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

Good morning and welcome to WellPoint's fourth quarter earnings conference call. I am Jamie Miller, Chief Accounting Officer and executive responsible for Investor Relations, and with me this morning are Angela Braly, our President and Chief Executive Officer; and Wayne DeVeydt our Executive Vice President and Chief Financial Officer. Angela will begin this morning's call with an overview of our fourth quarter accomplishments, Wayne will then offer a detailed review of our fourth quarter financial performance and current guidance, which will be followed by a question-and-answer session. We will be making some forward-looking statements on this call. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of WellPoint. These risks and uncertainties can cause actual results to differ materially from our current expectations, and we advise listeners to review the risk factors discussed in our press release this morning and other periodic filings we make with the SEC. I will now turn the call over to Angela Braly.

Good morning and thank you Jamie. We're very pleased to report another good year for WellPoint, with record membership levels, revenues and earnings. We achieved our earnings per share expectations during the fourth quarter and full year of 2007 and continued our strong organic membership growth by adding over 700,000 new members during 2007. This is an excellent indication that customers continue to find great value in the products and services that we are providing to the marketplace. In the fourth quarter our reported GAAP net income of $1.51 per diluted share was 18% higher than $1.28 per diluted share in the fourth quarter of 2006. The fourth quarter of 2007 included less than $0.01 per share in net realized investment gains, while the fourth quarter of 2006 included $0.01 per share in net realized investment gains. For the full year of 2007, GAAP net income of $5.56 per diluted share was 15.4% higher than 2006. Our 2007 earnings included $0.01 per share in net realized investment gains, while 2006 included tax benefit of $0.04 per share resulting from changes in state tax apportionment factors following the WellChoice acquisition. Our medical enrollment totaled 34.8 million members at December 31, 2007, an increase of 708,000 members from 34.1 million members at December 31, 2006. The largest enrollment increase was in the National business, which grew by 537,000 members. Large, multi-state organizations continue to be attracted to WellPoint's compelling value proposition, which includes access to the broadest provider network in the industry, competitive pricing, leading wellness and care management programs, and innovative products and services. Membership in State Sponsored business increased by 292,000 during 2007, as we entered new markets with our Medicaid managed care programs. We also expanded geographically in the Senior business, adding 57,000 members, and enrollment in the Federal…

Thank you, Angela and good morning to all of those participating on this call. We are very pleased with our financial results this quarter to $1.51 in earnings per share, that include less than $0.01 per share in net realized investment gains. Premium revenue was a record $14.3 billion in the fourth quarter of '07, an increase of $972 million or 7.3% over 4Q of '06, due to disciplined pricing in our Local Group business and growth in State Sponsored and Medicare Advantage business. Administrative fees were $914 million in the fourth quarter of '07, an increase of $9 million or 1% over Q4 of '06, due primarily to growth in our National Accounts business, including Blue Card and local group. Self-funded membership increased by 992,000 members in 2007; during the year, 235,000 members switched from our fully insured plans to self-funded plans and this includes a 144,000 Connecticut Medicaid members. The full year 2007 benefit expense ratio was 82.4%, an increase of 120 basis points from 81.2% in 2006. Approximately 80 basis points of the increase was driven by the medical business of our Specialty, Senior and State Sponsored Business reporting segment. The remaining increase includes our business mix shift to a larger proportion of higher loss ratio products and less favorably than anticipated reserve development from 2006 and 2007. The benefit expense ratio was 82.9% in the fourth quarter of 2007, an increase of 190 basis points from 81% in the prior year quarter. The higher than expected 4Q'07 benefit expense ratio results from items that generally should not impact 2008. What I'd like to do is take a few minutes to walk you through the specifics. As we previously discussed, 2007 was unfavorably impacted by 2006 reserves that developed less favorably in 2007 than anticipated, this contributed…

Thank you, Wayne. Operator, please open the call up for questions.

(Operator Instructions) Our first question and comes from the line today have Matthew Borsch with Goldman Sachs. Go ahead.

