Ladies and gentlemen, thank you for standing by, and welcome to the Anthem Fourth Quarter Results Conference Call. At this time, all lines are in a listen-only mode. Later there will be a question-and-answer session; instructions will be given at that time. As a reminder, this conference is being recorded. I would now like to turn the conference over to the company's management.

Good morning and welcome to Anthem's fourth quarter 2016 earnings call. This is Doug Simpson, Vice President of Investor Relations. With us this morning are Joe Swedish, Chairman, President and CEO; and John Gallina, our CFO. Joe will provide an update on recent developments and our 2016 financial results; John will then discuss our business unit performance and other key financial metrics; and then Joe will discuss our 2017 outlook, and provide some incremental commentary on earnings expectations beyond 2017. We will then be available for Q&A. 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 antheminc.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 Anthem. 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. I will now turn the call over to Joe.

Thank you, Doug, and good morning. This morning, we announced fourth quarter 2016 GAAP earnings per share of $1.37 and adjusted earnings per share of $1.76, with membership and revenue tracking above our previous expectations. For the full-year 2016, GAAP earnings per share was $9.21, and adjusted earnings per share was $11, representing year-over-year growth of 8.3%. As we previously stated in an 8-K filed a few weeks ago, we increased our adjusted earnings per share outlook from $10.80 to $11, primarily driven by a retroactive change in the minimum MLR calculation under California's Medicaid expansion program. Before John and I discuss the details of our 2016 financials and our earnings outlook, I'd like to start by discussing our perspective on the changing political landscape. Anthem remains actively engaged in the policymaking process on behalf of our customers at both the Federal and state level. We believe the health insurance industry in general and Anthem in particular, is part of the solution in addressing the major issues of access, quality, and affordability. As we have said repeatedly, the individual market under ACA has not been working well, and changes are needed to ensure stability. We're hopeful that Congress and the administration are taking a measured approach to repairing the ACA that seeks a smooth transition to prevent health coverage disruptions for Americans whenever possible. Changes are needed to ensure both a stable and sustainable individual market and a smooth transition for consumers. Specifically, steps must be taken to address two key shortcomings in the current market – risk pool integrity and affordability. Suggested changes include: Repeal the health insurance tax and extend transitional or otherwise known as grandmother plans indefinitely to improve affordability; decrease the number of special enrollment periods, and requiring pre-verification of eligibility; address challenges with nonpayment of…

Thanks, Joe. In the Government Business, we added an additional 109,000 members during the quarter, bringing the total 2016 enrollment increase to 614,000 members, representing 6.9% versus year-end 2015. The enrollment growth and pricing increases translate into 2016 Government Business operating revenue of $45.5 billion, a growth of 11.4% versus 2015. Operating margins for the Government Business was 3.9% in 2016, a decline of 90 basis points compared to the prior year, driven by lower gross margins in the Medicaid business. As we communicated previously, we expected Medicaid margins to compress from 2015 levels due to rate actions impacting 2016. In addition, we experienced higher-than-expected claims across Medicaid business in the current year, including materially higher-than-expected cost in the recently implemented Iowa contract. Operating margins in the fourth quarter of 4.5% were higher than expected due to the retroactive change in the minimum MLR calculation under California's Medicaid expansion business we discussed earlier. Importantly, core medical cost trends during the quarter were relatively in line with our most recent expectations. The pipeline of opportunity for our Medicaid business remains substantial, with approximately three-fourths of the pipeline in new and specialized services, and the remainder in traditional Medicaid services. We continue to believe our Medicaid asset and geographic footprint is very well positioned to capitalize on these growth opportunities over the next five years, as we continuously demonstrate that we are part of the solution to addressing the challenges of rising healthcare cost for our state partners' constituents while improving quality. Within Medicare, we are pleased with the progress the team continues to make, as our 2016 margins reflected improvement versus 2015. The improvement is a direct result of investments made in our Medicare business over the past three years. We have now positioned our portfolio to grow MA in 2017,…

