Elevance Health Inc. (ELV) Q4 2012 Earnings Report, Transcript and Summary

Douglas Simpson John Cannon - Interim Chief Executive Officer and Interim President Wayne S. Deveydt - Chief Financial Officer and Executive Vice President Kenneth R. Goulet - Executive Vice President, Chief Executive Officer of Commercial & Individual Business and President of Commercial & Individual Business Richard C. Zoretic - Executive Vice President and President of Medicaid Programs Leeba Lessin - Executive Vice President of Medicare Programs

Matthew Borsch - Goldman Sachs Group Inc., Research Division Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division Melissa McGinnis - Morgan Stanley, Research Division Justin Lake - JP Morgan Chase & Co, Research Division Justin Lake - UBS Investment Bank, Research Division Christine Arnold - Cowen and Company, LLC, Research Division Christian Rigg - Susquehanna Financial Group, LLLP, Research Division Joshua R. Raskin - Barclays Capital, Research Division Scott J. Fidel - Deutsche Bank AG, Research Division Kevin M. Fischbeck - BofA Merrill Lynch, Research Division David H. Windley - Jefferies & Company, Inc., Research Division

Ladies and gentlemen, thank you for standing by. Welcome to the WellPoint Inc. Fourth Quarter Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to the company's management.

Good morning, everyone, and welcome to WellPoint's Fourth Quarter 2012 Earnings Call. This is Doug Simpson, Vice President of Investor Relations. Presenting today are John Cannon, Interim President and CEO; and Wayne Deveydt, Executive Vice President and CFO. Also available for Q&A are Ken Goulet, President and CEO of our Commercial, Individual and Exchange businesses; Leeba Lessin, Head of our Medicare programs; and Dick Zoretic, who is leading our Medicaid operations. John will start with an update on the business and highlight progress against our goals which we laid out last September. He will then offer commentary around fourth quarter results and perspective on the year ahead, including investment and preparation for the coming implementation of health insurance exchanges. Wayne will then review the quarterly and full year financial highlights and offer our 2013 outlook. Q&A will follow Wayne's remarks. During the call, we will reference certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available on our website at www.wellpoint.com. We will also be making some forward-looking statements on this call. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of WellPoint. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review the risk factors discussed in today's press release and in our quarterly and annual filings with the SEC. Finally, as you are aware, we completed our acquisition of Amerigroup on December 24, 2012. As a result, closing and prefinancing costs related to the transaction, as well as the 8 days of Amerigroup's operating activity, are included in WellPoint's fourth quarter 2012 GAAP financial results. We have excluded these items from our adjusted EPS calculations. I will now turn the call over to John.