Yes, Hi good morning. Maybe I could just dig a little bit deeper on the fourth quarter MCR in particular just understanding the change in your view on reserving from last quarter. Can you give us some idea of, where are you saw the impact in terms of -- if it doesn’t change your view on components of medical trend maybe where are the bulk of the claims volume was and was there a regional area, where the expenses came in higher than expected and I guess last sort of related point here is the extent which you are comfortable that you have this cleaned up now and ensure conservative position going into 2008.

Let me kind of address that on a high level Mathew, we do feel very solid about 2008 and where we are. As saw this experience in the slowdown that Wayne referred to, it was on a single system and we did have some migration into that system. We are very focused on excellent service and we saw the results of that in the fourth quarter as our claims processing timeliness increased and we got better transparency into the reserve bank. So, I will let Wayne speak to a little bit more, but we are feeling really good about '08.

Yes, Hi Matt. In terms of the question the slowdown we had contemplated, it is very common when you are doing a migration that you get a slowdown in some of your claims processing. Part of our focus was to account for that, which we thought we had done as of the third quarter, as part of our desire to continue to provide customer service and improve our customer service rankings, which did improve in the fourth quarter. We really accelerated paying some of that backlog down. In doing that, we got a little more transparency around some of the actual development. So from our perspective, I'd say I feel very confident that we've got our reserves with that high single-digit level they have been at historically and then we are going to start the New Year off very strong, but these type of items are do occur. A couple of things we did at year end though as we did slow the completion factors down a bit, and we also increased our incurred PMPM on the reserves and that combination of those two items, I think really gives us much more comfort that we think we got it right and they will be starting off the new year strong.

And if I just we can, one more quick one which is just on the, pricing conditions you are seeing in your markets since you entered the new year, if you can compare that to last year?

We still think the market is very rational. We certainly are seeing competition, but we are seeing very disciplined and we think the market continues to stay disciplined. In terms of year-over-year, we thought the market was rational in 2007 although quite competitive.

Alright, thank you.

Thanks. And our next question comes from the line of Bill Georges with JP Morgan. Please go ahead.

Thanks. Good morning. Just another follow-up question on the MLR, I guess, during the Investor Day, you provided a walkthrough taking us from, in '07 MLR of 82.0 to your forecast for '08 of 81.6. Could you update us on that starting with the higher base, now that's '07 books are closed?

Wayne, you want to respond to that?

Yeah. Hi, Bill. I would say that again, while the pieces may change slightly as we roll that forward. I don't expect our original guidance to change from what we provided at our IR day. One of the things to keep in mind is that, some of these programs, specifically Ohio and Connecticut, I think it's very fair to say that we have learned our lessons a year ago in light of what happened in California. And we are going to get big rate increases into the next year without knowing we had those locked and loaded. So from an earnings per share perspective, these become very neutral, in fact, our assumption was that we wanted to be conservative to the extent that if had to exit these programs, we will be able to cover our exit cost. So in terms of exiting Ohio, it's neutral. In terms of Connecticut the state has put forward an extension. We have not agreed to that extension and we are still working through the details, but from an overall earnings per share perspective remains neutral. From a NOR perspective, well that inherently would drive a lower NOR in moving those programs. As we talked about, we little behind in some of other areas, and as we finished up our fourth quarter some of our individual was slightly lower than we had expected. And those, are actually contribute a little bit favorably to the EMR, so when you cut a net amount, we still think our original guidance is right on at this point in time and we are very confident with it.

Okay. And then just as a follow-up question. I guess, Medicaid membership growth was a meaningful part of the story in '07. Do some of the problems that you've seen in your Medicaid book, does that change you philosophy towards the business, and if so, how?

And so, we're going to stay incredibly disciplined, I think, as a result of some of the process improvements we have from 2007. But we are committed to that market segment. We drive value there. And so, you will see a stay in that market, but we're going to be very disciplined in how we contract with the states.

Okay. Thanks very much.

Thank you. And we have a question now from the line of Josh Raskin with Lehman Brothers. Please go ahead.

