Good day. My name is Moira and I’ll be your conference operator today. At this time, I would like to welcome everyone to today’s Humana second quarter 2019 earnings conference call. All lines have been placed on mute to prevent any background noise, and after the speakers’ remarks there will be a question and answer session. If you would like to ask a question, simply press star then the number one on your touchtone keypad. If you would like to withdraw your question, you may press the pound key. Thank you. With that, it is now my pleasure to turn today’s program over to Amy Smith, Vice President of Investor Relations. Ma’am, the floor is yours.

Thank you and good morning. In a moment, Bruce Broussard, Humana’s President and Chief Executive Officer, and Brian Cane, Chief Financial Officer, will discuss our second quarter 2019 results and our updated financial outlook for the full year. Following these prepared remarks, we will open up the line for a question and answer session with industry analysts. We encourage the investing public and media to listen to both management’s prepared remarks and the related Q&A with analysts. This call is being recorded for replay purposes. That replay will be available on the Investor Relations page of Humana’s website, humana.com later today. Before we begin our discussion, I need to advise call participants of our cautionary statements. Certain of the matters discussed in this conference call are forward-looking and involve a number of risks and uncertainties. Actual results could differ materially. Investors are advised to read the detailed risk factors discussed in our second quarter 2019 earnings press release as well as in our filings with the Securities and Exchange Commission. Today’s press release, our historical financial news releases, and our filings with the SEC are also available on our Investor Relations site. Call participants should note that today’s discussion includes financial measures that are not in accordance with generally accepted accounting principles, or GAAP. Management’s explanation for the use of these non-GAAP measures and reconciliations of GAAP to non-GAAP financial measures are included in today’s press release. Finally, any references to earnings per share or EPS made during this conference call refer to diluted earnings per common share. With that, I’ll turn the call over to Bruce Broussard.

Good morning and thank you for joining us. Today we reported adjusted earnings per share of $6.05 for the second quarter of 2019 and raised our full-year 2019 adjusted EPS guidance to approximately $17.60, primarily reflecting improved results in our retail segment. We are pleased to deliver these strong results while experiencing the highest individual Medicare Advantage membership growth we have see in the last decade, which is reflective of our operating discipline and execution, investments in our integrated care delivery strategy, and our relentless focus on creating a simple and personalized healthcare experience for our members. Today we are raising our full-year 2019 individual MA membership growth guidance to a range of 480,000 to 500,000 members, primarily reflecting improved rest of the year growth projections for agents and our dual special needs plans. Through the end of the second quarter, our DSNP membership grew approximately 21% or 46,000 members from the prior year, demonstrating our ability to serve the unique needs of this population through our benefit offerings and the deep clinical programs and services we’ve built over the years. Seniors are increasingly choosing Medicare Advantage because of the program rewards high quality of care, fosters deep relationships, aligns incentives under a consumer-based model designed to manage the sickest, most vulnerable beneficiaries, encourages a holistic view of member health, and creates the competitive market forces that encourage innovation. The aging population and the ongoing increased penetration of Medicare Advantage as a percentage of total Medicare eligibles combined with our strong brand and value proposition gives us confidence in our long-term membership growth prospects. It is important to note that our growth trajectory is balanced across product lines, including HMO, PPO, and DSNP, individual Medicare Advantage offerings, group Medicare, and Medicaid. To drive this broad and balanced long term growth,…

Thank you Bruce, and good morning everyone. Today we reported adjusted EPS of $6.05 for the second quarter. This exceeds our previous expectations primarily due to higher revenue and better than expected medical costs in our retail segment. The favorable utilization of that we experienced earlier in the year in our retail segment relative to our initial expectations has persisted, and we are also seeing better than expected results in our healthcare services segment. This favorability was partially offset by lower than expected results in our group and specialty segment. The strong year-to-date 2019 performance has positioned us to make additional strategic investments in the back half of 2019 to support our members’ health, enhance customer experience, and lessen the member impact of the headwinds we face in 2020, all while increasing our full year 2019 revenue and adjusted EPS outlook. Today, we raised our full year revenue guidance by approximately $900 million to $64.2 billion to $64.8 billion and increased our adjusted EPS to approximately $17.60 from our previous range of $17.25 to $17.50. This represents year-over-year consolidated revenue growth of approximately 13 to 14% and adjusted EPS growth of approximately 21% in 2019. We expect third quarter adjusted EPS to approach 26% of the full year number, which factors in the expected negative impact of weekday seasonality in the third quarter and higher investment spending in the back half of the year. As Bruce stated in his remarks, we are excited about our ability to execute our strategy and deliver strong results well in excess of our long term growth target of 11 to 15% while also achieving 16% individual Medicare Advantage membership growth in 2019, which not only significantly exceeds the market growth rate but also is the highest net membership addition Humana has experienced in any…

