Ladies and gentlemen, thank you for standing by. Welcome to the WellPoint, Inc. Fourth Quarter Results Conference Call. [Operator Instructions] I would now like to turn the conference over to the company's management. Please go ahead.

Good morning, and welcome to WellPoint Fourth 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 fourth quarter and full-year 2010 results, actions and accomplishments. Wayne will then offer a detailed review of our 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 of Strategy and Marketing 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're pleased to report strong results for the fourth quarter of 2010. Earnings per share totaled $1.40 on a GAAP basis, and included net investment gains of approximately $0.07 per share. Earnings per share in the fourth quarter of 2009 totaled $5.95, which included net after-tax income of $4.79 per share resulting from a gain on the sale of the NextRx subsidiary, partially offset by costs for restructuring activities and intangible asset impairment. Excluding the items noted in each period, our adjusted EPS was $1.33 for the fourth quarter of 2010, representing growth of 14.7% over adjusted EPS of $1.16 in the same period of last year. Our fourth quarter operating results exceeded our forecast, primarily due to lower-than-expected medical costs and a reduction in the targeted margin for adverse deviation in our medical claims payable balance, partially offset by higher incentive compensation and other administrative costs related to our ongoing efficiency and continuous improvement initiatives. We also experienced lower savings and tax from the quarter and favorability in our capital management area. The fourth quarter results were a continuation of the strong overall performance we experienced throughout 2010 as almost all of our businesses performed better than we planned. For the full year, we reported GAAP earnings per share of $6.94, which included net investment gains of approximately $0.23 per share, partially offset by an impairment charge of $0.03 per share. Excluding these items, our full-year 2010 adjusted EPS totaled $6.74, which was above our original guidance and represented growth of 10.7% over $6.09 of adjusted EPS in 2009. As of December 31, 2010, our medical enrollment exceeded 33.3 million members, representing approximately 11% of the U.S. population. Our enrollment declined by 347,000 members or 1% during 2010, primarily due to the…

Thank you, Angela, and good morning. I'm pleased to have the opportunity to comment on our positive financial results. Premium income was $13.4 billion in the quarter, a decrease of $545 million, or 4% from the fourth quarter of 2009, due primarily to the conversion of a large municipal group to a self-funded arrangement during the second quarter of 2010, and the transfer of UniCare business in Texas and Illinois at the beginning of the year. Premium income decreased by $73 million or 0.5% in the third quarter of 2010, representing the second consecutive quarter of sequential premium growth. Administrative fees were $969 million in the fourth quarter, up 16 million or approximately 2% in the same period of last year. This was driven by growth in self-funded membership and an increase in yield in our National Account business, partially offset by lower BlueCard revenue and a reduction in certain PBM-related revenues earned in 2009. For the full year of 2010, our National Accounts administrative fee revenue increased on a per-member, per-month basis, indicating that we continue to grow our National business discipline as a result of our strong value proposition. Other revenue, which historically consisted almost entirely of revenue associated with the sale of mail order drugs by NextRx, declined by $112 million from the fourth quarter of last year, reflecting the sale of NextRx in December of 2009. The benefit expense ratio for the fourth quarter of 2010 was 84.5%, a decrease of 130 basis points from the same period of 2009. As Angela noted, this was driven by the Local Group business and a reduction in our targeted margin for adverse deviation, partially offset by an increase in the benefit expense ratio for Medicare Advantage business. During the fourth quarter of 2010, we lowered a targeted margin…

Operator, please open the queue for questions.

[Operator Instructions] Your first question comes from the line of Josh Raskin from Barclays.

Just A quick follow up, I just want to make sure I understand what you were saying about the Individual book in California. It sounded like you're expecting, should we say lower losses, or do you actually expect profitability in 2011 because of future anticipated rate increases? And I don't know if it’s easy enough to give us, what's the entails, I guess, an operating gain from that segment?

Brian and Wayne are here and can address a little bit more about California.

Josh, let me start off with saying that what we expected to have forecasted was what's more of a normal seasonality in the fourth quarter, and the lower trends that we saw across the U.S. continue in the fourth quarter, and so for that reason, we did not lose as much but nonetheless, still lost more than $110 million in California for the year. So it benefited a little bit by the adverse deviation reserve release we did in the quarter as well. So net-net, if we say, what was the final loss in California? It's over $110 million. So that's the delta going into 2011. We are working with the regulators and I'll have Brian comment on that in more detail around how to mitigate that. Our goal, obviously, is to return to profitability by 2012 at the latest. But clearly, trying to find mechanisms to substantially mitigate that for next year. Brian, you want to add some more around your recent meetings?

