Molina Healthcare Inc (MOH) 2015 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Molina Healthcare fourth-quarter and year-end 2015 earnings conference call. (Operator Instructions)

As a reminder, this conference is being recorded Monday, February 8, 2016. I'd now like to turn the conference over to Juan Jose Orellana, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, Nikki. Hello, everyone, and thank you for joining us. We apologize for the late start, but apparently there was a problem with the telephone number. So hopefully everybody will have joined by now.

The purpose of this call is to discuss Molina Healthcare's financial results for the fourth quarter and fiscal year ended December 31, 2015. The Company issued its earnings release reporting these results today after the market closed, and this release is now posted for viewing on our Company website.

On the call with me today are Dr. Mario Molina, our Chief Executive Officer; 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. If you have multiple questions, we ask that you get back in the queue so that others can have an opportunity to ask their questions.

As a reminder, on Thursday at our investor day presentation, we will discuss the Company's outlook for 2016. Today we will only be taking questions related to our earnings release.

Additionally, our comments today will contain forward-looking statements under the Safe Harbor Provisions of the Private Securities Litigation Reform Act. 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, 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 website or on the SEC's website.

All forward-looking statements made during today's call (technical difficulty) as of February 8, 2016, and we disclaim any obligation to update such statements except as required by securities laws. This call is being recorded, and a 30-day replay of the conference call will be available on our Company's website, molinahealthcare.com.

I would now like to turn the call over to Dr. Mario Molina.

Thank you, Juan Jose, and thank you for that nice introduction. Hello, everyone, and thank you for joining our call this afternoon.

The fourth quarter of 2015 capped off a very strong year for Molina Healthcare. Net income more than doubled when compared to 2014, and we are making progress towards our goal of a 1.5% to 2% net income margin by the end of 2017.

However, today I want to talk about our results within the framework of our mission and strategy. Our mission is to provide quality healthcare to people receiving government assistance. One of our first objectives of our strategy over the past 35 years has been to grow and diversify our revenue. We have done just that 2015.

Revenue grew by 46%, from $9.7 billion in 2014 to just over $14 billion in 2015. Revenue growth was driven by an increase in membership of about 35%, from 2.6 million members in 2014 to slightly more than 3.5 million members by the end of 2015.

Our growth strategy can be divided into four components: Growth and retention in our existing markets; expansion into new geographies; transitioning members and benefits from fee-for-service to managed care; and finally, developing and acquiring new products and capabilities. During 2015 we successfully executed on all four of these components to our growth strategy.

We retained and grew existing business with our re-procurement wins in Michigan and Washington. Our new contract in Michigan expanded our service area across all of the Lower Peninsula, spanning an additional 18 counties. The Washington win, along with our acquisition of Columbia United Providers, strengthens our presence in the Southwestern region. It also serves as a solid foundation to build on as the state continues to consolidate medical and behavioral health benefits under a single contract through additional regional procurements over the next few years.

We also grew our marketplace enrollment from 15,000 members in 2014 to over 200,000 members in December 2015. Finally, in-market or tuck-in acquisitions made a major contribution to our growth in existing markets in 2015. 2015 was the most active year in M&A in our Company's history.

Of the nine acquisitions we announced in 2015, eight were in-market or tuck-in acquisitions in four of our existing states. These acquisitions alone will add about [$1.2] billion in premium revenue in 2016. Because these are asset purchases where we acquire the Medicaid contract from another health plan, these (technical difficulty) risk and allow us to spread existing administrative overhead costs over a larger membership.

In keeping with the second component of our growth strategy, entering into new geographic markets, we launched our health plan in Puerto Rico in April of 2015.

As I noted a minute ago, transitioning members and benefits from fee-for-service to managed care is the third component of our growth strategy. In 2015 we saw strong growth in our Medicare/Medicaid plan and aged, blind, and disabled programs. While smaller in total numbers of members, these programs translate into strong revenue growth because these members come with much higher premiums when compared to the marketplace and Medicaid expansion programs or our TANF members.

The final component of our growth strategy is the development and acquisition of new products and capabilities. In addition to the in-market acquisitions that I've already discussed, we also acquired a behavioral health and mental health services provider, Providence Human Services, in November. This transaction has now closed and has been rebranded under the name Pathways. Pathways brings in-house additional capabilities in behavioral health and some long-term services and supports.