Thanks, John. Before we begin, and it's important to note that this commentary about the 2017 outlook details reflects Anthem on a standalone basis. We expect operating revenues to grow to a range of $86.5 billion to $87.5 billion in 2017, reflecting growth in higher revenue PMPM insured membership in the Government Business and premium rate increases to cover overall medical cost trends. In total, we expect our enrollment to increase by about 200,000 to 400,000 in 2017. Specifically in Commercial, we expect membership to increase by a little less than 150,000 members. Our self-funded enrollment is expected to increase by approximately 350,000 lives in 2017, with positive momentum in securing new contract wins and maintaining retention rates in the large group segment, along with expected growth in BlueCard enrollment. While we expect another growth year in ASO, our Commercial fully-insured enrollment will be pressured. We expect membership declines in our Individual business as individual non-ACA compliant membership will continue to decrease. We were encouraged that the early indicators of the open-enrollment activity are ahead of these expectations with a demographic mix that is consistent with our expectations. At this time, however, we do not yet have visibility on the makeup of our renewal membership or the health of the overall risk pool. Our outlook continues to expect our individual ACA-compliant plans to be breakeven to slightly profitable in 2017. We expect Local Group fully-insured membership losses of approximately 100,000 as members continue to transition into self-funded product offerings, albeit at a slower rate than recent years and the impact of membership declines as Small Group plans migrate into ACA-compliant products. For Government, we expect another year of growth, with membership expected to increase by more than 150,000. We expect Medicaid to add more than 100,000 lives, reflecting organic growth…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from the line of Kevin Fischbeck from Bank of America. Please go ahead.

Okay, great. Thanks. That's helpful, the long-term commentary. I guess maybe just following up on that. One clarification, first, and then a question on it. I think you said, high-single digit, low-double digit earnings growth. Did you mean EPS growth, not earnings growth? And then, the question – the other question would be, when you look at the three products, Medicaid, Medicare, and Commercial, where are you versus that long-term target margin in each product? Do you see pressure in any of them? Do you see margin opportunity on any of them?

Yeah, thank you, Kevin. In terms of the high-single digit, low-double digit, that was on an EPS basis, so that would include a little bit of capital deployment associated with that on a long-term basis. Associated with the second part of your question, the Medicare, we've done extremely well over the past few years trying to get that platform fixed and get it corrected. And we're very close to target margins in that block of business right now, albeit at a lower membership level than we would like to have on a long-term basis. We think that there is some significant opportunities for growing the top-line and maintaining those target margins. On the Medicaid, it's a mixed bag. The Medicaid expansion, we've done extraordinarily well, and we've actually been earning above target margins. And that's one of the headwinds we have going into 2017, is the pricing associated with the Medicaid expansion book of business coming back down into target margin levels. And then on the Commercial, we think there's a lot of opportunities associated with wallet share, doing a better job of penetrating our large group ASO block of business, as well as trying to retain and maintain our ACA-compliant and non-ACA compliant Small Group books of business. So it's not a simple question, but we think we're very well positioned for growth, but we're doing pretty well right now.

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

Thanks. Good morning. First, just a clarification, if you could quantify the impact of the HIF holiday on the MLR at the G&A and the revenues? And then, my second question is just the buybacks, or I guess the share count coming down 2 million to 6 million shares seems relatively conservative in light of the $3.3 million of parent cash, not to mention the $3.5 billion that you'll generate over the year. And I understand your plan is to start in 2Q. But I think, Joe, you said you'd resume sort of normal share repurchase activities, and I guess I'm just curious why you wouldn't resume a more aggressive stance, in light of the pause you've taken over the last two years? Is there pending M&As? Is there something else that you want to provide that additional flexibility?

