Ladies and gentlemen, thank you for standing by, and welcome to the WellPoint Conference Call. [Operator Instructions] I would now like to turn the conference over to the company's management.

Good morning, and welcome to WellPoint's third quarter earnings conference call. I'm Michael Kleinman, Vice President of Investor Relations. With me this morning are Angela Braly, our Chair, 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 third quarter results, actions and accomplishments. Wayne will then offer a detailed review of our third quarter financial performance capital management and current guidance 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&A session. During this call, we will reference certain non-GAAP measures. A reconciliation of these non-GAAP measures to the most directly comparable measures calculated in accordance with GAAP is available on the Investor Information page of our company website at www.wellpoint.com. We will also 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. 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. Today, we are pleased to report strong results for the third quarter of 2010. Earnings per share totaled $1.84 on a GAAP basis which included net investment gains of approximately $0.10 per share. Earnings per share in the third quarter of 2009 totaled $1.53 and included $0.03 per share of its net investment gains and an impairment charge of $0.28 per share. Excluding the items noted in each period, our adjusted EPS was $1.74 for the third quarter of 2010 compared to adjusted EPS of $1.78 in the same period of last year. Our quarterly performance exceeded our forecast, primarily due to higher than anticipated favorable reserve development and disciplined administrative expense control. Based on our third quarter results, we've increased our full year 2010 GAAP EPS guidance to at least $6.60, which includes year-to-date net investment gains of approximately $0.18 per share and an impairment charge from the first quarter totaling $0.03 per share. On an adjusted basis, or excluding the items noted, we've raised our full year EPS guidance by $0.20 to at least $6.45. Medical enrollment was stable in the third quarter, totaling 33.5 million members as of September 30, 2010. While we experienced minor interest attrition during this quarter, the level of attrition moderated. And we ended the quarter with approximately 200,000 more members than we expected. Both fully insured and self-funded enrollment results were better than our prior forecast. The unfavorable employment trends which have impacted our commercial business over the past two years appeared to be stabilizing, and we therefore raised our year-end 2010 medical enrollment outlook by 200,000 to 33.3 million members. We continue to provide excellent value for our customers in this difficult economy as evidenced by the positive membership results we have achieved this year…

Thank you, Angela, and good morning. Premium income was $13.4 billion in the quarter, a decrease of $704 million or 5% in the third quarter of 2009. Approximately half of this decline related to the conversion of large municipal accounts to a self-funded arrangement in the second quarter of 2010. The remaining reduction was primarily attributable to lower fully insured membership, resulting from economic condition and the strategic transfer of UniCare business in Texas and Illinois. While premiums declined from the prior-year quarter, the increase by $110 million or nearly 1% on a sequential basis as the attrition in our fully insured membership has moderated. This represented the first sequential increase in premium revenue since the fourth quarter of 2008. The administrative fees were $963 million in the third quarter, down just $6 million or less than 1% in the same period of last year. This was due primarily to a reduction in certain PBM related revenues earned in 2009, which offset an increase in our commercial ASO fee revenue. Other revenue, which historically consisted almost entirely of revenue associated with the sale of male order drug by NextRx declined by $163 million from the third quarter of last year, reflecting the sale of NextRx in December 2009. The benefit expense ratio for the third quarter of 2010 was 83.8%, an increase of 170 basis points from the third quarter of 2009. This was driven by an increase in the benefit expense ratios for the Senior and Individual businesses, partially offset by a decline in the ratio of the Local Group business. In the third quarter of 2010, we recognize an estimated $110 million of higher than anticipated favorable prior year reserve development, which is comparable to the estimated $112 million of higher than anticipated reserve development that was recognized…

Operator, please open the queue for questions.

[Operator Instructions] We'll our first question comes the line of John Rex with JPMorgan. John Rex - JP Morgan Chase & Co: A little more focus on the 11 and particularly were thinking about that costs in the lower costs are great this year and what you're building in 211 for expectation for full-year cost trend and what components might look different particularly, Angela you mentioned if you could size for lower unit costs that you're getting from hospitals.