Altogether our growth strategy has allowed us to expand from less than 1 million members in 2005 to 3.9 million members today, resulting in a compound annual growth rate of 16%. Our revenues, on the other hand, have grown 1.5 times faster than that of our membership during same period. That is because we have a greater portion of our members with chronic health conditions that come with higher premiums, enabling us to achieve a compound annual growth of revenues of 24%.

In 2015 we saw net income more than double from $62 million in 2014 to $143 million in 2015. On a relative basis our net interest margin increased from 0.6% in 2014 to 1% in 2015, a jump of 67% and an important milestone on our path towards achieving our long-term net income margin goal of 1.5% to 2%.

How did we improve our financial performance? Our medical care ratio declined from 89.5% of revenue in 2014 to 89% of revenue in 2015, while administrative costs rose only slightly, pressured by costs associated with the marketplace. Nevertheless, we have made solid progress on improving our margins.

At the same time, we have worked to keep our administrative costs low, at around 8%, down from a high of 10% in 2013. This is significant when you consider that we continued to expand our business considerably over the past two years while growing into infrastructure we had invested in prior to commencing new tracks involving long-term care services and serving the chronic care conditions of dual-eligible members.

We did all of this without losing our focus on quality. Five of our health plans improved their CMS quality ratings from Medicare to 3.5 stars, and all of our eligible health plans maintain accreditation by the National Committee for Quality Assurance.

But that's not all. We continued to invest in the Company to better serve our members the future. We installed electronic health records in all of our clinics, earning meaningful use payments along the way. We also expanded the size of a number of our clinics and added behavioral health providers and social workers to help our members deal with mental health and social issues that were affecting and complicating their healthcare.

We built provider and member portals to allow physicians and members to interact with our health plans more easily, and we took steps to further bolster the privacy of protected health information. We implemented new Medicaid/Medicare plan contracts in Michigan, South Carolina, and Texas, and brought up a new health plan in Puerto Rico. All of these things will drive shareholder value in the long-term.

I'm proud of the team that we have built, and I'm proud of what we've accomplished over the past 35 years. This past year was an inflection point in our efforts to improve our margins. That being said, the opportunity before us with managed long-term care services for Medicaid patients and the opportunities for care coordination -- our opportunity lies with these patients in the future, and our future is bright, indeed.

And now I'd like to turn the call over to John, who will review in detail the financial results for the quarter and the year ending December 2015.

Thank you, Mario; and hello, everyone. As Mario said, the fourth quarter was a strong close to a strong year. Our financial performance in 2015 exceeded our expectations and bodes well for the future. In addition to our top-line revenue and membership growth, we took substantial strides towards our margin targets for the end of 2017.

We will be providing additional insight to what 2016 holds later this week during our investor day. But for now, I want to focus on our performance throughout 2015. Today we report full-year earnings of $2.57, almost doubling the $1.29 we reported last year. Fourth-quarter EPS of $0.51 in our full-year earnings would have been $0.26 and $0.27 higher, respectively, but for the following items.

First, we recorded a $15 million charge resulting from the early termination of a hospital management agreement. Let me be clear: this expense has been included in our 2015 results and will not be a drag on earnings in 2016. (technical difficulty) G&A expense relating to transaction costs during the quarter associated with our acquisitions. Finally, we also recognized $6 million of interest expense related to our recent senior note offerings that we issued in November, an expense that we will continue to recognize going forward.

Premium revenue was up almost 50% from 2014 and has more than doubled since 2013. That growth in itself is impressive, but we should not forget the many paths we have traveled to get here.

In two years we have established a start-up health plan in Puerto Rico, opened six Medicare/Medicaid health plans, established a strong position in the ACA marketplaces, won four key reprocurements among our health plan and MMS states, closed on 10 acquisitions through January 2016, and provided over 0.5 million Medicaid expansion members the peace of mind that comes with access to affordable, quality healthcare. We did all of this while strengthening our capital position, improving profitability, and staying true to our commitment to deliver quality healthcare to those most in need.

Words cannot express the pride that Mario, my sister Martha, and I feel when we look at what Molina has accomplished. We offer our heartfelt thanks to each and every one of the 20,000 Molina team members who helped make this happen.

