: 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’m Michael Kleinman, Vice President of Investor Relations. With me this morning are Angela Braly, our President and Chief Executive Officer; and Wayne DeVeydt, Executive Vice President and Chief Financial Officer. Angela will begin this morning’s call with an overview of our fourth quarter results, actions and accomplishments. Wayne will then offer a detailed review of our fourth quarter financial performance, which will be followed by a question-and-answer session. Ken Goulet, Executive Vice President and President of our Commercial Business and Brian Sassi, Executive Vice President and President of our Consumer Business, are available to participate in the Q-and-A session. During this call, we will reference certain non-GAAP measures. Our reconciliation of these non-GAAP measures to the most directly comparable measures calculated in accordance with GAAP is available in our press release and on the investor information page of our company website at www.wellpoint.com. We’ll 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 current expectations. We advise listeners to review the risk factors discussed in our press release this morning and in our quarterly and annual filings with the SEC. I will now turn the call over to Angela.

Thank you Michael and good morning. WellPoint had a solid performance in 2009 amidst a challenging economy. Today, we announced full year 2009 net income of $4.7 billion or $9.88 per share. This included an after tax gain of $2.4 billion from the sale of our PBM to Express Scripts, partially offset by $542 million in after tax restructuring-related charges, intangible asset impairments related to the PBM sale and UniCare membership decline and net investment losses. In 2008, our net income was $2.5 billion and included net after tax costs of $377 million, resulting from net investment losses and asset impairment charges, partially offset by the favorable resolution of certain federal and state tax matters. Excluding these items in each year, adjusted net income per share was $6.09 in 2009, an increase of 11% from $5.48 in 2008. Our adjusted earnings per share increased in 2009 as a result of significantly improved performance in our consumer segment, better than expected results in the capital management areas of the company and higher than anticipated favorable reserve development. Fourth quarter 2009 GAAP net income was $2.7 billion or $5.95 per share compared to $331 million or $0.65 per share in 2008. On an adjusted basis, excluding the gain on sale of the PBM, restructuring charges, intangible asset impairment and net investment losses in each period, adjusted net income was $536 million in the fourth quarter 2009 or $1.16 per share compared to adjusted net income of $682 million or $1.34 per share in 2008. We had a solid fourth quarter in core operations, where results were inline with our expectations, reflecting actions we’ve taken to effectively manage our business through the current economic situation and for the long term. Operating revenue totaled $60.8 billion in 2009, down 1% from $61.6 billion in…

Thank you, Angela and good morning. We had a very good fourth quarter of 2009 with net income higher than expected as we achieved a larger than expected gain on the sale of our PBM, benefited from a lower effective tax rate than previously anticipated, and recognized higher than anticipated favorable reserve releases of approximately $50 million in the fourth quarter that were not reestablished at year end. Premium income was $14 billion in the quarter, a $306 million or 2% decrease from the prior year quarter, primarily due to fully insured membership declines, mostly offset by premium rate increases. Administrative fees were $953 million in the fourth quarter of 2009, down $23 million or 2% from the prior year quarter, primarily due to lower revenues in the National Government Services business, our exit from the Connecticut Medicaid program, and lower Local Group ASO membership, partially offset by higher commercial administrative fees per member per month. The benefit expense ratio for the fourth quarter of 2009 was 84.8%, inline with our expectation and 140 basis points higher than the same period of last year. The increase in our Local Group benefit expense ratio is the primary driver. As we noted last quarter, the impact of the recession on business mix shifts and utilization patterns and higher flu expenses drove an increase in Local Group benefit expense ratio during 2009. Our Consumer segment results improved year-over-year due to operational improvements we made in our Senior and State Sponsored businesses, which were partially offset by our higher individual benefit expense ratio. We recognized higher than anticipated favorable reserve releases of approximately $50 million in the fourth quarter of 2009 and this favorably impacted the fourth quarter ‘09 benefit expense ratio by 40 basis points. For 2010, we have been pricing ahead of…

Thanks Wayne. Operator, please open the queue for questions.

(Operator Instructions) Your first question comes from John Rex - JP Morgan.

So I wanted to turn first to kind of your commentary on the reserve position here coming out of the year. So you spoke about still being conservatively stated. The obvious metrics that we see in a GAAP financial, though, up cash flow, DCPs, etc., just don’t go in the right direction in terms of what we typically think about. So I wonder if you can help us kind of clean that up a bit in thinking about the reserve position coming out of the year. Also, just kind of how you view gets the margin that you have built in to the current payables accrual?

