Humana Inc (HUM) 2008 Q1 法說會逐字稿

Good morning, ladies and gentlemen, my name is Lori and I will be your conference operator today. At this time I would like to welcome everyone to the Humana first-quarter 2008 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (OPERATOR INSTRUCTIONS)

At this time, I will turn the conference over to the Vice President of Investor Relations, Ms. Regina Nethery. Ms. Nethery, please go ahead.

Good morning and thank you for joining us. In this morning's call, Mike McCallister, Humana's President and Chief Executive Officer, and Jim Bloem senior vice president and Chief Financial Officer will briefly discuss highlights from our first-quarter 2008 results as well as comment on our earnings outlook. Following these prepared remarks, we will open up the lines for a question-and-answer session with industry analysts.

Joining Mike and Jim for the Q&A session will be Jim Murray, our Chief Operating Officer, Art Hipwell, Senior Vice President, and Kathy Pellegrino, Vice President and acting General Counsel. We encourage the investing public and media to listen in 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 Humana's website, www.Humana.com later today. This call is also being simulcast via the Internet along with a virtual slide presentation. For those of you who have Company Fire Wall issues and cannot access the live presentation, an Adobe version of the slides has been posted to the investor relations section of Humana's website.

Before we begin our discussion, I need to remind each of you of our cautionary statement. 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 most recent filings with the Securities and Exchange Commission. All of our SEC filings are available via the investor relations page of Humana's website as well as on the SEC's website.

Additionally investors are advised to read Humana's first-quarter 2008 earnings press release issue this morning April 28, 2008. This press release and other historical financial news releases are also available on our website. Finally, any references to earnings per share or EPS made in this morning's call refer to diluted earnings per common share.

With that, I'll turn the call over to Mike McCallister.

Good morning, everyone, and thank you for joining us. This morning we reported first-quarter 2008 earnings of $0.47 per share, $0.01 more than the high point of our most recent guidance of $0.44 to $0.46. This represents a 12% increase over the $0.42 per share we earned in the first quarter of 2007.

Two important points stand out from the quarter's activity. First, except for the stand-alone PDP issues we discussed with you last month, our 2008 income components are forecast o be in line or better than those we originally shared with you at the time of our third-quarter 2007 call in October of last year. And second, we reached 68% of our full-year Medicare Advantage net new membership growth target by April 1, in line with our forecasted additions by that date.

Based on that and on additional sales activity we were seeing in April, we remain confident we will net up between 200,000 and 250,000 new Medicare Advantage members in 2008.

Let's now look in more depth at our Medicare and commercial business environments. Turning first to the Medicare environment, we are pleased that the final 2009 Medicare rates announced on April 7 are adequate to continue to develop products for Medicare beneficiaries with more value than they receive from traditional Medicare. As we've said many times in the past, we will adjust benefits to keep medical cost trends in line with net premium increases.

As I mentioned a moment ago, our year-to-date Medicare Advantage net growth is on target with PPO products continuing to gain popularity. Our Medicare PPO products experienced net membership growth of 73,000 in the first four months of this year versus virtually no growth in those products during the first four months of 2007. In addition, we continue to round out our Medicare product spectrum through a multistate rollout of Medigap plans. We've been approved to sell Medigap policies in 46 states plus Puerto Rico and Washington D.C. and expect to be licensed in another two states by the end of this year.

With respect to the Medicare political environment, it's no secret that Congress must raise additional revenues to offset any changes it makes to avert a cut in physician reimbursement that is scheduled to go into effect July 1. We don't believe it is prudent to cut benefits to seniors to increase reimbursement to physicians. Any cut to Medicare Advantage rates is essentially a cut in benefits to enrolled seniors. So I expect the debate to be robust. Members of Congress continue to hear from their constituents who recognize the value of their Medicare Advantage plans.

In parallel with our membership growth over the past few years has been the progress we have made in cost reduction and quality improvement through our many clinical and care coordination programs designed expressly for Medicare Advantage members. All of these customized programs are tailored to improve wellness and well-being for seniors and those with disabilities. Medicare members who participate in them consistently report high levels of satisfaction. And all are absent from traditional Medicare which basically acts as a claims paying mechanism with neither cost controls nor quality enhancing tools and techniques.

I will now take a moment to discuss a few of these programs in more depth including with one example of the positive health results they produced. In future calls, I'll highlight other programs and their results.

Our guidance approach to wellness and well-being follows a continuum that begins with a health risk assessment or HRA. And health risk assessment is a critical tool in both setting a baseline for member health status but also providing early indications where clinical coordination can begin to have immediate impact. Without the HRA, help in coordination would by necessity need to wait for claims development to provide insight.

Additionally, the HRA captures important information not embedded in our claims data. The result is speed and productivity for members and Humana, and deriving the best results from the many clinical programs in our arsenal.

As this slide shows, we had a significant rise in HRA participation in early 2008 due to a recently inaugurated rewards program that encourages our members to participate. We've already nearly doubled the 2007 participation rate by new members with a goal of steadily increasing participation.

Let me give you an example of how we apply this HRA data. As you know, a high percentage of people with Medicare suffer with chronic illness. We make available to eligible members appropriate disease management programs to help ensure that they are maximizing their opportunities to manage chronic disease. Our experience shows that participation in these voluntary programs improves member's mobility, their sense of well-being and their quality of life while at the same time reducing cost.

As you can see from this slide, enrollment in disease management programs is trending up nicely. In the first quarter of 2008, we exceeded 50% participation for the first time across all products. Our long-term goal is to drive full participation across all products including the newer PPO and private fee for service offerings.

We can already see the positive impact of better clinical coordination through a number of important measures. The dual benefit is greater wellness for our members and lower cost for the healthcare system as a whole. One of these measures is the readmission rate to hospitals within 30 days of discharge of patients. Post hospital care after an initial hospitalization often through disease management programs is critical to reducing the chance of a patient being readmitted for the same disease.

As the chart shows, care coordination and care management have a dramatic positive effect on hospital readmission rates for Medicare members. The take away from these examples is that while still early in our application of clinical coordination across new products and new members throughout the nation, we grow ever more confident in our ability to drive savings while achieving better outcomes for seniors. This supports the argument that the private sector is an important part of the answer to the nation's need to better manage the Medicare program.