Josh, good morning. Thanks for the question. Let me answer the second question, maybe John can pick up the first question and get into some detail, but I think I also underscored the use of the word opportunistic. I think your point is a good one in terms of the commentary, which is, we are certainly going to target a certain level, but I believe, if we see the opportunity present itself, we may become – use the word more aggressive, so I wouldn't rule it out. But, again, being opportunistic is critical. And then to your point, that certainly gives us powder with respect to other opportunities in and around M&A and investments and other capital deployment arenas, that would pursue certain growth opportunities for the company that we think would be very vital to our success going forward. John?

Yeah, sure, thank you, Joe. And then, Josh, on the other question on the HIF holiday, as we had indicated in our prepared comments, that makes many of our metrics non-comparable on a reported basis year over year. I would look at it this way, in 2016, the amount of health insurer fee that Anthem is going to be required to pay, and is expensed, is approximately $1.2 billion. And we've had a very cognizant approach to try to ensure that our pricing associated with that maintained a constant EPS number. So we're pricing for the fee, the tax gross-up, and the non-deductibility of that again and again, so you can sort of then calculate the impacts. Once you go through that, you'll see that the MLR ratio, year over year, it is going up nominally, really not much at all. The single biggest driver by far is the fee. The G&A ratio is coming down a bit, but the single biggest driver of it coming down – the magnitude's coming down, is the fee. And then you also have to realize that in the competitive environment that we work in, occasionally there can be some fungibility associated with the pricing and how much it's fee versus other things. As well as that in the Medicare Advantage area that we've taken the waiver of the fee and we've baked it into product design and benefits to the customer so that the members actually enjoy that. So a lot of moving parts, but the vast majority of our reported movement is the fee.

Your next question comes from the line of Ana Gupte from Leerink Partners. Please go ahead.

Yeah, thanks, good morning. The first question was, can you just quantify the magnitude of your loss on Iowa in 2016 and where your margins ended up? And then, what is your rate increase that you are expecting, and will it be in Jan or in July?

Yeah, Ana, thank you for the inquiry. In terms of – I'll answer the second part first. The renewal was due on July 1, and that's when we would expect to obtain actuarially justified rates associated with Iowa. We are still negotiating with the State of Iowa in terms of the rates. So it's premature to provide a specific point estimate or data element on that, other than to say that we're requesting actuarially justified rates. In terms of 2016, as we had stated, I think in the second quarter call that the expense – the medical loss ratio is a good 20 percentage points higher than we expected. It did come down a bit over the rest of the year, in some of our medical management initiatives and some of our other cost of care initiatives went into place, but it still ended up at a loss in the 10 to 15 percentage points higher than we would have expected, based on that block of business.

I might underscore – to add on to John's commentary, we continue to be in dialogue with the Governor's Office. As you may know, there has been a transition or there is a transition now in process regarding the appointment of a new governor. The Lieutenant Governor is moving into the office and we're in dialogue with her office, and we're hopeful that that continued dialogue in and around the needs that we have for – I guess, call it correcting the inadequacy will produce results. But, again, we will not know that for still some period of time. But, again, we remain hopeful that the dialogue will produce intended results.

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

Hi there, you mentioned that some of your individual enrollments was coming in higher than expected. Where do you think you're landing as of now? I know open enrollment just ended last night. But, where do you think your individual enrollment wound up entering this year? And if this turns out to be another year of losses, without some meaningful legislation – I know we're hopeful that there will be meaningful legislation and administrative action, will you exit for 2018?

Yes. So Christine, let me answer your question on enrollment, and then I know Joe has some commentary on the second part of your question. In terms of the enrollment, even though open enrollment ended last night, that only provides us one portion of the equation, and that's the applications, and we monitor that very closely. Applications are a little bit stronger, a little bit better than we expected. Not dramatically, but a little bit stronger. And as we look at the demographics associated with those applications, whether it's age and income distribution, subsidy eligibility, metal levels, various things like that, we're very comfortable with the overall amount of applications as compared to what we planned for. What we do not know and what no one knows at this point is how the renewals work and what percent of renewals that you'll retain versus who jumps to another plan versus who goes somewhere else. And so that's really premature to give an exact membership number because it's really unknown. But I will say the applications were a little bit stronger than we had anticipated. Joe?