We continue to transition from a company providing episodic medical care to also serving members with complex care needs that include healthcare and long-term services and sports. During 2015 enrollment (technical difficulty) 3.5 million members, an increase of more than 900,000 members when compared to December of 2014. Membership growth remained strong across all lines of business as a result of continued organic Medicaid expansion growth, the launch of our Puerto Rico health plan, enrollment growth in our Medicare/Medicaid plans in Texas and Michigan as they completed passive enrollment, strong marketplace enrollment, and the completion and closing of four in-market acquisitions during 2015.

Our marketplace business continues to perform well. Our fourth-quarter marketplace medical care ratio was higher than we've seen earlier in the year, but this was the result of true-ups to our risk adjustment liability that relate to the entire year.

Mario talked about the convergence of medical cost ratios between marketplace and the rest of our business last month in San Francisco. We'll have more to say about this later in the week, but for now it is enough to know that we are confident that marketplace enrollment will remain a valuable complement to our core business moving forward.

Medical margin improvement has largely given our bottom-line profitability improvement. In fact, all of our states saw improved medical margin compared to last year's performance, and our nearly $1.5 billion medical margin this year represents a 53% improvement to 2014 results. We believe that our lower medical care ratio in 2015 is the first indication of success for our efforts focused on care management and care coordination for our members with the most complex medical and social needs.

Our general and administrative ratio increased to 8.2% in 2015 compared to 7.9% in 2014. If we remove the impact of marketplace broker commissions and exchange fees from the calculation, G&A ratio actually decreased from 7.8% in 2014 to 7.5% this year. Sequentially, our G&A ratio in the fourth quarter of 2015 was higher than in the third quarter, primarily of higher costs incurred for the 2016 Medicare and marketplace open enrollments and various acquisition costs.

In general, we were very pleased with the year-over-year reduction in our consolidated medical care ratio, improving administrative efficiency bolsters, and improving medical margins I spoke about a few minutes ago. As of December 31, 2015, the Company had cash and investments of more than $4 billion, including in excess of $600 million at the parent Company. As our results include the reductions I first mentioned, I am pleased with our performance and our results for the year as we continue to grow while demonstrating progress towards our longer-term goals.

As a reminder, we will be hosting our investor day conference in New York City this Thursday, February 11, at 12:30 PM Eastern time. At that presentation we will be discussing the Company's outlook and strategy for 2016. We look forward to seeing you there or encourage that you listen in via the webcast.

This concludes our prepared remarks. We are now ready to take questions, but I will again remind everyone: we will not be speaking to questions that address performance or expected performance for 2016. Thank you.

(Operator Instructions) Joshua Raskin, Barclays.

So first question, just on the hospital contract termination -- I just wanted to better understand what exactly happened there. Was that some sort of contract dispute around rates, et cetera? And then were you in some sort of position where you owed the facility some sort of settlements, or how did that cost you guys money?

Yes, Josh, this is John. It was a little bit different kind of contract than we are used to. A couple of years ago we actually went into management of the acute-care services of a hospital that we did not own, but that a behavioral health company owned. Given their priorities and our priorities not converge as we expected, we felt the best thing for us to do was to get out of that contract. In order to get out of the contract, we took a charge of $15 million.

Okay, so it was some sort of performance fee that you guys would have to -- it was just to break the contract, it sounds like. So it wasn't a medical expense or anything like that?

Correct.

Joshua, we did book it in medical expense, because it was part of our direct delivery network. But this is not an ongoing provider contract like we would have with an unaffiliated hospital.

Okay. And so now you'll just replace it with some sort of fee-for-service payment to other providers in the market, whatever market that is?

That's correct.

Okay, got you. And then just second, on the Texas performance fee, it looks like you didn't book -- I don't want to say you didn't book anything, but it didn't look like you booked the full amount, for sure, in the fourth quarter. Did you book anything? And then if not, are we now less confident? Or is this just, again, a timing issue, where you can't prove it, so you're not booking it?

I think it's the latter, Joshua. We didn't book anything in the fourth quarter. It's not that we are less confident; it's just that we have really no additional news that would give us any more confidence at this point to book anything. It's a very challenging environment to try and keep the accounting in parallel with items that we can't assess.

Okay. And then as I remember, John, you had given guidance early in the year, when you guys were providing initial guidance, that had included that, right? So I just want to make sure that's right. That's typically the practice, but if you anticipate getting some sort of performance fees, that will be included; and then we should think about your earnings coming in a little bit better relative -- despite the fact you didn't get any of the Texas performance fees. Is that fair?

