Good morning and welcome to the Centene Corporation Fourth Quarter and Year-End 2012 Financial Results Conference Call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Ed Kroll. Please go ahead.

Thank you, operator and good morning everyone. Thank you for joining us on today’s call. Michael Neidorff, Chairman and Chief Executive Officer; and Bill Scheffel, Executive Vice President and Chief Financial Officer of Centene Corporation, will host this morning’s call. The call is expected to last about 45 minutes and may also be accessed throughout our website at centene.com. A replay will be available shortly after this call’s completion also on our website at centene.com or by dialing 877-344-7529 in the U.S. and Canada or in other countries by dialling 412-317-0088. The playback number for both of those calls is 10023301. 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 most recently filed Form 10-Q dated October 23, 2012, 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. As a reminder, you can find our 2013 earnings release dates on our website in the investor relations section. Also our next investor day is June 17, 2013 in New York City. Please mark your calendars. With that, I’d like to turn the call over to our Chairman and CEO, Michael Neidorff. Michael

Thank you, Ed. Good morning everyone. And thank you for joining Centene’s fourth quarter and full year 2012 earnings call. In general, fourth quarter results were consistent with our guidance provided at the December 14’s investor day when excluding higher than expected flu costs. I will provide more color on the flu epidemic shortly. My comments today will include an update on the key issues and other topics discussed at our investor day. I will also talk about our recently announced acquisition Acaria, a strategically important specialty pharmacy organization. I will then turn the call over to Bill for details on our fourth quarter and full year 2012 financial results. At our December investor day, we noted higher than expected medical costs associated with a much earlier than normal and more intense flu season particularly in Texas, which is our largest market. At that time we took down our 2012 guidance by approximately $0.15 to $0.18 per share to account for additional flu costs. However the flu hit even harder in the fourth quarter than originally anticipated. The fourth quarter included an incremental $0.30 flu costs compared to the fourth quarter of 2011. That was $0.11 above our expectations. Our initial read of January indicates a flu costs are similar to the levels experienced in December 2012. Our original planning anticipated higher flu costs in the first quarter of 2013 compared to the fourth quarter of 2012. Flu related costs are just one component of our total medical costs. Additionally, the most recent CDC data suggests that the flu season peaked in mid-January. Recognizing this we have not changed our annual guidance. Next Kentucky, we believe the state’s Medicaid program is not sustainable in its current form due to structural and policy flaws. The Kentucky loss was $1.71 per share…

Thank you, Michael and good morning. For the fourth quarter of 2012, premium and service revenues were $2.3 billion, an increase of 58% over the last year’s fourth quarter. For the year ended December 31st -- December 2012 premium and service revenues were over $8.2 billion, an increase of 59% year-over-year. The increase in premium and service revenues in 2012 is driven by several factors. First, the addition of five new states during the last two years, Illinois, Kentucky, Louisiana, Missouri and Washington. Second, expansions in three states during the last two years, in Texas effective February 2011 and March 2012, and Arizona long-term care effective October 2011 and the Ohio pharmacy (inaudible) effective October 2011. And then also in the fourth quarter of this year, pharmacy benefits were carved in Louisiana effective November 1 and the Mississippi managed care program was expanded to cover additional membership categories December 1. Premium Premium taxes grew significantly to $429 million in 2012 from $160 million in 2011. This is the result of certain states significantly expanding their hospital and provider tax assessments. We are paid these amounts and then immediately passed through the payments to specified providers. Our health benefits ratio was 91.3% for the fourth quarter compared to 85.9% in the fourth quarter of 2011. As we previewed during our guidance meeting on December 14, we have experienced a high level of flu related costs, particularly in Texas during the fourth quarter. Flu costs more than doubled in December over November and the increase will flu costs between years is estimated at $0.30 per share fourth quarter over fourth quarter. During the third quarter we recorded a premium deficiency reserve related to our Kentucky health plan. And in the fourth quarter we experienced a higher level of claims receipts for all…

(Operator Instructions) The first question will come from Chris Rigg of Susquehanna Financial Group .