Thanks. Good morning. I guess I'll ask one more question on the MLR. Wayne, I think you said that the fourth quarter items, none of them were going to impact 2008. I certainly understand the '06 reserve, now assuming if reserves were adequate that would not occur, Ohio and Connecticut, 40 bps, I understand that. But the mix shift of 40 basis points, I am just curious why would that not continue into 2008? Do you expect a shift back to a different mix of business?

Josh, that's a very good question. Part of it is there will be some inter-quarter potentially shifting occurrence. So, for example, let's take Ohio. In Ohio, we had assumed that we would not get a level of rate increases in the plan. We wanted to be conservative with that. At the same time, what was disappointing for us was that in the fourth quarter Ohio deteriorated significantly. And that, coupled with the rate decrease, really required us to terminate that contract effective in the first week of January, which we did. That inherently will cause a higher MLR in the quarter. The flipside is we have some other areas where we are doing better than expected that we think will drive the MLR down. We continue to see some good growth within our group business, both small and local. Our national accounts are doing better, including adding over 5,000 full insured lives that we had not expected. So, we have a number of really moving parts here. And again, we're three weeks into the year at this point. So it's hard to have a 100% visibility. But what I would tell you is we've got some good things happening out there and we're seeing some positive development in other areas. And we think, when you net them all out, we're still going to be dead-on with our original guidance.

Okay. So, it sounds like, obviously, the mix shift occurred, but there are some of the offsetting factors.

Yeah

A quick follow-up. Could you just walk us through your expectations in terms of investment portfolio returns, your investment income expectations and what sort of yield assumptions you are using?

Michael, do you have a yield assumption? I don't have it. It's off of the top of my head, Josh. I can get back to you on that. I would tell you that we were conservative in our estimation because we did expect that there may be some levels of decline in rates. I would say that the level of declines, I think, we would all agree have been somewhat unprecedented in the recent term. But I still feel confident in our original guidance there. But I'll get you specifics on that later after the call.

Perfect. Thanks.

Thanks.

Thank you. And our next question then comes from the line of John Rex with Bear Stearns. Please go ahead.

Yeah. I was wondering if you just could compare for us. I mean you mentioned about using slower completion factors in your 4Q accruals, also increasing the PMPM reserves. How does that compare to the factor that we are using in the 4Q '06 on both those elements? I know this is difficult to quantify, but a way you can kind of show us how that's changed.

John, I have to get back to you with the specifics on it. What I will tell you is that we did a number of analyses, both from an actuarial perspective, but I would tell you I also did in on a cash basis, because, as you know, sometimes the numbers can be a little misleading if you don't look at it on a cash basis. What I would tell you is that they are higher, but they are higher to reflect the combination of cost of care trends coupled with the fact that we do know last year in 4Q of '06 that we were artificially too low, and we know that, and we know that having the benefit of hindsight. So, one of the things we did is, is not only looked at it from an actuarial perspective, but we did somewhere announce from a cash perspective. And I would say that they are up over the last year, they are up quite a bit. And I think it gives us some comfort that we're going into '08 adequately reserved.

And are the completion factors that you are using for 4Q '07 are they slower than you were using for 4Q '06?

Yes.

Okay. And then, just on your G&A spend, I mean usually in a 4Q because of open enrollment you will bear a lot of cost. So it's a little unusual to be down sequentially in a quarter like that. Is there an element here that we should consider deferred spend in the G&A line in 4Q '07?

No, John. There were no investments in advertising. Any of our decisions that we said we are going to invest in '08 at all that were deferred. What is fair to look at is that we are a performance-based company. And while we exceeded a number of our metrics this year and actually added over 700,000 new lives, more than any other competitor did, it fell short of our goals. And a big adjustment in the quarter was related to performance-based compensation.

But aside from that portion, and then this isn't a bad run rate to think about for the 1Q, and then we'd also want to be backing off the normal $70 million to $80 million in additional spend you get for an open enrollment in 4Q. Is that the way to think about the setup going into the next quarter?

Yeah.