That's fair.

Okay. And I assume you would just continue that practice? You'll assume you're going to be able to book performance fees as you've always been able to in your contracts?

We do assume that we will book a portion of it. And on Thursday we can provide some additional insight into that.

Okay, I'll leave it there. Thanks, guys.

Sarah James, Wedbush.

You guys have had a number of contracts that renewed their rate. Since we last spoke there's, I think, Texas in September, and Michigan in October, and then a number in January. So if can you kind of walk us through what you're seeing so far with the rate update?

Sarah, this is John. I don't have the numbers specifically for Texas, and suffice it to say, we are going to be detailing that out on Thursday. But it still remains very low single digits, if anything at all. And I think a couple states actually had some -- a drop in the rates effective Jan 1. So the rate environment is not where we'd like it to be, and our improvement is not going to be driven primarily by increased rates.

Got it. And was there anything out-of-period in the quarter in relation to the New Mexico true-up? I think in the past you guys had talked about the liability being in excess of third-quarter accruals there. So was there anything out-of-period recognized in New Mexico?

Sarah, it's Joe speaking. No, there wasn't. And if I could just tack on to what John said about rates, we are not seeing anything different, as he emphasized, now than we've been talking about for the last couple of years -- low single digits at best. So I just wanted to make sure that was clear. But nothing picked up in New Mexico.

Got it. And just to clarify, Joe, are liabilities still in excess of current accruals for New Mexico? Or are you guys kind of on par now?

Going back to the third-quarter disclosure I wouldn't say liabilities are in excess of accruals, because the two equal each other.

Yes.

If you took the department's most extreme position, yes, that exceeds our liability. But we do not believe that it's going to play out to the department's most extreme position. So we think we are adequately reserved at December 31.

Thank you.

Kevin Fischbeck, Bank of America.

This is actually Steve Baxter on for Kevin. I wanted to come back to your comments on the exchange business. Can you quantify the impact, the dollar impact, of the risk adjustment true-up in the quarter -- and, I guess, what the entire net change to the Three Rs was? Just trying to get a sense for the run rate of the business headed into 2016.

It's Joe. I'll take that question. Outside of risk adjustment, the impact of the Three Rs, it's very minimal. Obviously, the corridors, I think, everybody is familiar with. There's not a lot of protection from those. Reinsurance is pretty much easily measured.

So then we're left with the risk adjustment. And I think it's fair to say that if you look at the year in total, which we disclosed for marketplace (technical difficulty) the number for the full year. So I think, roughly, you could take the difference in MCR between the fourth quarter and the year to date, and that would basically reflect the impact of risk adjustment in the fourth quarter.

Okay. And I guess nothing so significant that it kind of impacts how you feel like you are positioned for 2016?

Well, that's a 2016 question. But I think John, from March -- he made it clear that we still feel reasonably confident about marketplace from our perspective.

Okay, thanks. And then, I guess, on the recent acquisitions you guys have done -- can you give us an update on the performance of Providence, or I guess now, Pathways's performance, since you closed the deal, and performance of the tuck-in deals? I think you guys have said that those typically come on a little bit above total Company margins. Is that kind of playing out with your expectations?

Providence is a little bit of a different animal than our normal managed-care tuck-ins. We see some of those come in with margins that start out a little bit lower, and then they go higher. They start out a little bit lower because you've got some pent-up demand that occurs, like, usually in the first quarter after the acquisition. They end up having higher margins overall, because you don't have to add as much in terms of an admin expense. Incremental admin for a tuck-in is less than the average.

On Providence, that's largely a fee-for-service business currently, which -- Mario will discuss on Thursday how we want to use that the future. But we've only had it now for November and December, so it is moving along as expected for the first two months.

Okay, thank you.

Ana Gupte, Leerink Partners.

So I wanted to just follow up on the 1.5% to 2% you've expressed confidence in the net income margin. How are the marketplaces performing? It looks like you went from about 55% to 70% in the third quarter, and now it's 73% or 74% on the MLR.

As you are seeing the open enrollment membership coming in, ex-the Three Rs, and you've seen quite a bit of attrition, it looks like -- how is this going to bode for next year? And do you expect margins to remain constant or expand?

So, Ana, you said the magic words: next year. We'll talk about that on Thursday.

