Ladies and gentlemen, thank you for standing by. Welcome to the Molina Healthcare First Quarter 2011 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the conference over to Mr. Juan José Orellana, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Shawna. Hello, everyone, and thank you for joining us. The purpose of this call is to discuss Molina Healthcare's financial results for the first quarter ended March 31, 2011. The company's earnings release reporting its results was issued today after the market closed, and is now posted for viewing on our company website. On the call with me today are Dr. Mario Molina, our CEO; John Molina, our CFO; Terry Bayer, our COO; and Joseph White, our Chief Accounting Officer. After the completion of our prepared remarks, we will open the call to take your questions. Our comments today will contain forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act, including statements regarding our guidance for 2011. All of our forward-looking statements are based on our current expectations and assumptions which are subject to numerous risk factors that could cause our actual results to differ materially. A description of such risk factors can be found in our earnings release and in our reports filed with the Securities and Exchange Commission, including our Form 10-K annual report for fiscal year 2010, our Form 10-Q quarterly reports and our Form 8-K current reports. These reports can be accessed under the Investor Relations tab of our company's website or on the SEC's website. All forward-looking statements made during today's call represent our judgment as of April 18, 2011, and we disclaim any obligation to update such statements. This call is being recorded and a 30-day replay of the conference call will be available over the Internet through the company's website at molinahealthcare.com. I would now like to turn the call over to Dr. Mario Molina.

Thank you, Juan José, and welcome, everyone. We know that many people are celebrating a holiday this evening. John and I will therefore keep our remarks brief, so that those observing the holiday can get to their friends and families. Just a few months ago, we completed an important year for Molina Healthcare. We celebrated the company's 30th year in business, as well as our success in delivering strong earnings growth in 2010. We exceeded the guidance provided, and the company's financial position was strengthened as a result of our operational results. Today, I am pleased to report that our first quarter results have given us a solid start toward achieving the financial guidance we provided for 2011. Our financial results improved dramatically over the first quarter of 2010. Implementation of various contracting and medical management incentives resulted in lower medical costs across our Consolidated Health Plans segment during the first quarter of 2011. Inpatient utilization dropped by 7% compared with the first quarter of last year, while pharmacy utilization was flat despite the return to a more typical influenza pattern. Overall, our Medical Care ratio dropped by approximately 80 basis points year-over-year. Premium revenue per-member per-month increased by only 1% in the first quarter. Our larger and more established health plans fared the best in the first quarter. California, Ohio, Utah and Washington all have lower medical care ratios when compared to the first quarter of 2010. And Michigan's medical care ratio was up slightly. At some of our smaller or newer health plans, we continued to confront challenges during the first quarter that resulted in medical cost trends that exceeded premium growth. In Wisconsin, our newest and smallest health plan in terms of enrollment, greater visibility into our cost trends due to longer experience and a reduction in…

Thank you, Mario. We are very pleased with our results for this quarter. EPS for the quarter was $0.56, up 37% from a year ago. Net income from the quarter was $17 million, up 64% over last year and EBITDA was up 62% over last year. Operating revenue for the quarter was $1 billion, up $153 million or approximately 16% from the first quarter of 2010. Our total enrollment grew by 165,000 members or 11% over the first quarter of 2010. This growth is mainly attributed to solid organic growth in Texas and Ohio, as well as the acquisition of our Wisconsin Health Plan. In Texas, the 2 recent RFP awards, 1 for CHIP members in September of 2010 and 1 for STAR+PLUS members this past February, have more than tripled our enrollment in that state since last August. In Wisconsin, our acquisition of the plant closed in September of 2010, which enhances year-over-year growth. Sequentially, our enrollment rose by 34,000 members over the fourth quarter of 2010. Medicare enrollment grew by 43% over the first quarter of last year and we now serve approximately 24,000 Medicare members. Today, Medicare accounts were 1.5% of our membership and approximately 8% of our revenue. Our membership growth was essentially the sole driver of higher revenue for the quarter, as blended premium revenue per-member per-month grew only 1%. Although we have received relatively small rate increases in states like Ohio, California, Utah and Washington over the past year, we have seen substantial cuts in states like New Mexico and Wisconsin. As Mario touched upon, medical costs that exceeded premium growth in Wisconsin due to an 11% rate decrease on January 2011 require the establishment of a premium deficiency reserve of approximately $3 million in the first quarter of 2011. We've also seen a…

[Operator Instructions] Our first question comes from the line of Josh Raskin with Barclays Capital.