Josh, as Wayne said, we did lose about $110 million last year. We've got a couple of active rate filings that we're working closely with both the California regulators on as of today. And while we anticipate that some positive outcomes as a result of those discussions, it is our plan at the moment that we won't return to profitability but we'll make some substantial headway against kind of what happened last year.

I think the overarching issue also is we need a sustainable solution in California and other states, not only for the business model but importantly, for customers in these geographies. We need sustainable long-term solutions where the Individual market can be viable. It's going to be increasingly important in the future and so we're going to work collaboratively with regulators across the various states to get to that result.

So it sounds like you guys are still expecting a loss, that loss is including some expectation of these rate filings that are currently active coming through. And then by 2012, that will be a profitable book of business?

Yes, I think that's correct.

And then also, you've talked about 2011, I guess, as a base year or a trough year or however you want to think about it. What's the longer-term growth rate? As we think about 2012 and beyond, where do you think EPS growth for the overall enterprise is at this point?

Josh, part of describing 2011 as a base year is illustrating the impact of the minimum medical loss ratio. We've been describing about a $300 million headwind to overall operating income. What we'll do at IR Day is give a little more explanation about some of the assumptions that we have moving forward in terms of future growth. As you heard us say, we do think we have an opportunity, and we're really well positioned for organic membership growth. We think there are other acquisition opportunities as we go forward. Given the diversity of the segments that we're in as well, we think that positions us well for growth. And Senior, as it goes forward in the demographics produce a potential membership growth, we obviously think we're really well positioned for our State Sponsored, or what we call State Sponsored, which is the Medicaid Managed Care business. And given our expertise in the ASO market, we think we're in a really great position, and we're seeing some of that come through. We're positioning ourselves for future growth in Individual as the exchanges would come on in 2014. So we want to tell you all about that in IR Day, and we look forward to seeing you there.

Josh, one thing I would add is that, if you look at even Commercial this year, despite the difficult economy, recognizing that we made a decision to sell UniCare, if you exclude that, we actually grew in our Commercial book this year across all of our Blue states, and we grew in our Senior book this year and in our Medicaid book. So I am very optimistic as our growth. And I think as Angela said, 2011 is just a based year reset because of the MLRs, but we believe we're showing the top line growth that we wanted to see and our investments are paying off.

Your next question comes from the line of Charles Boorady from Credit Suisse First Boston. Charles Boorady - Crédit Suisse AG: You mentioned a lot of intriguing things related to your provider contracting trends, especially with hospitals, I wonder if you could just bottom line for us what you're building into your guidance for 2011 in terms of utilization, expectations, but also pricing. It sounds like you're getting some pretty good success, especially in California, with renegotiating unit prices. I know some unit price increases already locked in as a result of previous years' multi-year contracts though. So maybe can share with us what the bottom line increase in pricing is you're expecting? And just bifurcate what recent trends are from what you're locked into from previous years?

I'll let Wayne be a little more specific. Philosophically, we are feeling like we're well-positioned to make a difference in terms of the discussions with providers, the hospitals, doctors and others, both on two fronts: one on the traditional contracting. And remember, in that vein, we have contracts that typically about a-third of our contracts might renew in a given year. And then on the provider payment innovation side, we are seeing a lot of receptivity to working with us in a collaborative innovative payment arrangement, whether it be an accountable care organization, which we're working with a number of different facilities on and number one, to have those conversations. Also patients in the medical homes, bundling, pilot, we're working on making sure that those are programs that we can really scale for the future. But we need to move forward on this and we feel like we are. We think transparency has made a difference here as well and particularly given the minimum medical loss ratios that go into effect in 2011, with those in place, yet we still see these rising rates. I think it is moving the discussion to a more meaningful conversation about what is driving underlying cost of care. Now Wayne will probably want to give more specifics to that.