Thank you, Doug, and good morning, everyone. As Doug mentioned, this morning, I'm going to focus my remarks on 3 principal areas: First, I'll provide a progress report on our second half 2012 operational and financial goals; I'll also give you an update on the business changes underlying our improved performance; And finally, I'll comment on our 2013 outlook with some broader thoughts on our longer term positioning. So let me start with an update on where we stand versus the objectives we laid out in September. Our goals in the second half of 2012 were to: first, close the Amerigroup transaction; second, improve execution against our operational and financial targets; and third, develop our 2013 plan and continue to move the company forward during this interim period. We've met these objectives, but we know that we have more work to do over the next 12 to 18 months to prepare WellPoint to capitalize on future growth opportunities, particularly in government-sponsored business. So to review our progress. We closed on the Amerigroup acquisition in the fourth quarter, which was earlier than we originally anticipated. With Amerigroup, we now serve more than 36 million medical members. We have a Medicaid presence in 20 states, which is the largest footprint in the industry, covering over 4.5 million members of various state-sponsored programs. The Amerigroup acquisition fits well with our strategic plan to position ourselves for a significant shift towards government-sponsored business. Notably, we now have a Medicaid presence in 8 of our 14 Blue states. We look forward to working with policymakers at the state and federal level to help people access the health care system in the most effective and efficient means possible. We will continue to work in a constructive and collaborative way with state and federal decision-makers to make these programs as successful as possible for the benefit of our existing and prospective customers. We have delivered on our financial commitments. Our fourth quarter results were strong, with adjusted EPS of $1.03, coming in ahead of our expectations and driving full year adjusted EPS to $7.56 versus the $7.30 to $7.40 range we previously forecasted. The year ended on a solid note, and we have been encouraged by both membership and margin trends over the last 6 months. Excluding Amerigroup, medical enrollment was essentially stable in the quarter and ended the year approximately 120,000 members above our expectations. We continue to price prudently to cover cost trends as evidenced by our results and metrics. We've seen some modest improvement in certain competitive markets during recent months, and we'll continue to watch our local markets closely as we move into the 2014 renewal cycle. We have made investments during the quarter while also maintaining discipline with respect to our administrative spending. This enabled us to exceed our goals for the quarter, even though we covered a number of severance and other expense items. Capital deployment remains strong in 2012, with a total return of nearly $2.9 billion between our share repurchase program and our dividend. We intend to remain disciplined with shareholder capital in 2013 and beyond. From a business line standpoint, I would characterize 2012 as another solid year in the Commercial segment, where operating gain grew 3.5% and operating margin expanded 50 basis points. In Medicare and Medicaid, 2012 proved to be the challenging year we had anticipated. Going forward, we see substantial room for margin improvement and growth in both of these areas with new and very experienced operational leadership, which leads me to my next point. We're moving the organization forward. I want to spend a minute on operational leadership and some of the changes we're making as an organization. With Amerigroup now closed and our CareMore model continuing to expand, we believe we have best-in-class assets in the commercial market, in the Medicaid business and with respect to chronic care. To maximize the value of these assets, we've taken targeted steps in the last several months to better align our leadership structure with the growth opportunities we see over the coming years. In Commercial, the opportunities and challenges of reform are being tackled by Ken Goulet and his team. And we have done an extensive amount of research and investment around product design and structure, which is continuing. We gained great new talent with the Amerigroup acquisition, including Dick Zoretic, who's leading our combined Medicaid businesses. Dick will also lead our dual eligible strategy, working closely with Leeba Lessin, the Head of our Medicare programs. We also believe that growth in specialty is closely linked with innovation, technological enablement and analytic capabilities. So that's why we've paired these areas under Lori Beer, who also runs our IT functions. We feel very fortunate to have these strong and operational experienced leaders in these roles as we look to capitalize on the coming revenue growth opportunities we see ahead. With the right people leading our business segments, we also need to position them for success and improve operational execution against our strategic plan. This is essential to delivering on our goals of accelerating top line and operating income growth and enhancing shareholder value. Let me offer some examples of what we are changing across the company. First, we've taken steps to decentralize certain business line decision-making by giving our P&L owners more control over the levers that most impact their businesses. This increased autonomy will be coupled with greater personal accountability for results as they now define and own their priorities and resources and have decision rights over how to best deploy those resources. Quite simply, we've better aligned responsibility and accountability. Second, we're working to simplify and streamline reporting in decision-making. As the market evolves and we enter a very dynamic period for the industry, we need to ensure we're as nimble and flexible as we can be. Third, culturally, we are creating as open and transparent an environment as we can. I firmly believe that bad news does not get better with age. And we want to make certain that we proactively address any hotspots as quickly and throughly as possible. Every business has day-to-day challenges, but the best companies succeed in addressing these quickly before they become a larger problem. Fourth, we've expanded our review process to monitor our future growth investments, our returns on those investments and the timing of those returns. We also recognize the need to remain flexible and adjust investment allocations strategically as needed. Fifth, we remain focused on addressing the issues of affordability and access with innovative products that leverage our strong provider relationships. Our deep local presence positions us to meaningfully impact health care delivery in our markets. And we're focused on payment innovation at all levels of the system, whether it's a small independent physician group or a larger hospital organization. We're determined to offer the most affordable coverage possible and to improve health care access through greater collaboration with providers and other stakeholders. Finally, we're committed to making health care reform work. That's not to suggest that the current framework is perfect. Improvements can and should be made, and we'll work collaboratively with state and federal decision-makers on that. I believe that our national scale, combined with our local market penetration, uniquely positions us to seize the opportunity to help improve clinical outcomes as well as cost effectiveness for the benefit of patients, our partners and ultimately, our shareholders. So with encouraging operating trends in the second half of 2012 and a realigned operational leadership team, we're feeling optimistic about the future. As we've said previously, 2013 will be a year of investing for growth. And it's incumbent upon us to monitor and pace those investments to ensure we're maximizing the productivity of our capital. In terms of financial targets, we expect that EPS will grow over our 2012 adjusted EPS level, albeit at a modest pace, in part because the 2012 numbers came in higher-than-expected when we last updated you, coupled with the uncertainties such as potential sequestration, the flu, underlying medical utilization and the continued implementation of health care reform. It's fair to say that we did not incorporate our full level of outperformance in the second half of 2012 into our 2013 assumptions about business trends and our initial 2013 EPS outlook. We're encouraged by the performance of our associates and the business in the last 6 months, but we also want to retain an appropriately prudent stance in our outlook in light of what we expect to be a fluid and dynamic market over the next 18 to 24 months. Additionally, we've also taken a prudent stance on pricing to cover cost trends. And our 2013 outlook includes a drag from both Amerigroup integration costs and planned incremental investments for growth of approximately $300 million. Finally, capital deployment is an area of high performance for us, and we expect to remain active with both our share repurchase program and our dividend payments. So to summarize, we're very pleased with our second half 2012 performance and feel good about how we entered 2013. Our business model is evolving to capitalize on the opportunities we see across our segments. We have experienced leaders in place to drive operational execution in their areas, and they'll be leveraging their substantial expertise to deliver on our business objectives and support growth. As I noted previously, our business operates in a challenging environment, and the next few years will bring significant change as well as opportunities, as health care reform is more fully implemented. We're determined to lead the industry through this evolution with our research-based strategy and delivery of innovative products and services to our customers. I believe we have the right people, the right assets and the right strategy to win in this new marketplace. We're confident that we can drive sustained operating income growth over the next several years. And we remain committed to a compound EPS growth rate target of 10% to 14% from 2012 through 2017. Now before I turn the call over to Wayne, I would like to acknowledge our new associates from Amerigroup. We're excited about integrating our operations over the next several months. Collectively, our enterprise now employs more than 43,000 people. And together, we serve nearly 67 million people across the country. This is an honor and a privilege, and we'll continue to make improving their health and the quality of their lives our #1 priority. With that, I'll turn the call over to Wayne to discuss our fourth quarter and full year results and 2013 outlook in more detail. Wayne?