Okay, all right. But I guess from the experience in the fourth quarter, say, for going from the third quarter to the fourth quarter, you saw a little bit of deterioration. Are you seeing any issues with special enrollments?

And when you look at the risk adjusters, are you thinking about a pooled risk adjuster across companies that are serving more than just the churn from the Medicaid population? And how have you booked it?

Ana, it's Joe. I'm not sure I understood the last question, but just in general, we feel that for 2015, the full-year financial performance we disclosed is indicative of where the margins ended up for this year. We don't think fourth quarter reflects anything unique or any kind of inflection point. And as John and Mario said, we'll talk about the rest on Thursday.

Okay. And just following up on your tax rate, how should I think about this, you know, when I'm modeling it? It surprised me a little bit because it was positive.

Well, tax rate for the total year came in at -- came in pretty close to what we thought it would come in when we guided back in -- revised guidance back in September. The rate came in around -- I want to say 56.2%, which is -- 55.5%, excuse me. And I think back in June we guided to 56%. So it's come in about what we expected it would come in at. Obviously it's high, for all the reasons we have talked about in the past -- the non-deductibility of the health insurance provider fee, in particular.

But the fourth quarter came in lower than that, correct? Or am I reading that wrong?

That's correct. And, you know, in the fourth quarter, as is very typical, we took in some discrete items that were favorable -- various credits and stuff that are available. [WASI] credits, R&D credits, normal-course type of stuff.

The ETR is also helped a little bit by the fact that our pretax income came in higher than we were anticipating back in June, when we revised guidance. So that gives you -- that improvement in the pretax number gives you some -- also gives you some lift in lowering your effective tax rate.

Got it. All right, thank you.

Chris Rigg, Susquehanna.

Just one quick follow-up on the tax rate. If I normalize it for the health insurer fee, it looks like it came in in the upper-20% range in the quarter. Is that the right way to think about it?

I think at a very technical level that might be the right way to think about it, Chris; but again, if you think about what happened in the fourth quarter, we had the benefit of discrete items, which are obviously not repeated in the other quarters. So that's going to push down the rate.

And again, the fact that pretax income came in higher than we anticipated is also going to push down the ETR for the year. And it's all going to be magnified in the quarter. So like much of this year's financial performance, I think the way to look at it is to look at where we ended up the full-year on. And if you care to extrapolate, extrapolate from that, or wait until we talk about it on Thursday.

Okay. And then on the $15 million charge in the quarter -- I know you guys don't update guidance very frequently, but was that $15 million assumed in the guidance that you had left out there?

No, it wasn't.

Okay. And then the last question, which just may fall into the conversation later in the week, but you raised about $700 million a couple months ago. And it looks like a lot of that is still residual on the balance sheet. How should we think about the deployment of that money? Thanks.

There really hasn't been any change in the strategy of how we want to deploy the money in terms of statutory capital as we enter new markets and acquisitions, both of health plans and new capabilities.

Okay. But is the money earmarked specifically for something at this point, or just -- right now just in the kitty for future uses?

Yes.

(laughter) Okay, I'll leave it there. Thanks a lot.

A.J. Rice, UBS.

Just a couple of quick things. On the duals, give us just your latest thoughts as you ended the year on that program. And I noticed specifically California, I guess, has announced they're going to delay their decision on whether to continue. Are you in discussions with them? What's happening, just generally, in the dual program, and particularly California?

Yes, this is Mario. The duals continue to march forward. We are happy with the contracts.

The issue in California is around the managed care tax. I do think that's going to get resolved. So we're not anticipating any changes in those programs right now. If there was one thing we would like to see the government do, it would be to allow us to market and enroll directly, as we do for other Medicare beneficiaries.

Okay, all right. And I might just ask you quickly, for my follow-up, on the Puerto Rico -- it looks like you had a very good medical care ratio in the quarter. Just wondering -- it seems like that must be going well. Is there any update on Puerto Rico and how that's working?

You know, there's not a lot to say about Puerto Rico at this point. We've had that contract for less than a year. I would say that it's operating pretty much the way we anticipated. We had some initial startup problems that are typical for any kind of a new health plan, but those have largely been ironed out. And it seems to be doing well.

Okay, all right. Thanks a lot.

Scott Fidel, Credit Suisse.

Thanks. Just had a question on Florida; it looked like the MLR was up quite a bit sequentially. Was that where you guys were booking the hospital management charge, or was there something else going on there?