Charles, a few things to add. Angela covered a lot of it, but our unit price trends on hospitals this year are actually lower than what we had the previous year, and we expect going into 2011 will be even lower. So I think we are clearly getting to that point that we’re driving the unit price down in the negotiations and in the way we're partnering with our providers. That being said though, we are assuming though the trend line to go up next year. We'll provide more details at IR day. And that's primarily due to the fact that we believe we'll see a more normalized level of utilization in 2011. Now whether or not that ultimately occurs remains to be seen, but we are starting to see, we believe, will be the beginning of a rebound. We think that, that should begin and so we’re pricing for that. In addition, we're assuming it will rebound. That we'll get back to a much more of a normal flu-related trend than we saw in 2010. We also assume we baked in the health care reform costs that will come through and how those will affect our trend. So ultimately, when you look at them all in, where we finished this year, we are assuming trend will be higher next year despite the lower unit prices that we're negotiating in many of our contracts, but we'll provide better detail at IR Day as to those individual components for you.

And in terms of just quantifying the better unit pricing, is it that you're getting 3% or 4% now, versus 7% or 8% in previous years or just kind of ballpark how big of an improvement is that on the unit price side?

In some cases, the prices are going down over what they've got this year. So I mean some cases, we're not actually even giving increases. Some are below range. Some, quite honestly, Charles, could be higher, meaning at the 9% or 10%, but these would be organizations that have the highest quality and the lowest pay providers in their markets and what we're trying to do is make sure that they get rewarded and compensated for that high-quality. But I think net, net, all in, we'll get more details, but we believe will definitely be in the single-digit range for next year, and we'll talk more at IR Day.

Your next question comes from the line of John Rex from JPMorgan. John Rex - JP Morgan Chase & Co: I want to look at the operating expenses for a moment here. Could you talk just kind of maybe perhaps a cleaned-up op expense number for the 4Q, despite some things on the call. I mean, I think probably in there is maybe like roughly $100 million of fixed asset write-off that wasn't spiked out. So is there a view to a recurrence of that? And then just maybe just kind of clean up that op expense number so we can think about a jumping-off point for '11?

John, I think that's a good question. We are really pleased with the performance for the quarter, and I think it is important to understand what is in the SG&A number. We did have our number of non-cash items and we made a number of investments, some of which may recur relating to health care reform and our strategy for future growth. So Wayne, why don't you go through that?

John, let me walk you through the pieces. We had about $150 million of what I'll call non-cash charges that we covered in the quarter, and I'll walk through each one of these in a little bit of detail. One is, as we look at health care reform, and how we saw it evolving over the next, say, 5-plus years, we did a deep dive of all of our assets in the organization, that would include internally-developed software, core systems, locations, et cetera, and made a decision around our longer-term strategy on those assets that we thought we could take an impairment charge today. And so we took a $95 million non-cash impairment charge in the quarter. In addition, we took a $30-plus million pension charge. Now while our pension plans are fully funded on a cash basis, this was an accounting non-cash charge, specifically while our plans are frozen, what we are finding is that more individuals are electing to take a full payout upon retirement versus deferring that payout over the life of their retirement. We think that's primarily the reflection of what we're seeing the economy. When that occurs, you're forced to accelerate the accounting component of that charge regardless of the funded status. Now we think that, that trend could continue into 2011. We're not assuming the economy will improve and for that reason, we're assuming people will continue to elect to take lump-sum payments. And so while the non-cash charge in the quarter of $30 million, I would not necessarily assume that, that would not repeat. There's a higher probability it would repeat next year and so we've made that assumption as well. And then we had about $25 million, just under $25 million of lease write-offs as well that we accelerated as we consolidated our location. That's about, again, when you add those up, about $150 million that we covered in the quarter. And then on top of that, we made some investments in some other items. For example, we made some additional investments in our marketing and advertising and our start investments around Senior. With Private Fee-for-Service going away, we saw a unique opportunity to really accelerate those investments this year, not only for enrollment in 2011, but for the start program to set ourselves up very well for the 2012. We started making those investments and already qualified, we believe, under the under the new start calculations for enhanced payments, but we think we can even accelerate that more and made those investments. We also had some severance in the quarter and enhanced incentive comp as well. So when you add all that up, we believe we had a very strong quarter covering those components.

That said, I think when we look forward to 2011, we did make some tough decisions about SG&A. We expect it to decline, the ratio to decline in 2011 and you'll see some of that coming through as we execute against these initiatives that are producing lower SG&A but also, we're maintaining and improving our service level. John Rex - JP Morgan Chase & Co: And then turning to the net cost expectation. So you've gone to 6%, 6.5% for '10, can you then size in, what is the number that you expect for return factor for group for '11 that's incorporated in your pricing view?