Our first question comes from the line of Ricky Goldwasser from Morgan Stanley. Your line is open.

Yes, hi, good morning. Building on the comment around the 2020 positioning, obviously last year you mentioned that you expect 2020 growth to be below the long term range of 11 to 15. Given that now you’ve submitted the bids and all the improvement that we’ve seen this quarter, any updates to that?

Well, I would just reiterate what I just mentioned in my remarks, that obviously we’ve worked very, very hard to mitigate the impact. The impact is significant, but we do have a number of tailwinds that we’ve incorporated into our bids, but nonetheless it’s still a material headwind that we have to deal with. Again, we believe we’ll have a competitive product out there for 2020, and again, just reiterating our EPS guidance, high level guidance from last quarter. So I would say that certainly the second quarter outperformance helps us from a bid design perspective, but we still face meaningful headwinds for 2020.

Then one follow-up, if I may. You talked about your technology strategy, and I think one of the debates in the marketplace is that seniors tend to utilize less digital into their medical benefits, or how they manage their medical. Based on the pilots that you’ve done, what are you seeing in the marketplace, and do you think that this is an opportunity that the market is underestimating?

I would say we continue to see growth in the use of seniors and technology, and we continue with the agents that that will be the case. But more importantly, what we see as being the enabler of technology and where it really comes into play is streamlining within the healthcare system to allow the ability to have more information, to then allow us to have deeper analytics that then allows us to have more proactive interventions. I would say that the investments are around a consumer orientation for self service kind of activities, but it’s much more around enabling providers to be much more proactive in being able to treat and prevent conditions from progressing.

Our next question comes from the line of Kevin Fischbeck from Bank of America. Your line is open, you may ask your question.

All right, great. Thanks. I’m just trying to understand the commentary here because trying to put the 2020 outlook, it really hasn’t changed, I guess from the wording at least that you’re using as far as reasonable growth off of 2019, but it does feel like the membership growth has gotten better in 2019, which should help 2020. It sounds like you’re making a lot of investments. Is there a reason why you’re still using the same language, or is there any directional color you might provide within what a reasonable range might be as we think about 2020?

Good morning, Kevin. We are not prepared to do that. We’ll give more specificity on our third quarter call, as we typically do, and detailed guidance on our fourth quarter call. As I said to the prior question, the second quarter outperformance has helped our bid design, and it’s important to invest those dollars for customers and to ensure that we have a competitive produce, and we’ve worked very hard to do that. You can’t underestimate the impact of the health insurance fee on our customers, and we’ve done everything we can to try to mitigate that.

Kevin, I would just add to Brian’s comments, I think out of all the industry players and we as a result of having high PMPM revenue, the industry fee disproportionately affects us more versus others in the industry, so our headwind starting out of the gate was greater. We have worked with this balance of ensuring that we continue to deliver appropriate margin improvement to our shareholders and at the same time continuing to have a competitive product in the marketplace, and at the same time have availability to invest in where we see the industry going with technology and clinical programs. It’s that balance that the management team has faced, and we see the overachievements in 2019 helping achieve that balance. If you were to sit in our day-to-day meetings, you would see that we are very focused on continuing to improve the productivity of the organization, both in the capital deployment area, which was evident by our ASR today, and the ability for us to reinvest our organic growth into returning to the shareholders, but then secondarily also in continuing to invest in the productivity aspects of our business. It’s a high order to try to achieve all these headwinds, but we are working hard on behalf of our shareholders and customers to overcome it.