Just want to come back to the guidance for the year. When we think about sort of a fully baked outlook for 2013, including Florida long-term care, including Acaria, do you think that the $2.60 to $2.90 directionally is flat, up or down?

At this point I would say it’s flat. I think we said we didn’t expect to have any particular level of accretion for Acaria in the first 12 months. There will be, we said, $0.06 for transaction costs and Florida long term care, the business expansion costs have already included the startup costs for that, we would expect that the amount of revenue and medical costs we would have particularly in the fourth quarter would not be a meaningful adjustment.

And then I may have missed it, but did you disclose the Kentucky loss ratio in the quarter?

We have not specifically talked about what that is. I think that it continues to be high as we said we booked the additional $10 million, so it’s well into the hundreds.

And then last question, more of a big picture question. We all can kind of agree that the industry tax on the Medicaid side doesn't make a lot of sense. But as of right now it's still scheduled to roll in the next year and you have a rate -- rate cycles obviously -- Georgia, Texas, Florida all come on in the second half of the year. I guess is it your expectation that in the absence of adjustment that the rates that you will see will have some sort of pro rata adjustment to sort of make you whole on the industry tax? Or do you actually think there is some margin erosion potential over the short-term as rates will not reflect the industry tax that begins January 1 of next year?

I think that is a couple of factors. One, we continue to work that issue in the House and Senate. Obviously when the passed the bill, there was no reconciliation between the two bills, and everybody we talked to are well aware of it and the fact that it’s one thing commercially, it’s something else in government services, which have to be actuarially sound. So I believe that we will be able to work the states at appropriate rates to keep them actuarially sound vis-à-vis that particular task because we have no choice. But we also have the states working with us and agreeing by and large that – something we have to change on it.

Our next question will come from Josh Raskin of Barclays. Josh Raskin – Barclays Capital: Just wanted to make sure I understood, Bill, did you say -- I'm just curious what you said about the flu costs embedded in the first quarter. Did you say you’re anticipating a similar impact as you saw in the fourth quarter, meaning maybe an incremental $0.30? Or were you saying you have a normal season and then the flu could be an issue again? I just want to make sure I heard that right.

So what we have seen so far is the month of January flu costs have been similar to the level you have seen in December. And as I said, in the fourth quarter December’s costs were twice as higher – more than twice as high as November. So we’re coming into this year with an elevated level to start with but we have seen in more recent weeks we started to decline. So we had built in a larger amount for Q1 and based on what we see right now, we believe that this level of flu will be higher than we originally anticipated. But given our current estimates we believe that will be absorbed within our current range of our guidance estimate $2.60, $2.90. But it doesn’t mean that first quarter results in and of themselves will not be slightly impacted by higher level of flu costs.

Josh, it appears that the flu peaked earlier this year because of the earlier stride in the fourth quarter of last year. And our medical department, Mary Mason and others say we’ve not seen twin peaks in the flu historically. And so as we said we saw it starting to dissipate, the CDC did the second week in January. Their experience is tracking with what we are seeing in our markets, Texas being the large one. So at this point, as Bill said, it may have some – it may have us (inaudible) Josh Raskin – Barclays Capital: And would you be surprised if your earnings were up year over year in the first quarter? Should we interpret that to mean you would expect your earnings in the first quarter to be down on a year over year basis?

I think that’s a reasonable assumption right now.

It doesn’t mean that – the flu is so episodic. That it becomes a little more difficult to project than other costs where you have more history, or a different former history. Josh Raskin – Barclays Capital: And then just second question. I am a big fan of this new existing market, same store versus new store metrics you guys are giving. As I look at the metric in the fourth quarter, it looks like what I will call same-store MVR was up 390 basis points, but the new business was up 360. And I certainly understand the new business is still at a higher level. But I am just curious what drove the same store? Was that flu costs in Texas? I am just trying to figure out what exactly is in new store.