Thank you, John, and good morning. My comments today will focus on the key financial highlights from the fourth quarter and full year 2012. Additional details are included in this morning's press release. I'll also provide some business line commentary and then close with a discussion of our 2013 guidance. I will highlight the impact of Amerigroup throughout my discussion as appropriate. Overall, fourth quarter results were stronger than we expected, driven by a combination of improved core operating performance and favorability in the capital management areas. On a GAAP basis, we reported fourth quarter EPS of $1.51 and full year EPS of $8.18. Both of these results were higher than we expected due to favorable operating results and net positive contributions of $0.48 in the fourth quarter related to the settlement of certain tax issues and net realized investment gains, partially offset by costs related to the Amerigroup acquisition. On Amerigroup specifically, our fourth quarter GAAP results included approximately $73 million of pretax expense, consisting of closing costs and incremental financing costs as we prefinanced the transaction with debt issuances in the fall, partially offset by a small amount of earnings in the 8 days of Amerigroup operating activity. Exclude the items, our fourth quarter adjusted EPS was $1.03, an increase of 4% from $0.99 in the fourth quarter 2011. Full year 2012 adjusted EPS was $7.56, an increase of 8% from $7 in 2011 and above the $7.30 to $7.40 range we previously forecasted. As you recall, last quarter, we said that our outlook for 2012 could reflect some measure of conservatism if the favorable trends we experienced in Q3 were to run through year end. This played out, and we feel good about where we finished the year operationally. Our fourth quarter results reflected lower-than-anticipated commercial medical costs and stability in our membership base. We also performed well from an underlying administrative expense standpoint, as our reported SG&A figure was driven higher by AGP closing costs and other severance costs and impairment expense items. Our results were supported by strong operating cash flow and an appropriately conservative year end balance sheet. Medical enrollment increased by 2.6 million members on a sequential basis due to the acquisition of Amerigroup. Our same-store enrollment was relatively stable in the quarter, as modest attrition in the national business was offset by growth in local group. Operating revenue increased by $96 million or 0.6% versus the fourth quarter of 2011. This increase included contributions of $317 million from the Amerigroup and 1-800 CONTACTS acquisitions collectively. Excluding the acquisitions, operating revenue declined by $221 million or 1.5%, due primarily to lower fully-insured local group membership volume. For the full year 2012, operating revenue increased by $863 million or 1.4% on a reported basis from 2011 and by $430 million or just south of 1% excluding acquisitions. The benefit expense ratio of 87.3% declined 30 basis points from the prior-year quarter as an improvement in the Commercial segment was partially offset by increases in the Medicare and Medicaid businesses. The consolidated benefit expense ratio was below our expectations for the quarter due primarily to the favorable commercial medical cost experienced. For the full year 2012, underlying Local Group medical cost trend was near the low end of the 7% plus or minus 50 basis points range. Unit cost increases continue to be the primary driver of medical trend, while utilization moderated over the second half of 2012. We continue to expect that medical trend will increase during 2013 but be within the range of 7% plus or minus 50 basis points for the full year of 2013. We are pricing our business accordingly. SG&A expense increased by $184 million or 8% on a GAAP basis, while our underlying SG&A performance was favorable to our forecast in the quarter. Our GAAP SG&A results included the Amerigroup closing costs, as well as a number of other severance and impairment expense items. While some of the non-Amerigroup expense items we covered during the quarter could potentially be considered onetime in nature, it is also possible that similar charges may recur in the future in light of our ongoing efficiency initiatives. Therefore, we have not excluded these items from our adjusted EPS calculations. We exceeded our core SG&A expense goals for the quarter while continuing to make the strategic investments we outlined earlier in the year. We will continue to be diligent about our SG&A spending as we move forward. A quick comment about below-the-line activity. Net investment income increased by $19 million or 12% from the fourth quarter a year ago and was enhanced by carrying higher investment balances during the quarter due to the timing of the Amerigroup acquisition financing. And as stated earlier, our GAAP income tax expense was abnormally low in the quarter due to the positive tax settlement. Reserves have developed favorably and remain appropriately conservative. Favorable prior year development totaled $514 million in 2012, significantly greater than the $210 million recognized in 2011. We believe we are towards the upper end of our targeted mid to high single-digit margins for average deviation as of December 31, 2012. Excluding Amerigroup, our DCP decreased 1.6 days sequentially, consistent with our normal seasonality pattern. DCP was 0.2 days higher than the 40.6 days reported as of December 31, 2011. Debt-to-cap ratio of 38.6% as of 12/31/2012, reflects our debt issuances for the Amerigroup closing. We expect this ratio to decline by more than 100 basis points over the next year and anticipate being below 35% by the end of 2014. Our parent cash balance of $2 billion at 12/31/2012 was higher than our prior expectation. We will be using approximately $570 million this month to repurchase the high coupon Amerigroup bonds, and we do not have any senior debt scheduled to mature in 2013. We currently expect subsidiary dividends of approximately $2.3 billion during 2013, but just a reminder, that these are typically weighted towards the second half of the year. We generated strong operating cash flow of $760 million or 1.6x our net income in the fourth quarter, supporting earnings quality in the quarter. For the full year 2012, operating cash was $2.7 billion and above our net income. We repurchased 11 million shares for $668 million in the fourth quarter, most of which occurred in October following the convertible debt offering. For the full year of 2012, we repurchased 39.7 million shares, or 11.7% of the shares outstanding at 12/31/2011, for $2.5 billion. We had approximately $1.8 billion remaining under our board-approved authorization at year end 2012. We also used $367 million during the year for our cash dividend. I'd like to take a few minutes now to comment on the market in general and some of our specific lines of business. The market environment remains competitive but rational overall. As John noted, we have seen some hardening in certain markets over the recent months. In Commercial, we are pleased with our 2012 operating gain result and look forward to getting back on a path to commercial membership growth in 2014 and beyond. As we discussed previously, enrollment is expected to decline in 2013, reflecting the carryover impact of some legacy pricing decisions in the ASO marketplace, along with our decision to maintain pricing discipline on the fully-insured side of the business in advance of 2014. We also anticipate some membership loss in the individual market during the second half of the year as some people may choose to withhold buying coverage until the exchange is open. Our incremental business investments in 2013 include approximately $150 million related to our exchange business development efforts. We believe we have the assets to win in this new marketplace and are committed to formulating our competitive strategies around consumer-based research and product development. In our consumer reporting segment, we're reporting operating loss of $173 million on a GAAP basis in the fourth quarter. The majority of this loss was driven by the recognition of the Amerigroup closing costs, as well as the other severance and impairment expense items I referenced earlier. Adjusting for those items, the sequential change in this segment's performance more closely mirrored the prior year results. All that being said, we continue to have performance improvement opportunities in our Medicare and Medicaid business areas and believe we are taking the steps necessary to improve future results. Regarding Medicare, we are comfortable with our positioning for 2013. As expected, market exits constrained enrollment at the start of the year. The decline occurred primarily in PPO-dominant service areas. As we discussed in the past, we will be emphasizing HMO product offerings more heavily as we move forward. Partially offsetting the lower M&A sales were better-than-expected results in our Medicare Supplement products. We plan to invest approximately $150 million incrementally in our Medicare program business during 2013. Moving to Medicaid, performance deteriorated in the quarter, primarily in California. We continue to experience pressures in the Seniors and Persons with Disabilities program. We believe we've taken a conservative but appropriate posture in accounting for the uncertainties related to funding for California's various state-sponsored programs, while we continue to work with the state on a mutual beneficial solution. Turning to our 2013 outlook. As John noted, we are pleased with our performance over the second half of 2012 and believe we are entering 2013 on a strong note. Our current guidance is for EPS of at least $7.60 in 2013. This is consistent with our prior expectation that EPS would grow moderately from the $7.30 to $7.40 adjusted EPS range we anticipated for 2012. Our fourth quarter results were better than we expected and gives us reason for optimism about business performance in 2013. We believe our guidance is appropriate given uncertainties such as the flu, sequestration, medical utilization and the continued implementation of health care reform. I would also note that this guidance continues to include a significant amount of Amerigroup integration costs. With respect to specific line items, operating revenue is expected to be in the range of $71.5 billion to $73 billion, an increase of approximately 18% to 20% from $60.7 billion in 2012. The inclusion of Amerigroup is expected to drive nearly $11 billion of this increase. Revenue in the core WellPoint business is expected to increase slightly, reflecting anticipated growth in Specialty, dual eligible and FEP programs, partially offset by lower medical enrollment. We ended 2012 with 36.1 million members, including Amerigroup. For the reasons I discussed earlier, we currently expect enrollment to decline by 650,000 to 750,000, about half each in the ASO and fully-insured businesses. The benefit expense ratio is expected to be in the range of 86% plus or minus 50 basis points. This is an increase from 85.3% in 2012 and primarily reflects the inclusion of Amerigroup business, which carries a higher benefit expense ratio than our consolidated company average and an anticipated increase in the commercial benefit expense ratio, partially offset by modest improvement in Medicare business. The SG&A expense ratio is expected to be in the range of 13.5% plus or minus 50 basis points. This compares to 14.4% end of 2012 and primarily reflects the inclusion of Amerigroup business, which runs a lower SG&A ratio than our consolidated company average, and planned investments of approximately $300 million, primarily in the exchange and senior business areas, partially offset by SG&A improvements related to our year-end activities and focus on efficiency. Investment income is expected to be in the range of $575 million to $625 million, and interest expense is expected to be in the range of $630 million to $650 million. Intangible amortization expense is expected to be in the range of $260 million to $275 million, and our income tax rate is expected to be approximately 35%. Diluted share count is expected to be in the range of 300 million to 305 million for the full year. Note that our current plan assumes a capital return of approximately $2 billion between our share repurchase program and the dividend, but we expect our share repurchase activity to be more back-end loaded than has historically been the case. Operating cash flow is expected to be at least $2.6 billion. And finally, while we do not provide quarterly EPS guidance, we generally expect the quarterly progression of EPS in 2013 to mirror the 2012 adjusted EPS pattern, with roughly 60% of our EPS expected in the first half of the year and roughly 40% in the second half. So in summary, I will simply reiterate that we are pleased with our second half results and optimistic about our business trajectory heading into 2013. I'll now turn the call back to John to lead the question-and-answer session.