Okay, great. And maybe just one last thing just back on Ohio and Connecticut, I want to make sure I understand if something changed from what you're seeing, is it a right call like nine months to-date in '07, both plans are running kind of in a mid 90s in terms of MCR. Did they get meaningfully worse in the 4Q or kind of just persisted the levels you think throughout the year?

No. They got meaningfully worse in 4Q, John. What's interesting is, take Ohio as an example, being such a new program you really don't have lot of visibility until you get further in the year when you get enough data points. We saw slight deterioration in the third quarter, but not enough to really concern us or worry us. It's still a new program. We are working with the state on contract negotiations. What we saw was pretty significant deterioration in the fourth quarter, much more than we had expected. And couple that with late in the year, and I'm talking about literally right before the holidays, as they're coming forward, the net rate reduction really led to our action that we took in January. So, it was really unexpected.

Okay, great. Thank you.

Thanks. And our next question then comes from the line of Christine Arnold with Morgan Stanley. Please go ahead.

Hi. I'm going to come at this head-on. So I apologize if it comes across in a tough way. But it seems to me that your medical trends came in higher than expected if you needed to increase your reserves related to '07. So baseline medical trend looks like it was higher than you thought. And yet, we're hearing from the marketplace that you elapsed pricing entering 2008. Could you help us understand whether you are going to reprice later in the year on commercial or what your plans are?

Christine, that's why I always appreciate and love about you, is you don't pull any punches and you hit its head on with it. No, I am very confident in our pricing right now, I really am. Keep in mind, and I think your comments are dead-on. I mean what it really says is that our high single-digit margin for adverse development within '07 was not we thought it was within some of the quarters and so when you just quote you get it back toward needs to be.

Is that means medical trend had do have been higher than you expected when your reserves to your baseline trend is higher, true or false?

No, I think it's true to say that medical trend was slightly higher than we had expected. I would also say that relative to our pricing that we had assumed next year meaning '08, we had contemplated some of that higher trend. When we saw October which again, October was more than normally wasn't really run rate, but we looked at that and we said, look we got to think about some of that some of our pricing that we had been filing at the time and that's what we did. So, I'm not worried about '08, but your point is that on for '07.

But your last pricing in individual and small group entering '08 in California, which is like 2 million members, are you saying that's not representative of your pricing across your book or you saying California is better than the last year book?

California was a very good year. We did very well in California in '07.

So, where were the costs higher than expected in '07 regionally?

The more across the board and again this is about high single-digit margin that we are talking about the delta. We are not talking about changing underlying pricing. So, I want to make sure that I'm adequately addressing your question, but we carry more margin on our books than anybody does in the industry, anybody and we stood very significant margin development. So we are talking about the delta between a mid to upper single-digit versus high single-digit that we're strengthening for. So, I still feel very confident in our pricing in our renewals, if we had a situation, which I don't believe we have today, where we thought the pricing wasn't adequate and we sell the one-third of our book that comprise with 30 to 60 days notice, but at this point Christine I feel very confident of that.

Okay. Thanks.

Thank you. And our next question and then comes from the line of Justin Lake with UBS. Please go ahead.

The second thing, I would tell you is that having the benefit of what happened throughout this past year and how reserves developed, while we migrated, one of the things that we met with the actuaries on and talked about is the fact we want to ensure that we go in to '08, there we're going with great confidence, we're not going to fall short. It's still an estimate. I can't tell you that, it's going to be exactly 100% right. It could be little over, could be a little under, but at this point in time we are still looking at. The other thing is our cycle time has really shrunk between when we receiving a claim we will be paying and that’s part of our initiative to drive better customer service. So, I think those are really the two factors that are different from a year ago and when you consider these factors those would generally say you should accelerate your completion factors and we didn’t do that we actually slowed them down.

Well, also we do have fewer claims processing systems now than we had at the end of '06 and we are seeing the benefit of that in number of ways. We can get our arms around the inventory, the claims processing metrics. We get better visibility as we get more efficient and have fewer systems.