Well, I think in new stores, you also get pharmacy carve-ins which is occurred in Texas and some other things which has a higher HBR effect for that element of the costs. And so I think that what we see is for the existing stores, you’re going to have an increase because we have higher mix and acuity levels in terms of the SSI tact numbers we’ve added over time. In the new stores you’re obviously impacted significantly by Texas and Kentucky. Josh Raskin – Barclays Capital: I guess I was just surprised, I thought Texas and Kentucky would have -- the new store numbers would have been up more significantly year over year than the existing. Or I'm just trying to figure out what drove the 390 basis point existing same-store number up.

You’re talking about for the existing or for the new? Josh Raskin – Barclays Capital: For existing. So the 88.5%?

Right, again I think a lot of that has to do with the fact that the type of members that we have been adding, and that you have rated it as a higher HBR for example on ABD book of business, it would be a TANF book. We’ve added a lot of higher acuity membership over time and that’s what caused the existing HBR to be higher.

Our next question will come from Ralph Giacobbe of Credit Suisse. Ralph Giacobbe – Credit Suisse: Just wanted to go to Texas. You’d previously talked about getting back to a normalized margin in 2013. I guess is that still the goal? Can you help us with sort of the timeline for resolution and whether it would be retro and maybe what guidance assumes?

I think we still anticipate the state, its membership normalizing during the course of the year. We know the state recognizes the issue, they gave us the letter which we shared in a conference in December. How they handle, whether on a going forward basis, or actual basis that should be determined. It’s in the legislation now, they’re working through it. And as soon as we know something we will be glad to share. Ralph Giacobbe – Credit Suisse: In terms of the guidance assumptions for rate, have you guys talked about that?

The guidance we’ve given annually anticipates appropriate action on the part of the state. Ralph Giacobbe – Credit Suisse: And then maybe can you provide some color on the Florida long-term care RFP? I think one of your competitors noted that they felt that underwriting was tight in certain counties and that the target loss ratio was kind of 93% to 95% or something like that along those percentages. Obviously you were awarded kind of 10 to 11 regions in the state. Can you maybe talk about your comfort around underwriting in the state and your ability to sort of run these contracts profitably?

I think historically we have always said that we’re not – numbers that we don’t believe are consistent with the well managed business and appropriate medical loss ratio, we see it that way. We went after the service areas we believed we could manage, we had to (inaudible) with the state. We also think they had a very thorough process they went through. So having went through that process we feel good about it. Jesse, anything you want to add about the – how we look at it actuarially?

Just maybe a couple of thoughts, Ralph, one is as you look – similar to point that Bill just made, with respect to ABD and some of the other populations, you’ve got much higher premiums associated with affordable term care business. So as a result the allocation between medical costs and administrative costs is different but that doesn't necessarily mean that long term margin expectations would be different. So I think that it’s fair to say that HBRs will be higher for long-term care product, that doesn't necessarily mean that the margins would be lower over time.

Our next question will come from Justin Lake of JP Morgan.

First, in terms of the MLR guidance for the year, can you guys break out, given that you are going to be reporting this new store same store number, can you give us what your guidance implies in terms of the new store, same store MLR?

At this point, we’ve not decided to give guidance numbers on the same-store existing new business MLRs, I think our plan is to report that each quarter but not necessarily to give look -- forward-looking information on that. I think what we have said is that as a percentage of business, we know that some of the new business will roll into the old business during 2013 such that we get to the end of 2013 second half, closer to 15% to 20% of the revenues coming from new business versus 35% that we saw in Q4.

Is there any way to even just share with us then what you think the same-store MLR would be on a reasonable basis, let's say for the year, even if you don't want to comment on the new store?

I think we said on investor day that there was about 500 to 700 basis point differential in the MLRs between new and existing, I think that relationship has been there for several years. We would expect that to continue going forward. And this is about as much as I can say on it.

And then on the acquisition, I apologize if I missed this. But net of all of the transaction costs and the stock issuance can you give us an idea of what you think the accretion is going to be on the deal?

The initial year it’s breakeven, neutral to earnings in the first 12 months.

Excluding the $0.06 of transaction costs that we would expect to record upon closing.

So that’s ex the transaction costs, will actually be dilutive to $0.05 to $0.06 for the year?

Yes.