Thanks, Wayne. Before we get to Q&A, I just want to address the CEO search process briefly. Our board continues to move thoughtfully and as quickly as possible with the process, and we continue to believe we'll have a decision within the first quarter, hopefully sooner rather than later. Beyond that, we're not commenting on the process or potential candidates, as we've said previously. We remain focused on operating the company during this interim period, and we're pleased with the contributions of all of our associates in driving our improved results over the last 6 months. With that, operator, please open the queue for questions.

[Operator Instructions] Your first question comes from the line of Matthew Borsch from Goldman Sachs.

Could you just talk a little bit more about your outlook on medical cost trend? I'm curious if the flu season comes into the picture at all in your -- maybe your noncommercial outlook and if you're seeing anything at this point that would justify what is now a slightly elevated view of trend for this year versus what you experienced in 2012?

Matt, our outlook does assume that the flu does have an elevated impact to us over normal expectations at this point, primarily on the AGP business, the Medicaid business. In the [ph] commercial front, we haven't seen much of an impact. We said earlier at the JPMorgan conference, about $0.02 impact to our earnings in the fourth quarter, and it panned out because of that $0.02 impact in terms of above normal. So in general, I would say that our outlook does reflect that, and our medical cost trend does reflect that as well.

Okay. And just one follow-up on the commercial front. You -- and I may have missed your reference to factors driving the 650,000 to 750,000 member attrition. Is that partly on your own pricing discipline relative to the market? And if it is, I'm just trying to juxtapose that against your comments that you're seeing hardening in the pricing discipline. And I'm wondering if you're seeing competitors fully put through -- if you can see this, fully put through some of the financial obligations related to health reform in their pricing?

Yes, Matt. I would say that of the membership decline that we're forecasting for the year, about 1/2 of it is in the ASO. I'm going to let Ken comment on that in just a minute of what we're seeing there. And the other half in the fully-insured book, and I wouldn't say that, that half does reflect our pricing discipline around our Small Group business that we expect to maintain. It also does reflect the fact that we do expect minimal sales in the back half of the year in the individual book, as people prepare themselves for the exchanges. We think that's a prudent position to take both in pricing and assumptions around exchange behaviors at this point in time. And it may prove to be conservative, but again, we believe it's prudent. Ken is going to comment on the ASO activity because that affects us on 1/1 [ph].

Matthew, I'll just say that similar to the first half of the year, the market is competitive but rational overall. The -- on the ASO front, we had some legacy pricing decisions from 2011, and we went into this year saying that we would have a negative impact because of groups that decide [ph] that far back. In the second half of the year, we had a very strong value prop on total health management, our current and future savings, our consumer engagement and future vision. And we actually had a pretty good sales season, but we went in with a headwind that was pretty large on the national ASO. I would also highlight on the fully-insured, a part of it is still that the final exit of a number of products in the New York marketplace which had a fairly substantial impact this year and will have a 50,000-or-so fully-insured life impact in 2013.

Your next question comes from the line of Tom Carroll from Stifel. Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division: Yes. So I wanted to just get a sense of, again, maybe have you repeat what's going on to add conservatism to the outlook for this year? And I think you highlighted 3 things. You said you did not incorporate fourth quarter outperformance in your '13 guidance. You've got AGP integration costs that are dragging things a bit. And you also have SG&A investments that are dragging things a bit. I wonder if you would just maybe go through each of those 3 components and give us -- quantify as best as you can or give us some sense of the impact such that we can kind of try to quantify the way we do the conservatism that you've built in?

Tom, let me start off with a few items that I can give you at least some quantifications for. First of all, as you did hear in the call, that is correct. The positive underlying operational results we've seen in the back half of the year, we have not reflected that trend continuing into 2013. We hope that proves to be a cautious and conservative view, similar to what we saw in the third quarter, which panned out in the fourth quarter. But for now, that has not been baked in, in terms of the starting point. In terms of Amerigroup, what we would say is we have between $0.20 and $0.25 headwind for integration costs still to occur in 2013. So for modeling purposes, split the difference. But that's about the range we're looking at, in the $0.20 to $0.25 range, that is embedded in our guidance for 2013. We do have $300 million of incremental investments above our normal run rate baked in for both improvements in our Senior business, as well as preparation for the exchanges. And relative to other headwinds which we haven't quantified but we have baked in to our guidance, we have both an impact from what we think an elevated flu would look like. We've baked in an impact for sequestration. And I would say that with the fiscal cliff still looming, we like the opportunity to have as much cash available at our parent. We think opportunities arise if something was to happen and provide a unique M&A opportunities for us in the future. And for that reason, we have back-end loaded our buyback assumptions regarding the capital we plan to deploy primarily to the back half of the year with a majority of that occurring versus historically, as you know, we've done that more straight line or heavier on the front end. So those are the key data points that are fully embedded in our outlook. Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division: And just as a follow-up, in terms of your outperformance coming off of fourth quarter, would you call that $0.05 a quarter? I mean, is that in the neighborhood?