Again, John, we'll talk more at IR Day as to what we're pricing forward at that point. But again, we expect it to be up for all the reasons we outlined. We see a few things that could mitigate that, which would be some improvement in COBRA. But all in, we still expect it to be net up. And again, we'll provide more detail and we believe we're pricing accordingly.

Your next question comes from the line of Scott Fidel from Deutsche Bank.

Just had a question on fully-insured enrollment for Commercial for 2011. You walked through pretty much all the other customer segments, just interested directionally in how you're thinking about Commercial fully-insured enrollment for this year?

I'm going to let Ken Goulet handle that. Ken?

We're anticipating a continuation of strong results from the execution we've had this year. However, there will be a slight reduction in fully-insured as it continues to be a transition of fully-insured to ASO business. And there continues to be some attrition due to the economy. But it's essentially slightly lower than flat, but it's solid, and we feel very good about our results.

And Scott, one thing I would add as well, is we'll talk more at IR day. And we are not assuming improvement in the economy. So in summary, what Ken said, generally, with that assumption though, that assumes that we'll lose slightly more in a group change potentially versus actually getting growth. If the economy does improve, then that obviously would help our results. But I think right now, we're feeling pretty good in light of the economy that we're in, and then as Ken mentioned, even on the fully-insured, we might see a slight decline, we're actually picking that up on the ASO. So it's not that they're leaving WellPoint, they're staying with us. And then we see very significant growth for the one related to National Accounts.

And do you have just a ballpark estimate of what that in-group attrition that you're building in for 2011 that's directly related to the economy?

I'll give you a couple of numbers. On first the ASO side, we have been losing, and by losing, it's not looking to competitor, it's simply someone going from the insured range to the employers downsizing their size. We've been losing in that 20,000 members to 25,000 members a month range, and on the fully insured side, it's been about half of that. And we've been offsetting it with new sales and good retention, exactly.

Your next question comes from the line of Matt Borsch from Goldman Sachs.

Wayne, you made a reference to claims trend so far or that perhaps you're seeing a bit of a rebound in utilization. Is that strictly -- did I catch you right on that, and is that based on year-end trend or a little bit of what you've seen so far this year? Is there anything you can spike out there?

Matt, it's interesting. We look at rolling 12-month, rolling six-month, rolling three-month. And so, if you're looking at a rolling 12-month, the decline is quite steep, and you really don't see a turn. If you look at rolling six, it's still fairly steep, you don't see a turn. If you look at rolling three, it's more flattening. And so what I mean by that, is that we're not seeing what I would call that steep decline anymore. And the fact that it's flattened out on a rolling three gives us positive think, it's probably ready to start to rebound at this point. We're not seeing that continuation. I don't want to imply and apologize if I did that we're seeing this big spike or rebound or even subtly. It's more that it's flattened and we're not seeing on a more three-month rolling trend that continuation of a downward decline. So I think what we'll start to see, and that's why we priced accordingly, is a rebound in 2011.

And if I could just ask a separate question on Medicare damage. You referenced in your press release some pressure there and sited the 2010 rates. And we haven't seen that, I don't think from many others this year because the underlying cost trend seem to have offset the rate pressure. But you guys appear you have felt it in this quarter, does that preview more pressure that you expect in 2011 given rates are flat? Or what's your view there?

Matt, I don't think we meant to overemphasize that. I think it was more of a reflection of just the fact that we experienced reimbursement coming down, and that's going to continue, we expect, overtime. But you're right, we did see better trends overall. So Brian, you want to speak to Med Advantage in particular?

I think Angela was spot on, and I think our comments we're comparing last year's Q4 to this year's Q4, there is a net reduction in reimbursement. But we are very confident in how the Med Advantage book is performing right now. We're coming out of open enrollments. We're very pleased with how our sales are coming in. we continue to, year-over-year, make improvements in both our sales and our marketing. And early view is that sales are coming in much better than projected, about 15% to 20%. We don't have 100% visibility in terms of the lapses but what we do know is it looks like lapses are favorable too. So one, we've been successful at converting higher percentage of our Private Fee-for-Service into network products in our 14 states. And overall, I think we're going to have a very positive year for Med Advantage.

I would say, we've really executed well in terms of Med Advantage business. We're really positioned for growth there. The brand is very strong for the Senior market and so we're very positive about it.