Yeah, thank you. Christine, let me deal with our outlook with respect to how we might further engage in the market or retract. As I said in third quarter earnings call, that we are very carefully evaluating how the marketplace will evolve related to the legislative and regulatory changes that may be enacted as certain regulators and legislators seek stabilization of the marketplace. We have weighed in considerably and continue to do so with all the leadership in Congress, and I can tell you that we have some very specific asks, and I commented on those asks in my remarks. But also there are probably about four or five other expectations. And what all that maps to is a set of expectations that we will be monitoring very carefully to see if they are implemented, such that as we approach the end of the first half of this year, we will have to make decisions, as I said, on the last earnings call, whether or not we surgically extract ourselves from certain rating regions, or quite frankly even on a larger scale, depending on the stability of the marketplace. We believe that this year, we have a – I'd call it maybe a fairly modest outlook in terms of being able to pursue or accomplish a profitability that would be – would recognize stability, because of the price increases that we achieved for this year's entry into the marketplace. But if we can't see stability going into 2018 with respect to either pricing, product, or the overall rules of engagement, then we will begin making some very conscious decisions with respect to extracting ourselves. We will have more to say by our Q2 call. I think it's fair to say that we still are in a state of evaluation, but I think I wanted to share with you that we are very mindful, very vigilant, and we will make the right decisions to protect the business with respect to moving into the next year. Conversely, as I said, I believe, and we do have some positive indicators that stabilization could very likely occur, and given the advocacy that's occurring on behalf of the industry, and I'm again, hopeful that our recommendations will be looked at very carefully, and adopted. But, again, it remains to be seen, and we'll say more as we end up our Q2 call, so. Thank you, Christine, for that question.

Your next question comes from the line of Sarah James from Piper Jaffray. Please go ahead. Austin T. Quackenbush - Piper Jaffray & Co.: Hi, this is actually Austin on for Sarah. Can you go into a little more detail on the California minimum MLR retroactive change? Is there any offsets under the legal settlement and that offered margin targets for California Medicaid?

Yeah, sure, thank you, Austin. The California Medicaid retroactive adjustment – the medical loss ratio calculation, just for a little bit of clarifications, had to do with how taxes are treated and getting the definition within the California Medicaid arena to more closely align with the definition that already existed as part of the ACA MLR rebate calculation. In terms of – that was the primary driver of us going from $10.80 to $11 for 2016. We were already in an MLR rebate position in California when this occurred. And so what had happened was once we re-performed the calculation under the corrected rules, under the corrected definition, it allowed us to reduce the amount of liability we had on the books associated with the MLR rebate. So there is no offset or – it's just a – we perform the calculation, we'll settle the MLR rebate with the state in 2017, as was previously prescribed and it allowed us to be the primary driver of adding $0.20 per share to the shareholders here at the end of 2016.

Your next question comes from the line of A.J. Rice from UBS. Please go ahead.

Thanks. Hi, everybody. Maybe a question and then point of clarification. Didn't really comment too much on the Cigna deal, and you probably can't. But I'm just looking for clarification, the extension of the agreement, is that something that you can unilaterally ask for? Or does Cigna have to sign off on that? And then I thought the judge had indicated in the case that we would probably hear something by the end of January. Obviously that has passed. Has there been any communication as to either why the delay or the updated timing? And then I'll just ask my point of clarification. On your comment about Local Group medical cost trend, you are expecting it to be down, you referenced this Hep C change. Is that the only thing that's different, otherwise your medical cost trend would be the same expectation this year versus 2016? And is that related to Express in any way or is that strictly something you guys did unilaterally?