Wayne, I guess I looked at your -- you provided a lot of disclosure on the roll forward I don’t mean to get through details here, but I did look at the roll forward you gave us the incurred claims and you gave us the paid claims. When I looked at that '07 versus '06 and its running exactly on top of each other at 88% and I even look at the third quarter versus the fourth quarter and how it trended, the numbers aren’t staying that you paid a lot more claims as a percentage of incurred in the fourth quarter, is there something else I can look at or is there -- is that not representative of what actually happened, am I looking at the wrong number.

Yeah. I think Justin -- I think after the call we will take it offline, but I don’t think they are representative. I think also things keep in mind these are full year numbers, so again we talked about some of that trip we did in this quarter related to what should probably happened in earlier quarters, but our pays were down significantly in the fourth quarter, and again that's a point in time roll forward. So, we will address this one offline with you, but I'm very confident.

Okay. And then maybe just to follow-up on the revenue guidance, you took down the top line by 1.3 billion, obviously the Ohio Medicaid hasn’t impacted -- maybe you can just spike out Ohio Medicaid, you mentioned Medicare Advantage is running a little bit below your expectations. Can you give us kind of components of where that revenue guidance decline comes from?

Its about a third of it relates to the Ohio Medicaid at this point in time. We have about a third just it relate to Connecticut. While we had literally right before IR they gotten a verbal agreement on a ASO contract, we are adjusting for that, are fully insured basis, because they were still talking to us about doing fully insured. They are still meeting with us and offered a new contract expansion, but again we are not talking about that publicly at this point rather than to say that, we are not going to bake in any of that into our revenue guidance for next year. So, we are mending for that. And then about a third of that really relates to our fourth quarter shortfall and some of our individual and some of our MA shortfall we're seeing right now.

Right, what is the MA number now for this year, I think you said 150 before?

It's only slightly below that and Justin I'm hesitant to amend it much at this point even quite a number, because while our ops are slightly down, we think our terms were little bit conservative than our estimation. And we do have some action plans throughout the year. So, I'm not prepared yet to lower the number with a specific yet, since only three weeks into the New Year. But the big thing is right now it's clear to say that ops are down, where thought they be at and so we are starting up the year a little bit in the hone of revenue side.

Thanks a lot.

Thank you. And we have a question now from the line of Tom Carroll with Stifel Nicolaus. Please go ahead.

Hey, good morning. Quick follow-up on Ohio market, could you talk more about what drove the unfavorable medical experience there? And then secondly, was there anything in your contract that precluded you from selling that business to one of the other managed care companies?

Tom, well, first of all, I would say is very much utilization driven in the program. And we saw utilization really spike there, because other lines of business and books in Ohio doing quite well. One of things that concerned is still, was that again with the new program, you get better data as the year goes on, but really saw a pretty significant spike in the fourth quarter. And I don't think, I mean I’ll be surprised if any of our competitors aren’t seeing the same thing, because if you look at public filings at 930, almost all of them were starting to see some early signs of some negative development. So, when you couple that with a net rate reduction that made that decision quite easy to exit. The issue is with the state is that, we had to give appropriate notice and timely notice to them. So they can provide appropriate notices to other players and vendors. When you consider the fact that it was running at a loss, when you consider the fact that the state was not willing to give any rate increase, in fact, one of rate reduction, there wasn't much of the sale that could be made of the book.

Tom, we have really focused on our contracting in the Medicaid managed care contract, to make sure we have appropriate termination provision, in terms of whether you can transfer the contract. In some cases, we can and look at that as an option, here they were offering a rate decrease probably for the universally.

So utilization driven, again, is it coming from any one particular specialty or service, I mean is it OB related, that's kind of think I was looking for in terms of an answer.

No. No, I mean it's more broad across the board. But Tom, we'll get back to you if there is any one area that's specifically driven, but it was pretty across the board.

Okay. Thanks

Thank you. And our next question comes from the line of Charles Boorady with Citi. Please go ahead.

Hi, thanks. Good morning. First, I'm wondering when in '07 did you identify that the fourth quarter '06 medical claims liabilities were developing less favorably than your previous expecting?