Tom, again, I wouldn't site -- I really don't feel comfortable sizing it now. I do want to see these trends continue. I do think it's fair to say though that core underlying earnings in the quarter were even much stronger than reported on a GAAP basis because of the significant amount of onetime items that we covered but have not separately broken out, including severance, the acceleration of some deferred acquisition costs that we believe will go away as part of the Affordable Care Act and other charges. And those have all hit the consumer segment. So you can get a pretty good gauge as to the volume of items that we cover by looking at the Consumer segment performance.

Your next question comes from the line of Melissa McGinnis from Morgan Stanley.

Maybe now that AGP is a part of the story and part of the growth story, Dick, can you provide some commentary on AGP's recent performance on the Florida long-term care RFP? And then also update us on the growth opportunities around TANF and duals that you're most excited about as we head towards 2014.

Sure. Well, thanks for the question. We're actually pretty pleased with the results in Florida on the long-term care rebid. We won 2 counties, but we only bid 3. And the reason why we only bid 3 counties is because the -- we thought the underwriting was fairly tight that the state and their actuary provided. The target loss ratio on the underwriting was in the neighborhood of 93% to 95%, depending on the region that we were looking at, and there were 11 regions, as you may know. And in looking at the regions, we identified 3 regions where we thought we could make a modest margin. And principally, it was because we already had assets on the ground in the number of those regions, and we felt like the underwriting was not quite as tight in those regions. We certainly felt had we bid more regions, that we could have been successful in a larger number of regions. But quite frankly, we were concerned that if we bid all 11 regions in 1, the majority of what we bid, we would end up with a large book of revenue. And we were a little bit concerned that if that revenue or that business rather didn't run well, that, that could produce material losses, so we bid conservatively intentionally. We felt that we can make money in the regions that we bid. And if by chance those regions did not perform well, that it wouldn't result in large losses for the organization. So all in all, we took a disciplined approach to bid. We bid conservatively, and we were pleased with what we won. Relative to the longer range opportunities, we think there's still very significant in Medicaid. We expect a number of our larger states to be rebid over the course of the next year or so, notably Florida, Georgia, Tennessee. And while there's always risk with a rebid, we think there's more upside than down in each of those markets because of our competitive positioning. We continue to track a number of new business opportunities in states that we're not in, so we see growth continuing to come from new markets. Speaking broadly, as I think everybody knows, the Medicaid program is still relatively under-penetrated from the managed care standpoint. There's close to half of the Medicaid beneficiaries in managed care programs today, but less than 1/4 of the overall Medicaid spending is in managed care with the lion's share of the ABD and long-term care spending in Medicaid still not in managed care, so we see significant growth opportunities in that market segment. I think everybody is aware of the significant dual opportunities that exist, dual eligible opportunities. We're tracking opportunities in about 6 key states right now that we believe will go live in 2014, and we think our chances of winning in those markets is quite good. And then, of course, health care reform will bring -- should bring Medicaid expansion in a number of markets in 2014. We recognize that there's a number of governors, particularly in Republican states, who have said that they're not going to expand, but we also have a number of Democratic states that have stated that they will expand. And we think in the long run, the economic benefit to the states will be such that most states will eventually expand Medicaid and we'll see significant growth not just in 2014, but beyond in the space. So when you aggregate all of that, we think there's enormous potential for continued growth from a top line perspective over the course of the next 2, 3, 4 years. And then I should mention that we have a lot of activity underway right now in 2013, designed to improve the margins on our existing book. So from an earnings growth standpoint, we would expect that in '14 and beyond, we should start to see the benefit of those activities. So we see a lot of top line growth. We also see margin improvement, and that should drive a lot of incremental earnings growth for the enterprise in the years ahead.

Great. Maybe just one follow-up on 2014 Medicaid margins. In your conversations with the states to date, what do you think they're going to do about the industry excise tax, especially as it relates to a lot of your rate renewals actually happen in the back half of '12 and carry into the first half of '13 or into the first half of '14. How do you think they're going to deal with the tax around rate increases?

Well, in general, we believe that the tax will ultimately make its way into the rating process. It is a legitimate expense. The rates need to be actuarially sound. Certainly, the industry's position is that the tax needs to be accounted for in the rating process. And so overall, I would say, that is our expectation. What exactly results state to state, I think we're just going to have to wait and see. So I don't think it's -- I think it would be premature to declare victory on that issue just yet. But overall, I think we're cautiously optimistic.

Your next question comes from line of Justin Lake from JPMorgan. Justin Lake - JP Morgan Chase & Co, Research Division: First question, John, you talked about having confidence in sustained operating income growth over the next several years. Should we take that to mean that your early view on 2014 is that operating earnings should be up year-over-year?

Thanks for the question, Justin. And obviously, it's premature to project into 2014. I would say that at this point, certainly, our intention is to grow, and we are positioning the company to do that and I've outlined a number of those initiatives for you today as well as previously. But overall, I would say that growth is our objective. Justin Lake - JP Morgan Chase & Co, Research Division: And just to follow up there, I mean, I know there's a ton of uncertainty on exchanges and you've done a great job of kind of outlining your risks, the exposure there, I guess, I should say. Is there any other business segment whether it's large group, ASO, Medicare, Medicaid, where you don't think you'll have earnings growth year-over-year or there's some question as to whether you'll have earnings growth year-over-year, for instance, Medicare Advantage with the cuts coming through?

Justin, this is Wayne. I think at this point, again, we're not giving '14 guidance. But clearly, we would expect to see growth in the Medicaid expansion happening in '14, as you heard Dick say, not only the expansion, but the new bids that are going to occur, coupled with the margin improvements we see both in the AGP and probably more importantly, in the WellPoint book of Medicaid. So I think that's clearly an area for growth. The investments we're making in the Senior business are being made with the intention of driving growth in the HMO market and improve star ratings. Again, we did indicate that we think that's about 2 years before we start seeing the full benefits of that, but we may see some of that next year. And obviously, the exchange is an area we fully expect to grow and that's why we're making the investments this year. And in addition, you won't have all the integration costs that we spiked out for you. The $0.20 to $0.25 that we're going to incur in '13 will not occur in '14. So I think there's many areas that we would expect to grow across all of our businesses. The one area that we see as a potential headwind right now is the small group margin and how that actually migrates to exchanges. And we've got a number of strategies to try to maintain that business within the small group, but are also very comfortable moving to the exchanges as we think we're going to have a very good product offering.