This is Joe Kuhns, filling in for Josh today. First 1 is, can you just give us an update? I know you talked a little bit about the RFPs. But I guess in terms of timing, which are the ones that are coming up next and when should we expect, for California specifically, when should we expect to start seeing some ABD members come in?

Well, let's talk about California for a second. This is John. The ABD members should start to come on the roads in June or July of this year and it was done not through a separate RFP. As Mario discussed, the Texas RFP came out with a due date of May 23. There've been a couple of RFPs in the MMS space. But beyond that, I don't think that we have much of a signal other than what's already out there which you guys and all the analysts have been covering.

Right. And were you surprised at all specifically about Texas that the effective start date didn't change given the delay?

No.

And anything else for that matter surprising in your opinion on the Texas RFP?

This is Mario. We did not find anything surprising about the Texas RFP.

Okay, thanks. And I know you're obviously reaffirming 2011 guidance. Any comment today on 2012 guidance or are you leaving that off the table for now?

I think we made some comments at our Investor Day about 2012. I don't think we want to go beyond what we said previously.

Okay. And just 1 more, if I may. I guess this is really more of a logistical question, but was -- I guess, what was the decision process in terms of reporting so early in earnings season? Usually, I think, last year you guys were around the first week of May. So just curious to see why you moved up the date.

You hit the nail on the head. It was logistics. We have our shareholder meeting next week. We've got spring break for my kids and a couple of other folks have spring break coming up. So it was just easier to get it done early.

Understood. Thank you very much.

Our next question comes from the line of Tom Carroll with Stifel, Nicolaus.

A few questions. On the transition of the capitated costs from fee-for-service to -- I'm sorry, from capitation to fee-for-service in Washington and Michigan, is this more of a proactive approach on your part as you expect the rate environment to be challenging in the coming years, or is this just more reflective of how the population is choosing providers?

No, I think this is more an issue of -- this is Mario, Tom. This is an issue of provider preference and the way they have chosen to be paid, which I think is really ironic because there's been so much talk about the cannibal care organizations which would put providers at risk, and yet more and more of the providers are coming to us saying they want fee-for-service contracting arrangements.

So this is the docs actually saying they want to get paid fee-for-service.

Correct.

Interesting. Okay. What drove the RX costs in Washington state, and does that suggest anything about future claims flow?

Tom, it's Joe speaking. I think in both California and Washington when we look at pharmacy costs, I think the biggest impact this quarter was a continuing diminution of pharmacy rebates. We talked about the pharmacy rebates we received via the pharmaceutical manufacturers drying up as the states collect that. Also, curiously enough, those are 2 of the -- I guess not curiously, those are 2 of the states where we had high synergist use as a result of the synergist season. Also, there's are 2 of the states where we had probably the least, probably have the highest RX utilization creep for the quarter. Essentially a combination of factors, but I think what really stands out for them this quarter is the way they've been hit by the loss of the pharmacy rebates.

Okay. And then lastly, what's the decrease in admissions per thousand, was that focused in any 1 or 2 markets or mostly evenly spread?

We saw that pretty much everywhere, except our Missouri and our Ohio plants, otherwise very consistent.

Very good. Thanks.

Our next question comes from the line of Sarah James with Wedbush.