The other positive thing that we're starting to see is really forward momentum in terms of net sub sales in a number of our key markets. So part of our goal is to run on all cylinders in the Senior business, and we have such a great footprint already, and that's up. And we've been trying to reenergize that engine and it looks like through this open enrollment we'll start to see the results of that.

It's part of our strategy that we'll talk about at IR day too. We think that we can capture a lot of membership from Seniors coming from the commercial ranks. So we're looking forward to that.

Your next question comes from the line of Ana Gupte from Sanford Bernstein.

I had a question on what you're seeing playing out in the marketplace with regard to pricing and broker commissions, your own philosophy, as well as that of your competition. So on the pricing, are you seeing your competition and yourselves mainly pricing to cost trend and then looking to pay the rebate out? Or are selective competitors also pricing to loss ratio floors possibly to gain share?

Ana, I'm going to let Ken and Brian. There's a couple of different questions in your question, one about broker comp, one about pricing as well. And as you know, in the different geographies, depending on where he comes from, with the impact of minimum medical loss ratio, you have different stories there. So Ken you want to say something about it?

In general, pricing is rational and all carriers are pricing to trend now. But that said, there are small pockets and geographic areas where you'll see a competitor that has an MLR ratio and is making a little bit more aggressive pricing not for a membership play but probably because they were positioned relative to MLRs and you see a little bit of a change in the competitive position. But in general, we feel very comfortable that the market has been rational and is actually seen to solidify over the last year.

Ana, this is Brian. I would echo that, in the Individual market, it all depends on specific carrier's starting point and how far off they were from the MLR floor, including us. We had more favorable starting points in some areas than others, and so I think that's having a factor. With respect to broker commission, we've announced broker changes Q4, Q1, as have a number of our competitors. I think in the individual market, there was an expectation across the brokerage community that there were going to be changes and I would say there weren't many surprises, and it does not look like broker commission changes are having a dramatic impact on the overall market or level of sales activity.

And then on the Group side, I would just add that across-the-board, we all feel that we brokers and agents are an important part of the distribution system. It's going to be very complex over the next couple of years. There's still going to be a very big place where they'll be representing clients. As Brian said, there was changes in the individual side. We have already been transitioning on the small group, large group side in many of our markets to a PMPM basis and we are continuing that through the remainder of our markets, but talking with our partners in each of the markets as we do it and understanding the best rollouts. And then on the large Group side, a couple of our competitors have gone to a service fee arrangement. We've assessed that. We continue to look at options and we'll assess that in 2012 and beyond.

Your next question comes from the line of Justin Lake from UBS.

First, just wanted to follow up on the '11 EBIT discussion. So you said SG&A cuts should offset the MLR floor impact, and then you'll see some improvement in California. So from a headwind-tailwind basis, what seem the jumping-off point for EBIT should actually be up rather than flat? I'm just wondering if there is anything I'm missing here or are we looking for growth in the core business x these items?

Let me speak to that a little bit and that I'll turn it back to Wayne and we can get back over to headwinds and tailwinds. Obviously, we'll go over that in greater detail at IR Day. If you look at our gain and exclude the $315 million of favorable reserve development for 2010, we do think we made some good calls on how to manage SG&A to bring our gain to flat. Given the economy, the changes that we've seen relating to health care reform, where employment is and we're looking specifically at employment with coverage, as to not just unemployment. We're looking at affordability. We think it's appropriate in this environment to be conservative. But Wayne, why don't you go through the headwinds and tailwinds on the up-gain side, and then Justin, when we get to IR Day. Our board is meeting next month and we'll finalize our capital deployment strategy and we'll be able to give you more details about below the line as well at IR Day. So Wayne, why don't you go through the headwinds and tailwinds?

So Justin, again, as we said, if you take the $315 million off, we don't believe that's stretching more. As you'll see we've said believe that's achievable. And so ultimately, from our perspective then will be how does underlying trends evolve throughout the year. Clearly, our G&A efficiencies, we think, will come through, and they will cover we talked about. We obviously have to cover the Private Fee-for-Service in our non-Blue space going away. And as you heard Brian say, we believe we're covering that right now slightly better than expectation. So we're feeling pretty good there. And then ultimately, we wanted to see how health reform act should play out over the next year, and how states implement it and roll it out. To the extent that things are more favorable, then obviously, we would spike it out and let folks know. But I think at this point, we think setting that as the original goal, outlining that and driving further G&A efficiency while making investments in 2011, as we prepare for 2012 start environment, further system consolidation, things that we think will show that not only is G&A down in 2010 on an absolute basis, you will see it down substantially in 2011 and our goals is to position ourselves for 2012 to be down again. So ultimately, I think if we do even better, some of that EBIT will be used to drive further efficiency at a more accelerated pace, not a less accelerated pace. So again, we believe that, that is actually in the year performance, so much headwind and so much uncertainty. We actually are very pleased with that being the initial goal and we'll give more details below the line at IR Day around our assumptions as well. But we also think that being conservative in this environment is prudent.