Thanks. Good question. Good morning, Charles. You want to know when in '07, we identified that '06 was developing less favorably?

Yeah.

That was in Q1. I would say by basically mid February, we had pretty good visibility that we were starting to develop negatively.

Okay. So the comment that you put in your press release about it was really more explaining, why '06 was reported so low and…

Yes. That's correct.

Okay.

That's correct, Charles.

So, this was related to the lag. There was a lag and you're identifying this related to the systems conversions that you described in other words?

No. No.

And in terms of the systems migrations, in light of what happened in '07, the case there had been a change in your plans for continued migrations in '08. Are you slowing them down and how many platforms where you are now and what do you expect to be at the end of the year?

We are dealing around our migrations, and we saw real process improvement over the year. We migrated over the last really year and a half four states off of their legacy systems onto our preferred systems. And so, there was quite a bit of migration movement over '06 and '07. But towards the end of '07, we had pretty significant migration activity in our national accounts, host business that went very well. We executed really well on that migration as well as into PBM. We had some flawless execution around those migrations. So, our plan is to continue to migrate in the way that we have with the process improvement, so that we are doing so slowly and cautiously and making good decisions around each element of the process and a really integrated business plan with operations and claims and IT. So, we feel really good about that. In terms of ultimately, our destination systems, we have hope to be down to three systems in 2010, three core claims processing system, and in 2011 and beyond even reducing that further. So, we have not changed our overall strategy. We are going to continue to do that, because it does drive the right results and then we can make investments, with lights on retiring systems into innovation and consumer directed capabilities.

In 2008 though, it is one system that we would expect to retire represents about 7.7 million members. But 3.1 is Medical and about 4.6 is specialty members. But I think as Angela said, we are driving the efficiencies from a G&A perspective that we fully expected to get with these and that's going well, we have managed these well, our customer service scores are actually improving and they have been good, but they are actually getting better. But the flip side is; I think we took in to account some of the payment activity and shortened our completion factors. And so the real change is, we are not going to do that in the future. We're going to remain ultra conservative on the reserve side. And we can change our process.

You mentioned the Medicaid, it seems like there was a pattern when you look at California, Ohio, Connecticut. And states budgets are going to get even tighter in '08 especially California's. So I am just wondering if you think it's prudent to revise enrollment expectations for Medicaid. Could there be other surprises in '08?

Yeah I think we are trying to be really clear. Connecticut doesn’t extend on an ASO basis. We'll keep describing that. We feel comfortable with where we have come with the 10 of the 11 contracts in California. Obviously, we have this one contract that were a subcontractor that remained. But essentially, as the states are looking at their budgets, we have good data that shows that managed care and Medicaid really produces a better outcome for the state in terms of overall cost, than a pure fee for service environment. So, we really believe that they are going to look for that solution. We are going to be very disciplined in how we do that, but we'll stay very focused on executing well in the Medicaid segment.

When you bought $77 million shares back in the last year, the share count went down about $56 million, generally where did the other $20 million shares go? How much was for comp versus for acquisitions or other things?

Sorry Charles. Could you repeat that, I want to make sure I understand the question.

Yeah, you bought back 77 million shares in the last year.

Yeah.

Your share account is down by $56 million. So there's about a $21 million share difference.

Yeah the weighted average account is down by that amount. So, again the number of the shares we buy late in the year, we are not getting the full credit for, but we get the full credit in '08.

And mostly adjusting for that but was there an issuance of shares for an acquisitions or?

No. The acquisitions we did this past year such as AIM, we used our -- we used cash.

Got it. Okay. Thanks.

Thank you. We have a question then from the line of Greg Nersessian with Credit Suisse. Please go ahead.

Hi, thank you. Good morning. Wayne a question about the 1Q '08 guidance just in terms of the medical loss ratio, it sounds like you are getting rate cut in Ohio and that business doesn’t terminated until the end of the quarter. And then you are also getting more heavily into Part D with lower risk quarters. So wondering that directionally the 1Q, '08 MLR versus 83.1% you reported 1Q '07 how should we think about that? Should it be higher 1Q, '08 year-over-year?