Our next question comes from the line of Peter Costa from Wells Fargo. Your line is open, please ask your question.

My question is on Part D. Given all the changes that have been talked about in Washington on Part D, in particular the Senate Finance Committee bill restricting the Part D program, you’ve talked about revitalizing your Part D program, and then yesterday, you just saw the bids that came out, national average bid. What’s your expectation for growth in Part D for next year and then for the years beyond that?

Well there is, as you mentioned, a number of proposals out there on Part D that we’re obviously sorting through. As Bruce mentioned in his remarks, we are committed to growing the PDP product over time. It’s an important part of our portfolio, our customers like the product. It’s important for our pharmacy business, and so you’ll see some meaningful product repositioning in 2020, which we’ll talk more about when everything’s finalized on the next quarter call, but we have to see where things shake out versus our competitors. As we mentioned, over time we are committed to growing this business again.

So by repositioning, do you mean you’re going to re-trench back next year a little bit?

No, not necessarily. Again, I think we have to see where our competitors ultimately shake out with their benefit design. I would say that we have made some meaningful changes in our plans and we’ll see how those resonate, but it’s important to understand where the marketplace is before we can comment.

I think right now, just to add to Brian’s comments, Peter, we are working hard to reposition, as he said, to a product that we feel would be competitive in the marketplace. Due to some constraints in structure within PDP and other things, it’s not an easy task to navigate through, but I think when plans are published publicly, you’ll see that we are thoughtful about how we approach that. The second thing, similar to what we’re doing in the MA space, we are also focused on how do we continue to make it easier for the brokers and in addition for the customers and oriented to segmentation within that area, so it’s really a two-part approach. We are hesitant to give any kind of estimates because we don’t know the comparator to how we would fit in the marketplace, so it’s not about being timid about next year, it’s just really we are committed to the product, we are committed to making change to make it competitive, but it’s just how do we look to others in the marketplace.

Okay, thanks. Great quarter.

Our next question comes from the line of Josh Raskin from Nephron Research. You may go ahead and ask your question.

Thanks. First, just a clarification. I want to make sure, Brian, I heard that you were talking about not coming in with your long term growth rate in 2020. Was that off the 1725 base that you referenced last quarter, or is that off of the higher base this year? Then my real question is just around the accelerated share repurchase that you’ve announced for this evening. Is that just a simple confidence in the core, feeling a little bit better about 2020, or should we read into that around short term M&A and maybe lack of opportunity there?

Good morning Josh. I was referring to off the 1725 on the first part of your question as the baseline, and again that’s really a function of the fact that we’ve taken this outperformance, as I mentioned in my remarks, and invested that into the bid. As we think about the adjusted baseline, we think about our initial guidance, and that’s why it’s off the 1725. As it relates to the ASR, we do feel that our stock is a very good investment, first and foremost. Secondly, we have ample capacity, and doing a billion dollar ASR today really doesn’t meaningfully impact that capacity to execute our strategy. As I mentioned we are looking at a number of what I’d describe as tactical M&A opportunities and we have ample capacity for that, so I wouldn’t read anything into it. We recently received our dividends up to the parent company and we’ve deleveraged pretty meaningfully from the last ASR that we did, so we felt it appropriate and a good investment to buy back stock.

Josh, just to add to that a little bit, one of the unique aspects of Humana has been the strength of our organic growth and the ability for us to generate cash without having to buy earnings, and that has allowed us, I think, to be more opportunistic in returning cash to shareholders and specifically more in stock buybacks. As you’ve seen in the past, we do deals, but the deals have been more oriented to adding capabilities as opposed to just expansion of our existing customer base, because we feel that our value proposition in our existing customer base is strong and enhancing that value proposition through adding capabilities has been the strategy longer term.

Makes sense, thanks guys.

Our next question comes from the line of Matt Borsch from BMO Capital. Your line is open, you may ask your question.

Yes, hi. Congratulations on the great results. I have a question about what you’re seeing in terms of the overall growth in the MA program. Obviously we can track that, but I’m curious in your perspective, do you think that there’s a pick-up in the MA penetration with agents? I know before, you’ve talked about you see it more in the, if I’ve got this right, 67, 68-year-old population where the MA product is more typically taken up. I’m wondering if you’re seeing that changing at all.