I’m going to let Wayne take us through the math because I think that’s important, but keep in mind, I think we continue to be conservative in how we operate and also, keep in mind that we really had a good 18 months of improvement and 12 solid months of what I would call real stability in our transparency and clarity into claims and that, I think, has contributed to a continuous conservative reserving methodology, but we do need to explain DCP and we can specifically explain some of the cash flow issues. So Wayne, you want to go through each of those?

I think it’s fair to say that the two metrics can be very misleading over what we would typically expect them to indicate. So, let me address cash flow first, and then let me go into the DCP because it is affected by some of the cash flow items that are occurring. Just as a reminder for our listeners, we had guided for positive operating cash flow about $100 million in the quarter and that included us fully funding our employee pension plans in the quarter. So, net of tax, we had a net cash outflow of operating cash flow of $130 million in the fourth quarter. Now that, again, was in our original guidance, but I wanted you to be aware that that did impact the cash flow for the quarter and you need to keep that in mind. The second thing though that is very relevant is we have three states that actually owed us approximately $100 million as of 12/31 and was fully expected to be collected in the last week of December, that actually came in the first week of January. So we have collected it, but that $100 million is simply timing and we’ve earned the underlying income in the quarter, but we receive the cash flow in the first quarter of January. So when you actually add that in, the cash flow looks good and then the final item that is causing a cash flow anomaly is that when we closed the transaction with Express Scripts, one of the underlying terms we had was how their systems pay versus how our systems paid and essentially, simply put, the payment cycles moved up by one week over the next 10 years. You get a onetime kind of hit, if you will, at the start of…

Your next question comes from Justin Lake - UBS.

My question is on the MLR trajectory in the fourth quarter. Clearly, you saw a pretty significant increase, sequentially about 300 basis points. If I look back over the last couple of years, that’s been closer to 100 basis points. So can you talk about what’s driving that increased seasonality? Then given the H1N1 costs, I think we all think came in lower in the quarter, what was the pressures that lost that benefit in MLR year-over-year despite the benefit and how do you see that playing out next year as well? Thanks.

We did obviously talk in our remarks about both the flu and the COBRA because we have seen increased COBRA membership and that’s reflected as well. We had talked the third quarter about flu ticking up, but then it frankly abated somewhat. So Wayne, do you want to talk a little bit about the business mix and the fact that COBRA is in that commercial MLR in particular?

Justin, the first thing is kind of the broader history repeating or is it actually getting worse. The reality is that over the last two years, we’ve seen the average deductible in our book in every segment, whether it would be individual, small group, etc. increased by 20% over the past two years. So with that dynamic, you end up with lower MLRs through the first three quarters and you end up with a higher MLR theoretically in the fourth quarter and so that trend is just continuing. So last year they went up about 10%. This year they went up another 10% and so that is one factor that I would just say where history is not necessarily indicative of the future. The second thing I would add, though, is if you recall correctly in our third quarter, the H1N1 spike we saw was in the Tamiflu being prescribed in the last two weeks of September. The actual doc visits and the actual claims associated with that did come through, and we saw a lot of that come through in October, so H1N1 was actually still very elevated in October. Now, it abated dramatically in November, December. So we had the very high as expected for one month, much lower than expected for the next two. What offset the much lower than expected, though, is that our COBRA went from 2.2% of our book to 2.5% of our book in the fourth quarter. So in essence, we didn’t get what I would call a little more of the upside we maybe expected to see with the last two months of abatement because it was essentially offset by the COBRA.

While we’re talking about COBRA too, we often get the question about the subsidy around COBRA being extended for 15 months. We believe we priced for the higher COBRA membership and expenses through the 2010 pricing.

Your next question comes from Charles Boorady - Citi.

Just a couple things I’d like to hear a little bit more about. Angela, if you can characterize for us the kinds of conversations going on among the boards of Blue plans and whether health reform has maybe changed the opinion of some non-profits to reconsider conversion, and if you think we should expect heightened M&A among the Blues? Then on NextRx, I was just hoping to hear a little bit more around how the conversions have gone. Any initial client feedback now that the 1/1/2010 period is behind us? Any service related issues you need to address? Also whether the G&A that we’re going to see in the Q1 is reflective of what to expect on an ongoing basis or if there’s going to need to be a handing off period of some of the expenses related to NextRx?