Yeah. A.J., again, good morning. Thanks for the question. Regarding the Cigna deal and the extension, that is a unilateral determination decision on our part, and obviously we've already expressed our exercise of that position, with respect to a filing recently. So we are moving forward. And with respect to the judge, it's certainly not uncommon and we're not bothered by the length of time, because it is a very complicated case, lot of moving parts, and the submittals were very extensive. So certainly – again, we're not bothered by it. Obviously, we certainly would like a decision soon so we can move on. And obviously we're still hopeful too. But, again, I think give the judge her due in terms of the thoughtful process she has to go through. We're very confident that we should be getting a decision very soon. You may recall, she did say somewhere in the end of the month timeframe, and I think it's come upon us, so we'll see when it happens. Hopefully in the coming days. John?

Yeah, thank you, Joe. And A.J., your specific question on trend, so just to clarify, trend for 2016 came in relatively in line with our expectations. Felt very, very good about that, maybe closer to the low-end of the range that we provided at the beginning of 2016. And then, as we look into 2017 in general, trend is relatively stable year over year, except for the one item that you pointed out, and that was the Hepatitis C drug spend. So that has nothing to do with Express Scripts. In 2015, we changed the coverage options and allowed a broader coverage of people that qualified for Hep C treatment. We proactively went out at that point in time and did some rebate contracting and various other things that really mitigated the significant increase that we saw in 2016. The increases would have been even greater without the proactive steps we took. Now, we believe that the cost structure associated with that, the utilization associated with that is going to stay flat from 2016 to 2017. It's just that by staying flat from 2016 to 2017, it means we did not have the increase that we saw from 2015 to 2016, so it's impacting our overall trend calculations. So at the end of the day, trend is really stable year over year. We just have the mathematical dynamic of what's going on with Hepatitis C. But thank you for the question.

Your next question comes from the line of Justin Lake from Wolfe Research. Please go ahead.

Thanks. Just had one clarification and one question. So first, the follow-up is can you give us the precise number of ACA individual compliant and non-compliant individual members assumed in the overall 2017 membership guidance? And then can you give us some more color on the PBM? Specifically, is the RFP already out in the market yet? And then you said you would have a decision by the end of the year. Would that include sharing with us the expected drug cost savings estimates and the expected economic impact to the business when the new deal starts? Thanks.

Yeah, hey, Justin. In terms of the individual ACA compliant, just to give you a frame of reference, it's about 80%. Just a tiny bit over 80% is ACA compliant in our plan, which means that approaching 20% is non-compliant. So yeah. And then in terms of the – in terms of the – what was the question? Could you repeat the question on the PBM?

Sure. Is the RFP out in the market yet? And then you said you'd have a decision by the end of the year. Would that include sharing with us drug cost savings estimates and the expected economic impact to the business when the new deal starts, relative to what you said before?

Yeah, no, thank you. Yeah, so the RFP is not yet out, although it's imminent. And as we have stated previously, we expect to go through and then be very thoughtful in our approach, and by the fourth quarter of 2017, provide more clarity to all of you associated with our future pharmacy strategy. At that point in time, we would expect to provide some quantification and clarification associated with what the economics are, which could be as a 2020 type upside at that point in time.

But still, the base that we're building off of in terms of what we've communicated many times is $3 billion savings per year, obviously escalated over time. So I think we'll certainly be able to give you some line of sight regarding $3 billion as a base, and then how that might improve leading up to 2020.

Yeah. How much of that is passed back through the customer and provides affordability aspects, versus how much is retained by the shareholders.

Yeah.

Your next question comes from the line of Ralph Giacobbe from Citi. Please go ahead.

Thanks, good morning. Just wanted to clarify first. On the long-term guidance, is it fair to sort of back away from that $14 EPS number at this point, just kind of considering the guide for 2017 and your growth targets that you laid out? And then my question was more around sort of the components of trend guidance. If you could maybe break those down for us, and maybe put it in the context of – look, I certainly understand that trend came in at the lower end of the 7% to 7.5% range, and even if Hep C was sort of at 50 bps, it doesn't suggest sort of the typical cushion of, say, that expectation of potential trend uptick in that 50 bps to 100 bps range. So if you could maybe reconcile for that as well? Thanks.