Yes, there’s no doubt that over the last several years, there has been a pick-up really across age ranges in MA penetration, Matt. You’re right in that as people get to 67, 68, 69, that penetration tends to increase. I think what happens when people age in, they’re deciding what makes sense, not quite ready to make a commitment. For those who want a Medicare supplement plan, they’re able to get it without getting underwritten, which has some benefits, and then they take their time and figure out what the right plan is. We’re very bullish on the long term prospects of the MA market. If you exclude the Minnesota cost plans this year, which distorted the growth rates, you’re going to see individual MA growth well north of 8%, we think, and that’s obviously quite a robust number. We don’t see any reason for that to stop. Now again, the HIF does provide headwinds for next year and so I think that could on the margin impact the growth rate, although we haven’t seen that necessarily materially swing the appeal of the product just because of what we’re able to do and all the things that Bruce articulated in his remarks. It is a richer product, there are more benefits. Importantly, there also are care coordination benefits that members don’t get in traditional Medicare, even with the Medicare supplement policy. They’re left to navigate the healthcare system on their own, so that’s where we think Medicare Advantage has great promise and people are really voting with their feet.

Great, thank you.

Our next question comes from the line of Justin Lake from Wolfe Research. Your line is open, you may ask your question.

Thanks. My question is on the updated guidance for ’19. Your MLR guidance in the retail segment appears to be pretty conservatively biased relative to the first half performance and the typically seasonality we’ve seen in the last couple years. Should we read that to assume that you’re not guiding to the better utilization you’ve seen continuing in the back half, and if so, should we assume that your bids only reflect the first half outperformance rather than assuming it continues for the full year?

Morning Justin. I would characterize the back half more a function of seasonality and things of that sort. I wouldn’t read too much into it. Our bids do make an assumption about our full year estimate, so we do make a full year estimate. We don’t assume that utilization is going to get better from where it is today, but I think it’s fair to say that you assume it’s going to trail forward largely as how you’re seeing. We’ll see where the back half shakes out. We feel good about the guidance that we’ve given for the back half, but I think some of the differential there is some seasonality factors going on in the back half of this year.

Brian, is there something different about the seasonality? You know, what I’m looking at, and I could be wrong in my math, but it looks like your retail guide for MLR is basically flat in the second half versus first half. In the last two years, it’s been down 300 basis points first half to second half, and obviously we know about Part D seasonality. Is there something new?

I wouldn’t say there’s something new, other than for typically the third quarter, the workday pattern is different and it’s just a higher utilization quarter than we’ve seen in recent years. I think that’s probably the main difference. Small changes in workday seasonality can have a pretty material impact on your MERs, so again I wouldn’t read too much into that. Like I said, we feel good about the guidance we have out there and we’ll see where it ends up.

All right, thanks for the call.

Our next question comes from the line of Charles Rhyee from Cowen. Your line is open, you may ask your question.

Thanks for taking the question. I had a question about the Epic partnership that you’re talking about here. Does this also include basically you’re going to be implementing Epic across all your clinics, and if that’s the case, can you talk about what capex expectations you have as you roll that out over, let’s say this year and next year, and also does this include maybe now looking to partner with other EHR vendors to coordinate care with members that might not be going to a place like that uses Epic? Thanks.

Yes, it doesn’t contemplate rolling out Epic to our clinics. It is really more of an interoperability opportunity versus anything else, and it’s not very material an investment for us as an organization. It really highlights the power once the interoperability is operating of being able to have both easier workflow within the Epic system on behalf of certain administrative matters from us as an organization, but secondarily also the ease of opportunity for us to be able to utilize that information to provide back to the providers on more proactive care management and coordination of care. So it’s a great opportunity, we are excited at the relationship with Epic. I know they’re excited with the relationship with us and being able to take this and be the payor that’s really helping lead them create a payor channel to facilitate a much better and simpler experience, both for the member and for the providers that are using their system.

Great, thanks. I’m sorry if I missed this, but did you touch on the group segment here? I know it’s relatively small, but the MLR was a little bit higher than expected. Is there something here as you think about balancing pricing versus growth and cost? Maybe if you could touch on that a little bit more? Thanks.