That's great. Just one last numbers question. On Medicare Advantage specifically, I apologize if I missed this, but what is the expectation for Medicare Advantage membership and also Commercial risk membership this year?

Yes. Justin, I'll let Leeba respond to that.

For Medicare Advantage, we did expect a decline in membership as a result of the reductions in service areas. As we mentioned, we have unexpected growth in our Medicare supplement business that was in part driven by those exits. We'll be providing full membership guidance at the upcoming Investor conference. But the reductions are consistent with the targeted reductions that we had from our service area exits.

And then, Justin, to your broader question, as we indicated, about half of the decline in membership is going to be ASO and half fully insured. So the half that's ASO is all Commercial; and then on the half that's fully insured, it's a combination of disciplined pricing in small group that we're going to maintain throughout the year. And then Medicare will be a component of that, with a little bit of some Individual in there as well.

Your next question comes from the line of Christine Arnold from Cowen.

A couple of questions. On AGP, you gave us a lot of good detail there. Are you still on target for $50 million in synergies? And I think when you announced the transaction, consensus expectations for AGP's 2013 EBITDA was $470 million. Do those seem like reasonable numbers to you?

Christine, yes, what I would tell you is relative to our original expectations, and I'll give some broad parameters what we spoken about before and then try to update those for you. So when we initially announced the transaction, we expected it to be in the mid-teens accretive, including all onetime costs. This stub period, the 8 days, so if you said, so what was the impact for this 8-day period, all in, for all the onetime costs and other items is roughly $0.08. So if you look at it as mid-teens before, you should expect roughly $0.08 better into next year because that was obviously baked in the mid-teens. We still are confident in the mid-teens. We are taking a more cautious view for flu right now, which is why we haven't raised the mid-teens. We are still fully expecting the synergies of at least $50 million. We believe that is very achievable. We think we have line of sight on the full $50 million and hopefully then some, based on what we've seen to date. So I'd say from that perspective, we're feeling very positive. Relative to our assumptions when we announced the transaction, I'd say the top line is coming in better than we had expected, both in membership and in revenue. I'd say our synergies are better than we expected at this point, and our below-the-line debt cost is slightly better than we had modeled. The big item right now is what's the flu going to impact us by, and that's why we're still confident with the at least mid-teen range, but hopefully could do better.

Great. And then on Medicare Advantage, it's been a challenge and I think a big part of your longer-term plan is to really turn around those losses that you had in the Medicare Advantage operating line. How much do you think you can get back in 2013 of the $600 million you've kind of lost over the last 3 years, given that maybe you're exiting some PPO markets that were unprofitable and that gives you an immediate help?

Yes. So Christine, one thing I would say is, I would like to wait till February at our IR day when we give a little more detail here. But what I would say is, you will start seeing improvement immediately in the margins for Medicare this year and substantial improvement. But it's important to recognize that we wanted to invest for the long-term strategy for both the STAR ratings and the HMO positioning. And with that, we're investing $150 million of those earnings incrementally this year. So what you may see in the segment reporting as we go forward is not as much earnings growth. But please keep in mind, we are covering that $150 million of incremental investments. So if you look at that on a run-rate basis, the core earnings are going to improve this year, but then be offset primarily by the investments for this year, but to drive growth beginning really in '14 and '15.

Okay. Probably pretty stable overall earnings from the operations?

Stable is an appropriate way to look at it.

Yes. And Christine, I would just emphasize that, and we said this before, our Medicare turnaround plan is a multiyear strategy. As Wayne indicated, we do expect margin improvement during first phase of this with enrollment growth coming later.

Your next question comes from line of Chris Rigg from Susquehanna.

I just want to help you -- can you help me better understand the $0.20 to $0.25 from Amerigroup? Those are onetime in nature and not likely to repeat in 2014?

No, Chris. Let me clarify. So the portion of that cost is going to repeat. It's the debt on the AGP earnings. So I'm sorry, I'm sorry, I was referring to what happened in '12. You're referring to '13. In that $0.20 to $0.25 for '13 range, those are the integration costs. We expect those to fade away after '13. As we mentioned when we announced the transaction, at least mid-teens accretion in '13. With those costs going away, you will get growth from that beginning in '14, and then we expected at least $1 accretion by 2015.

Okay. And then -- so when you guys report results over the course of this year, are you likely to report the adjusted number like you just did in the fourth quarter so the $0.20 to $0.25 is broken out separately?

No, we will plan to include as part of our normal course of business now. So all of our numbers will include those integration costs being embedded in our numbers.

Okay, okay. And then just on the AB 97 and the provider cuts that seem like they have at least court approval to move forward, at least from the Circuit Court of Appeals, how does that impact, if at all, your results this year?

In terms of AB 97?

Yes, yes, I mean, is that -- what are you guys assuming in the guidance?

What I would assume is, we believe we have appropriately reserved for whatever exposures we could have regarding AB 97 at this point in time. We are optimistic that we will get that implemented in an appropriate manner, very similar to governor's proposal, which is more prospectively, but we recognize that we need to take a prudent position around what exposures could exist in terms of how that maybe put forward [ph]. We think our guidance does have that prudent position baked into it.

Okay. And so, if that's not retroactive and it does move forward, is there a cash impact from a cash flow perspective? Or is it -- there's no impact?

Not a cash flow perspective because again, in theory, a lot of the cash has already exchanged hands, so what you really just have is whether -- if it's retroactive, we'll have a negative cash flow impact because we'll ultimately have to impact whether those rates get back. I doubt we'll be writing a check. I think it'll be more reflected in the future rates though, so -- but in essence, if it's prospective, we believe we had a prudent posture on this, and there would be potential positive development for us.

Your next question comes from the line of Josh Raskin from Barclays.