Before leaving Medicare, let me briefly update you on our announcement from last month. Our current stand-alone PDP benefit expense estimates for the first quarter and for full-year 2008 are in line with the guidance we provided on March 12. We do not see any other business metrics that would adversely impact our current view of stand-alone PDP for the balance of 2008. As we said we would, we've moved swiftly and effectively to correct our Medicare prescription drug plan bid process in plenty of time for the June filing deadline for 2009 plans.

The structure and progress for developing bids has been thoroughly revamped and bid process oversight both within the Company and from outside experts has been significantly strengthened. I will remind you that because Medicare resets every year, this is a onetime situation, the impact of which will end on December 31 with PDP profitability back on track in 2009. We are fully committed to restoring PDP profitability to appropriate levels regardless of whether this results in a smaller PDP membership in the future.

Moreover, no other part of our business, specifically Medicare Advantage, is affected. Medicare continues to be a strong driver for us and we firmly believe that our 2009 results will continue the growth trajectory we saw developing based on our 2007 results and our previously projected 2008 expectations.

Another key development within the quarter was in our military service business. On March 24, the Department of Defense issued its long-awaited formal request for proposal for T3, the next contracts for TRICARE medical benefits nationwide. Responses to the RFP are due on May 27 and we will participate. Since current contracts expire in 2009 and the RFP doesn't call for the new ones to start until 2010, we expect DoD to extend our current contract for one year.

In our commercial segment, we anticipate extending our record of steady pretax earnings growth this year. We have the best balanced membership portfolio in our history and benefit expense trends are in check. pricing discipline is strong and as the bar chart shows, our 2007 acquisitions of KMG and Comp Benefits have broadened our capabilities in the voluntary benefits, dental and vision markets, consistent with employers' growing desire for benefit providers who offer full-service solutions.

At the same time, medical membership within the commercial segment continues to show steady but targeted growth. In fact, we're raising our expectation for total commercial medical membership growth to between 90,000 and 120,000 members in 2008 driven by individual and small group sales and retention improvement.

Let me highlight the growth we've experienced over the past few years in the small group and individual and how they are related. It's a commonly understood phenomenon that the percentage of small businesses that provide health coverage to their employees is dropping. However, an offsetting trend is that most job creation in the United States is by small companies. As a result, the small-business market remains relatively healthy and growing. Concurrently, the individual market continues to grow as a result of the dynamics of the small-business market segment.

The good news for Humana is that we have strong capabilities in both segments and that there are synergies between the two relative distribution channels, broker support, online tools, communications, marketing and service support.

This slide illustrates how we've grown our individual and small group products over the past four years taking advantage of the market dynamics I discussed a moment ago.

Before concluding, let me update you on Availity, the industry-leading venture we cofounded that's helping drive down our claim cycle time as we discussed in our news release this morning. As we receive claims faster and pay them faster, the 120,000 doctors and hospitals in all 50 states who participate in Availity are experiencing better support and service. Launched in Florida as a joint venture with BlueCross BlueShield in 2002, this single source administrative portal for providers expects to process more than 525 million transactions this year. It also now has partnerships with virtually all major health benefits carriers.

In Texas, the focus of major recent expansion, Availity is scheduled to process 115 million transactions this year, up significantly from 2007. Availity is an excellent example where appropriate cooperation among competitors can bring significant improvement and process speed across many claims and service functions while self-funding the rollout through efficiency for payers and providers alike. Ultimately Availity helps to lead the way toward the creation of a real-time national health information highway to the benefit of doctors and hospitals, consumers and the health system.

In closing, this morning we are raising the earnings per share guidance we shared with you on March 12 to reflect changes in estimates for both our tax rate and share count. As we said in our call on March 12, the root cause PDP bid process issues that produced our revised 2008 guidance, are both plainly visible and easily fixed and much progress has been made in the month and a half since then on fixing them.

Since stand-alone PDP represents only 11% of our revenues and all remaining parts of our business are hitting their revenue and earnings goals smartly, we anticipate and on target performance for the rest of the year and a resumed earnings growth trajectory for 2009 and beyond.

With that, I'll turn the call over to Jim Bloem.

Thanks, Mike, and good morning everyone. Let's start with our first-quarter earnings results of $0.47 per share which exceeded the upper end of our expectations by $0.01. The penny was due to a lowering of our tax rate to 35.3%. This lower tax rate is a consequence of the stand-alone PDP issues we disclosed on March 12 since tax-exempt investment income is now expected to be a higher percentage of our total reported pretax income in each quarter and for the full year.

In addition, the approximately 1.5 million shares repurchased in late March had little effect on the first quarter's diluted share count but the resulting reduction of 9/10 of 1% in the previously outstanding diluted shares is now reflected in our full-year share count guidance along with the reduced dilutive effect of outstanding stock options due to our lower share price.

Also occurring in the first quarter, we want you to note that the negative first-quarter earnings impact of the PDP issues disclosed on March 12 were as we had expected. Finally, an improvement in our claims cycle time impacted both our days in claims payable and operating cash flows. As usual, we've detailed the component causes of these changes in both the text and statistical pages of this morning's press release. In a few minutes, I will review those items in further detail as well as their expected impact on the full-year operating cash flow guidance.

Next let's look at the expected 2008 overall Medicare benefits ratio. As this slide shows, the benefits ratio progression through the year continues to be driven by our Part D benefits. As members progress through the various stages of their benefits, we expect the impact of the stand-alone PDP issues to both lessen and track closer to the original benefit ratio pattern we projected when we released our fourth-quarter 2007 results on February 4.

It's important to note that the difference between the red line which shows our 2008 estimates at the time of the fourth-quarter call, and the purple line which shows our current estimate, that difference is attributable to PDP issues we outlined for you in mid-March. Our projection for the total Medicare benefits ratio for the full year remains in the same 85% to 86% range that we shared with you at that time.

Turning now to benefits payable, our prior period development relative to our year-end reserve estimates was right in line with our expectation. This affirms our commitment to consistency and conservatism in both our actuarial assumptions and reserving policies. Additionally, this fact also confirms the cost trend assumptions used in pricing both our 2008 Medicare and commercial lines of business are aligned with our currently observed trend run rate.

Our view of this year's flu season is that although it was worse than last year, it's well within the normal range of variation that we experience from quarter to quarter and it doesn't change our outlook for the full year. With respect to our stand-alone PDP business, the claims experience that we have observed since our last announcement which includes both the last half of March and most of the month of April remains consistent with our March 12 estimates.