Charles, let me talk about the Blue plan question that you asked because I think it’s an important one. I clearly think the health care reform discussion gave us all an opportunity to understand some of the fundamental drivers that are important to this business no matter what happens. Namely scale, we need to have scale, we need to have the best discounts in the market and those are characteristics that we as Blue plans can share together. That, as well as the UniCare transaction for us was a strategic one. We transitioned the membership in Texas and Illinois to another Blue plan. So we really think we’re working really well with our Blue plan partners, whether they are ready to do a transaction is yet to be seen, but I think the nature of the need for scale, the access that we provide to capital creates a great opportunity for us for the future and, clarity around health care reform or not necessarily having the same level of overhang, they spur us to have more opportunities in the future. In terms of the Express Scripts transaction and partnership, I have to say we are just very thrilled with the relationship that we had with Express Scripts. They are an excellent organization, and our team and their team worked incredibly well together to get through the closing and we were very diligent together as a team throughout the closing and throughout 1/1. These guys are really professionals, and they were ready for every possibility, and we did not have a hiccup. So those relationships are really going well. I think we’re really serving our customers well, and that was our focus for the transition, but we also have great opportunity that we haven’t yet completely reached with them around their Consumerology, their focus on the customer, their ability to get mail order penetration, and those are all things that we are working with them on now to serve our members for the future.

One thing I would add to Charles, your question on the G&A, “How that will evolve?” It’s a really good question, so I want to make sure that our listeners understand the impact on G&A. We will have bubble staff for this migration period throughout all of 2010, and the reason for that is that so first quarter will be kind of a reasonable run rate for purposes of this component throughout the year. I don’t think you’ll see improvements till 2011 regarding the bubble staff. The reason for that is on the date the deal closed, we had to reprogram our systems to be able to handle all that membership, but over the next 12 months, we will be migrating that membership off of our systems to their systems. So I would say for 1/1 enrollment, as Angela said, it’s been exceptional and it’s been well, but that’s partially because, we’ve got bubble staff and they’ve got bubble staff, and we wanted to assure there were no issues. So we will continue with that staff throughout 2010. I think in 2011, you’ll start to see some of those synergies then.

Your next question comes from Doug Simpson - Morgan Stanley.

Wayne, I missed what you gave as your cash balance at year, free cash at the parent?

Doug, at 12/31, we have $4.5 billion at the parent at year end. I just, only thing I wanted to clarify which we did in our prepared remarks was, I wanted folks to recognize that the majority of the taxes for the PBM are going to be paid out of one of the subs we have, so that does not count. There’s only about $300 million of that $4.5 billion is actually going to be used for taxes for the PBM, the rest will come out of the sub. So if you look to kind of free cash flow available, it’s about $4.2 billion right now.

When you talk about the $2.3 billion of dividends next year, is that after that $1.2 billion, or before it?

Yes, $2.3 billion of dividends, so if you were doing simple math, Doug, I’d say start the year with $4.5 billion. We would have ordinary dividends of $2.3 billion. Now, clearly, we will try for extraordinary we’ve done every year. We’ve been successful historically, but right now if you’re modeling, I would use $2.3 billion of ordinary dividends and then, of course, our uses will be, we have $100 million of principal payments, about $500 million of interest expense. We are assuming that rates are going to continue to move up and that renegotiating the credit facility will result in higher costs in this new environment and then taxes for the PBM of $300 million, so total uses of $900 million. So again, if you do nothing, you’ve got almost $6 billion, $5.9 billion, to deploy at year end and then of course, right now, we plan to deploy roughly $4 billion.

Of that $6 billion then, maybe I’m just missing this, but I thought you said you had to pay $1.2 billion in taxes in the first quarter?

Again, Doug, of those taxes, $300 million will come from the parent. $900 million will come from the sub that is below the parent, and we’ll use the inter company tax settlement to pull that money out. So I wanted you to know, if you want to look at it of that $1.2 billion going out, just recognize that there is $900 million not coming from this parent money.

Can you just talk about the 90% of in-patient trend related to unit costs? What are your employer customers saying about this? Are they aware of that as a cost driver? Just specifically, if you look out 12, 18 months, what are you really trying to do to knock that trend down?

We’ve been looking at that and working with our customers on that. Part of what we’re seeing is we had more intensity or case acuity in in-patient, because the right cases are going to out-patient. So you’re going to see a little bit of that. Out-patient settings, we need to get the right procedures into those settings as well. We are working through a number of different medical management strategies though to focus on that higher case acuity, to look at the contracting issues, particularly whether or not we’re hitting outliers successively. That gives us an opportunity potentially to review some of the contracting relationships and the nature of that; as well as some of our specific case management activities around certain disease states. We can take that, for example, our AIM technology and turn it to cardiology and other things. So we’re really getting at some of that higher intensity in-patient cases.

