Wayne S. Deveydt - Chief Financial officer and Executive Vice President Michael Kleinman - Vice President of Investor Relations and Acting Vice President of Internal Audit, Ethics & Compliance Ken R. Goulet - Executive Vice President, Chief Executive Officer of Commercial Business Unit and President of Commercial Business Unit Brian A. Sassi - Executive Vice President of Marketing, Chief Executive Officer of Consumer Business Unit and President of Consumer Business Unit Angela F. Braly - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Carl R. McDonald - Citigroup Inc, Research Division Charles Andrew Boorady - Crédit Suisse AG, Research Division Kevin M. Fischbeck - BofA Merrill Lynch, Research Division Matthew Borsch - Goldman Sachs Group Inc., Research Division Christine Arnold - Cowen and Company, LLC, Research Division Doug Simpson - Morgan Stanley, Research Division Justin Lake - UBS Investment Bank, Research Division David H. Windley - Jefferies & Company, Inc., Research Division Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division Joshua R. Raskin - Barclays Capital, Research Division Christian Rigg - Susquehanna Financial Group, LLLP, Research Division Ana Gupte - Sanford C. Bernstein & Co., LLC., Research Division Scott J. Fidel - Deutsche Bank AG, Research Division John F. Rex - JP Morgan Chase & Co, Research Division

Ladies and gentlemen, thank you for standing by, and welcome to the WellPoint Fourth Quarter Results Conference Call. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to the company's management.

Good morning, and welcome to WellPoint's Fourth Quarter Earnings Conference Call. I'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 a summary of our fourth quarter and full year 2011 performance. Angela will also provide an overview for our strategies for continued success in 2012 and beyond. And will be followed by Wayne, who will review our 2012 financial expectations and capital management plans in detail. Our prepared remarks 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 our company website at www.wellpoint.com. We will also be making some forward-looking statements on this call. The 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 fourth quarter and full year 2011 results that are at the high end of our guidance range. In the fourth quarter, earnings per share totaled $0.96 and included net investment losses of $0.03 per share. Earnings per share in the fourth quarter of 2010 totaled $1.40, including net investment gains of $0.07 per share. Excluding the net investment gains and losses in each period, our adjusted EPS was $0.99 in the fourth quarter of 2011 compared with adjusted EPS of $1.33 in the same period of 2010. Our fourth quarter results concluded a successful 2011 for our company. During the year, we added 928,000 new medical members and achieved financial results that were in line or better than we expected in most of our businesses. We also created a more efficient organization and executed on a number of strategic initiatives as we prepare to capitalize on the important future growth opportunities we see in the marketplace. For the full year of 2011, we reported GAAP earnings per share of $7.25, which included $0.25 per share of net investment gains. Excluding the net investment gains, our adjusted EPS was $7, which exceeded our original plan and represented an increase of 3.9% from adjusted EPS of $6.74 in 2010. We've now grown adjusted earnings per share for 3 consecutive years, and we expect our positive momentum to continue in 2012. As of December 31, 2011, our medical enrollment totaled nearly 34.3 million members and represented approximately 11% of the U.S. population. Our enrollment decreased by 104,000 during the fourth quarter as we lost one very large self-funded group and, to a lesser extent, continue to experience negative in-group change. For 2012, we expect that in-group membership change will continue to be…

Thank you, Angela, and good morning. I agree that we're building off a solid 2011 and are well positioned for continued success in 2012 and beyond. Let me begin with our membership expectations for 2012. As Angela discussed, we currently project a decline of 600,000 members in 2012, approximately 70% of which is related to strategic decisions we've made in selected markets and will result in margin improvement. From a funding perspective, we expect self-funded and fully insured enrollment to decline by approximately 350,000 and 250,000, respectively. The declines will occur in the Commercial segment and reflect our disciplined pricing in National Accounts, the actions we've taken in the New York small-group market and our expectation for continued in-group membership attrition. We expect Senior membership to grow modestly as declines in California related to the regional PPO product are offset by growth from our expansions in new service areas and the rollout of our CareMore model. State-sponsored enrollment will likely remain relatively flat, with growth in the California Seniors and persons with disabilities program and in Texas, predominantly offset by anticipated declines in Medi-Cal. Our outlook for state-sponsored membership reflects our strategy to maintain our market shares in these programs given current state fiscal situations, while we continue to be optimistic about the significant value that can be created through Medicaid managed care over the long term, including new opportunities to serve the dual-eligible population. Premium revenue is expected to increase by 4% to $58.2 billion in 2012. The increase reflects commercial pricing that is generally commensurate with underlying cost trend and the inclusion of CareMore for a full year, partially offset by the decline in fully insured membership. Our pricing assumes minimal rebates related to minimum medical loss ratio requirements and that benefit buy-downs are consistent with historical averages.…

Operator, please open the queue for questions.