Now let's take a more detailed look at our days in claims payable which fell 3.3 days in the first quarter. As most of you know, we believe it's important to analyze the reasons for any directional change in days in claims payable before drawing premature or lockstep conclusions such as an increase in days in claims payable always is good and a decrease in days in claims payable always is bad. As indicated in this morning's press release, a number of factors are contributing to the improvement of our claims cycle time.

As noted in the slide, transitioning our Medicare private fee-for-service business to an internal platform impacted our days in claims payable for the quarter by 1.7 days. I'll elaborate more on this in the next slide but before then, a second factor impacting our days in claims payable calculation is the Part D expense quarterly pattern. As you are probably aware, we exclude stand-alone PDP business from our days in claims payable computations because of its low level of associated IBNR. However, since we include all of our MAPD expenses, the days in claims payable computation is influenced by the Part D expenses for our MAPD business.

Since these prescription drug benefits generally decline over the course of the calendar year as the impact of the coverage gap comes into play, the denominator in the days in claims payable computation declines with each sequential quarter, everything else being equal. Then each year as we transition from the fourth quarter to the first quarter, the denominator resets, i.e., it increases due to higher drug costs, net result in a noticeable reduction in days in claims payable. This year the impact of this item was to lower days in claims payable by 1.5 days while last year it reduced this metric by 1.3 days.

The third major days in claims payable factor highlighted in this morning's press release was the growth in our Medicare PPO business. Since our PPO providers generally submit claims faster than non-network providers, growth in network based membership shortens the time between when a claim is incurred and our receipt of the bill from the provider. This is what we refer to as the claim receipt cycle time. Any shortening of this cycle tends to expedite cash payments to providers and thus lower the days in claims payable.

Returning now to the improvement in our claims cycle times, we have seen a fairly steady decline in our claim receipt cycle time since the end of 2005. This improvement is shown by the green line on the slide. The blue line shows that the reduction in claim receipt cycle time generally correlates with an increase in the percentage of business administered on internal platforms. This is especially true recently.

Now in addition to the recent growth in Medicare PPO products and membership that I mentioned a few moments ago, the connectivity of our provider networks across all of our products has been improving during the same period. That said, the most significant factor still affecting the change in days in claims payable this quarter is the continued migration of our private fee-for-service business to our internal claims processing platform.

When we began the tremendous ramp up for the Medicare private fee-for-service business back in 2005, we outsourced our claim processing function to a Medicare fiscal intermediary. This was in order to help ensure a successful experience for both our members and providers during this initial period of tremendous and rapid growth. However, we did not consider this outsourcing in claims processing to be a long-term solution and immediately we began the steps necessary to administer those claims internally.

Early last year, we began a slow but steady migration of outsourced private fee-for-service business to our internal platform. That migration coupled with the improvements in the speed of our in-house processing as demonstrated by our March 31 days in claims on hand of 4.4 days being the lowest since the second quarter of 2005, that migration results in the private fee-for-service claims being processed significantly faster, driving down the days in claims payable again by 1.7 days in this quarter. We expect to have all of our Medicare claims processing in-house by the end of this year and that will provide the beneficial effects of lower administrative costs, better connectivity between commercial guidance -- our commercial guidance model, improved provider network connectivity and expedited data for insight and analysis.

I realize that I've focused quite a bit of my time thus far on the reduction of our days in claims payable. We believe that improving the claims cycle time metric is both favorable and necessary as we further improve our high service levels and add increased transparency to help benefit cost and delivery. All of this furthers consumer engagement in all of our products and segments and further, this strategy gives us significantly improved relationships with providers across the country.

Turning now to operating cash flows, our improved claims cycle metrics are also anticipated to affect the full-year operating cash flows. So let's begin by briefly analyzing the first quarter. This slide shows the major factors affecting both this year's and last year's first-quarter cash flows from operations. As you can see from the slide, last year nearly $445 million of operating cash flows was aided by three factors which totaled $180 million. Those factors did not recur this year.

Additionally, this year's very modest formula of operating cash flows was burdened by three factors totaling $270 million and those factors did not occur last year. When you consider that the sum of net income plus non-cash expense add backs in each quarter were roughly equal, these six factors show that Humana's operating cash flow generation capability remains strong.

Now moving onto our expectation then for full-year 2008 operating cash flows, the only factor from the first quarter that is anticipated to have a significant additional impact in the remaining quarters is that continued migration of the Medicare private fee-for-service claims to our internal platform. Accordingly, we've adjusted our expectations for full-year cash flows from operations.

Now given that the other first-quarter operating cash flow factors I described should not recur in the remaining quarters, and given the fact that the first quarter as usual is our lowest in terms of projected net income, we are confident that we can meet our 2008 targeted operating cash flows of $1 billion to $1.2 billion. Again, the difference between the midpoint of this revised guidance range and our actual 2007 operating cash flows roughly reflects the difference in net income expected in 2008 and reported in 2007.

Before I conclude, let's briefly review our investments in depth. Despite the continued volatility in the credit markets, we continue to experience solid investment performance due to our twin strategies of variable interest rates on both our debt and investments and secondly, rigorous adherence to a high credit quality investment standards. The principal attributes of these standards are listed on the slide.

These two strategies enable us to maintain our 2008 net investment income range of $270 million to $295 million despite significant short-term interest rate reductions and continued credit quality concerns across the fixed income sector since the beginning of this year.

To summarize then, except for the PDP issues we disclosed on March 12 and we realize that this is a very big exception, we're pleased with our first-quarter financial results and comfortable with our full-year 2008 guidance. We expect to continue to make financial progress in all of the lines of business as we progress through the remainder of the year by doing those things that have enabled our progress over the last five years. Some of those things are continued investment, underwriting discipline, utilizing technology, offering products which meet consumer needs across the healthcare spectrum. We intend to do all of this in a way which we expect will continue to further earnings in operating cash flow growth while engaging in satisfying all of our constituents.

With that, we will open the lines for your questions. We ask that you limit yourself to two questions in fairness for those waiting in the queue. Operator, will you please introduce the first caller?

Thank you. (OPERATOR INSTRUCTIONS) Josh Raskin, Lehman Brothers.

Good morning. Jim, not to belabor the cash flow question, but I guess if I look at the cash flow statement, it looked like the outflows were in changes in receivables, other assets and other liabilities. And I guess I would have expected it more on the medical payables that you guys were accelerating at the time. So could you just help us understand just from a cash flow statement perspective how to think about it?