And then just lastly on the flu, can you tell us what your flu number was last year in the first quarter?

I think that last year was a very low season for flu, and so that’s now we baked into our guidance. So I think it was less than $10 million in Q1 last year for actual flue costs.

And what’s baked in -- remind me what's baked into the guidance this year?

Well I think our original guidance had a much higher level than that for Q1, and we’ve bumped that up even more given that – so we’ve seen for January.

Our next question will come from Carl McDonald of Citigroup. Carl McDonald – Citigroup: Just wanted to run through the premium deficiency reserve in Kentucky. So if you ended third quarter with $63 million, you added $10 million in the fourth quarter that you had already disclosed, so that got you to $73 million, ended the year with $41.5 million. It looks like you've applied $31.5 million in 4Q, is that the right interpretation?

I would agree with that math. Yeah I think we added additional $10 million in the fourth quarter, as we talked about for additional claims costs that we had come in and we ended up at December 31 with $41 million which really covers our estimate of the premium deficiency reserve from January 1 to July 5.

And they did change a few of the policies as well as – they’ve eliminated or the retroactive assignment for SSI numbers, for example, won’t change in the program. Carl McDonald – Citigroup: So I guess I mean, that gets to my second question which is if the out-patient was over $30 million in 4Q alone and you only have $41 million left on the premium deficiency reserve. Are those changes that have been made big enough that $41 million will cover those losses or would you anticipate that we may see that the premium deficiency reserves have to be increased again?

I think right now that’s our best estimate for 2013 and I think particularly when you compare 2012 to 2013, we would expect that Kentucky would have a minimal impact on 2013 after consideration that we got to 41 million of premium deficiency reserve, there could be $3 million or $4 million of exit costs and other things that prop up during the course of year which we've estimated in our costs – in our original guidance. But if we’re off we wouldn’t expect it to be up a whole lot compared to as Michael said I think our loss in Kentucky operations for 2012 was $1.71.

Now there if you remember, and Carl, when we see something that could impact the guidance or we had some information, we've never been bashful about it, putting it out there and making the appropriate adjustment as we see. Carl McDonald – Citigroup: But in terms of the Kentucky exit timeline, I know you’re not going to opine on likelihood, but just – I’d just be interested in the milestones on some of the timeline. Basically just want to understand if it’s possible that you can get out by July? And so if the decision in late March is an example where to go against you can maybe just walk through next steps in terms of that timeline.

At that point, we’re back in quarter and we’ll work through it quite expeditiously. I won’t say any more except I would emphasize that the court did retain the jurisdiction. They stayed any action on us versus dismissing it to start over. So I think we have a judge who understands the issue in terms of timing and the impacts, so it’s hard to say any more beyond that.

Our next question will come from Peter Costa with Wells Fargo Securities. Peter Costa – Wells Fargo Securities: Can you go through sort of the capital requirements that you are expecting over the next year and a half or so as we get into 2014 and the premiums start to grow? Do you think your capital position is good enough for that? We have just taken a little hit to capital here this quarter; can we talk a little more about that.

I will start off and Bill can pick it from there. As we have indicated that we believe that we have adequate capital through our cash flows, positive cash flows and our revolver to cover our capital needs for the balance of the year.

I think that as we've seen over the last year and a half the growth that we put on the books obviously requires funding at the subsidiary level for statutory capital. That will continue in 2013 and as we said our cash flow for all of 2012 I think was $279 million, something like that, we would expect that in 2013 it will be even greater than that given the operations that we have. So a lot of the capital requirements are met through internally generated funds and as we said the revolver that we have is unused at 12/31 and it’s a $350 million revolver expandable to $400 million. So the acquisition that we talked about is funded quite a bit with stock which will not really dilute our capital ratio very much and other acquisitions that we talked about we also look to include a meaningful portion of equity as part of those. Peter Costa – Wells Fargo Securities: Do you foresee your internal cash flows generating all the capital requirements for the next year and a half? Is that accurate?

We’re particularly looking at 2013. 2014 is little less clear given Medicaid expansion and exchanges and how things fall out there in terms of what the requirements are. And so I think we can probably be in a position to better update 2014 once we get into the second half of the year and have a better look at how things are going to progress in 2014.