Thank you. I was wondering how we should think about seasonality. I think yesterday you indicated 2011 would be more back-end loaded than past years, and if I adjust for the Wisconsin reserve fees of about $0.07 and the MMS margin step up in the second half, does the year still look like 60% second half, 40% first half? [Technical Difficulty]

Sure. Yes. I was wondering how I should think about seasonality. At the Investor Day, you guys had mentioned that you're being more back-end loaded than past years, so if you adjust for the Wisconsin reserves it would be $0.07. And the second half step up in MMS margins, I was wondering if the year still looks like 60% second half, 40% first half?

I think, Sarah, rather than trying to pigeonhole or pinpoint how much is coming from back half versus first half, what I would say is first quarter is ahead of, I think, even our expectations. But I'm just being a little cautious because of the rate environment. It's still in flux.

Do you have any basic assumptions for the second half rate?

I'm sorry, say that again, Sarah?

Do you have any assumptions for the second half rates currently built into your 2011 guidance that you could share with us?

What I would say is there's really been no change to the information we provided in January at our Investor Day. I think what's changed for us is that the first quarter results came in a little bit better than anticipated and a lot of that had to do with lower hospital utilization. It's a good sign because that's something that we have some control over. But I would be cautious about extrapolating the whole year based on 1 quarter. So really, no change to guidance, no change to the information that we provided in January, slightly lower medical costs in the first quarter than anticipated leading to better earnings.

Got it. And on the hospital utilization, is there anything in particular that you see that's driving that or any color that you could provide?

No, I think this is just a product of our medical management initiatives. We've been trying to push the medical management down to the state health plans, asking our state health plan, CMOs and medical directors to step up a little bit and help us control our medical costs better, especially at a time when we are experiencing minimal rate increases on the premium side.

Better medical management. And the last question is on the clinics. I think you talked about building a couple of clinics in California. I was wondering if there was any update on that.

We've still got, I think, 2 more that are scheduled to be open later this year. And we did open our second clinic in Washington in late last year or early this year.

That was in December. Plus we've expanded the capacity at 2 of our clinics in California, all of this is anticipation of the influx of the ABD members. We wanted to have a little bit stronger staff model clinic network to be able to handle that growth.

Okay. So would it be fair to say that they would be up and running before the ABD members come in at the end of the year?

Yes.

Thank you.

Our next question comes from the line of Chris Rigg with Susquehanna.

Just to put this utilization issue to rest, it sounds like you're saying the lower utilization was primarily a result of the lower admits in the hospital. Is that correct?

Yes, that's correct.

Okay. And are you saying that it was Molina-specific or do you think it was more general broadly to the industry?

Well, here's what I would say. It's very difficult to generalize from 1 health plan to another and I would urge everyone to be cautious about that. What we see in the first quarter is higher utilization due to the flu typically. But that's mostly on the outpatient side. So the fact that we had a slightly more intense flu season in 2011 than 2010, but lower medical costs is really reflective of the fact that we had lower hospital utilization. And as I said, we've been struggling for a long time to try and improve our margins and decrease our medical costs, and I think that we're seeing some of the benefit of that work. And I hope that, that will continue for the remainder of the year. But again, I caution everyone to be very careful about trying to extrapolate our performance to the rest of the industry.

Okay, thanks. And then thinking about the guidance for this year, can you tell us what percentage of your member months -- what percentage of your member months you currently have rate visibility on?

The only state -- actually 2 states, Ohio and Wisconsin. The rest of them will be a July or October rate change. Like 20%. It's probably 20%, 22%. Do you follow that?

Sort of. I guess what I'm trying to figure out is that as of today, because these -- there are varying times when the rate changes take effect, how much is locked up? Meaning, what do you know you have for sure and then what percent is still variable for your expectations for 2011?

So basically, it's Joe speaking, Wisconsin and Ohio receive 1/1 rate increases. Everybody else is going to hit either 6/30 or 9/30. So if you look at our earnings release, we break out the enrollment. I think you can just do the arithmetic.