So it sounds like you do have conservative below-the-line assumptions there as well. Is there anything you can outline there as far as the thoughts on investment income, interest expense and share count?

Justin, I would say that at this point, on interest expense, again we'll give more details, but as we've said, we've talked about that we're assuming from a cash flow perspective about $500 million being used. Clearly, that would be larger than our typical run rate but nonetheless, we have debt coming due in 2012 and the assumption is that we may choose to finance that debt sooner and carry it sooner. So some may say that's conservative, but we think it's prudent depending on whether that environment is. We're also assuming the headwind from investment income will be in excess of $100-plus million. If you look at our portfolio, we have about $16 billion in fixed maturities with an average duration of less than four years, about 3.65 years ago. So when you look at the churn on that, if you look where reinvestment rates have been on, say, a five-year threshold, they're down over 200 basis points. So just doing a simple math, you can either come up with $100-plus million headwind. Now clearly, to the extent investment rates improve throughout the year, and they have improved since fourth quarter already, that could be better. But nonetheless, we're not in the business to predict of where investment rates will be. We draw our own conclusions and we think being conservative there is, again, appropriate. In terms of share repurchase and capital distribution, we're meeting with our board next month and we would prefer to wait until then and then discuss that in further detail at IR Day. But as you saw from our ending cash balance and the dividends we expect for the year, we will be in a good position for capital deployment.

Your next question comes from the line of Michael Baker from Raymond James. Michael Baker - Raymond James & Associates: You indicated that you sunsetted a number of platforms this year and you're now down to 10. Can you give us a sense of the annualized savings you expect to achieve and, then what your ultimate expectation is when you go from 10 to three over time?

A couple of things about the platforms. First of all, we think we're really well-positioned in terms of the execution of these transitions. We moved all of our pharmacy benefits off of our NextRx systems onto Express Scripts systems. And as a result, there's numerous retirements that will result from that. And the other transitions that occurred, both in National and in our Medicaid Managed Care State Sponsored business really occurred with very, very minimal disruption. So we're really pleased with the execution of that. As we get to IR Day and we talk about a little bit more about the strategy, we can be more specific about some of the savings we think are going to result there. But a couple of things we did this year that relate to that is, we brought together this Enterprise Business Services unit led by Lori Beer. It brings together not only the IT function, but also the service function, some of the sourcing functions, so our procurement area. And by bringing those elements together, we think that really is going to drive not only the right moves in terms of system consolidations but the right process changes or really great execution going forward. So Wayne, do you want to say anything more about that?

Yes. The only thing I would add is that many of migrations are contributing savings initially. So the fact that we closed down three systems does give positive run rate going into, say, next year. Now the down side to that is, we've got the new government requirements around ICD-10. And you have to be compliant on ICD-10 by October 2013. So our goal is between now and that date, is to get down to six systems with an ultimate goal of being three so that we don't have to actually build mitigation programs for ICD-10 on those systems and basically preserve those funds to be re-invested in the business versus put on a system that we're going to retire, and then ultimately will be comparing for ICD-10 on six systems, and then around closer to 2015 or so, our goal is to get closer down to three systems. With a pretty sizable system that we want to migrate in 2011, it's about 2 million members. But what's great is our core three platforms have been functioning well. We migrated the three this year in addition to the ESI migration and I think you would all agree there's been a very little disruption at all during that process. So we really think that this has become a core competency or ours. You will start to see run rate, but you've got to get passed 2013 to get the real incremental benefits of these system consolidations.

And we can take you through this a little bit more. Throughout these changes, we made some investments in the new systems that are going to serve a broader membership base. And we can leverage them. So for example, we have new member phasing portal that has much more capability than our prior systems, then we can retire those prior portals. We're doing the same on the provider side and getting much more satisfaction from providers being able to use multi-payer portals. And then we can retire systems. We brought our databases together and have the opportunity. While you initially make that investment to bring up the new systems, then we can retire the older systems as we go forward. I think Brian’s experienced the new business.