Sure. I talked a little bit about it in my remarks. I wouldn’t say it’s really necessarily a pricing dynamic, it’s really a mix dynamic as our book continues to evolve away from the community rated small group space, which has some choppiness in it and just has different dynamics in terms of medical expense ratios, etc. We continue to invest in this business more broadly. We believe there are a number of opportunities for us to play a role in this space and offer a compelling product, so part of the guidance also reflects investing both in the traditional group commercial space but also in the specialty space, meaning largely dental, which runs very good margins and it’s a business that we want to grow particularly as we sell and cross-sell more of it, both to our individual members on the Medicare side as well as our group commercial members. We continue to invest in that segment and we’re bullish about its prospects.

Great, thank you.

Our next question comes from the line of Sarah James from Piper Jaffray. Your line is open.

Thank you. You spoke about 2019 investment spend being some pull forward and some incremental spend, specifically I’m talking about the increased amount in the second half. Can you offer more color on what the step-down could be in spend in 2020 by sizing the 2019 non-recurring investment spend that was more strategic, and also the pull forward from 2020 into 2019?

Morning Sarah. I think that’s a very fair question, but we’re really not prepared to give that level of granular detail. I would just say that, as I’ve said multiple times, we have worked hard to set up 2020 to be a good year, both on the top line as well as the bottom line, and in order to do that we recognize that we still need to invest and make the business sustainable, so to the extent we can bring investments forward and accelerate them into 2019, we’re going to do that. We’re also, I would say, making incremental investments in 2019 that we don’t necessarily have to make in 2020 so we can accelerate all the things that Bruce articulated in his remarks, because it’s important that we think beyond just 2019 and 2020 and over the next number of years, and that’s really what we’re investing for. So I’m really not prepared to give you specifics - it’s not immaterial, obviously, but again you should take the message that we’re really trying to balance our short term, some of the pressures that we face with long term sustainability.

Thank you.

Our next question comes from the line of David Windley from Jefferies. Your line is open, you may ask your question.

Hi there, good morning. It’s Dave Styblo in for Dave Windley. A question about just recognizing that you don’t have the individual MA competitive landscape for 2020 yet, do you think you can grow well above the industry average again next year given the accelerated investments you’re making in the second half, as well as incorporating some of this year’s upside into the bids?

It is too early to comment on our relative positioning. We just don’t know the answer to that. I would just say that we have worked hard, as I said, to create a competitive product, and obviously we need to see what others do with their benefit design. We are more impacted, as Bruce said, from the HIF that we’ve talked about, so we do have those incremental headwinds that we have to face, but again for all the things we’ve said in the last hour here, we’re very focused on trying to mitigate that. I would also say that we continue to invest in the broker channel. They’ve been great partners for us, really across the board. We wouldn’t be in the position we’re in were it not for the external broker channel frankly, as well as all the great work that our internal market point team does as well, so we are very focused on cultivating those relationships and giving them the dollars they need to support our product. That’s another element of our strategy. But we’ll see where it goes. We’ll know more in the next few months where the benefits are, and obviously we’ll have more to say on the third quarter call.

Thanks.

Our next question comes from the line of Michael Newshel from Evercore. Your line is open, you may ask your question.

I just wanted to clarify on the impact of mix shift in the group business. The higher benefits expense ratio there, that’s just the risk pool getting worse because employers are switching to self insured are relatively healthier? I know that’s not a new trend, but is it just the magnitude there of risk deterioration has been worse than what you priced for?

Again, I don’t know if I would call it necessarily risk deterioration. It’s more just the mix of our membership as they move from one segment to the other and what’s left is a worse risk pool, so from that perspective, yes. Frankly, a lot of the back-up on the MER that isn’t stop-loss related--remember, our stop-loss product is priced at a much higher MER than traditional commercial insurance, so as that mix shifts, remember the ASO is parallel to stop-loss, as that mix shifts you’re going to get higher MER. We’re also impacted this year by some negative PPD - prior period development, from last year that has impacted the medical expense ratio this year, and so year-over-year it’s not an immaterial change for the segment. Remember that this segment for us is very, very small and so small changes and arguable immaterial changes for the company nonetheless have outsized effects on some of the ratios that you see. I think that’s important to take into account as well.