Your next question comes from Josh Raskin - Barclays.

Just following up a little bit on that last question around medical management, I guess, we’ve talked for a couple of years now about improved contracting and new medical management techniques, and yet year in and year out, we’re continuing to see very high single digit medical cost trend and actual acceleration in recent years. So I’m curious, from the impact of the economy and all sorts of forces, whether that’s reform related or not. Are your customers allowing you at this point to be a little more aggressive from a medical management perspective? Are we going to get back to more referrals and pre-authorizations and other sort of medical management techniques that may actually start slowing down the rate of costs and how long is this sort of sustainable at this 9% range?

Josh, I would say there were a couple of different levers and then I’m going to turn it to Ken to talk about, the customers’ viewpoint here a little bit. One is I do think that we do have a tailwind, meaning support for a more vigorous look at contracting and that often that relates particularly around hospital contracting to important network questions in terms of do we have a significant provider in the network, but the employer community is more interested than ever that we drive for value in the contract negotiation. I would then turn to the medical management levels that you described, and we do have an opportunity, and we are frankly, focusing on how to drive more effectiveness through the medical management program and then there’s probably a third level that we talked a little bit about in our prepared remarks around really changing the reimbursement methodology to get to the right outcomes and we can’t kind of give up on that level either and go back to the traditional level. Because that’s ultimately where we’re going to have the more breakthrough around making sure that we have more of a shared risk model or one that really produces the right outcome, which we believe will produce a lower cost overtime, but I would love for Ken and Brian, since they are here to talk about the customers’ viewpoint about that and their desire and willingness for us to focus on those medical management levels.

Josh, this is Ken. I’ll jump in first. I think Angela captured it pretty well, but a couple things I would highlight. On the customer and employer ability to support us in our negotiations and their tolerance for rate increases, they want to take as many actions possible to drive down the cost of care. So in many of our more difficult negotiations, they’ve been more willing over the last year to participate as a Local Employer Group, in getting involved and giving their opinions in our negotiations with our facilities and we’ve had only a couple of ones hit the newspaper recently, but in each of those, our customers are supporting us in our activities and making sure we are working together to drive down the cost of care. There more of willingness for driving down costs in other ways I would say narrow networks are getting an increasingly good look from our employer groups who have just refreshed our select network in California because of many of the requests coming in and I think we will see an increase in that over the years, not away to HMO and utilization, but more towards networks where we’ve have the products, we’ve had some utilization, but it’s picking up. Then finally, just clinical programs, we had over 700,000 members buy into our integrated health program, which is our highest touch clinical programs going into 1/1, which is a sign that employer groups are willing to purchase and buy the more involved engagement models to help drive down utilization. So across the board, there is a willingness to partner together, both on the contracting side, the product design, and the clinical programs.

Hi, Josh. This is Brian. I agree with everything that Angela and Ken said. I think additionally within the Consumer businesses, affordability is obviously one of the key issues and managing medical management is one of the key levels that we have and I still think that we still have upside opportunity relative to becoming more efficient, making sure that we’re rolling out the tools that we have at our disposal such as RHI to focus our medical management activities on the right cases at the right time. So I think there’s as we continue that effort in 2010, we will see some upside opportunity there.

I guess just as a follow up there, do you think that your efforts in your contracting are more aggressive in terms of incremental change on the medical management front than you’ve seen in prior years and I guess if you had to guess three years from now, do you think your medical cost trend is higher or lower than the 8.9% you saw in 2009?

I would say to the first part of that question, yes. We think we’re being more aggressive and we are getting better engagement through the mechanisms that both Brian and Ken talked about and our desire and expectation is to further have a positive impact on trend, bring the trends down and as I said, the third level being those more risk sharing related levels around accountable organizations that are responsible for output and give warrantees on readmissions, etc. That too, I think is going to make a meaningful change in terms of the future trend.

Your next question comes from Matthew Borsch - Goldman Sachs.

If I could just turn back to the fourth quarter trend and I know you’ve got a few questions here, but to the extent you can spike out where, in what geographies H1N1 had more or less impact? When you talk about COBRA and also the deductible impact, am I correct in presuming you are seeing that more strongly in your individual small group business? Then finally on the same broad topic, what was the experience like with Texas and Illinois in terms of the results you had there as you are exiting those markets?

