onto models thatinvolve greater incentives. We've increased substantially this year. I'd say we're up from 10 to 15% up to close to 40%. Weexpect, we'll by next year -- we'll have well over 50% of our members andphysicians under those models in Tennessee.

Great. Thank you.

Thank you. We’ll go next to Michael Baker, Raymond James.

Yes. I was wondering, given recent developments of one ofyour competitors in Florida, if you've thought about a more aggressive marketexpansion going forward in that region?

You know, we are trying to undertake some more significantexpansions, but with the timing process at CMS you're getting pretty late rightnow to expand market areas for January of 2009. And to start something from scratch right now you'd probablybe looking at January 2010.

Thanks for the commentary.

Thank you. We’ll go next Matt Perry, Wachovia Capital Markets.

Hi. Good morning. Just a couple of quick questions. First onyour comments on special needs plans, I guess, could you give us any indicationof, I guess, how actively you'll be marketing those during open enrollment, oris that more kind of a product to be concentrated on after open enrollmentcloses? And then any indication of how many members, you thinkyou'll be able to sign up in those products?

I think it is probably -- well, not exclusively, more thelatter. I think it's a product that we're going to try and really get focusedon after open enrollment. I'd just comment that our growth during lock-in lastyear was a net of about 1,000 members a month. This year, we're more -- we'reunder 500, more in the 300 to 400-member range. And I think our expectation is we had hoped to at least getback to that 1,000 member a month, kind of number, but we'll look at that moreclosely as we get more experience with the products.

Okay. And then secondly, if I understood your commentscorrectly on PDP auto-assignment, you said you might be eligible for 117,000but that some portion of those might choose other plans. Is there anything youcan tell us about your experience in '07 that might allow us to at leastballpark what percentage of those 117,000, you might pick up in '08?

Just based on a study on a much smaller number that wereceived last year, we lost about 10% before January and ended up over the nextfew months losing another 10% to 15%, although that was offset by new adsduring those months post January.

Okay. So you might be able to hold onto two-thirds orthree-quarters of that amount, do you think?

I think our expectation is 75% to 80% of them ultimately,but -- and again, we do expect, as we have this year. We've had net growthevery month and we expect that will kind of come on top of that more or lessnew members.

Okay. And then just lastly, am I thinking about '08 PDPper-member per-month revenues correctly, because it looks, simply just lookingat your bids it looks like the average for '08 might be down $5 versus '07, soshould we see kind of a $5 decline in PMPM in '08.

You can sort of hard circle the $5. I think directionallythey'll go down and I think order of magnitude they'll go down about half thelevel they went down from '06 going into '07.

Okay, great. Thanks a lot.

Thank you. We are going next to Carl McDonald, CIBC.

Thank you. I just had another question on the PDP. The riskcorridor gets a little bigger for you in 2008 and relative to the commentarythat the bid you submitted for 2008 didn't necessarily catch the fact thatutilization costs have been a lot lower this year. Will that be a significantbenefit for you next year? How would you characterize that?

Yes, it sure helps. I mean, obviously, if you're havingfavorable experience you'd like to keep as much of the risk as possible so thatshould be a benefit.

Any sense of the magnitude that you can give us?

Well, I mean, I think you'd keep another 2.5% of thepositive. In other words, if you have favorable experience you keep 5% of it asopposed to 2.5% before you start sharing a lot. I think everybody now is basingbids based more and more on actual experience, so I think the variationshouldn't -- 5% variation on your target would be a lot. And I don't think we're anticipating seeing a whole lot, ifany, risk corridor adjustments at the end of 2008, but we'll see. Thatcontinues to develop and we get smarter every month about that.

All right. And I'd also be interested in your thoughts onwhether you think -- or whether you see a durational effect in your Medicarebusiness, Medicare Advantage, in terms of -- is there a significant differencein loss ratio for members, say their first 12 months versus members that havebeen in the plan for a longer period of time?

We've been pretty vocal about --we do believe what's thecase, and no, we absolutely think so and are suspect of business that's lessthan three years old of being mature to a steady, predictable point on lossratios.

And, any sense of what the magnitude is, difference in termsof loss ratio between the two?

It's significant from what we've seen and I'll just -- Imean, we've seen variations by market as much as 15 to 20 points over athree-year period.

And last question on that is, your sense of that because themembers that you're signing up tend to be younger, healthier, or is it just thesituation that members just need some time to figure out what the benefits are?

You know this is all speculation and theory and I don't knowthat we've proved much. My theory has been that a huge part of Medicareexpenses are incurred in the last six months of life and beneficiaries that arein end-to-life events typically aren't changing their insurance plans. But I do believe that these are old people so the fact thateven if they were healthy when you signed them up, after you've had them for ayear or two, they start to incur the same kinds of diseases as the generalpopulation at comparable rates. And at that point, your medical managementsystems need to be in place.