23% total.

So 1 way of looking at that is that we have the rate -- we know the rates were slightly more than half. Correct?

Okay. That's what I'm trying to figure out.

Through the second part of the year, we have rates in half. So in July they change or in October they change. So a little more than half of the rates are locked in for this year.

Okay. And then is it possible...

Having said that, I also want to caution everyone, that if states run out of money, there's nothing that says they can't come back and adjust the rates downward during the contract period.

Okay. And then last question here on the guidance. Is it possible to tell us whether -- you gave a detailed breakout of the line items at your Investor Day. Did any of those line items change materially since January?

No, I don't think so. Our policy has always been if there's a material change, we'll let people know. I think that for the most part, the year is tracking as we anticipated, but with slightly lower hospital utilization and better margins as a result.

Okay. Thanks a lot.

Our next question comes from the line of Scott Green from Bank of America Merrill Lynch.

So first, I was reading through the Louisiana RFP, and I thought I read that they were extending the fiscal intermediary vendors contract through 2015. So I was asking is that you? Is your contract extended for another 5 years? Is that new? I didn't see it in risk factors this quarter.

This is Terry Bayer. We are the current fiscal intermediary, so a state will often extend the contract to cover the development period should there be a new vendor.

Okay. So is there still an RFP you're preparing to submit a bid for there?

Yes, we have submitted a bid to reprocure that business. So we are both the incumbent and the potential future awardee of the business going forward.

Okay. All right. So that wasn't new from your perspective. You're still competing to retain that business at the same time frame.

Yes. I think what the state is signaling is that there is not going to be an abrupt change even if they were to bring in a new contractor, as Terry said, there's a run out period where they would have us probably continue that contract. So I think that's what they're trying to signal to the bidders that there should be minimal disruption to them with regard to the MMIS vendor.

And then secondly, so in Wisconsin, can you clarify the premium deficiency reserve? Is that higher-than-expected cost vary initially as you have gotten claims that are more mature or is it lower revenues there?

This is Joe speaking. I think it's better to say it's generally driven by lower revenues. We took about an 8% cut there effective September 1, 2010, you'll recall and then another 11% on top of that effective January 1. So essentially, the revenue is simply not keeping up with the medical cost.

Okay. All right. And then I guess following up on Sarah's question, you had already assumed in your initial guidance 0% per rate update on unsigned contracts going forward. And your results in the first quarter are better than expected. So I guess that means we're assuming something less than zero going forward or just some other conservatism. There may be just a lower number there. Is that based on any conversation you're actually currently having with states where you now think rates might be lower or just general caution?

I would say it's general caution. We will have a much better visibility after the second quarter is done. And we hate to change guidance now when we change again once we have better visibility on rates.

Okay. All right. A question on California. So could you just update us on where we are in terms of there was a proposal for 10% provider rate cut in the back half of the year, and I think they're working on some study to show if it would impact access to care or not. There is also some placeholder for a rate increase to HMO plans. So if you could give us your perspective on where we are in that process. And then related to that, in 2008, there was also a proposed 10% provider rate cut in California and you quantified that potential impact at around $0.10 EPS in the back half of the year. And I was wondering if that would be the same way to think about it using those 2008 disclosures that you gave, if that happened to be...

Well, this is Mario. What I would say about that is that in the first place, there are a lot of moving parts with the California budget. And as I've said in the past, until the tax receipts come in and you get the May revised, I'm always very cautious about anything that's said about the California budget until after May. So I would continue to wait and see. With respect to what the impact of a provider rate decrease would be on the health plan, I would just caution you that the company is larger than it was in 2008, and California makes up a smaller percentage of its overall business. So it probably would have a smaller effect than it would have in 2008, but there's just a lot of uncertainty about what's going to happen with California. But the only thing we really do know for sure is that the process of moving the ABD patients into managed care has begun. Letters have been going out to the beneficiaries, notifying them that they must choose a plan. And I think that, that is on track. Beyond that, I think it's too soon to really comment.