Let me first address the back pocket of the question, which was around the COBRAs, and the deductibles and that. We’re really seeing nothing in the individual because again, these are currently employers that are leaving their group. So it’s basically small group and large Local Group. What’s interesting Matt, is that I would say as it relates to the COBRA. I mean, those States that are having larger unemployment like California and Ohio, we are seeing more COBRA, but it’s more a function of the underlying employment levels than it is a function of what I would call adverse selection because of the state. The second thing I would say is as it’s related to the flu. I would say all of our States got equally hit, but not all at the same time. So some States had the impact sooner such as Georgia, but as it started to spread across the U.S., we were no less tainted in any one State. I wouldn’t call it adversely higher in any one State either, though. I would just say they were all pretty bad as related to the H1N1 impact. I would also say though abated almost equally at the same time, meaning that everybody’s now down at a comparable level across our States. Relative to the fourth quarter trend, again, a big part of what we said even in the third quarter was, we raised trend, primarily the original 100 basis points was pretty much exclusively due to H1N1 and due to COBRA or mix shift. As we said, COBRA and mix shift are hard to differentiate because they’re kind of one in the same that if you get more COBRA members, you’re getting some mix shift adverse selection, if you will and see they are a little bit fungible and a little difficult to bifurcate, but of that 100 basis point increase at the time, about 50% was H1N1 and about 50% was COBRA related.

On Texas and Illinois?

Matthew, the Texas Illinois question, the transition went very well with UniCare. The customers had really a very transparent transition. We beat our expectations on the number of customers retained through the transition with HCSC. Our providers and our partners that we worked with, we communicated up front; they were very aware of the transition and we would say the transition went without a flaw.

I think too, though Matt, with getting to the question about the UniCare membership, Matt, over the last couple years, we had a really experienced operator, Dennis Casey reports to Ken, came in and ran that UniCare membership and tried to really right size it, but it was a strategic decision to transfer that membership. We don’t have the scale. We don’t have the depth of the provider discounts that we have in other geographies and that was really critical. When you look at 12/31, that UniCare membership is still in there, and we’re expecting about a 400,000 member decline to be reflected from the 1/1, essentially the transition of that membership. In terms of the quarter, we saw some of the membership loss come out of Texas and Illinois, but I think that performance of that book was pretty stable throughout 2009 because we had really right priced it over the last couple of years.

The difficult part, Matt, was we did not think we could continue without eventually getting adverse selection and having that happen relatively quickly. So I don’t think you’ll see a huge windfall in MLR next year because of it going away, but I would tell you that the pace of that membership in UniCare was declining. We were on a pace for adverse selection very quickly.

Your next question comes from Christine Arnold - Cowen & Co. Christine Arnold - Cowen & Co.: You all had guided for an 82.6% aggregate MLR excluding any positive development here and you had $50 million of positive development, which means the MLR was higher than you anticipated in the fourth quarter. A couple questions here, one, was there any negative development related to prior quarters, or did you just see trend coming in higher in the fourth quarter and if so, where? Then, I estimate your commercial MLR was up about 70 basis points. Is it reasonable to think you’ll get that back and then more because, you should just get that back as the 870,000 members transition to ASO, assuming they have like a 90% loss ratio? So can you talk to the commercial dynamics and kind of what you’re seeing?

The first part is absolutely what you’re stating and we are. I think while H1N1 started to abate, I think the thing still misleading, although is it was very, very high in October, very high. So I think in many people’s mind, we’re thinking it was a non-issue for the quarter. It was not a non-issue and overall, regular flu in the quarter was still elevated over normal. So I think we had what I would call that dynamic occurring. Couple that with the fact that our COBRA experience in the commercial book went from 2.2 to 2.5 that was another dynamic, meaning you’re getting a little bit of a mix shift problem, but all that being said, I would say that we were pricing for that dynamic to occur. We had been pricing ahead of trend specifically if that was to occur. So I think to your point of you should see the MLR come down and improve next year, the answer is, absolutely yes and by a reasonable amount in light of the fact that we’ve now priced for a level of COBRA. We’ve priced for what we thought would be some level of H1N1 to continue into 2010. If it continues at the abated level, that will be a positive thing, hopefully, but nonetheless, I think it’s very fair to say that we should expect the MLRs to come down. Christine Arnold - Cowen & Co.: So is my math right? We’re up 70 to 90 basis points in ‘09; we should get just that back by eliminating the $870,000, so it should improve by more than 100 basis points?

I would suggest that we wait until IR Day, because then we’ll show you the ins and outs as well regarding what is shifting from ASO or from pulling share to ASO, as well as the impact of UniCare and other items, but your broad math of coming down is very much right, Christine. Christine Arnold - Cowen & Co.: What about the history of it being up 70 to 90 in ‘09, just so I have the baseline right, please?