And then you also have some high acuity, long-term care things coming in which will have – should have significant cash flow associated with that. Peter Costa – Wells Fargo Securities: You didn't talk very much about Louisiana. Can you give us a little update on the performance there?

I think Louisiana has rolled out in three phases beginning in February through June and then it added the pharmacy carve-in effective November 1, so at this point in time it's been up and running for a reasonable period of operations and seems to be performing within our expectations.

Our next question will come from Scott Fidel of Deutsche Bank. Scott Fidel – Deutsche Bank: Thanks. First question just if you can talk about how discussions are progressing on the primary care provider parity rules and it looks like WellCare gave an update that they had been negotiating a bit on that in Florida. So maybe if you can update on Florida specifically and then more broadly how those discussions are proceeding. And then whether you expect that the capitation rates that you'll receive for that will fully cover the costs of moving the provider rates up to in parity Medicare.

I think the best comments, it’s a good question, as we are in active discussions and working through those issues. And it’s best not to front run those situations.

Other than – we expect those to be neutral to us at the end of the day and we will accommodate whatever needs they happen from an individual state’s perspective but we really don’t expect it to have a net impact to us.

We’re very conscious of it, it’s all considered everything we are doing. And the panels are working through us very appropriately, methodically. Scott Fidel – Deutsche Bank: And then just a second question just taking together some of the comments that you have made so far on the flu costs in 1Q and what’s incorporated into the outlook. Is it fair to say that it sounds like you are still comfortable with your range of guidance, but that does have a pretty wide range to it? So if the flu kept up with the level that we have seen a bit in January that you’re comfortable with guidance but likely more towards the lower end of that $2.60 to $2.90 range?

I think what we said is that we saw earlier more intense start in Q4 with the flu. We saw it continuing in January but we’ve also seen it start to tail off in the second, third week of January which is in earlier tail off than we have historically seen. And that – so we feel that we are appropriately refunded on the year and I'm not commenting or giving any consideration to the ranges, within the full range, I am not saying it’s at bottom end, or higher end of it. It’s within the range and all the facts we have not seen a double peak historically, the twin peak in flu development, Mary Mason, our Chief Medical Officer will tell you. And so we’re comfortable with the guidance we had to this point and if we thought something else, we’d tell you that.

To date there are number of moving parts within the year for the whole year’s guidance. And at this point in time based on everything we see we’re comfortable maintain that guidance at this point.

As Bill commented, you see the same-store new store, the new store has gone from 35% as we sit here today and tailing off towards the end of the year at 15% with improvement in the MLR. We gave some guidance 500 basis point swings in MLR between old and new. So all these things have been considered and we put the range out there to reflect the moving parts. Scott Fidel – Deutsche Bank: And then just had a follow-up question on the Florida long-term care contracts. And just first, what are the initial length of the initial contracts that you are in discussions regarding Florida LTC? And then if the pricing does not prove to be sufficient, and just given some of the commentary that we have heard from your peers on this front, what would be the process through which potentially you would then have an opportunity to sort of renegotiate pricing? So basically how long is the initial term for the pricing and then how long is the overall initial term for the contracts?

So we’ve got – as you expected in a lot of these contracts, the duration of the contract is multi-year and there is some flexibility on that front. But the pricing is annual pricing. So unlike what we have seen in Kentucky for example this will be an annual pricing kind of process that would be reflective and going through the actuarial assessment and determining actuarial soundness based on the performance of the program, and that could be both at the aggregate level and at the individual company level.

We are in this product already in Florida and so other states. So we have some comfort level with it and we have been operating in Florida for several years working with the rate environment. And the issue of moving members to stay at home and community setting versus in a facility is the objective in these types of programs. And so we’re comfortable that particularly given that we participate in 10 regions, we have scale of this program within the state of Florida which allows us a little more room to maneuvre.