Hi, it's Joe speaking. The main issue that you see pushing through Florida MLR is just the adjustments that we talked about -- the exchanges. Remember, most of our exchange enrollment last year was in Florida.

Okay, got it. So that was mostly just the change in the risk adjuster accruals playing out in Florida?

Exactly, exactly. So think of that as being spread over the entire year.

Okay, got it. Okay, thanks.

(Operator Instructions) Tom Carroll, Stifel.

Just one quick one on service revenue. It doubled sequentially; is that related to the Providence acquisition?

Tom, it's Joe. That's correct. We are recording revenue associated with Pathways as service revenue and related expenses as service expense, just to separate it from our health plan.

And then just a quick follow-up on the tax issues: the favorable items that were recorded in the fourth quarter -- were you mostly expecting those? Because we had modeled a much higher tax rate.

I don't want to say -- you know, our tax leadership may have forecasted it. I know that we typically do receive these kind of benefits, you know, these kinds of discrete benefits. We generally record those in the fourth quarter. I don't think they're surprising in their size.

I think what you might not have modeled -- I don't know, Tom, what you model for a pretax income number. But again, if you modeled a pretax income number much as we expected in our guidance, when that number turned out higher, it's going to push down the effective tax rate. So that might be your issue there.

So maybe these things just come in when they come in, and for the full year you were pretty much right on where you expected? That's probably how I should think about it?

Yes, with -- again, with the exception that pretax income came in higher than we expected. So that was a little bit of a lift -- or depressant on the tax rate.

Okay. Thank you, that's it.

Gary Taylor, JPMorgan.

I was just slightly tuned out two questions ago. So I hope I'm not asking the same question, but if I am, just tell me to move on.

But, Joe, you've done a good job all year describing to us that some of these very low MLRs in the marketplace business aren't completely, obviously, accruing to earnings because the minimum medical loss ratios. Given that you've got these additional risk adjustment accruals in the fourth quarter, were you able to reverse any of the rebate accruals for the year to date?

Yes, they're small right now. The rebate accruals are within -- well under $10 million now. I don't have that handy, but they've pretty much dropped to nothing.

Okay. And also I just wanted (technical difficulty) loss ratio includes that $15 million. So, really, that's, maybe, recurring numbers, about 40 basis points lower -- $88.7 million maybe? Is that right?

I haven't done the math on that, but you're correct: it is in medical costs. So to get an MLR, you'd have to back that out.

Right. And then last question: I guess I have lost track of MyCare Chicago? Did that transaction close yet? We were looking for maybe $60,000 in Illinois enrollment, which obviously wasn't in the year-end number sequentially.

This is John. We are still waiting on one of the Chicago acquisitions to close in March. The rest close in January. Those are two.

It's Joe again, yes. So when those close in January, obviously you don't see them on these numbers.

Yes, yes. Okay, thank you.

Michael Baker, Raymond James.

Just a follow-up on the earlier question in terms of Pathways/Providence. Sounds like that's running through service revenue. When you have a situation in which a state includes behavioral, going forward, at some point are we going to see some of that revenue get allocated to that state as you do services internally? Or how should we think about that?

It's Joe speaking. I think what you'll see going forward is that the health plan will pick up a portion of that service expense, yes.

Okay, thank you.

So your bottom-line impact, though, should be improved -- slightly improved margins.

I appreciate it. Thanks, Joe.

Dave Windley, Jefferies.

Part of my Florida question was asked a couple of minutes ago, but I did want to clarify: we were also expecting a rate update to impact your revenue and MLR in the fourth quarter, and I think recognizing maybe five or even six months' worth of rate updates in the fourth quarter. Did that happen? And what impact on the MLR did that have, if you can tell me?

Dave, are you talking specifically about Florida?

Yes.

Okay. The Florida rate increase was --

I think the Florida rate increase we start about 5%. We started picking that up --

In September. So we talked about that at the last call.

Right. So that's been there from third quarter on.

So you can accrue that in the last quarter, pro rata? It wasn't a [cash back] in the fourth quarter?

Correct. First -- for two months.

Okay, all right, thank you.

And we have no further questions at this time. I'll turn the call back to you.

Thanks for joining us, everyone, and we look forward to seeing you on Thursday in New York for investor day.

And ladies and gentlemen, that does conclude the conference call for today. We thank you once again for your participation and ask that you please disconnect your lines.