I don’t have that in front of me, so we’ll have to follow up on that.

Your next question comes from Carl McDonald - Oppenheimer.

I know you’re going to give more detail at the Investor Day, but just in broad strokes, with the loss ratio coming down in 2010, and the at least $6 earnings guidance. Is there something on the SG&A that we should be aware of? Maybe something related to the PBM transaction, where we’re going to see a more significant spike in SG&A in 2010?

No, I mean I think, as we’ve mentioned, Carl, we are going to make some investments there still. We mentioned before about a couple $100 million that we’ve got planned for to further migrate some of our systems. We did migrate a couple of systems this year again in 2009, and they were flawless. We did the ESI migration and that has gone flawlessly, but I think outside of that, I do think overall SG&A, you’re going to see come down in absolute dollars. Not just because of the PBM going away, but we needed to right-size our organization relative to our membership. So those will be things that we will talk out about separately, but in general, I don’t think you’re going to see SG&A be elevated. It’s going to be just the opposite impact. I do think though that while commercial MLR is going to be down and other items, we’re not assuming at this point you will see any reserve redundancy repeating, which again, as you know, is part of our conservative position that we always take. So when you’re looking kind of year-over-year on EBIT, I’m not sure if people are modeling for that to occur or not, but I do think that there might be a little bit of a difference on how much G&A will help next year versus how much MLR will help. So we’ll provide more guidance on IR Day.

So you’re making the point the commercial loss ratio should be down by some amount in 2010, but not necessarily as much on the consolidated loss ratio?

Correct, because your senior loss ratio is going to go up with the senior rate cuts that occurred and you should expect Medicaid to go up slightly. I don’t think we’re going to model for these wonderful windfalls we keep hearing about are going to happen with all this federal funding. So, we’re modeling that it’s going to be a much tighter environment than maybe people are anticipating.

Your next question comes from Scott Fidel - Deutsche Bank.

First question is, if you just have an estimate for how much swine flu expense you ended up booking for the full year of 2009?

I’m looking around my team to see if I can get you an exact number. Well, here’s the difficult part, Scott. Nothing gets quoted as swine flu, and nothing is quoted as flu. So we have to use things like upper respiratory. We have to look at Tamiflu prescribed and assume that doctor visit was flu-related. So the problem is, no matter what number I give you, it’s probably wrong. What I can tell you though are that we thought there would be at least 50 to 60 basis points of trend for that and that would equate to about 120 million. So if you wanted to try to gauge kind of an approximation, that’s about what it would be, but just, recognize that it’s very difficult for us to know exactly what flu is.

Then just on a follow up, on the Medicare selling season, if you could talk about from a product preference, what you are seeing this year in open enrollment season in terms of migration and network products and then also just with the seniors that lost their private fee for service coverage last year are you seeing more of a bias towards them moving into network PPO products or are you seeing some of them retrench back into med supp?

Let me just say that I think we’re very pleased with how open enrollment is going through January. As we’ve talked about on the calls previously, 2009 we spent a lot of time reengineering the entire senior division, including our sales and marketing efforts and through at least January, it looks like we had a very good selling season; we anticipated that we would, so it’s really not upside because it’s baked into the plan, but through January, we had about 115,000 some odd sales, which is about twice our normal sales. As we kind of look at how those sales break down, we are seeing good conversion from our private fee for service book in our 14 Blue plans two our PPO products and also in those markets where we have strong HMO offerings, like in New York and Ohio. So we do have what we call a Blue boomer strategy, which is really focused on conversion to network based products and it does look like that’s playing out as we expected it would.

Your next question comes from Kevin Fischbeck - Bank of America.

I was just wondering, I guess you maybe talked a little bit about it briefly when you talked about system conversion; but can you give us a little bit more detail about what actually happened as far as the restructuring activities and where you’re going to be getting how that’s going to be driving the savings in G&A next year?