Again, I think that the slide that I had that compared both first quarters, that is the first quarter of this year and first quarter of last year, really I think hits on what those differences are that are sort of lumped together in the cash flow statement. Again, if you go through them, most of what I said talked about the importance of improved claims cycle times and that was $115 million in this quarter. And then there was a leap year and then the timing of underpayments which was just the opposite in 2007 as it was in 2008.

In terms of that claims cycle time, I'd like to also say we think that we are rounding the corner around 50% of being completed with that and that was roughly about $115 million as the slide says. So that is why the cash flow from operating -- cash flow from operations guidance for the year was clipped by 200 to 300 because the full-year effect of that would be -- I'd say the midpoint would be 250.

I guess I'm just kind of confused when I think about the actual cash flow statement. How would you expect that to sort of manifest I guess in the future in terms of which line item would we expect to see that?

Well we're going to -- one of the big improvements will be that we're going to earn this is -- the first quarter is where we always report the lowest net income so that is going to improve significantly as we move forward. And then and that is really driven by the improvement in the business and getting more of those Medicare Advantage members that we are adding into our revenue flow. So that will again that will expand the benefit payable as well. But again, that is the pattern we have every year.

What I was trying to do is explain why the difference between [445] and $4 million and then how does $4 million get to $1 billion and $1.2 billion at the end of the year.

Right, I got that. Maybe I'll just follow up off line with some of the numbers. But just the second question on the commercial growth, we were surprised by the strength on the risk side. I know Mike had mentioned the individual and then the small group but maybe just a little bit more on the geographies and what sort of products are growing? That would be helpful.

This is Jim Murray. The individual business for us is doing very well. Those of you who have come in in the last couple of quarters we've talked about some new products that we've introduced where individuals can make selections based upon a menu. We've also done some things to make it easier for the brokers that we do business to do business with us. We've talked in the past about how important it is for us to try to create a differentiated value proposition rather than allowing ourselves to become commoditized and we recognize that there is some price that folks will leave. But we've tried to keep our pricing relatively close to the competition but recognizing and really pushing some of the other value that we bring.

The markets that we feel like the commercial individual business is doing extremely well would be states like Florida, Texas, Colorado, Utah, Georgia, Illinois and in some of those you can tell that we compete with not-for-profit Blues and some we compete for for-profit Blues. I guess from 50,000 feet what I would suggest is that some of the tools that we've been building over the years to differentiate ourselves from a consumer perspective seem to be playing well against some of the Blue plans that we compete against. It doesn't appear like they have done as much to create the kinds of tools and services that we have as a company.

And so we think there is an opportunity to take some membership away from some of the Blues that have been in this business for a long period of time and haven't done a lot of the things that we've done. We're also doing pretty well on the small group side. We had a nice January in small group and that looks nice in the quarter.

I can't point to a particular market. I would say Texas is doing nicely for us, Missouri is doing well for us, Kentucky and Ohio. But generally speaking, the small group growth is systemwide. And again, focusing significantly on how to differentiate ourselves so that we don't position ourselves as a price competitor.

That's extremely helpful. Thank you.

Matthew Borsch, Goldman Sachs.

Yes, good morning. Just taking a look at the reserve development. So you had $196 million non-TRICARE this quarter. And that I guess was about 80% of what you captured for the full year in 2007. But if I recall correctly in 2007 in the third quarter, you had $0.25 of that number that was -- that you created as essentially non-recurring. It just seems like it's a pretty big prior period development number. I'm wondering if that is in the range of what you would expect to be recurring.

Yes, we think that it is. The third quarter of last year number was really quite a small number of that $0.25. I believe it was only a nickel. I believe it's $15 million. So the way we look at it is this is really -- what we are seeing at TRICARE is in line with what we think will eventually play out. TRICARE is always negotiating with the government, there are always things that are still outstanding that come out of prior periods, and those are reflected in there as well.

Okay. And just a follow-up on the cash flow topic. I'm not sure if you covered this. I realize you cited the migration from the external claims platform as a big reason. As I understand it, that was the reason behind the change in cash flow outlook relative to what you had suggested on March 11th when you lowered the earnings outlook.

I'm just wondering what has really changed between today and March 11th that would lead you to lower the cash flow outlook based on what you know now versus six weeks ago?

As we work through this, it's basically a question of how fast it occurred. And it occurred somewhat faster than we had anticipated. Like I said before, we had -- just to ground everybody -- this was about $115 million of the difference. We think we are about 45% to 50% of the way, and we hadn't really factored that into the March 12, because what March 12 was designed to do was show you what was the effect of the error we made on these things. And all the other things we only look at on a quarterly basis.

So we weren't refreshing all of the aspects of guidance. We were only refreshing those to the extent that they were impacted by the change that we announced on March 12. The fact is as we are moving faster along than we originally anticipated with respect to the transition of private fee for service to an external platform, and now we're allowing for that in our guidance.

We will be done by the end of the year. As I said, we are just approaching 50%, let's say. So the 200 to 300 is sort of in the middle of twice what we've done in the first quarter.

Okay, thank you.

Charles Boorady with Citi.

Thanks, good morning. Can you give us a roll forward with the ins and outs on the cash at the parent corp in '08; how much cash you ended '07 with, what is going to be generated in the parent and dividended up from the subs, and what you expect to pay out?

Charles, we had 535 at the end of the 12/31/07. We are still in discussions with various the state EOIs about the dividends for this coming year. So generally, we were going to give the answer to that in the next quarter's call after that is all completed and we've had a chance to settle in with them on the appropriate level of surplus, and then what is available for dividends to the parent. Again, that is all based on what we did last year.

Any rough estimates you can leave us with, what you hope to be able to dividend up?

Well at this point I'd prefer to just wait another 90 days until we finish it up. Things are going as we anticipated and again, I think that it's really best now because we are in discussions with several of them, several of the bigger ones that we would just refrain from that at this point and we will let you know next time.

Okay. If you could clarify the comments Mike made on 2009 just as you're going to the planning process for '09, are you excluding from '08 as a onetimer the Part D issue? So are you thinking about 2009 as growing from an '08 pro forma without the Part D losses?

We're looking on a trajectory basis basically along those lines. Again, we have to -- in order to really firm that up, that is our goal. In order to really firm that up and then be able to talk about that concretely, we need to go through the rest of the bid preparation, the bids need to be submitted and then vetted by CMS. And then we need to see how everybody else bid and then we will really know about whether our strategy has gotten us to that. But that definitely is our intention.