It's a good question. If everything was equal, than I would say yes. The flip side though is, we expect to see some improvement in our California state sponsored operations relative to 1Q of last year as well. So, we need to see how more the quarter pans out right now. While we don't provide the quarterly guidance, I would say that, again if everything was equal and perfect, that you would expect within the quarter slightly higher MLR.

Okay. And then just a follow-up on Charles' questions about the other states. You entered Indian, Kansas, Texas, and Nevada within the last couple of years also, can you allude it to me are there any issues in Indiana those states you are working with the states on or where those tracking inline with your expectations?

I would say most of our states attracting very much inline with our expectations, and I am pleased with our contract negotiations we did in California, because we are returning to a levels in those counties where we want to be. The flip side though is that, with all these programs many of these are annual programs and so you have to negotiate in every day. And I don't think there is any secret that more and more states are struggling with balancing their budgets, and so with that it makes our negotiations harder. So it's one though that, we want a partner with the state, we value the relationships with the state, but we can't be funding the states budgets and that what's been happening in the last year or so and that's why we took the swift action, we took in Ohio.

Okay. And then just last quick question on Connecticut. Is this freedom of information, situation, a deal breaker for you in that state, and I guess what would it take for you to stay or to leave and then just also the enrollment guidance for '08 that is not assuming you leave Connecticut, right that's assuming is stay either self-funded or fully insured?

Yes. The guidance it seems we are still in Connecticut on an ASO basis, and the four year issuing Connecticut has been a very significant issue for us and it's one that we've been very clear with the state on. It's important to us and it's different for us than potentially other contractors, because we are happy to have complete transparency around the Medicaid contract and the Medicaid piece schedules themselves. The language that's been proposed in the past has gone beyond that, and we go to our commercial business which we can't do. So that's what's been important to us in terms of that contract.

Greg, we are working on, we are working with the state though on alternatives. We provided a lot of alternatives; in fact, we very much support the state having all rights and access to all the data as it relates to their program. We've never had an issue with that and we continued to provide them language and supports in that manner and we are working a number of strategies. And I think the state values that and sees that, and that's why they've put forward a contract extension in front of us. Again we haven't signed it yet, because we are still wanted to make sure that we are all meeting the mutual needs of all parties. But that's why we are also so far leaving the membership in our guidance as well, because we do have contract extensions in front of us.

Okay. That's helpful. Thank you.

Thank you. And our next question and it comes from the line of Scott Fidel with Deutsche Bank. Please go ahead.

Thanks. Question just relates to individual '08, and you did mention there was a bit of a shortfall in the fourth quarter. Maybe if you can tell us what sequentially your individual enrollment did in the fourth quarter, and then what expectations you've built into individual for your guidance for 2008, and maybe just some in the markets where you might have seen the pressure around the individual enrollment?

Well, to tell you, a lot of the pressure we are seeing on the individual side is in our "non-Blue" states. We are seeing a fair amount of pressure there. In a few of our Blue states, we have seen some pressure, mostly in large metropolitan areas. And we have at least one competitor who is doing very rational pricing, the pricings very rational. But as you know with individual business, you are generally writing somebody at the healthier stage in your life, and so these individuals are applying a very appropriate strategy. They are coming in the markets, they are pricing appropriately, but they are offering higher commission, and so we’ve seen some slight deterioration and some of our Blue metropolitan areas, specifically in Georgia and California would be the two Blue states where we’ve seen some declines. But a significant portion of that decline is actually occurring in our non-Blue states.

Okay. And then Wayne just interested in sort of how you are approaching assumptions around the slowing economy, and I know you've talked a previously that build in some expectations for higher attrition and maybe just if you could update us on sort of how you are approaching expectation for attrition and then also how you think about medical cost trends as the economy slows in terms of, is it offset to slowing enrollment or do you think about medical cost transaction accelerating as the economy slows.