Yes, let me talk about that a little bit and I’ll pass it to Wayne to give a little more detail, we saw the membership decline, which we’ve described. We also had overhead that was covered by the PBM as well as UniCare and we needed to takeout costs associated with each of those elements. So in terms of the restructuring that produces these results, our other goal was to maintain and improve service levels throughout that process and I think we’ve done that effectively. If you look at the organization, I think we have right sized the organization at all levels to address that specifically. In terms of how we are investing, though, for future efficiencies, as Wayne said, we actually had a couple of conversion migrations that reduced our number of systems throughout 2010. We have some run out on some of those systems, so through the beginning of 2011, but we are working through those and you are not hearing a lot about that, which is exactly what should happen. As well as, Wayne talked about our focus on getting the ESI transition pretty effective. So, I think we were aggressive in our approach to get to the right organizational structure for the future. Now, as we look at migrations for the future, one thing is, we are investing in the people and the technology to make sure that those are flawless and that you don’t hear about those either and so, you will see that investment come through in terms of our 2010 SG&A because and we’ll talk more about that at Investor Day, but our goal was to make investments to make sure that as we took out costs, we did it without disrupting service to our customers. I don’t know if anybody wants to add to that?

Yes, the only thing I would say is of the $170 million or so to what Angela added, the vast majority, well over $100 million of that was right sizing for the sale of the PBM, the UniCare and then the overall membership declines and what we expect to see in 2010, but with that, you also then have facilities and locations that we would no longer need, and so there is a facilities related charge in there, which is about $25 million of that number and then there’s a small amount in there for contracts that we no longer needed to have, third party arrangements because of some of this membership that’s gone away and some of it that we sold. So you have kind of what I will call one-time payment penalties. Those clearly drive run rate benefits for 2010. However, as Angela said, we’re using some of that to reinvest to further consolidate our platforms, make sure we have appropriate bubble staff that those are done seamlessly. You will see though at IR Day and we will talk further, that our G&A is going to be improving dramatically, but I would also add that the real benefits are going to be coming in the years 2011 and there on as we go through some of these initiatives to put those through.

So should we be expecting any more charges as the year goes on or is this kind of what you need to do to get the away for the next two years?

Right now for 2010, it is what we believe we need to do throughout all of 2010 that we’ve been able to put. So we would not anticipate at this point in time any charges in 2010 at all, related to our various activities that we’re doing.

Your next question comes from Ana Gupte - Sanford Bernstein.

My question is about the outlook for your Consumer Business, which was a meaningful contributor in ‘09, offsetting weak Commercial performance, if you will. The four drivers I identified in ‘09, I think you’ve mentioned is you exited some unprofitable products in MA. You exited States, where you were unprofitable in the State Sponsored business. You were very, very conservative and released a lot of favorable reserves, and possibly engaged in spread pricing in Part D. I’ve not got clarity on that. So going to each of those in 2010, for MA, there’s some rate pressure. It’s not the biggest part of your business, but it’s a headwind. Medicaid, you just mentioned that the states may not be getting the kind of federal funding you are looking for. On reserves, you’ve continued to be conservative relative to others, but perhaps it looks like not as conservative as you’ve been last year. Then finally, on the spread pricing, that’s going away, and I’m not sure how that’s playing out with your sale of PBM. So what is your outlook for the consumer margins and year-over-year operating earnings growth into 2010?

I think you’re correct. I think 2009 was a very good year for consumer. I think for a number of reasons, while we will continue to optimize each of those businesses, we are going to go backwards for 2010 in Consumer because of a couple of the headwinds that you identified. In the Medicare segment and Senior, we had the MA reductions and just normal trend in that business, about a $400 million headwind. We’ve reduced that to about $100 million headwind, given a number of reengineering changes and product changes and pricing changes going into 2010. So we do know that that business is going to be impacted. As Wayne mentioned, Consumer overall had about $181 million in favorable reserve releases that were not reestablished. So again, being conservative going into 2010, that’s not reflected in our numbers. Also, in our State Sponsored business, obviously that was a beneficiary of some of those reserve releases, but we have also offset a number of that with reengineering in that business unit. While that will go backwards somewhat, we do expect kind of solid performance. Then an individual, we are challenged in that business similar to how we are in local business with the economy and unfortunately, we have not seen the up tick in membership, particularly because of the COBRA subsidy and that being extended. So, we do have some challenges, but I think what we were able do was reengineer each of those businesses and set the bar and the run rate at a much higher level than we have historically.

Of course, we’re going to talk more about that at IR Day, Ana.

One quick follow-up, on the $6 guidance you’re putting out there, are you baking in the full share repurchase that Wayne mentioned or is that a degree of conservatism that is being built in?

We have included that $4 billion of share repurchases in the $6.

Your next question comes from Matt Perry - Wells Fargo.