Thank you.

We are going next to Matthew Borsch, Goldman Sachs.

Good morning. This is Darin Miller sitting in for Matt.Question on SG&A, on an absolute level it was down sequentially. Can youprovide some color on that?

I'm not sure I follow you on that. On an absolute level itbeing down, Darin. I mean, it was up 6.1% in dollars.

It looks like in dollar terms it was down about $3 million.

I don't follow that, Darin. I'll have to call you backoffline on that.

Sure. I'll follow up with you on that. Texas Medicareenrollment looks like it was down sequentially.

I believe it was about flat. I don't know that it wasactually down but sure it didn't increase much.

And most of your other markets had modest increases. I wasjust wondering if there was anything going on that you can comment on thatmarket.

The Houston marketplace is the most competitive that we haveand clearly our biggest competitor down there is probably the most aggressivein terms of benefits. And so I think that leads to a little slower growth inthat market.

Okay. And I'm sorry if you've already commented on this. Thehigher outpatient costs you saw earlier this year, can you provide an update asfar as an explanation that was driving that and steps you're taking to addressthat?

Well, we're looking at some recontracting otherauthorization things. The trends have moderated somewhat. They're still higherthan we'd like and still, I think, higher than physician or inpatient trendsbut they're not at the levels we were seeing earlier in the year.

Great. Thank you.

Thank you. We are going next to Charles Boorady of Citi.

Good morning. On a same-store basis here, MA enrollmentguidance for the year, did that actually -- did you actually lower thatsame-store, excluding Leon, and if so, can you explain that?

I think, Charles, it's what we alluded to -- the answer isyes. We lowered it slightly, I think, 1 to 2,000 lives, and the answer is justwhat I talked about. We haven't seen the same level of net enrollment growthduring lock-in that we saw in prior years but we're still growing. It's notdramatic but it's slightly lower.

Okay. And the improved medical trends, did that reflect mixof Leon, bringing your expected trend down at all?

No. That's fourth quarter. Leon's not in the results, butthe annual, yes.

For the annual, there is one factor. I mean, Leon is comingin -- I think we're projecting it at 80 for the fourth quarter, which is at thelow end of the range.

Okay. And what percent complete are you on claims thatrelate to the period when you had a slight surprise on medical trends forearlier -- or earlier this year?

We'd be -- earlier this year -- we pay very quickly, so withone month run-out, we're 80% complete and with two months run-out we're closeto 90% complete.

So, in hindsight, was there anything new that you've learnedfor getting closer to 100% complete on the claims related to that period?

I think the experience compared to when we made theannouncement actually came in a little better than we were thinking. It's stillnot good, but it wasn't as bad as we thought.

In terms of diagnosing the root causes of it and whetherthat's something that is going to be more predictable going forward, or is itreally unpredictable in hindsight?

I'd say it was unpredictable in hindsight. I mean, it's avariety of smaller factors. It isn't just a single factor. It varies a bit bymarket. And we're trying to hone our routine analytical reports to pick up onthese nuances but that outpatient component is a whole hodgepodge of things andprobably is the most challenging to pin down. But I think we're getting betterat it.

All right. Last question on the WellCare Group. Were yousurprised by the magnitude of that search of 200 agents searching headquarters?

I haven't talked to anybody that has seen that or anythinglike it coming. Yes, absolutely. Like everyone else in the industry, I thinkwe're just staying tuned and try to figure out what's really going on.

How do you respond in terms of your own internal controls,government relations, etcetera? Is there any response that you take as acompany when you see something like that happen?

Well, actually, it feels pretty good. A number of months agowe hired a full-time chief compliance officer. She's been working with theBoard to strengthen our internal compliance programs and I don't think we'redoing anything differently because of WellCare. I feel pretty good that we continue to strength internalcompliance and make progress on that. We're not aware of any material issues byany means but it's just something we have to constantly pay attention to ifyou're dealing with the government.

Do you think the government will sort of reach out to theindustry and communicate with you and others what kinds of things they tookissue with so that corrective action can be taken, if necessary, in aconstructive way as opposed to waiting to see if 200 Feds appear on your frontlawn?

We certainly hope so. I think we're all looking to find outthe details of exactly what the issues are and obviously to the extent, weunderstand a little better we'll look awfully hard to make sure we don't haveany. We're certainly not aware of anything now.

Are there open lines of communication with CMS on this? Irecognize you wouldn't be able to share with us the specifics, the warrantswere sealed but are they -- is there an open line of communication, given themagnitude of what's happened there?

I'm not totally sure CMS is even aware of all the issues butwe're asking everybody we can what's going on and not getting many answers yetfrom anybody.

Okay. All right. Well, thanks very much and congrats on thequarter.