Yeah, sure, Ralph, thank you. So in terms of the $14, we've talked about some of the headwinds that we're facing on the third quarter call, and those headwinds are still very real, and we continue to work through them. Commercial insured mix was a headwind. The most significant of which was the ACA exchanges, the fact that there was supposed to be 26 million people enrolled in the exchanges by 2018, and we're at far, far short of half of that from a basis within the country, and what the impact is on us. But clearly, we're keeping our foot on the gas. We're trying to do everything possible in order to bridge the gap. But we wanted to ensure that everyone realized, back 90 days ago, that these headwinds were significant and we may not be able to completely overcome them. But we've got a lot of things going on that are going very, very, very well. Medicaid is ahead. We talked about Medicare, given the great growth we have with that. And all of this is without the PBM having any real upside in the $3 billion we talked about. So, we have not declared specifics on 2018 yet. Little premature to do that, but the headwinds are still very real. But we are working very hard to overcome as many of them as we possibly can. And then on your trend question, just say that we really don't go into specific trend information associated with each type of procedure, each type of process. But, as I said, the overall trend is relatively consistent year over year, except for the Hep C movement, in terms of how that's impacting it. So you can – now you can assume that that trend is normally unit price driven, that's the most significant driver of it on a year-over-year basis. Our utilization, we track that very closely, that remains pretty much in line with our expectations. In our medical management, our provider collaboration, those various other things have done a really nice job of keeping the utilization patterns fairly constant and fairly low movement year over year. So it's predominantly price. Thank you.

Your next question comes from the line of Matthew Borsch from Goldman Sachs. Please go ahead. Matthew Borsch - Goldman Sachs & Co.: Yes, hi, good morning. Let me ask about the Medicare Advantage and drug plan advance notice. Are there particular elements or factors that you'll be looking for when that notice comes out? And just, by the way, I'm curious on timing, whether you expect that will be today or tomorrow?

Well, how about if I say we expect it to be this week? Matthew Borsch - Goldman Sachs & Co.: All right.

It's with anything else, yeah, we certainly do expect it to be imminent and if it came out either today or tomorrow, neither of those would be a surprise. But, I mean, as you know with all those things, the devil is always in the details. I mean, we really need to evaluate it, need to understand how it impacts various aspects of our business and various aspects of our membership. We've got a – we're cautiously optimistic. Like I said before, our Medicaid – or, I'm sorry, our Medicare asset is a reconstructed asset, really poised for growth. And we feel very, very good about where we're going to be as a company in the Medicare and Medicare Advantage area specifically, over the next several years. So, tomorrow is just one piece of the puzzle. But until we actually see the details, it's a little premature to declare anything.

Your next question comes from the line of Dave Windley from Jefferies. Please go ahead.

Hi, good morning. Thanks for taking my question. I wanted to ask a question on SG&A. I think early in the year, you had talked about, not only the administrative efficiency savings, but also kind of Pay for Performance in environment and insinuated some comp cost cuts. And I think that that comp side of it was about half. I guess I'm curious now, at the end of the year, how that progressed, kind of the balance of sustainable cost cuts through admin efficiency versus comp that you need to reinstate? And then, the final part of this would be, how do you think the SG&A base is positioned or structured to support either of your kind of bigger outcomes – the deal closing with Cigna or your intent around perhaps some alternative strategy on the PBM? Thanks.

Great. Thanks, Dave. Let me respond to the comp question and underscore that what we referenced during the year is that our annual incentive plan is at risk – fully at risk – and we made a conscious decision, in terms of the modeling, that our award scheme would be based on, obviously, successful achievement of our expectations. And that we also balanced the payouts related to our support of the shareholder interest. And therefore, if we did not achieve expectations, then of course, our incentive plan would be cut accordingly, which, mid-year, we signaled that we were very intentional about that, and in fact, as the year progressed, we're able to witness because of the all-in commitments of management, that we were significantly improving our SG&A performance. There were other uptakes in the business model, and at the end of the year, we were able to provide advanced annual incentive plan payouts, above and beyond what was forecasted in the middle of the year. The point being that it's incentive-based, it is truly at risk, comp as a base wasn't affected, but again, I'm very proud of the fact that we were able to effectively control SG&A as well as bring in other advantages and performance improvements to the company that allowed us to significantly award our leadership teams with the incentive payments necessary for recognition. So all-in, we're very proud of how we managed it, and then the outcome is the result of the management process of our annual incentive plan model.