Charles, let me add to that. It's Mike. I've been telling people as I travel around if you look at our original midpoint with '08 guidance, I think it was 545, something in that area. And as we think about going forward, I think we are going to be looking to grow from that original point. We have to do some work as Jim said to decide how much of that growth is going to be because part of it is going to be -- clearly we won't have the drag of the PDP in '09 but then we have to decide what that business will look like as we finish the bid process. And I think there is some moving parts here.

Our mental model is this is a one time event and that we will be back on the trajectory that we were on before and we'll have to decide whether the '09 number is going to be what we might have originally thought or whether it is going to be different. But we are certainly not going to be incrementally moving from the point you are looking at today for '08.

Thanks.

Bill Georges, JPMorgan.

Good morning. I'm wondering if you could just address some of the moving parts around your commercial medical loss ratio? You referenced lower yields I guess as a result of mix shift but the MLR also came in much lower than historical levels. So could you give us your thought there? And where does it go going forward? Should we expect it to normalize?

Sure, this is Jim Murray again. Some of the things that are part of all of that is the mix shift that you just referenced from larger fully insured business which had been our history towards more individual and small business. The targeted medical expense ratios in individual and small group are significantly different than they are for larger fully insured books of business. So that is a very big dynamic. So the more we grow in individual and small business as a percentage of the total, our medical expense ratio will improve.

The other thing that we've got going on this quarter that significantly impacts us is the acquisition of Comp Benefits in last year's fourth quarter which has a very favorable medical expense ratio in the dental and vision space and also the acquisition of KMG in specialty lines which also have better than our existing book of business medical expense ratios. So all of those factors coming together have created the medical expense ratio that you see there today.

There's also a seasonal pattern that exists in the first quarter relative to the high deductible health plans which wears off as the year progresses particularly in the fourth quarter. But we are pleased with the direction that we are going in our medical expense ratio. And as we get our overall block of business more aligned to the risk mix that we talk about when you all come in, I think you will be very pleased with what you see going forward.

Okay, that is helpful. A question about the shift in your Medicare Advantage book toward more PPO. How do you think about that and how should we in turn think about that as you migrate members off of the private fee-for-service books?

This is Mike. We've said for a long time that we think the private fee-for-service is a transitional product over a number of years to help spread private sector offerings across the country and to introduce the idea to people. I think that has been very successful. I think long-term -- and that is the reason I teed up a couple of clinical things today in my comments and will continue to do -- long-term, the future of Medicare Advantage is going to be managing and coordinating care for these people because we have to find cost savings. And part of that is going to be to get them into PPO products over time so that they bring in that last component of cost management which is the network itself.

We've been a pretty aggressive player when it comes to developing PPO capabilities, we've been working on networks for several years and now we are seeing the products becoming attractive to people and some people are moving so -- and buying straight into PPO as opposed to going to private fee-for-service first out.

So it's part of the long-term strategy. I think that the PPO is the future not the private fee-for-service and we've been preparing for it and now we are beginning to see early indications that the transition is going to occur.

Should we expect to see growth rates flip-flop then between the private fee-for-service and the PPO membership?

It depends on payment rates and if they change based on product design or what happens in Congress will dictate some of that. I think we let the market dictate that for us at this point. I'm indifferent to whether someone picks a private fee-for-service or a PPO product at this point. But over time, I think the growth rates could change dramatically depending on the overall context.

Okay, thank you.

Justin Lake, UBS.

Thanks, good morning. Just first question on PDP and as it relates to fixing the issues for 2009. I guess the most interesting one is the mix issue you have spoken to that I think was about $120 million. I think one of your larger competitors has also mentioned that the mix of those being pressure in their margins as well. Given the fact that CMS put out some new rags in regards to calculating the benchmarks and how they are going to allocate duals next year. Can you talk about what the pressures are going to be for you to weigh membership versus margins in that retail basic benefits plan where you have both the LIS and the retail members considering you need to both yourselves and United are going to be looking to price hard due to mix and they are going to be allocating them based on weighting -- membership weighting?

Sure, this is Jim Murray. As you might expect this past month and the next month we are doing quite a bit of analysis in terms of the dynamics that you just described trying to really understand the cost structure of the various kinds of business that we have. We are also evaluating where we think the benchmarks are going to go not only given the change that CMS announced recently but also what the dynamics of the industry are and what we are hearing in terms of what some of the competitors are feeling in terms of cost pressures here.

So not really willing to talk about our strategy but I would guess that there will be an upward bias to the benchmark. And as we said on March 12, we're going to price our products commensurate with where we think our business mix is going to fall out and we are doing some things to study our premium levels and what might likely happen and persistency related to the various blocks of business that we have to try to figure out the membership that we'll have after we deliver the premiums that we think are sufficient to return to levels that we were going to be at in '08 and hopefully in '09.

So lots of moving parts but as you might expect lots of study. I would guess there will be an upward bias, as you said, to the benchmarks this year after a couple of years of a downward shift in the benchmarks.

Okay. And then just in regard to Medicare Advantage enrollment growth. Can you talk us through -- kind of coming into the year, I think you had given three or four different categories where you had been looking to add membership on a gross basis. I think you have most recently updated us that the employer side was a little bit lighter than expected and you were making it up in other areas. Can you give us an idea of where you are now versus what you expected as far as gross additions? And specifically, can you highlight how PDP upselling is working out for 2008? Thanks.

Sure. Again, this is Jim Murray. We had talked a year or so ago or during the course of 2007 about the various categories that we anticipated getting membership from. And what I think we talked about the last time was the fact that the group opportunity for us wasn't playing out as we had anticipated. And so we moved some things around in terms of getting our career agents to make up that shortfall. I think what I said at the time was that going forward for all of our guidance to you and for our setting of budgets internally, what I would prefer to do is to set targets based upon what we think the career and delegated and affinity relationships could provide. And to the extent that we get any group business, that it would be totally upside.

We're doing a lot of work in the group space. We've got lots of folks who are talking to a lot of customers, small companies that have retirees, large companies, government agencies, welfare funds, and what have you, and we're creating a lot of good relationships but what I would like to do is rather than just fish, I would like to catch some. But I don't want to count on that until they come in.