It's interesting. We have taken our guidance assuming a slowdown and specifically we were very specific about relative to the national account business that we had expected. Now the good news is, think our assumptions were conservative and we are actually seeing slightly better than expected result there, which is good. But I think we are far from having this economy downturn from being final, and so we are not ready to declare victory there that we’ve got it a 100% right, but right now I would say some of our assumptions appear to be conservative at this point. Flipside is we all know that when we start to see reductions in jobs that you actually end up having not detecting utilization initially, because you have individuals who are taking advantage of those elective services that they didn't have done before. When they know they are losing their job, they try to take advantage of that. So, that is something we all have to keep an eye on for the next year relative to that. But we did bake in some of that into our original guidance and, right now, we appear to be okay on that.

And if I could just ask one last quick one. Just relative to the Medicaid MLR again, and maybe, can you tell us how much improvement in the Medicaid MLR overall you are anticipating in the 2008 guidance relative to 2007? And maybe just give us sort of a base line of where the aggregate Medicaid MLR is sort of exceeding 2007 out?

Scott, let me get back to you on that one. I want to make sure I'm adequately addressing your question. But one of the things we really need to do is pull together more of an apples-to-apples comparison to on what we are exceeding. Well, we are not exceeding but rate increases have helped us after negotiations. So, we don't usually provide this information by line of business. But let me respond to you offline on that to make sure I get your question and answer that adequately.

Okay. Thank you.

Thanks. And our last question this morning comes from the line of Carl McDonald with Oppenheimer. Please go ahead.

Thanks. Just had a quick balance sheet follow-up, which was end of '06, you had about $5.5 billion of mortgage securities on the balance sheet. Can you give us a sense of how that broke down between various categories?

The mortgage security?

Exactly.

Most of them were in high quality government-backed securities. So I mean we have very little in what I would call alternatives. In fact, our entire alternative portfolio, even when you include REITs, LLCs, everything out there is less than 2.5%.

Okay.

These are very high quality government-backed, Fannie Mae, Ginnie Mae. I mean these are really high quality, Carl.

Got you. All right. And then anything that you are anticipating in terms of shipping that portfolio around in 2008, any impact on the yield there?

Well, I think we're going to have to, obviously, keep an eye on where yields are at. The spreads right now are obviously pretty dramatic. And we're going to continue to manage our portfolio to maximize our total return. So, at this point, I think our strategy going in the year was we assumed a lower yield curve. But right now, I would say, rates are probably slightly lower than what we would expected. And at the same time, we manage our portfolio on a regular basis, on a daily basis. So, it's hard for me to give you a specific strategy point. I think when you look at '07 we would all agree who would have thought rates would have went up as fast as they went, who would thought they would have went down as fast as they did, but they didn't, both extremes in the same year. So, we're obviously not going to bet they're going up on some of the things we're seeing right now. And so, we're taking appropriate actions in the portfolio.

Great. Thank you

Thank you. And I'd now like to turn the conference back to Angela Braly for the company's closing comments.

Thank you all for your questions. In closing, we had a productive year in 2007 and we're off to a good start for 2008. I am very proud of our 41,000 associates for their efforts, accomplishments and dedication. As 2008 began, the new executive leadership team and I energetically look forward to leading WellPoint forward with confidence about our ability to truly make a difference in healthcare and provide more value to our customers and our shareholders. I want to thank you for your interest this morning, and have a great day.

Thank you. And ladies and gentlemen, this conference will be available for replay starting today Wednesday, January 23 at 1:45 PM Eastern Time, and it will be available through Tuesday, February 5 at Midnight Eastern Time. And you may access the AT&T executive replay service by dialing 1-800-475-6701 for within the United States or Canada, or from outside the United States or Canada please dial 320-365-3814, and then enter the access code of 857272. Those numbers once again are 1-800-475-6701 for within the US or Canada or 320-365-3844 for outside the US or Canada, and again enter the access code of 857272. And that does conclude our conference for today. Thanks for your participation and for using AT&T's executive teleconference. You may now disconnect.