Thank you. We are going next to Josh Raskin of LehmanBrothers.

Hi. Thanks. Good morning. First question just on, as wethink about 2008 membership growth, and if I look back over the MedicareAdvantage membership growth. If we look back over the last couple of years, youguys have added organic growth somewhere in the 12 to 14,000 life range. And I think that was a little bit below what you guys sortof hoped would run at. Different reasons for different years, but I'm curious,as you think about '08, what are some of the pluses and minuses? How do youthink about sort of that low-teen thousands of growth rate in terms ofmembership for '08?

I think, in general, and we'll sharpen our pencils a bit aswe do 2008 guidance but in general, Josh, I mentioned we emphasize for '08 moreprofitability and margins and a little less membership in a couple of respects,especially in Alabama and Tennessee and drop some unprofitable members invarious products and counties. Not a huge amount, but in general, I think,while we're optimistic we can see EBITDA growth. I think membership growth might be a little bit down fromprior years.

Okay. And that's sort of the respite better retention andsome of this did roll out, is that a way to think about it?

Yes. You know, we may well see a little different pattern, Ithink the things we did may actually reduce the January enrollment just basedon transition, you know, going -- dropping a few members. The sniff products are likely to be more lock-in relatedwhen we see that growth so it'll be the growth could be a little more evenlyspread throughout the year as opposed to front ended the way it's beenhistorically.

Okay.

Josh, better retention could potentially change that picturebut we're not banking on that. We're not planning for a significantdeterioration in attrition rates but we're certainly not planning forsignificant improvement, although we've committed a lot of resources to thatarea.

Okay. I think, I get the color that you guys are talkingabout. And then, Kevin just a quick balance sheet account question for you. Thetwo liability line items that I'm just curious on, the funds held for thebenefit of members and then the risk corridor at CMS, I think I understand therisk corridors? But could you just help me understand which buckets line upwith sort of what the way CMS thinks of it? They think of it in sort of threebuckets and you guys have it in two liability accounts, I'm just trying toreconcile those two.

Yes. Once you've got, Josh and I guess, the basis of yourquestion is where is the $103 million coming from?

Yes.

When you get the 10-Q you'll have a very detailed it showsyou exactly where it's coming from. But in a nutshell basically the funds heldfor the most part is an in and out calculation. So a part of it comes out ofthat funds-held account but you're continually replenishing it during the year. So, the $103 is going to become -- is going to come partlyout of funds held, partly out of risk corridor. I believe the risk corridornumber of that $103 is all but $9 or $10 million goes out.

If you subtract 34 from that the balance comes out here.

If you take, I just got the answer. If you take the $103million.

Yes.

Subtract the $34 million risk corridor that's on the balancesheet in the current liabilities.

Yes.

The rest comes out of the funds held account.

Okay.

So, the long-term portion of the risk corridor relates to2007 because you'll obviously settle that later on in 2008.

And then, I guess, just. Okay. So that's helpful from anumerical standpoint. But coming back to the business, the risk corridors theremaining portion of that $70-ish million or so that is a function of youroperations around the PDP -- around the Part D program coming in better thanexpected. That's just simply we've done better we owe part of it back to thegovernment.

That's the risk corridor piece, correct.

Okay.

What's in the funds held account is really just the positiveaccounting where you receive advance payments from CMS for low income subsidyand reinsurance and then you charge amounts against that as they're incurred. None of those dollars ever go through P&L and so youjust get a residual balance that sits on the balance sheet and continuallymoves.

Okay.

Those are components that we're not at risk for, so if theutilization is lower we have to give the money back, if it's higher we actuallyget reimbursed for that. And it covers the cost sharing of low-income membersand then a reinsurance component that CMS rakes the risk for.

Right. I guess.

They front you the money so you can pay your clients.

Right. Which certainly I understand, I was just trying toget at with a P&L impact we can take a look at the risk corridor balancesheet item, that's the one that really?

That's correct. All the funds held activity is staying awayfrom the P&L.

Yes. Okay. Perfect. Thank you very much.

(Operator Instructions) We’ll go to Michael Baker, RaymondJames.

Yes. Just a follow-up. I was wondering if you could updateus in terms of your plans for leadership in the marketing area given Craig'sdeparture earlier this year?

We have just recently hired someone here at corporate whowas working with Craig for continuity's sake and I don't know that I'd term[Michael Pensley] his name, him as Craig's replacement necessarily butcertainly in the short term for this open enrollment period he's working withCraig.

Thanks.

Thank you. And with no further questions, I'd like to turnthe conference back over for any additional or closing remarks to Mr. HerbertFritch.

Well, thanks. We appreciate your interest and look forwardto talking to you again and seeing you down in Miami for Investor Day.

Thank you for your participation. That does conclude today'sconference. You may disconnect at this time.