All of the other pieces that we talked about in terms of upselling and the career folks and the affinities and delegated agents are all doing extremely well as is demonstrated by our reconfirming that we are going to hit somewhere between our guidance that we talked about. But the group is one that we just want to be much more comfortable with and when we start to see some positive sales there, then we will report those as upside.

What was the upselling target for this year? Can you just remind me?

We hope to get somewhere between 80,000 and 100,000 members from the PDP opportunity.

And you are on target for that?

Yes.

Thank you very much.

Christine Arnold, Morgan Stanley.

There are a couple of administrative things and then a conceptual question. Did you have any realized capital gains in the quarter? Investment income looked pretty solid?

None out of the ordinary. Generally in the first quarter, we do some rebalancing of the portfolio and in the normal trade that goes with that because interest rates have come down. There were some but I don't -- it's not anything greater than it was the same time last year.

So was 7.5 million in the fourth quarter, was it higher or lower than that?

It was about that. I think it was 8 or 9.

Okay. And then the roll forward looked really positive. Was there net prior period development helping any of the business lines in particular commercial this quarter?

No.

Okay. And then finally, could you talk a little bit about your Medicare Advantage yielded? I would have expected risk scores from membership you added last year to improve the yield and yet the yield on Medicare Advantage was kind of 1%, 1.5%. Might you be seeing improved risk scores later in the year as you true up from new membership last year? How do we think about the Medicare Advantage yield we saw this quarter?

We're seeing a problem with talking about an overall yield as the mix of membership and where we are selling. If we looked at a specific state or region, then we could have a discussion around mix. We feel very good about where our mix is coming in if you look at it on a state-by-state basis. But again, some of the areas that we are growing in the gross premium that we get from the government is below where we had members in the past and so it is difficult to look at it in total.

So this is a good run rate where we are first quarter?

I didn't hear that question.

I'm sorry. This is a good run rate what we are seeing this quarter?

Yes.

Okay, thank you.

Greg Nersessian, Credit Suisse.

Good morning. First question is just a quick clarification. All the enrollment guidance for the year is organic, correct? Does not include the OSF?

That is correct.

Okay, great. And then the 29,000 jump in April in terms of the MA enrollment, could you characterize -- it doesn't sound like those are retiree account. Was that just agents or was there some SNP membership in there?

No, just normal sales, not a significant number of groups.

Okay, great. And then could you just touch on your target commercial SG&A ratio? Your mix of business is shifting there to individual and more specialty products driving that up. Is there a target you could speak to over time in terms of where you hope to get your commercial SG&A ratio or is this a good run rate?

Again, I think it is a good run rate and as Jim mentioned when we talked about the benefit ratio in commercial, the corollary of that or what follows from that is the better benefit ratios in the newer products that we've added and in the mix of business that we are continuing to seek, those have higher selling costs associated with them and they have a higher SG&A ratio. And we've said that basically that would add 40 basis points to the consolidated this year and you saw that consolidated -- you saw that 40 basis points in the first quarter.

So we think that the run rate is pretty good and again, it is just reflective of the mix. The good news is though is again, there is a very positive result in commercial because of these adds.

Okay so do you think that the commercial pretax margin is going to approximate -- it was a little bit higher than the 6% target in the quarter but obviously you spoke to the seasonality from the high deductible plans. I mean, when we think about that for the full-year, are you expecting something approximating 6%?

It comes down just as that answers to Justin, because again, we continue as we indicated in the press release to have more consumer, more Smart Plans, more high deductible early in the year. So we are seeing right now a very -- the highest margin basically that we'll probably see all year because of that. And then that will recede during the year to come in closer to that.

Those of you who have come in in the past year or so, we've talked about the fact that we've targeted something closer to the 6% range for 2009 full year. And then based upon where the competitors are versus where we are at at that point trying to figure out how high we can do. But we are pleased with our continuing progress over the last several years.

Okay great, and then last quick one. There was a drop in the securities lending payable balance sheet account. What is that exactly and could you describe what the drop in that was a function of?

Well, it's a function of how much security of lending occurs and here is what you get with that. There is a 2% additional collateral when you lend out securities. The cash portion is there so generally speaking, the volatility that was in the prior quarter at the end of the year that volatility went down, that led to less. There's a comparable liability to the asset so whatever it is it doesn't really affect the balance sheet.

Okay and no impact on the cash flow statement or the income statement?

No, because again there is one on each side and it goes in financing cash flows as opposed to operating which is what we've been talking about.

Okay, thank you.

Scott Fidel, Deutsche Bank.

Thanks. First question, do you have a same-store commercial MLR for the quarter or if you can spike out just how much the acquisitions reduced the commercial MLR by?

This is a Jim Murray. I don't think we have that off the top of our head.

Once we integrate acquisition -- I mean in the fourth quarter we've had -- we said we had each of these companies for a small amount of time basically the month of December. But then once they come in, we just put it in with all the other business that we have in commercial and it gets subject to the rule that we look at all commercial as a whole. And we don't disclose really what each of the pieces are.

If I was going to guess, the revenues on the books of business that we acquired are probably less than $0.5 billion so I wouldn't anticipate that it is a significant impact although it is probably some part of the increase. I'm sorry we can't be more clear about that.

That is okay. And a follow-up, just get your views around sort of secular medical cost trends at this point and it looks like all of the component guidance for cost are stable sequentially. Just given the ongoing debate right now in the industry on whether cost trends are rising or not, just would be interested in your views on that in the commercial market.

And then maybe also if you can highlight how your variation in claims trends might be looking across the three primary MA products, private PHMO, PPO and whether you are seeing any variance in them or whether they are all tracking in line with expectations?

This is Jim Murray again. We are seeing really stable medical cost trends. Over the last several years, we've done a lot to try to focus on the various elements of medical spend. Again over the last several years, we've been flat to slightly down. We don't see any piece of that accelerate in any way, shape or form. And so it may well be that we've just focused on it little bit more than our competitors or it may well be that the industry is more flatfish than some of the debate that I read about when I read some of your write ups.

As it relates to the MA, as you might expect because of the growth of the PPO business, the early returns on that are hard to figure out relative to the private fee-for-service. Obviously our HMO business which is about 500,000 members, the medical spend there is very, very solid. PPO looks like it is going to be where we had anticipated. We are in the process of studying that as we are doing our bids in May and June.