Okay. All right, fair enough. So more color there in May I guess. So hopefully, if they get a budget passed on time maybe. And then in Georgia, you had spoken previously about working to establish networks there in preparation for an RFP that's now been delayed by at least a year. So what do you do there if you either had people on the ground or you had a network in place? Is there a cost associated with just that sitting there for a year or 2 or is there a way to lower those costs or maybe you start selling Medicare plan or something like that. What are your thoughts about that?

What we would do is, this is John, keep efforts, I would say more than minimal less than maximum efforts to keep the network that we've got together. It doesn't cost us really much in order to keep the contracts open. And should we say that we have excess resources, we'll put them into other locations where we're trying to build and expand.

Okay. All right. And lastly, could you talk about the sequential decrease in Washington enrollment? What drove that? I think it was down 14,000 lines sequentially.

Sure. There are a couple of issues in Washington that are driving the enrollment decrease. One, when we moved some of the contracts off of full risk to fee-for-service, we did have some membership attrition. But that's okay. We also -- Washington in 2010 brought up a new MMIS system. We're very familiar with transitions, having gone through that in Maine and Idaho ourselves, and we think there's some issues related to the implementation of the MMIS that affected our ability to gain enrollment in Washington.

Okay. So do you think going forward you can regain some of that or should just kind of be steady state from here?

We're working with the state on the MMIS issues.

All right. And then maybe one more. Are you guys looking at the Kentucky RFP at all or are you more focused on the opportunities that you outlined at Investor Day?

Well, it's always been our policy not to comment on potential RFPs. So we're not going to comment on that one.

Okay. All right, thank you.

Our next question comes from the line of Carl McDonald with Citigroup.

Thank you. First question is if you could update us on how you're feeling about the California ABD rates. I know initially the proposal from the state, a couple of the plans, thought the rates were a little bit. So anything that's changed since the initial proposal?

Well, we're in the ABD business right now. So we have our current rate. And although we've been quoted the go-forward rate, it's premature to conclude that its final in any way because of the budget issues. And again, we don't comment until we have it in hand.

Then with this expansion, just hypothetically if the state gave you a rate that you thought was way too low for ABD, do you have to take the membership? Can we basically force it onto you or can you choose whether to participate?

It would be mandatory enrollment. So we would have to accept the members, yes.

The second question is -- recognizing the comment you just made on not commenting on RFPs. I know it did, Louisiana specifically, there was some dispute over whether or not you guys would be able to bid given the existing MMIS relationship. Did you ever get conclusion on that the last time around?

Well, Carl, that's an interesting question especially in light of the fact that United [ph] owns Gen X [ph]. I find it curious that people are so concerned about our IT vendor relationship.

But anything specific on Louisiana or. . .

No.

And then last question is, if you could just talk about your pharmacy strategy, thinking specifically on the preterm labor drug? Now that the KB has the exclusive there, what the strategy will be?

I don't think there's really any change in our strategy. We have about between 400 and 500 women in the 17-P program and we'll continue with that. One of the issues about this drug being exclusive, I think it's changed. We can continue to use the compounded products. So I don't think it's going to be a huge issue.

Got it. So you're plan then is just continue to do what you've been doing?

Yes.

In using the compounded product?

Correct.

Great. Thank you very much.

Our next question comes from the line of Brian Wright with Citadel.

On taxes, what was the MLR ex the STAR+PLUS expansion in Dallas, Fort Worth?

Brian, it's Joe speaking. We normally don't share that level of detail. The STAR+PLUS expansion at Fort Worth, though, I will say their MCR was lightly below the number reported for Texas as whole.

Okay, thanks. And then just lastly, the claims inventory was up at the end of the quarter relative to where it was a year ago and even though for the fourth quarter, and the dollar amounts are higher as well, but the days claims payable was down. Could you kind of reconcile some of those metrics?