I will also just add, going back to when we first won – the first bidding on RFP on Georgia and when (inaudible) they did it on price, they came through well on us. And there are other instances in the connector where they said all – it’s so low and we’re not giving the state back money, because of the surprise that was there. So there is a certain pattern when people don’t win they talk about the ones that won did it on price. And there is enough history there to say that we are conservative and reasonable and experienced when it comes to that.

Our next question will come from Brian Wright of Monnes Crespi & Hardt. Brian Wright – Monnes Crespi & Hardt: Could you give us a little more details on the process of the -- I guess supplemental rate increase discussion at the state legislature in Texas?

Once again Brian, we’ve had good – we’ve had very constructive discussion, it was back to them realizing what occurred in Q4, how it occurred and they have insurance about it. They have worked with us, they have put the numbers forward to the state and it is a wise man that stays out of the middle of those discussions. And I would not want to say we’re not being wise about it. And I appreciate what you’re trying to do and I respect that but when legislation involves especially I can do is sit back and let the state who needs the funding deal with legislatures and not trying to express opinions on it. I am sure you understand that. Brian Wright – Monnes Crespi & Hardt: I just wanted to make sure -- does the guidance assume any supplemental increase in Hidalgo?

Yes, yes, we have confidence that the state recognizes it and it does assume appropriate supplemental funding to Hidalgo and appropriate action in the rural market as well. Brian Wright – Monnes Crespi & Hardt: And just one last one if I can. When does the legislature finish the -- like when do they normally adjourn for this act (ph)

It’s the last week in March. I’d just remind you if they passed it, then the state has to work through and through by service area, by sales and we would hope that they are able to get that information, and the amendments to the contracts with any stores, toward the end of the quarter. What’s important is that they will have dealt with it in an appropriate fashion. It all starts there.

Our next question will come from Scott Green of Bank of America Merrill Lynch. Scott Green – Bank of America Merrill Lynch: First, just a follow-up on Florida. Looking at the RFP scores it looked like the technical scores for Centene were about average, but then you kind of leapfrogged some of your competitors during the invitation to negotiate process, which potentially implied that you were pricing lower. So I know in other markets you have explicitly talked about some utilization savings that were assumed. So is there any number like that you could give us for what utilization savings you assumed in Florida or how you might have been able to use your incumbent claims data to underwrite there just to get us more comfortable with the process?

Yeah, I think one of the things that’s important here obviously we are still relatively early with respect to the announcement and there is a lot of activity. I don’t think there’s total visibility on the technical scores on that the why. But we will continue to evaluate those things as we go through, as everybody else along the shore. But really the process that the state went through I think is important here and Michael referenced to the diligence that ACA went through, the state of Florida went through in this process. So there was the technical response. But there is also on a region specific basis oral presentations and that is candidly the best for us to represent our experience in serving this population, and I think that was ultimately reflective in the outcome of the scoring process. So there is both technical and then there is oral presentations where we think we did quite well. And then there is a pricing component and I think just to reinforce what you already know Scott that there was – this was not bid rates, there was a range that the state had provided. And so the state had set the actuarial range and there is really questions of where people came out within that range that was set by the state.

You have also said upfront in asking the question, we have experienced in the market that we will be able to demonstrate to state what we can do in that market specifically. I think they have an appreciation of our systems and the capacity we have. We are managing higher acuity members and so all those things came into play and I think we had the – the large reception (ph) was the right outcome. Scott Green – Bank of America Merrill Lynch: And separately, could you tell us what the status is of the Georgia Medicaid contract? I thought the state might have been working to add a couple optional extension years, but I'm not sure. How long is that supposed to -- goes to the Georgia Medicaid contract?

I don’t know that they had to disclose anything to us specifically in terms of any extensions and the people, Rob and others who manage the existing market health plans figured they have not disclosed anything beyond what we know now.

It appears to be another year out still. That’s been that way for a couple of years.

There is a fundamental that all states don’t like to do (inaudible), they don’t have to. Particularly have four months, working saving the money again part of the outcomes they want all those things that they tend to not want to do unless there is some procurement law that makes – there are some states that recognize the savings and have decided to expand it. As we see very aggressively Texas and others we’re glad to participate in that. So as it relates to Georgia it’s kind of stay tuned and you will probably know the same time as we do. Scott Green – Bank of America Merrill Lynch: So for now you are not expecting an RFP there in the area near term?