Our next question comes from the line of Steve Tanal from Goldman Sachs. Your line is open, you may ask your question.

Good morning, guys. Thanks for the question. I’ll make this sort of a two-parter on 2020. The first high level question is when you guys talk about headwinds, it seems to be plural, but the only one that I think I’m very comfortable with is the return of the HIF, so wondering if you could maybe walk through headwinds and tailwinds at this stage, what else we should be thinking about especially on the headwind side. Then beyond that but also on 2020, back in June you previewed expense reduction initiatives at our conference, and I just wanted to clarify if that’s one and the same as the productivity initiatives you discussed this morning, and wondering whether you might be willing to comment on the expected or targeted impact on next year, and if not, sort of in numbers terms maybe provide some qualitative color on materiality in the context of year-on-year EPS growth.

Sure. With regard to the headwinds, we probably made it plural because the HIF is so big. It is very material. I would also say, though, that while the rate notice was good and actually positive relative to not last year but years before that, we still have trend we have to overcome, unmanaged trend that is in excess of that, so those are just the natural headwinds we typically face. But there’s no doubt that the health insurance fee is far and away the biggest headwind, and it’s a big one. As you know, it’s non-deductible as well, so it’s a big number. That’s really the primary one. With respect to expenses versus productivity, yes that is the same set of activities that we’re undertaking to reduce our admin spend for 2020 while also, I think, setting us up for a stronger company going forward because of the way we are streamlining processes and rationalizing our business. I would say it’s material. I would say it’s definitely meaningful for next year the amount of cost that we’re taking out. As you said, we started talking about this many, many months ago. We started this last year knowing that the HIF could very well come back, and so unlike the 2017 experience where arguably we had lower hanging fruit to go after, we had to really go deeper here to figure out what areas could we be more productive. I would say the teams across the board have done a tremendous job of identifying, and now we’re in the process of executing the initiatives that we’re talking about here. But they are material, and we’ll talk more about it in the coming quarters.

Great, thank you.

Our next question comes from the line of Steven Valiquette from Barclays. Your line is open.

Great, thanks. Good morning, Bruce and Brian. There’s clearly been a lot of questions on the outlook so far, but back on the 2Q results, specifically the MLR coming in well below consensus estimates was obviously a bright spot in the quarter, especially with really minimal benefit from prior period development. I’m just curious if there’s any additional color you can provide on what seems to be an enhanced ability to control medical costs. Obviously other managed care companies and maybe other books of business have had some more mixed results this year. Is the biggest factor just tied to better engagement of members into your clinical programs, or what else would you call out as really the most critical factors? Thanks.

Sure, it’s a fair question. I’d say it’s a combination of things. Bruce went through a number of things in his remarks, and this integrated care model that we’ve created and all the various touch points that we’ve discussed do move the needle. They definitely do move the needle and, I think, give us a good handle of what the costs are and what members are in need of our clinical intervention . I think that is a part of it. I think we also have a very good handle from our tight financial and operating linkages that we’ve created. I think finance and operations are very tightly aligned and that allows us to see trends early. Really when we see potential issues in trend or we’re seeing a market or a particular product or whatever it may be that’s running a little bit hotter than we expected, we can immediately identify and go after it, so we’ve been very focused and proactive about that. But look - it’s not an easy business to manage. All of our costs are estimated, and so it’s important to identify these early warning systems that can allow us to identify the issues and then create the clinical programs and the customer engagement platform, and frankly the analytics to be able to identify who needs the intervention. We continue to invest in that. We’re nowhere near where we need to be. This is going to be more and more important over the coming years as the tools we invest in continue to develop, and you’ll see us continue to talk about that. Also, having new distribution channels that we’ve created, whether it’s Kindred or a PIPC or other areas where we can engage our members in different ways, that’s why we continue to invest those channels and in the technology that supports it so we can continue to manage our medical costs.

Okay, appreciate the extra color. Thanks.

Our next question comes from the line of Gary Taylor from JP Morgan. Your line is open.