And Dave, just to give you maybe a little more specificity associated with your question, on the back of Joe's response. The fourth quarter SG&A ratio is a little bit higher than what we had initially stated. But when you take a step back and look at the entire year, it's still about half of the savings or half of the decrease from the initial SG&A guidance back at the beginning of 2016 is non-recurring, and maybe half is operational efficiencies along with fixed cost leveraging. So even though we did increase the amount of compensation expense here in the fourth quarter, we're still below target on that. And so it still is a headwind as we get into 2017. Associated with the operational efficiencies, I mean, there has been a lot of very successful projects that have been done here over the past few years. Our higher accuracy of auto adjudication rates of claims continue to go up year over year. Our claims cycle time decreased. Those are things that actually improve the accuracy of our claims payment process, and we do it in a more cost effective and cost efficient manner, just as two examples of things where part of the savings in 2016 are recurring, and will be part of our run rate for 2017. So it's a bit of a mixed bag, but as Joe said, we're very proud of how we finished 2016, and think we're heading into 2017 with some nice momentum.

And your final question today comes from the line of Gary Taylor from JPMorgan. Please go ahead.

Hey, sliding in here at the end. Like everyone else, I have one actual clarification and then a question. Just want to clarify, John, I thought you said on the 3R risk adjustment, you continue to run a net receivable position as you had consistently. And I thought you ended 2015 in a net payable position, CMS actually paid you and that's what created a year-to-year pickup. Did I not hear that correctly?

We've been in a net receivable position consistently for a while. We were maybe a slight payer back in 2014, but we've been in a net receiver position most of the time since then. So hopefully that clarifies it.

And then my question just on tax rate. So without the HIF returning to comp a normal tax rate in 2017, 33% to 35%. I think consensus was closer to 38%. So we just didn't do a good job of modeling that, because it looks pretty consistent with where you were running pre-ACA. The question is that number, even pre-ACA, was 200 to 300 basis points lower than kind of the other big five. Can you just remind us why your recurring tax rate runs a couple of hundred basis points lower, at least, than others? Is there one sort of obvious item to point to?

It's not one significant obvious item. There is many, many things that are part of the effective tax rate. You really have to look at the states, and where companies make money, and what is the state tax situation – is it a premium tax state? Is it an income tax state? What is the income tax? Is it a franchise tax state? So all those things are clearly part of the variation. The investment portfolio, what percent of an investment portfolio is in tax exempt versus taxable yields? And how does that impact it? I mean, there is any fair share of permanent tax differences that occur. We're pretty comfortable with a lot of the tax planning strategies we've made. We all do start with the 35% rate on a pre-ACA, non-HIF type basis. And I'm not positive I know all of the differences between our rate and everybody else's, other than to say that we see this as a huge focus item, that every time that we can do a tax planning strategy, that just ignores the benefit to the shareholders. And so we put a lot of time and effort and focus on taxes behind the scenes that nobody really sees, and I think our effective tax rate helps confirm that. Thank you, Gary.

I'd now like to -

Okay. Operator?

I'd now like to turn the conference back to the company's management for the closing comments.

Thank you, operator. Thank you for your questions. As a company, we're committed to confronting our healthcare system's challenges and we're focused on expanding access to high-quality, affordable healthcare for our customers. I also want to thank all of our associates for their continued commitment to serving our 39.9 million members every day. Thank you for your interest in Anthem and we look forward to speaking with you soon at upcoming conferences.

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