This certainly isn't the first time we've had a drop in DCP coincide with an increase in claims inventory. We've also had the opposite on occasion. I think we have increased DCP with a drop in inventory. It's a rough correlation, Brian, that's all I would say. There are a lot of factors that go into our estimates that we don't know actuaries make. Everything from hospital bed days, authorized bed days, pharmacy utilization all of that. So I don't the change in inventory is particularly out of line with what we've seen in DCP. It's never been a particularly tight relationship. Brian, John was going to talk about if you also look to the roll forward table, it's rather interesting. We actually had a greater benefit from 12/31/10 in the claims roll forward table and then we did the first quarter of last year. So those two indicators are kind of pointing in opposite directions. But we're very comfortable with our reserves.

Okay. And then I just don't remember and I apologize. Have you guys talked about like what the DCP number you're expecting for the year then, kind of a range or. . .

No, we've never really talked about that because it's too difficult to predict. It's always worth remembering days and claims payable as a product of our results and derive number from our reserves. It's not how we set our reserves.

Okay. Thank you.

Our next question comes from the line of Kevin Lavine (sic) [Kenneth Lavine] with UBS.

Thanks for taking the questions. I have a question on the Ohio health plan. It's been pretty strong in recent periods in the last 6 months ago. I was just wondering if the MLR improvement there has kind of been notably different for the ABD population versus the DFC [ph] in the states, or if it’s pretty much been moving in tandem now?

I think, this is John, it's been moving in tandem. Ohio is an example of where we are able to grow the business, put on a focus on medical management and get some rate increases. A combination of those 3 factors allows health plan to do very well.

Got it. And then just to circle back around the 7% decline in the hospital admissions at the end of the quarter, how does that compare to the year-over-year trend that you saw in the fourth quarter of 2010? Was the fourth quarter, was that also down in equivalent amount year-over-year?

I don't believe -- it's Joe speaking. I don't believe so. Fourth quarter over fourth quarter.

The problem with the fourth quarter, when trying to compare it with the fourth quarter 2009 when we have the big spike in the flu season. Yes, it was a big blip.

I think it's fair to say that since the second, third quarter of last year, second half of last year, we have seen reduced inpatient utilization. I think it's been an ongoing trend. And that's 1 reason why we're confident that at least a good chunk of what's happening is driven by the efforts we've undertaken.

And what about within the first quarter? How did that -- what's the trajectory there into the quarter? Was the admissions decline perhaps greater when you were exiting March versus kind of earlier in January year-over-year?

I don't have that data, sorry.

That's all I have. Thanks, guys.

[Operator Instructions] Our next question comes from the line of Mr. Charles Boorady with Credit Suisse. Charles Boorady - Crédit Suisse AG: First question, just going back to my notes from your Investor Day. I recall you were assuming about a zero average rate increase for the year. And I'm wondering are you now revising that to say we should assume something less than zero for the full year? And if so, I'm wondering what changed.

No, Charles. We're sticking with our guidance numbers. We're not assuming that it's going to get worse. We're not assuming it's going to get better. It is what we said back in January, that continues to be our assumption. Charles Boorady - Crédit Suisse AG: Okay. Got it. So your commentary today about conserve our state budgets, et cetera, is that any change from what you were thinking at your Investor Day?

No, I don't think so. I mean, we've been telling people for a while that we thought that the rate environment was a problem. I think that the fact that the federal government increased the FMAP for a while pushed the issue out a little bit. But it continues to be a concern. And it's one of the things we want people to understand. It's a big risk for us. Charles Boorady - Crédit Suisse AG: Got it. So basically no change in your thinking for an expected roughly zero average price increase for the full year? In your commentary today, is it basically, are you seeing anything different from what you were seeing then? Are you giving us a bias towards a potential cut in rates based on what you're seeing so far? You said something about nothing prevents states from adjusting rates downward during a contract period.