But generally speaking we are pretty pleased with the medical trends on our MA business. We're seeing some nice stability. You all have talked in the past about the duration effect, and there's also an effect when you enter a state or a location at first, the disability population is the first to join. But you sell through that you get a much more stable base of business. So we are finding a lot about our medical trends on MA and we feel very good with what is happening.

And Mike shared with you some of the things that we'll see positive implications of in the future as we manage this book of business much more so than the Medicare fee-for-service world does. So again, pretty pleased with what we see developing.

Got it. And just quickly, on the 1Q MA enrollment, does that include the acquired United book in Vegas? And just if you could remind us if so, how many lives that netted out to?

No, it doesn't include it and I think it is 28,000 lives.

So that will be in 2Q?

That is the goal.

Okay, thank you.

John Rex, Bear Stearns.

Thanks. Wondering if you could just give us some kind of order of magnitude differential and what you saw for flu impact in the 1Q versus last year? Realizing you said it was definitely within the realm of what you had anticipated but can you help us understand how different it was versus last year, a much more mild season versus this year's much more severe season?

Yes, it was between $25 million and $30 million total all across all the product lines. So most of it obviously was in the Medicare but again, we think that that amount is really within our normal -- it's within our normal guidance and within the normal range of fluctuation that we observe on these things from quarter to quarter because there is always something in every quarter.

Some years the flu is bad and some years of the flu is good. This year was a little worse than it was in the prior two years but for us it wasn't something that threw us off track in terms of our guidance.

Okay. And when you said $25 million to $30 million, that would be $25 million to $30 million incremental from what you had realized last year or $25 million to $30 million all in?

$25 million to $30 million over last year.

Over last year, okay, great. And then just back on the trend components, based on some commentary about rising unit price pressures on the hospital side. You guys specifically note that you haven't seen that in the guidance you give. But have you seen any kind of shift in the marketplace out there at all and maybe kind of where you are from a contracting standpoint for the year with the hospital side?

Again, this is Jim Murray. We've talked in the past about the relationships that we tried to develop with a lot of the hospital systems trying to partner with them to figure out how we can assist them and be more administratively a partner and help them with some of the bad. I think I read in the Wall Street Journal this morning about hospitals with bad debt concerns and that is one of the things that we try to help them focus on.

We don't have an approach to go to war with hospital systems and enter into significant negotiations which can end up ugly. Our approach is working with them trying to get the best rate in a particular location or at least equal to the best rate by being a good partner with the. So we are not seeing a significant push back from the systems that we do business with. I don't see anything shifting in terms of our relationships or the negotiation process throughout the areas that we do business.

And speeding up the claims payment, those are the kinds of things that really help us with providers including hospitals.

Have you noticed any change in the discount differentials between best in class in the market and where you are coming in at generally over the past year?

It's shifting and slowly but I think it's an important trend. Jim mentioned earlier that we were growing our individual business and small group business in places like Utah, Colorado and Georgia where I think I've mentioned this to you a number of times in the past. Where we are seeing exactly that. The hospital systems that have -- they've all consolidated into situations where if they are not in a monopoly, they are in an oligopoly at best.

In some of these communities they've taken a much more strategic view of their relationship with payers and they are narrowing those payment rates to the point where the hospital deals are no longer a barrier to entry. And in those particular states, that is exactly what has occurred. We have market leading pricing in the hospital world in all three of those states and those are relatively small markets for us but they are growing nicely. So I think we are going to see more of that.

If you step back and you ask yourself if you were in a hospital CEO seat, why would you advantage one payer over another? And the answer is there is no reason to do such a thing. So I think we are going to see more of it and I think those prices are going to continue to get more narrow. Then I think the payers are going to have to compete on some other basis than their ability to get a better price from someone.

Great and just the last thing. The early '08 view -- I'm sorry '09 view that you've provided in terms of the indication there. Does that envision essentially a flat Medicare Advantage margin also over rate so just exing out Part D?

Well, we said since the beginning we target our entire Medicare book of business at 5% operating margin. We will continue to do that and we will do that as we sit and think about '09 as well. Again, we think that is a reasonable margin for that kind of business working with a giant government partner. And we think it is sustainable and supportable and there is such a huge growth in the market that it is fine to have that margin. So as we look into '09 and plan for it, we're going to be targeting again somewhere in that neighborhood for Medicare in total.

Great, thank you.

Carl McDonald, Oppenheimer.

I'd be interested in the PPO growth you saw in Medicare this year. Was any of that switching from private fee-for-service or was that all new members choosing the PPO product?

This is Jim Murray. It was a mix of both of those. One of the things that you might expect or we are attempting to do is to create benefit structures and premium structures where we will shift folks from private fee-for-service into PPO. And so there has been an effort on our behalf to try to begin to give people more and better choices in the PPO space because that is ultimately where we think we need to be in terms of our membership three or so years out. So there has been some migration because of that. But also from just sales of folks who may have had a Medicare supplement or were in the fee-for-service world, that is also a big part of that number as well.

Any way to quantify that in terms of is it 50-50 or is it still 75% new members and 25% switching?

I could guess but I am reluctant to do that. I don't want to give you a bad signal.

Okay. And clearly the net Medicare enrollment growth looks like it is coming in on track. Can you give us some commentary around what the gross adds and what the attrition has looked like in the first quarter relative to last year?

Well, I think the guidance talks to where we think we are as of April 1 I believe. Is that correct, Jim?

Right, and that is 153,000. And last year I think we were at around 134,300. So we are up about 13%, 14%.

Is that what you were specifically asking or --?

Well, I was looking for -- we can see what the net members are based on the first quarter in the guidance. I was just looking for what the gross additions had looked like through the first four months of the year and what attrition?

I don't think they are significantly different than we had suggested when we gave you the four components other than the group piece. But we don't have that specifically right here.

Thanks.

Peter Costa, FTN Midwest Securities.

Thanks. Can you describe what you expect to go on with your days claims payable going forward? If you're about halfway there on your systems conversion does that imply -- do you see think you should drop another two days by the end of this year all other things being equal? And then a question on your group Medicare product. Part of selling that is having a commercial product for the 55- to 64-year-olds. Can you describe what you have there and what you are doing to develop a product there?

I will take the first one with respect to the -- where we think days in claims payable are going to go. If nothing else changed, Peter, that would probably be right, you would have another 1.5 to 2 day hit. But there will be a lot of other moving parts in there too. So I don't -- which there are so many variables, it is very hard to say that that would be it. But you would be correct in terms of how much we've done so far and if you just basically doubled that, that is about where you would end up for the year.