With respect to 2011, we are expecting a little bit of a rebound in the trend in 2011. We are expecting more normal flu season, we expect some rebound in our pharmacy costs, we had an improvement from our initial year of Express Scripts. We expect scripts to have discounted continue to repeat but not necessarily incrementally were going to work with them obviously very diligently and programs to further penetrate around military and generic rates continue to improve. We also know though these impacts on health care reform that could add to costs throughout the delivery systems. That's going to be offset somewhat by the COBRA having rolled off a little bit that will expect less COBRA and 2011. So we are taking of this potential for a rebound in to our pricing and being disciplined you believe anything the market is being disciplined and rational in terms of pricing over all and of course you can predict impact of the large definitions at this point. John Rex - JP Morgan Chase & Co: So 7% this year, is it fair to say you're thinking something 8% next year?

Yes, John. At this point we don't want to give guidance in 2011 but I don't think it's unreasonable to assume that.

Our next question is from Justin Lake with UBS Investment Bank.

In terms of the results in the quarter and year-to-date, number of your peers have already reported this fact out a significant amount of development in both of the recorders as well as the second quarter. It doesn't appear that you've seen that same benefit, given that he talked your costume being down 100 basis points of the versus your initial guidance. I'm just wondering if you have any thoughts on why it hasn't happened.

One of the things that see me is regarding a development. We have continued to reserve this is consistent than conservative level of high single-digit exclusive margin. So we are not adjusted that as of 930 and so for that reason, what they been spiking up to date has been all that's been above and beyond what I would call the consistent conservative level. Clearly as he mentioned in our previous comments that we are not reflected any further adjustments that could occur which would be entering into the fourth quarter within our guidance I would anticipate that there will be an adjustment the difference will be most likely in the fourth quarter versus what we see in the first nine months. The second comment I want to make is to continue to 1% decline in trend, I think it's a reasonable assumption to assume that you would see an equal amount of positive impact to the bottom line. And will recognize at the commercial trend only with the vast majority of that almost 2/3 of that being offset by California alone and the loss is now up in the 150 level and if you recall we assumed that we will make money in California which will not be an unreasonable assumption. It's in the low single digits. . .

That's the California individual market, specifically.

So when you consider the profits that is eating up the majority of the improvement that we've seen in the commercial book.

You laid out in these headwinds, tailwinds. And they don't want to talk about 2011 guidance but as far as the rationale thinking about of down flat are there any thought process has to SG&A fronts as being offsetting a portion of the MLR? I know you don't have the rigs out yet, but the is there any early view as to whether you may be able to grow operating income or even grow for EPS in 2011 given the headwinds?

For the reasons you stated, you can't really get into 2011 at this point and they don't have the MLR but what we can tell you about is what we are doing, which is to the overall SG&A would be very disciplined are being very customer focused. We understand our customers have an affordability challenge and we have to address that both in reducing our DNA and our focus we want to partner with brokers and agency and consultancy have meaningful relationships year but we also have a working with them on share responsibility, which I think will be important in terms of the whole system working more efficiently and that will obviously be happening in 2011 and beyond.

Your next question is from Doug Simpson with Morgan Stanley.

Benching in your comments in the balance sheet, it's as if you guys are thinking through that right now and you'll come back to us, what specifically -- obviously we have the MLR rules were all rating for clarity of that, what would you like to see before thinking about taking leverage up to something at the start of the center of the historical range that you talked about?

Thanks, Doug. From a leverage perspective we have more than enough Apple pants right now so leverage up the don't see a lot of value in that we are enjoying the lower interest rate that we're seeing from that perspective although it organization on the investment income side I think right now we do expect that to be more consolidation in the industry. This will be a very cost cause the program to implement healthcare reform and rethink skill is going to matter and so I think they like having that available for sizable acquisition if one becomes available or even small acquisitions as they become available but I don't see it will necessarily level up but we have more clarity around these final rules and regulations and what impact they will have on consolidation in the industry.

If we think about ending the year with a $2.8 billion number assuming you want to keep $1 billion at the parent that leads to $1.8 billion of dried powder and if you look at the last couple of years of free cash flow you run generally two-point I billion dollars talk to provide billion dollars. What should we be thinking about that cash doing next year? Maybe give us your thoughts on potential for dividend and just how much would you put it on the buy backs? How comfortable are you think that's a pretty big cash balance to just be sitting there.

I think your numbers are right on. You're probably need to keep about $1 billion at the parent as part of our liquidity framework to enable us to pay both short term and 12 months of principal interest so the services as he said about $1.8 billion, will recognize around $700 million that will go away in January that's coming due so are paying back down in January. It does relieve us roughly $1 billion. We'll be visiting with our board later this quarter. Our 2011 plans and part of evaluating that additional billion dollars along with 2011 cash though we expect to generate and we are exploring a number of capital the private alternatives.