Just wanted to understand a little bit more about the guidance and process and sort of what's come together the last couple of weeks. It sounded like 2 weeks ago, you guys were suggesting relatively flat net income and understanding that the fourth quarter came in better. But if I use the midpoint of your updated share count guidance, you're implying a decline of about 6.5%. So I just want to understand, is that sort of consistent with what you were seeing? Or has something changed in the last couple of weeks? And then, I'm also curious if the process by which you're setting guidance is different than what you've used in the years before. I don't know if that's impacted by the CEO search, or if you guys are thinking more conservatively due to the uncertainty in '13.

Yes. So Josh, let me take a stab at this. First of all, in our 8-K that we filed right before the JPMorgan Conference, we specifically stated off a base of $7.30 to $7.40 that we expect relatively stable adjusted net income for 2013. Obviously, we've outperformed that $7.30 to $7.40, and as John indicated earlier, have not reflected that in our updated guidance. Clearly, if those trends continue, that would prove to be a conservative view. With that in mind, though, we thought it was prudent in light of the elevated flu we're seeing to bake that in. We also thought it was prudent to bake in some level for sequestration, as well as moving the buybacks to be feathered in much slower on the front end of the year, much heavier in the back half of the year because, again, we like the advantages of having dry powder if the fiscal cliff causes a broader concern for the markets and for companies that would be cash constrained, and it gives us unique opportunity. So I would say, our positioning hasn't changed. We've really just come off a stronger base, and I think we've baked in some other items that we think give us a prudent view of things that could go wrong. But hopefully, similar to third quarter, if those don't occur, we could have better-than-expected results.

So Wayne, the same sort of process by which you build your guidance that you've used in prior years?

Yes, yes.

Okay. And then, just a second question then, some of your peers have broken it out. Is there a way for you to help us understand, in terms of exposure, how much of your actual EBITDA is expected to come from either the Individual or the small group or both segments?

I would say at this point, Josh, we'll give more details in February around our business segments. The one thing I would highlight, though, is that the impact for Individual regarding exchanges, we don't expect that to have a negative impact for us. We actually expect that to be a net positive impact. It's important to recognize with the 85% MLR for small -- for large group and the 80% for Individual and small group, relative to the Individual business, our margins are already in the 3% to 5% range for Individual. So we're not pushing high-end margins in that book already because of those MLRs. So we don't see a migration from the current Individual books of the exchanges being a headwind at all. In fact, it should be a net tailwind for us. Relative to the small group business, we have said that we would expect for our roughly 2 million members that we would see some margin headwind as those migrate. But I'll let Ken comment on a few of the things we're doing to at least position ourselves for the exchanges and how we're trying to address our small group business.

Josh, when we look at the business going forward, there'll be some margin reduction on the small group business, as Wayne stated, but we see this as a very good opportunity as well and an opportunity for top line growth. We do -- we've done a tremendous amount of consumer research on exchanges and are working with their regulators in all 14 states. While we feel that, really, the underlying economic constructs and the structure in each state will drive our decision, whether we participate or not, we're going in with a very positive attitude and feel that we have some great assets to be able to grow our business when we get into 2014. So we do see small group, as Wayne said, will be the area that will have the challenge. And we do feel that, over time, it will be more than offset with the opportunities we have in the exchanges and the growth, both top line and overall EBITDA growth, that we'll have as we grow our overall base.

The only thing I would add, Josh, and we said this publicly is that if you were to look in our entire small group business and model that over a 5-year period, what kind of margin attraction could have. And we said if you were to cut it roughly in half, you could build a headwind of about $400 million. So if you assume the entire business was to migrate and you assumed all margins were to go in half over a 5-year window, that's about the size of the headwinds you would have. Obviously, that would be substantially offset, though, by the exchange buildup that would occur there and the tailwinds we would get from all that new growth.

Got you. Okay. So -- and as you guys are saying offsetting in the long term, is that -- are you by definition saying in year '14, for Blues market you'll participate in both exchanges, so sort of all 28 of those exchanges?

We're going in with the assumption that we'll participate in anywhere it economically makes sense. So we are preparing. We're working with our regulators in each market. It ultimately does come down to a decision on how we work with our regulators, but we do anticipate using our advantages in all markets.

Your next question comes from the line of Scott Fidel from Deutsche Bank.

Actually, just wanted to continue that discussion on small group and just sort of be interested in how you think the pricing dynamics might play out over the course of the rest of the year in small group. Do you think that we're going to see some additional firming as you see carriers pricing in some of the ACA taxes and costs? Or do you think there could be some additional competition as you see folks trying to retain certain levels of market share in small group ahead of exchange implementation in 2014?

It's -- so far, it's been rational. And the impact to the Affordable Care Act, including the insurer fee, comes into play more as we head into the second half of the year, as the pricing the membership carries more into 2014 and therefore, has to be covered. It's probably important to say that our pricing for 2013 is about 75% baked right now, meaning the vast majority of the member months are already priced for. So there is -- we do feel that in most states, we've seen our -- the market as a whole price the ACA fee in because it's appropriate. It has not created a competitive disadvantage or a disjoint at this point, but it will be a market-by-market, region-by-region area. But I would go back to over 3/4 of our member months, pricing is already baked in for 2013.

Okay. And then just had a follow-up question just on Amerigroup, and maybe if you can comment a bit on how the performance of Amerigroup tracked in terms of margins in the fourth quarter? And then you did sort of reaffirm your views on the synergies in the accretion. So should we assume from that, that you're still assuming that AGP can produce net margins? I think, Wayne, you had mentioned previously that you were assuming sort of a 2% to 3% net margin sort of run rate for AGP post the acquisition, so just an update on expectations around AGP's margins.

Scott, I'll let Dick comment on the details of it. But again, I would say that the book of business is growing better-than-expected. The premium is better. We're being strategic in the markets we go after. As you've heard in Florida, I think there's a couple of counties that we're focused on but typical with new business coming in. But all in all, I think those margins are still reasonable, and I'll let Dick comment on what we're seeing right now.

Yes, not to go too much beyond that, but as you know, we had a lot of new business in 2012. I think our revenue as an independent company grew by something like 40%. A lot of that new business came from Texas. We entered the new State of Louisiana, a much smaller new state in the middle of the year at Washington and our loss ratio in some portions of Texas, principally the rural market as well as El Paso, was elevated and continues to be elevated, and our loss ratio in Louisiana is elevated from our original expectations as well. So overall, our MLR as a business is somewhat above where we thought it would be this time last year. But that's not uncommon. I mean, new business often comes in a little hotter than expected. We're doing usual things that you would expect that we always did in the past in terms of re-contracting and medical management initiatives, and we're also engaged in pretty heavy dialogue with the states relative to rate adequacy. We think a lot of this new business was underwritten pretty aggressively by the states. And so in the long run, we're optimistic this business is going to run as our business ran historically, but it's going to take a little time. We've got to let our initiatives take hold, and ultimately, we're going to have to get some help from the states in terms of rates. But we're confident in the end we'll get that. We've got to -- in particular, we have a strong track record in Texas, not only in terms of executing well as a team, but also in terms of the state being responsive from a rating standpoint. So it's going to take a little longer than we thought. We're probably going to feel some of that impact in 2013, but I think we'll get there eventually.