The honest answer is I am not expecting one -- but I am not expecting one. I expect that the state to change its mind and do something based on its budget area issue and their fiscal year starts in July. So as they look at it they can make appropriate decisions. We will encourage them every chance we get to expand what they cover. Scott Green – Bank of America Merrill Lynch: Lastly, looking at the fourth quarter MLR if you exclude flu in Kentucky it looks like it would be a little bit above your 2013 guidance range. So maybe you could just walk us through the main drivers to get you from where you are in the fourth quarter ‘12 to the midpoint of your guidance, which is 88.5% for ‘13.

I think the primary thing is that the rates in 2013 should be improved in Texas, it is our largest market, they have some pretty big impact, and just in general we’ve had rate increases will be applicable into the second half 2012, going into 2013 the whole year. And the fact that some of the older – the newer markets will start to mature and where we’ve had original margin built up and other things like that will no longer to be necessary. So we expect those to be more normalized margins.

Yeah we were starting to see some normalization until 6000 plus members move from another plan to us off – 9000 excuse me. And the state is well aware of that as we told you and they are evaluating appropriate rates and responses to it. So there were some moving parts that rolled into that Scott that made it little more difficult to get a straight comparison.

Our next question will come from Melissa McGinnis of Morgan Stanley.

I know we spent a lot of time on the Texas rates today, but maybe just to ask the question a different way. Help us get comfortable with your guidance range, which is a range. How many months could you sustain receiving the current rate you are receiving and not put at risk your current guidance range?

Did you say how many months would it be without any adjustment?

Could you go through March with nothing, because you go through July with no update. In what way would it become a true risk to your guidance if there is not a typical lay (ph) on the legislature?

Melissa, we’re in the middle of negotiating rates with the state and legislation. I could say anything other than we need them as soon as possible. I would not want to go beyond that. I mean we’ve asked to the states what we need and they’re responsible for timing and way. So we obviously will always work to minimize expense with the state, save them as money as we can do all the things they expect us to do. But well, no, you don’t worry about it if you don’t give us rates until June or July, that’s not the case. We obviously are working with the state because we need the rate approved now. By the way, they also recognize that and we fully expect them and the legislature to provide that rate adjustment. There is no reason to believe it won’t happen.

And then maybe a longer-term question. We are 11 months out now from the implementation of health reform. And Michael, from your perspective or your conversations with the state, do you think that on 1/1/14 there is going to be an orderly enough process whereby new Medicaid eligibles are all enrolled or enrolled in a very short period of time? Or is this something that’s going to be more like an eight quarter or 12 quarter rollout to full implementation across like the newly eligible lag (ph)

I think that – and our people managing this process have to presume that it will be ready to go 1/1/14. I don’t think – they may delay some of the steps along the way, when we’ve had our internal discussion. But we expect that and have to work against and plan to be there for 1/1/. I think to not do that will be foolhardy. So we expect a 1/1/ implementation, we’re working very hard against it with the states, and the states are anticipating their reduced savings that they will get to the funding from the federal government 100% for that membership. So they have every reason to push it as fast and hard as they can. And the states we’re in absent one understand what's sound policy and what's a sustainable program and we think that those states will continue as they have, historically they have worked with us in a very responsible way.

Sorry, I might have been a little bit unclear in what I was asking. Setting aside the risk that all of reform is delayed in some way out of state, what I really meant is like inside of Medicaid programs sometimes people who are eligible don't realize they are eligible sometimes until there is a medical event or something and they are in the ER and they get signed up for Medicaid. Do you think there is going to be enough public outreach to get the majority of eligibles enrolled assuming we have a 1/1/14 go live that they are in day one? Or is this going to be something that like seeing the enrollment as they realize it over a period of two to three years?