Our next question is from Joss rash can from Mark Gates capital.

On the MLR during an individual rate in that got pushed back and then the MLR compression. Could you quantify on the year-to-date this is what that's been in the MLR and maybe remind us around the regulations in California? If you could put through focal rate increases periodically so when is the next entry could put through another rate increase? I understand that you just got one last one here.

Via, you want to take that one?

In terms of California, current legislation is that carriers can only take a rate increase minimum of every six months, so we have a 10-1 rate increase of nearly as we could get would be for 1/20/'11. And then in terms of quantification from a loss ratio, I don't have that in hand but we view as you mentioned you have $150 million impact.

That's the full year impact?

Right. that's the full year impact in the important part to recognize those as we have an effective October was a budget vast majority of that 150 is what you're seeing for the first nine months of the year develop the runs through the back half of the year and a member that's just the laws. It assumes that were planning not to make any we did low single-digit margins of actual total impact exceeds the 200 million mark. Charles Boorady - Crédit Suisse AG: And then Medicare?

Could you repeat your question?

Just verification what the impact of MLR on M&A is.

The 2010 impact is very low single-digit impact.

From a dollar perspective, Joshua looking at $100 million payment and that's panning out as expected.

Next question is from Charles Boorady from Credit Suisse. Charles Boorady - Crédit Suisse AG: On your guidance point in headwinds in tailwinds, can you give us the same rundown for the fourth quarter in particularly your assumptions in a medical transfer 4Q and how you quantify it expectations for the flu and the roll-off as well as higher deductible health plan options?

For fourth quarter, couple of items. One is we are assuming a normal flu season for the quarter was obvious he recognized the first nine months of not affected normal flu season but all that being said, we believe it's better to plan for normal flu season despite what you've seen in the first nine months. In addition, we do believe that the seasonality will increase quite a bit both in the commercial and individual products because my death have continued to grow in the last couple of years so historical MLR patterns are not reflected I guess if you've seen in the most recent periods if you think was a little more seasonality and again we assume that a bit more than normal seasonality to the extent that trends continue like this in the first nine months that will be slightly better-than-expected result than what reforecasting at this point in time. And then in terms of other programs, there really is a minimus impact and fourth quarters to get at Assumption baked in but it's not that big of a headwind. Charles Boorady - Crédit Suisse AG: Go up onto our wondering if you could share with us any emerging trends or responses of the association to reform and also now with elections being a day behind us, in terms of things like that conversion to seeing blues more like we are less likely to convert. And we expect to see shared services you talked in the past about how your administrative efficiencies could serve well the interest of other Blue plans by expanding insurance services? We haven't seen a lot of that today. Any other chance he could share with us in the association plans?

The blues have really come together more over the last couple of years. And we are focused with them on a lot of consistency. We tend to assess our National Account market and is a reflection of our ability to create a seamless network and seamless service as an example of that in our Anthem Care Comparison tool which is our transparency tool and shows our members procedures what the relative cost is in the hospitals in your geography where they are episodes of cost and give us an quality data and that was adopted by cost association as transparency tool that's now being rolled out across not only our Blue plans but all the other Blue plans as well and this idea of shared services you haven't heard much about it -week-old the number of our systems across the Blue Cross association there a number of Blue plans on the resulting core system that we're going to end we have more than the majority of our memberships on and so the Israel scale beyond WellPoint that into the boot in terms of other opportunity. In terms of continuing the opportunity for consolidation, we believe particularly given the need for scale, size and scale is a real opportunity for growth and value and we think over time, there will be a unique opportunity for WellPoint to have further consolidation with the blues. There are a lot of factors to go into whether or not a Blue plan is really ready for that are at its appropriate under the circumstances and we think we can parse it in a variety of ways. Charles Boorady - Crédit Suisse AG: You haven't had an investor day for a while. Heavyset debate?

We may do something a little sooner depending of an final regulations, but right now are planning for it in January and tentatively on the 21st so we may Investor Relations this into.

Our next question is from Scott Fidel with Deutsche Bank.

In the California ADD expansion and if you have an estimate for how much an homage he think he might be able to adapt and some details that they develop so far around estimated yields on that membership and how you think margins will look at the type of business.