Your next question comes from the line of Sarah James from Wedbush Securities. And Sarah James disconnected. We'll go to the line of Kevin Fischbeck from Bank of America Merrill Lynch.

Okay, great. I just wanted to clarify something quick before I ask the follow-up question. You mentioned before that sequestration was a headwind to your numbers potentially for 2013. How does that flow through? Did you not price for that? And what's the relative size for sequestration?

Kevin, thanks. We did consider the potential impact of sequestration cuts as part of the bidding process. We do have plans to help mitigate the impact of cuts, should they take place. Our markets are, obviously, as you know, very competitive, and we would need to make some adjustments to provide our payments to compensate for sequestration cuts, but in an actuarially sound manner. So I would say yes, we have, to answer your question, the short answer is yes, we've taken that into account.

And we're not quantifying at this point in time. I think it's just important to recognize that while we believe we can implement many of these actions, we do believe that a lot of these actions will take some time as we have to do it on a contract-by-contract basis, and we plan to honor our contracts with our providers as written. And so, I think it's not a full-year baked impact. It's more the impact of the time that would take for us to implement all the actions that we would want to put forward.

And this is -- the potential impact of this is another reason for the prudent stance we've taken with respect to our initial 2013 financial guidance.

Okay. And then, as far as, I guess, a couple of things in California. Do you have -- are you -- what are you assuming as far as the dual rollout for 2013? And then Health Net obviously has a contract with California that's, at least, right now is somewhat unique. Is there an opportunity for you to do something similar in California?

Well, we were disappointed with the 3-month delay with the dual projects there, but we are looking forward, obviously, to serving this new population. However, if the delay will improve the state's rating-ness [ph] and increase the chance of success for the overall program, then we think it was a prudent move. We do plan to participate in 3 counties, as you probably know, Santa Clara, Alameda and directly and as a subcontractor to L.A. Care and L.A. County. So these programs are now scheduled to begin in September of 2013. But L.A. will be phased in over 18 months, which is, I believe, supposed to smooth the enrollment transition. We've not seen final rates here for the program. We are cautiously optimistic that they'll be adequately funded. We will maintain the option not to participate in the event that the funding is not sound.

The only thing I would add, Kevin, to your question is similar to Health Net's transaction, we're having our ongoing discussions with the state. We would expect, just as the state has committed to Health Net, that we would have actuarially sound rates with appropriate margins over time. And we just -- we would prefer to keep those discussions for now with us in the state as we move forward.

Okay. But you're not factoring anything in your guidance? Or is there something in there?

No, we had the build-out for the duals, though, in California and we've got, obviously, the delay baked in, so it has a slight negative impact in our guidance because it's been delayed by 3 months because the build-out costs don't go away. They maintained and yet now, the revenues start 3 months later. So we have a slight delay in our guidance -- a slight delay in the rollout, and that puts a slight impact on our earnings. But it wasn't expected to have a huge earnings impact in the current year anyway since the build-out costs occur regardless of the start date.

And your final question today comes from the line of David Windley from Jefferies. David H. Windley - Jefferies & Company, Inc., Research Division: So a question on the SG&A investment spending above normal, the $300 million. Would you expect some amount of that also to carry forward into 2014?

At this point, I think it's premature to be able to answer that. I think it will important at the IR Day in February that you can see the details of these investments and why we're investing where we're investing. But clearly, I think we would say, we would expect some of that to not recur. I think that's a very fair statement and provide some tailwinds to us. At the same time, though, depending on the pace of the duals and how those rollout, depending on the role the state would like us to play on exchanges and we're hoping it will play a bigger role with our states. I mean, there could be other items, but if there are other items, we will need to show you the revenue and the growth attributed to those investments. So for now, I would expect some of it, though, to be non-run rate and that we would get some of that back. But if it is spent, we'll give you line of sight at least around why we're investing and where. David H. Windley - Jefferies & Company, Inc., Research Division: Okay. And then a follow-up on -- just a broader question on your research on Individual and small group exchange actions and perhaps even broader than that. But I guess I'm just curious given the simulations and research that you have been doing, what your views are on employer dumping into exchanges? What -- do you expect that to be modest and slow? Or do you expect that to be more of a kind of an avalanche early on?

David, it's Ken. We don't think it will be an avalanche early on. We think that it will be moderate changes. It will primarily start in the small group market, and we feel that there'll be groups going on both that have coverage and will be transitioning to move over, and then there'll be a very significant portion of the market right now that isn't covered. As you know, the offer rates in small group are below 50% right now, so there'll be a lot of others adopting in just additional growth. But we see it in small group, in the lower income groups that would see the subsidies being an advantage. And right now, I think the market is assessing and evaluating on a state-by-state basis. A lot will depend on the marketing efforts by the states for their marketplaces and how we tie into it. But I'm not -- it will not be an avalanche. It will not grow very fast in the large group, and it will just transition over time, as Wayne said.

Thank you, everyone, for your questions. In closing, let me just say again, we are pleased with our fourth quarter results and are taking steps to ensure our company is well-positioned for increasing growth and success in the future. We're motivated by the opportunity to be a key part of the solution regarding the challenges of rising health care costs and access. We do look forward to sharing more information about our investment plan's outlook and longer-term strategies with you in the coming months. And let me say again that we will be hosting an Investor Day on February the 28 in New York City. We plan to expand on our strategies to drive future growth and provide you with an opportunity to become better acquainted with our leadership team. The logistical information is available on our website, and so we do look forward to seeing you all there. Finally, I'd like to say thanks to all of the WellPoint associates. We've done a lot in the last 6 months to improve our ability to execute in growth areas, and the results are showing through. I know the change can be difficult, so I appreciate all of your efforts and I'm confident that your hard work will drive even better results in the years ahead. I want to thank everybody for participating on our call this morning. And operator, would you please provide the call replay instructions?

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