No. Charles, the reason I was saying those things, I think that there's some misconception about our industry. You hear people say things like are the rates locked in? Rates are never locked in with state governments. They give us a rate and in the vast majority of cases, that rate doesn't change throughout the course of the year. But there have been times when rates have changed. I think a good example of that was the successive rate decreases we saw in Wisconsin. It's unusual, but it's not unheard of. I don't want people to take away from our discussions the notion that rates are absolutely locked in or carved in stone. And this is a significant rate factor for us this year because of the state budget problems. But I don't think it's really any different than what we talked about in January. I think we signaled in January that we weren't expecting much in the way of rate increases. And if you look at our results for the first quarter, premium rate increases were up 1%. That's not very much, especially given the historic numbers that we've had which have been in the low single digits. Charles Boorady - Crédit Suisse AG: Yes, I appreciate that. I guess the comment around states potentially adjusting rates downward during a contract period, I mean given the state budget challenges this year and given that medical trends were a lot weaker than expected last year, is it more reasonable to maybe assume as a base case that the rates might get cut or do you think that's unlikely to happen and that no increase or decrease is the best expected case for the year?

Charles, we're going to stick by the rate schedule that we put out in January. I think the comments that we have today really are reflective of -- we don't want our business to be solely dependent on states giving us or taking away rates. We are managing our business based on the available revenue stream we've got. And that's keeping our imminent costs in line with our expectations that's working on utilization and that's contracting efforts and diversification into things like MMS. We don't want the whole discussions to be about what our rate increase is because frankly, it sort of abdicates our profitably to the states. The states may go back and change rates when they get into financial problems as Mario has said. However, they're still bound by actuarial soundness. And Congress and CMS are looking at that whole process right now by putting some more teeth into the oversight. Charles Boorady - Crédit Suisse AG: Got it. That's helpful added color. Thank you. The next question on free cash apparent, just to make sure I got this right, it's $25.6 million versus $65 million in the fourth quarter. And I'm wondering if that's correct and what the drop related to.

It's Joe speaking. A lot of that is essentially just timing of cash flows. We have our weep in the first quarter. We pay out our 2010 incentive comp accrual. We also have to ensure that we have adequate statutory net worth in states like Wisconsin, where we're going to take that premium deficiency reserve. Obviously that diminished our network considerably. So obviously, it's a combination of normal ebbs and flows of cash and the need to fund Wisconsin in particular. Charles Boorady - Crédit Suisse AG: Got it. And then in Texas, I think you might have answered this. The MLR of 91 1, which is up quite a bit sequentially. Was that mainly new ABD lives added?

I think as I said on the call, we don't go into that detail, but I can tell you that the Dallas-Fort Worth MCR was something less than the consolidated Texas number. Charles Boorady - Crédit Suisse AG: Got it. And then just finally, on the sequential enrollments dropping just by a little bit. In Michigan by a couple of thousand, in Washington 14,000, New Mexico by about 1,000. Was there a common thread there, maybe eligibility going down as employment picks up or any way to explain those changes?

I think part of that in Michigan is exactly that about the population of the state, and in particular in Detroit, eligibility is going down. Charles Boorady - Crédit Suisse AG: Got it. And in Washington state, anything unusual?

Well, we already talked about Washington. I think there were a number of issues. One of them had to do with some of the changes in the provider contracts and the other is an issue on the MMIS side, which we think is affecting eligibility. We've informed the state and we're working with them to straighten out the eligibility issues in Washington. Charles Boorady - Crédit Suisse AG: Okay, got it. Yes, I did get those comments. So that explained that drop. In future expectations, did we already see the full impact of that or should we expect continued erosion there?

No, I don't expect continued erosion in Washington. Charles Boorady - Crédit Suisse AG: Okay. Great. Thanks, guys.

We have no further questions at this time. I'll turn the call back to you, Mr. Orellana.

Thank you, all. Thanks everyone for joining us today. We'll talk to you second quarter.