Hi, good morning. Just kind of a two-part question. One, when we think about the MLR upside versus your original guidance in the first part of the year, are you able to ascertain if more of that is coming from this large bolus of new memberships versus where that might typically be when you enroll a new member, or is most of it coming from your retained members, and if so, how does that inform your thinking about 2020 bids and margins?

I would say our new members are running in line, maybe slightly better than expectations. I’d say a lot of the upside is in the existing block, both the cost side and the revenue side, so we’re seeing both of that. The good news is that the membership is running--the new membership, because obviously one of the things we’re always focused on when you could grow 480,000 to 500,000 members, what are the members that you’ve got? We’ve been pleasantly, I guess happy to see that the utilization that we’ve seen from those members are running in line or a bit better than expectations, so I would say it’s a lot of the existing block that’s really driving the outperformance on the cost side.

Thank you. Could we have just a little more color on the upside in the healthcare services EBITDA of 20 some-odd percent year-over-year? Are you seeing an acceleration of visits or something on the PBM side in terms of margins? Just a little more color on that, please.

Sure. This is a business that we’ve worked really hard in two regards. One is to drive trend benders for our retail and group segments, and I think they do a really great job of doing that. The other is to drive standalone EBITDA in the business, notwithstanding the fact that we’re seeing lower utilization than forecast, and sometimes there are trade-offs there. I would say that the outperformance is pretty balanced across the board. Our pharmacy business is our largest driver of the segment, and it’s running particularly, I would say, on certain areas running better, some areas running in line. But again, small changes there can have a meaningful impact just on the EBITDA. Where we’re seeing, I’d say, greater percentage outperformance is on the Kindred side and on the Conviva side, where we’ve spent a lot of time working to turn around that Conviva business and the numbers are better than what we had in our forecast, and the Kindred team is really executing on the business plan. I also mentioned that our care delivery organization outside Conviva, sort of our new clinics, are running less of a loss, I would say, than we expected, so that’s been positive too. I would really say it’s balanced contribution across the EBITDA race, which we’re happy to see.

Thank you.

Our next question comes from the line of AJ Rice of Credit Suisse. Your line is open.

Hi everybody. Maybe just following up first on that pharmacy question, your MA growth has more than offset, you pointed out in the release, the PDP decline. I guess I’m just curious, I don’t think I’ve ever asked you this, is an MA life in the pharmacy side equivalent to a PDP in terms of overall script utilization or utilization of mail order or anything else? Are they sort of equivalent or is an MA life better or worse than a PDP life?

It’s a fair question. It really depends on where that MA life is coming from - is it HMO, is it PPO, what geography is it in, because certain geographies use mail order less than others, just given some of our risk partners and the like. I would say unfortunately to your question, it really depends. That’s probably not a satisfactory answer. It also frankly depends on where the PDP growth comes from, so some of our plans have much lower mail order penetration that other PDP plans. I would say it depends, but obviously the extra MA growth relative to our expectations is helping our pharmacy business.

Okay, and then I know it makes sense that you wouldn’t want to comment on the individual MA yet, not knowing where other bids are, but I’m assuming the group MA season is well along Can you just comment on what you’re seeing there, what you’re thinking heading into 2020 in that business line?

Yes, we’ve commented on this before. I would say we feel good about our group MA growth prospects. There aren’t a host of accounts out there, but there are some, a few guys that we’re chasing, and we feel good about some of the close ratios that we’ve seen. I feel good about where our group MA growth is going to come in next year.

Okay. You think you will see growth?

Yes, we definitely expect group MA growth next year, and I would say I feel good about that group MA growth. I’m not prepared to give you a number, but we feel good about what we’re seeing in the space and the accounts that we’ve already won. We feel good about that.

All right, thanks a lot.

There are no questions at this time. Mr. Bruce Broussard, you may continue.

Well, like every quarter, we really thank everyone’s support and having confidence in the company and continuing to be a supporter, but these results that we reported today cannot be obtained without the strong support by our associates, the 50,000 people that come to work every day, so thanking them for their dedication to improving the health of individuals and making it much easier for them to engage in their health. Everyone have a great day. Thank you.

Thank you again for joining us today. This concludes today’s conference call, and you may now disconnect. Have a great day, everyone.