Just a couple questions on pricing for 2010, can you help me understand whether or not you had begun to price for the potential industry fees that health care reform would assess on the industry starting in 2011? Had that kind of gotten into your price increases? Would you expect to continue to put that in even though reform is kind of uncertain? Then secondly, on the ASO side, we’ve seen kind of reported yields if we look at the income statement flat to down in ‘08 and then again in ‘09. Would we expect to see the same thing in 2010?

Let me address the first question because many people have asked us, “How did you plan for health care reform?” I would say we were focused throughout 2009 on execution and doing what mattered no matter what and we really refrained from getting the organization very focused and spinning around the potential changes from health care reform. With some exceptions we did anticipate, as health care reform was kind of going through the process, that there could be some 2010 impacts. So we began the process of operationalizing, potentially, things like the fee and how we would do that. Now, because of the change that we’ve seen in health care reform, while we think we were adequately priced for COBRA, adequately priced for trend going forward, potentially could cover a reduced sum that was being discussed around industry fees. We didn’t fully lay that out in all of our places where we’d have to file and do all those things. So as we look at health care reform, one of the advocacy positions that we continue to take is, these things drive higher costs for our customers. So we have to be very mindful about the impact of that and clearly, the insurer fees would have driven higher costs for our customers and that, ultimately, is borne by them in their pricing. So essentially I think we were poised and prepared and had begun the work on that, but are really not going to add those potential fees in at this point going forward. In terms of the ASO yields, I think things are getting rational, but I’ll turn it to Ken to respond to that as well.

There has been pressure on ASO over the last couple of years, but it has abated some as our competitors have firmed up. It seems, while there is a competitive process, our fees overall are up. Also, what we’ll talk about at Investor Day is, ASO profitability enhancers that we’re working through that will help our yields and help the overall profitability of the ASO book in the future years ahead.

Your next question comes from Brian Wright - Collins Stewart.

Did the PBM sale have any impact on the MLR in the fourth quarter, as far as lower unit prices on…?

It had a very nominal and actually would have been slightly worse just because of the way the economy worked. Our new deal with the new rates is really effective 1/1. So what we had was kind of a more neutralized rate structure in December, comparable to what we had before with our existing PBM. So our new rates all go in effect 1/1. So there’s actually no benefit to the MLR in the quarter.

Your final question comes from Tom Carroll - Stifel Nicolaus.

Yes, just a final question here. The conversation as you know about managed care companies paying a shareholder dividend seems to be back on the front burner again. I guess with your strong cash flow and lots of liquidity, has this discussion perhaps taken on some greater importance at the board level this year?

Tom, we continue to have very fulsome discussions around our capital plan with the board, and that includes the possibility of dividend overtime. As we reported today, we expect to use the $4 billion in cash this year in share repurchases, both due to the PBM transaction and then what I would call our regular run rate essentially of $2 billion over the year for repurchases, but we are very committed to continuing to have the discussion about the right way to return capital to shareholders. Dividends are very much a part of that conversation as well and we’ll keep you up-to-date on how that goes. As we anticipate changes in the future, we’ll continue to have that discussion.

Tom, we’re planning at IR Day to give a little bit of background about our capital deployment decisions, how they operate, the risk that we see, when we think a dividend is right, etc. So that at least shareholders recognize that this is being addressed regularly by our board and by management, but we also want to make sure people understand that there are always different risk with different deployment mechanisms. We want to make sure people understand those.

So, I want to thank everyone who was able to ask a question and apologize to those who we weren’t able to get into the call in the queue. So let me wrap up here. I want to thank you all. In closing, I want you to know that we are very confident about our future. There are opportunities and challenges from the current economic conditions and possible health care reform efforts. We have both the right strategy and the right team in place to address the challenges and capitalize on the opportunities that will be presented. We plan to continue delivering value to our customers and our shareholders in 2010 and beyond. We will be providing much more detail about our 2010 plans at Investor Day on February 23, 2010 and to register, please contact our Investor Relations department. I want to thank everybody for participating on our call this morning and operator, would you please give the call replay instructions.

Certainly, my pleasure and ladies and gentlemen, this conference will be available for replay starting today, Wednesday, January 27 at 11 am, Eastern Time and it will be available through Wednesday, February 10, at midnight Eastern Time and you can access the AT&T Executive Playback Service by dialing 1-800-475-6701 for within the United States or Canada or from outside the U.S. or Canada, please dial 320-365-3844, and then enter the access code of 123543. Those number once again 1-800-475-6701 for within the U.S. or Canada or 320-365-3844 from outside the U.S. or Canada and again enter the access code of 123543. That does conclude our conference for today. Thank you for your participation and for using AT&T’s Executive Teleconference. You may now disconnect.