On your question on the 50- to 64-year-old population, it's funny you should mention that. I have a 2 o'clock meeting today on just that subject. We are in the process of working with our folks in the individual space to try to create a product and an opportunity for us to sell folks in the 60 to 64 initially to see how that goes. And we are also starting to figure out different channels that can bring us some of those memberships. So I can't report right now exactly where we are at but we are in the process of creating some initiatives to focus on that because you raised an extremely good point on getting in front of these folks particularly as they are beginning to age in and there is as you know the baby boomers aging in is a significant opportunity which we are very, very focused on.

So we are going to spend some time over the next year or so getting our products and services in line to start to capture that more than we have in the past.

Peter, this is Mike. Let me take you to 250,000 feet for just a second. There should be no misunderstandings out there, that as we continue to execute on electronic connectivity across the system both for Humana and everyone else and we move further and further toward real-time transactions and that is the end game, we are looking for total real-time environments here, the more we succeed in doing that, the more this particular metric is going to drop on the back of performance.

And the net net of all that is terrific in terms of the economic impact and the net on the business and the brand from the standpoint of eliminating all of the administrative nonsense that goes on in this industry is big. And so we're going to continue to invest. That's the reason I keep teeing up Availity for you all to keep it in front of you because that in particular execution of that strategy will bring this down by virtue of getting greater and greater real-time transaction environments.

And if HSAs and the things that are necessary to make the consumer world work properly are going to ever meet their potential, then we have to have real-time transactions, and that is what this is all about.

Great, thank you.

Matt Perry, Wachovia Capital.

Good morning. Just wanted to clarify something on Medicare Advantage margins in the first quarter. The press release seemed to indicate that maybe underwriting margins had improved versus 1Q '07. Can you talk a little bit about that and whether that is more a mix change in terms of which products are growing? Or is it kind of a same-store improvement in medical loss ratios and that if that is the case, does it kind of go back to the things Mike highlighted from the slides, disease management and HRAs?

Matt, we don't break out again the individual benefit ratios on each of the two products as stand-alone and MA. But we did say that obviously because of everything that has happened, we didn't have a very good quarter in PDP so obviously the difference, a large share of the difference is in the MA product and it did enjoy an improvement over last year in terms of its pretax.

Okay. Secondly, share buybacks, you bought back a small number of shares in the quarter and you have I think $150 million repurchase authority out there. Is that something you've revisited since lowering the outlook last month with the Board or it is that on the table to revisit at some point in the future?

Well basically once the quarter ended, we were locked out until today. But we won't probably revisit that until later in the year after we finish up. Given the fact that we made a nice set of buys between the time we made the announcement after we were clear to do you that to the end of the quarter, we made a nice set of buys. And then now again, we will go and look at our sources and uses of funds for the rest of the year and we were going to talk about that in the next call in terms of what kind of parent cash did we get in terms of the dividend from the dividending of operating sub profits of last year and those types of things.

That is kind of where we are on that and we are going to continue to -- we've made a nice opening on it and we will then now will look at the rest of our capital sources and uses for the year and decide what we are going to do and we'll talk more about that in the next call.

But we will not withdraw the authorization.

Right. And you are comfortable running it up -- I mean you've said the range for debt to cap is 25 to 30, and you are kind of at 30 now but you are comfortable at that level, right?

Yes, we are. We're actually at 28.3 at the end of the quarter and we are comfortable with that guidance. We're very committed to our investment-grade ratings.

Okay, thank you.

Doug Simpson, Merrill Lynch.

Most of my questions have been answered already. But, Mike, I was just wondering, you had the complete plan issue a year back and then this year you had the PDP benefit design issue. Just maybe from a qualitative perspective, give us some comfort or the way you are thinking about 2009 and what is really different this year and how are you confident that you are not going to have another issue as we look toward 2009?

Well, it is a fair question. I think the first thing you have to do is you have to separate the two issues. We talked about this I think quite a bit on the call in March. We were entering an entire new world when we in the PDP business. In fact, the very first year and there was a lot to learn in terms of how seniors were going to choose and whether they were going to finance their drug use or whether there were going to buy insurance and protect themselves and those sort of things. We learned an awful lot in the first year and we learned through the complete plan experience that they weren't going to buy insurance. They were really financing and doing cash flow analysis on their drugs. And that is a separate sort of incident although at the time it was painful.

But if you recall, the overall performance of the PDP that year was actually pretty good. So I separate the two in my own mind. This year was really quite specific in terms of a mistake being made. Then the question is, if you think about '09, how do you prevent that from occurring? Because that is a totally different issue. We think we know how seniors at this point are going to buy and how they are going to choose and the things they are looking for. And that they are not all the same, we know all that.

So I think we are in a pretty good position as we make the process work better to get to the right result for '09. I'm very confident we will. We actually got the complete plan straightened out pretty quickly in '07. So I don't think this was a difficult thing to figure out at this point. I don't think it's a very difficult thing to fix. We have to do some homework around how market share might move under any number of scenarios. But I think Jim is right, the benchmark is likely to be moving up. We will have to take that into consideration.

But I think it is challenging to do a bidding process like this where everybody is a individual consumer and everyone is free to move around every year. So I don't want to understate the complexity of it. But I feel very comfortable we will be in good shape for '09. I think the real question mark is how big is the business going to be at that time, and we will work through that here in the next few months.

Okay, thank you.

At this time, there are no further questions. I'd like to turn the conference back over to Mike McCallister for any additional or closing comments.

Thanks again for joining us this morning. Let me just summarize by saying we are prepared to make sure that our PDP business is in the right position going forward. In Medicare Advantage, I think we will have some noise this summer as we talk about the physician payment schedules and how to fund all of that and I'm sure Medicare Advantage will be part of those conversations.

I think longer-term, nothing has really changed politically at this point. We will I think be a part of the Medicare solution over the long-term because of the clinical coordination and the things we are beginning to do to actually help with long-term costs in Medicare. Our product spectrum in commercial continues to expand and improve our margins and our performance. We continue to be excited about the opportunity to apply technology and we've got some great results there in recent quarters.

And then lastly, I want to think the Humana associates that are on the call for everything they've done to continue to put our company in a great spot for the future. So with that, we'll end the call. Thank you very much.

Thank you very much, ladies and gentlemen, for joining today's Humana first-quarter 2008 earnings release conference call. This concludes your conference. You may now disconnect.