I think, Michael, another byproduct of the system conversion is an enhanced customer experience for our members. For example, migrating all of our Pharmacy business to an enhanced Express Scripts systems gives availability of much more detailed reporting on the pharmacy benefit for employer groups and internally to us. Another byproduct of moving all of our State Sponsored business is really positioning ourselves as a platform for growth over time. And almost immediately, we saw a dramatic uptick in our auto-adjudication rates, which also has shown an improvement in claims quality. So there's a lot of downstream impacts that positively influenced both our customers, individual members or employers. Michael Baker - Raymond James & Associates: And I have a follow-up on the pharmacy strategy. I was wondering if you could just update us on your thoughts as it relates to mail, and how important that is in terms of driving efficiency going forward, particularly given the fact that retailers have gotten more aggressive with their pricing at 90-day at retail?

I would say as we joined with our partnership with Express Scripts, we think their capabilities are really going to help us accelerate the move to mail. I would say, if you look at 2010, our focus in 2010 was moving the membership onto Express Scripts systems, because we do believe their capabilities there were superior to ours. And frankly, I think 2011 is the year where we're really going to start executing a strategy, taking advantage of their capabilities, moving to mail and further thinking about ways to reduce overall pharmacy costs.

And your final question today comes from the line of Peter Costa from Wells Fargo.

Can you describe what happened with your tax rate in the quarter? You talked about rolling state taxes, is that a true up of the year's taxes or is that more of an ongoing thing?

You want to take that one?

No, I wouldn't view that as -- I'd get back to more normalized rate next year. This is just the regular true up that we do on all of our state tax accruals. And as it's probably fairly evident to all, that in some states that have generally higher tax rates, we made less than we typically do. And obviously, you guys are very aware of some of those states. And so, as we did our final apportionment backers and true up for the year, it was just a settlement on those. But I don't necessarily expect that to repeat and obviously we expect to increase profitability in certain states next year.

The growth you had in Medicare and the comments you've made today, it sounds like you're sort of accelerating your view or improving your view in terms of what you think of that product relative to the past? Is that fair to say or is that not the same strategy for you there?

Now let you talk about it, and then I'm going to turn it over to Brian. Clearly, over the last couple of years, we've done some really foundational improvements in terms of compliance and execution around our Medicare business. We've always thought it was an inherently great growth opportunity for us to strengthen our brand and size the market that exists. So Brian, why don't you speak to how we're feeling about it and where we think it is and the priority of the quarter here?

Yes. Certainly, as we've talked about, we've made a lot of investments over the last couple of years, really, to position ourselves for future growth. A lot of those investments are really starting to pay-off year-over-year from a sales and marketing standpoint. We continually do much better than the year before. Operationally, we're very strong. We have greatly improved our relationships with the regulators and as we went to our strategy development over the last year, we really categorized our business and we'll talk about this more at Investor Day. But certainly, Senior is one of our business segments that we've designated as an accelerate business, which means that we are going to continue to invest almost on a disproportionate share to capitalize on the growth. Looking at just the potential membership in our 14 Blue states, there are millions of baby boomers that are aging in to Senior and so we want to take position -- take advantage of our brand and really grow that position. And given our historical placement of that business, we still have a lot of headroom just to get up to our commercial market share levels in Medicare. So we're pretty optimistic about our ability to do that.

And I think despite the belief in cutting that, it will continue to occur in Medicare and that's out there. I mean, this is really a tailwind for us, both the membership gain and the up-gain on it, because of the starting point. And again, as Brian said, with the strength of our Blue brand, with the success we're seeing so far and with over a million-plus baby boomers aging-in every year in our Blue states for the next 19 years, that is a market that we do not believe you can ignore. And we thank it will give us some very good cash flow growth over time.

I want to thank everyone for their great questions. In closing, I want to reiterate, we have had a good year in 2010, and we're confidently looking towards the future. We believe we have both the right strategy and the right structure in place to address the challenges and capitalize on the opportunities that we believe we'll be presented. We plan to continue delivering value to our customers and our shareholders in 2011 and beyond, and we look forward to sharing more about our strategy to take advantage of new opportunities for growth. We'll be providing you with more detail about our 2011 plans and our long-term strategy at Investor Day on February 23. So to register, please contact our Investor Relations Department. I want to thank everyone for participating on our call this morning. Operator, could you please provide the call replay instructions?

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