I'll turn it over to Bryant but I have to say that our business has really been a great job of both operation of the McGrady our systems really preparing for both futures I think we are executing well. I have to take on the populations in a variety of different ways.

I think you are aware the puppet nation in California is based on how the state is changing the programs of the current participants of the state as they load DSP the population and managed care will be getting our fair share. Were anticipating that fair share to come in probably in the middle of the year in the 20,000 member range, and I think at this point it's really good view.

And so, maybe you could give us an update on the Connecticut rate situation and just whether you expect there will be any delays in implementing the rates that you had approved but obviously Blumenthal had some challenges to those. May be just an update on Connecticut.

Brianne have some more specific on Connecticut but we expect in this environment is regulatory scrutiny and were really very focused on being transparent about what our rate increases are and whether that's through here or whatever, talking about what traits are necessary, our California experience is a reflection of rising medical costs and other variables in the pool of insured really can impact the needs for these rate increases so Brianne the audit, Connecticut?

A lot of the noise had to do with some of the filing center effective 923 in Connecticut. Those were approved and those have been implemented. We are in the process of filing our 2011 rates and preparing for public hearing process that's been previously announced. Is not unusual in Connecticut who went through the process last year and are prepared to go through it again this year.

Next we'll go to Matthew Borsch with garden sacks.

Could you characterize the commercial pricing at your setting for 2011 is about the same or a bit higher than it was the year ago going into 2010?

You want to talk about the commercial marketplace?

Marketplace itself is rational across the board last quarter we identified at and have become more rational for some of our competitors. That was a benefit for us going into 2011 we are expecting medical costs to increase and over all our rate increases are about the same is likely higher than a year-ago and part of that is related to the benefit changes that we have in place related to be patented including the anticipated medical cost rebound as well.

What gives you confidence, if you have that, that the prior period reserve development won't recur in 2011? I realize that's a conservative assumption but how do you think about that.

I think it's us and with our past practices to the extent you have additional conservatism that involves and develops who will spec that out. One of our goals is to try to get through as just kind of run rate as we see in a underlying book some of the benefits we had in our stabilization higher rates is enabling us to get a better view than we had over the last couple of years. That's one of the reasons why you're seeing so much prior period involvement come through. I do anticipate that we may have more in the fourth quarter but until we see more around October, November, December, is a difficult to pull that out naturally spike it out at this point in time is why we have consistently not included that in that guidance. I think it's important for us to get as close on a regular consistent margin that you put in development month and in Martha at think the only way for investors to really understand what's happening in the core run rate. So if we do better next year will spec it out but forgetting to a point where were pretty tightened at margin. The numbers are coming in pretty close to that each month though.

Our last question is the line of Carl McDonald with Citigroup.

One of the big headwinds that you had for 2010 was the drop in the commercial risk enrollment. You didn't spec it out for a headwind so it isn't right to assume you're expecting a commercial risk business to be relatively stable next year?

Can, you want to take that?

The commercial stayed have stabilized going to this year so year-over-year there is still a slight headwind year-over-year because of losses earlier this year but it is moderated and it should be something that we can overcome through all the other sugars have available to us.

Carl, I think were doing fine in the marketplace. 10 and his team have been very disciplined so we think in this environment we have opportunities but as were looking at unemployment overall we've seen a level lost at some point but we're expecting it to be fairly flat in 2011, not a significant increase. Hopefully we'll do better than that but that's our expectations right now.

I'll turn the call back to Angela Braly with the company's closing comments.

Thank you. Thank you all for your questions. In closing, I would like to reiterate that we are performing well in most areas of the company, and we will remain confident in the future. We're working diligently to implement the initial requirements of healthcare reform while continuing to deliver strong value and excellent service to our customers. We're also taking actions to make the organization even more operationally efficient and effective, while investing for future growth and the incremental differentiation in the marketplace. We believe we're well positioned to drive increased value for our current and future customers and our shareholders. I want to thank everybody for participating on this call this morning. Operator, please provide the call replay instructions.

Ladies and gentlemen, this conference is available for replay. It starts today at 10:00 a.m. Eastern Time and will last until November 17 at midnight. You may access the replay at anytime by dialing (800)475-6701 or (320)365-3844. The access code is 123547. That does conclude your conference for today. Thank you for your participation. You may now disconnect.