I will let Jesse and others add to it but obviously the last time I saw was 12 million or more eligibles that are not enrolled in this country. So there will always be an element of that. But Jesse, what do you want to add in terms of ---

No, I’d say it’s a fair question and obviously (inaudible) great visibility on it at the moment. But I think it’s a reasonable expectation that given the amount of awareness and got more focused communications that will happen between now and 1/1/14 on a state specific basis I think there would be a higher kind of take up rate if you will out of the gate. But as Michael said, it’s certainly not going to be 100% out of the gate. Those things will continue to take hold over time as people become more aware of the programs and the moving parts associated with the programs and how it affects them personally.

Our next question will come from David Sagalov of Jefferies.

Thanks for taking my questions; I am just filling in for Windley while he is traveling. I had a follow-up kind of in terms of the guidance. It sounds like your updated guidance reflects incremental costs for both the flu and of course the Florida long-term care business expansion costs. So, I'm curious about what that suggests for the underlying guidance? Are you suggesting that the core business is improving enough to absorb those costs, or is it more of a factor that that guidance might be a little bit more biased to the low end of that range?

I think that when we talk about guidance on December 14, there were questions about what – how much conservatism was built into our guidance numbers, and I think that’s part of the issue here that we have a range for guidance and we’ve allowed for an estimate of $0.50 to $0.60 for example for business expansion costs and the long-term care program expansion costs included into that number now. And we do believe that the basic underlying businesses are sound and performing well. Flu, we’ve got some visibility to that right now for Q1 and feel comfortable with maintain our guidance given what we know at this point in time. And we feel for the whole year that the guidance numbers we gave are still the appropriate amounts to retain and the level of conservatism that we have built in I think allows us to retain that guidance.

I think just kind of answer the same thing in a slightly different way. On the flu, we’ve given you the substantiation of why we believe it’s adequately planned to this point in time because of the fact that it has peaked in these states that we’re going to look at. We did anticipate in December winning some of the long-term care where we currently operate, have a current operation and we plan the $0.60 expense to bring it up because long-term care does have more nurses, more case managers, I think we have the experience to know what that is when we plan for. So I would say the guidance as is out there reflects what we thought then and we see no reason to change it at this point in time.

So you are saying -- when you gave your mid-December guidance that you had contemplated some potential buildout for the Florida long-term care even though it wasn't announced at that point?

Right. You have to make certain assumptions and we were much more comfortable doing that than coming in.

As we just said the $0.50 to $0.60 that we had for business expansion costs included a number of known things, it also included placeholders for a other things that were in process and little bit of the unknown to be determined.

If we could just circle back to the quarterly progressions, especially kind of looking at the first quarter and thinking obviously higher flu costs this year. But is there some easing in some way on Kentucky or are there other factors to help offset that or just to help directionally? Are we certainly looking at something that should be down year over year? Are there any other offsets that would help get that closer to perhaps being flat year over year?

Of course, it’s our policy to give annual guidance as opposed to quarterly and so our help (ph) – Bill, I think you can add to it but I am going to say we’ve said that we are maintain annual guidance, we are saying that there are some – there were some incremental expenses in Q1 that we believe will be offset during the course of the year. And I think that summarized what we already said.

I think that Q1 has a number of open factors with respect when tax rates are going to be impacted, so that’s part of the biggest question of just timing. We believe it will be in there for the full year but how much is required in Q1 and it will depend on the actions taken and how everything tied up there.

It goes back to that issue of are they going to approve everything else but when -- it has to be signed, sealed and delivered for revenue recognition purposes. And we anticipate the state understands that would do all they can to do to achieve it but in the interest of candor, you can see something swinging from quarter to quarter but on the full year we expect it will be there.

And ladies and gentlemen that will conclude our question and question session. I would like to turn the conference back over to Mr. Michael Neidorff for closing remarks.

Well, I thank you and as I have said – as I said at the investor day ’12 is behind us, it was from a growth standpoint and positioning us for ’13 will prove to be a very good year from that perspective and we are really looking forward to reporting and believe we’re well-positioned for ’13. So we’ll talk to you in another three months or so. Take care and thank you.

Thank you sir. The conference has now concluded. We thank you for attending today’s presentation. You may now disconnect your lines.