[Operator Instructions] Our first question will come from Justin Lake from UBS.

A couple of questions here. First, on the Medicare side, Wayne -- or on the Consumer side, I should say, can you talk about the op gain there and specifically what you saw in the quarter, maybe kind of spiking out the California PPO from the rest of the business? Walk us through Medicaid in terms of what you saw in cost trends and the impact of pricing and how that business ended up relative to your expectations coming into the quarter.

Justin, let me start and then turn it over to Wayne. Clearly, our Consumer segment underperformed, and it was almost entirely due to the Senior business. You know that the most significant issue we had related to the California RPPO product, where we had a pretax loss of about $150 million for the full year, and as we've discussed with you all earlier, the product was not renewed for 2012, and we are expecting improved results. Now outside of California, we did have lower op gain than we expected for 2011, but it was profitable. And we think we priced our products appropriately in these markets for 2012. And then going into the year, in Medicare Advantage, we grew our service territories and we achieved the growth we expected there and that the op gain is going to turn around this business -- is going to turn around. So Wayne, do you want to break it out and also kind of talk about the seasonality for the fourth quarter as well?

Yes, just to give everybody -- we recognize this is probably the biggest question on folks' minds. I'll give you some comfort here. If you look at fourth quarter of 2010 versus fourth quarter of 2011 and really try to do a comp, we like that comp better simply because seasonality -- doing a sequential third quarter to fourth quarter can be misleading, but I will do that as well just to give you some of the data there. But if you look at Q4 of last year versus this year, the Consumer segment made about $112 million versus a loss this year of about $5 million, so there's about $117 million gap. Of that gap, about $50 million is the California RPPO, as we had highlighted in previous calls and said that we expected about $50 million for the remaining 3 quarters. $35 million of that gap relates to fourth quarter of 2010 positive reserve releases that were above and beyond our expectations, which we did spike out in the fourth quarter of last year. And then about $15 million is related to AB 97, which was passed in California, although CMS is still evaluating its implementation. It represents about $100 million of the gap, and the remaining $20 million are additional reserves that we chose to put up to reflect any potential advert deviation from any of the runoff on the businesses that we have as we go into 2012. So whether or not we'll need that reserve remains to be seen, but we thought it was appropriate in light of the runoff that was going to occur there. That's essentially the gap when you compare 4Q to 4Q, and it is almost entirely related to our Senior business, which we believe we've corrected for next year. In addition, if you were to look at it sequentially, you've got about a $250-million explanation between the Consumer, what it made in the third quarter of around $245 million versus the minus $5 million for this quarter. And about $200 million of that delta is the normal seasonality, with almost the vast majority of that, over 60% of that being in Individuals. That's the normal seasonality. Individuals was fine in the quarter. In fact, it over-performed versus our expectations. I would say that medical trends both for Individual as well as our Commercial book came in lower than our expectations, and we think we're well positioned with our pricing going into 2012. So the issue really is directly related to Senior, specifically California RPPO being the vast majority of it, where we've already made the decision to exit. And our pricing for 2012 is actually reflecting in the membership what we would have expected it to do in our other locations. So we're fairly -- doing fairly good about entering 2012 with it being isolated to Senior.

That's a lot of detail. Just one more quick follow-up on the Commercial cost trend commentary. Wayne, it sounded like the -- you're expecting trend to be relatively flat. Can you talk about where it ended the year versus that 7%? And then can you give us an idea -- one of the things I've been thinking about is just in terms of the core trend coming out of the year and how that 7% compares to core trend given the moving parts on, for instance, PPACA costs, like the impact of 26-year-olds and the cost of covered deductibles that are kind of onetime and maybe inflated core trends. And maybe there's more price cost spread there than looks apparent at first glance.

Yes, so just to make sure I understand your question, but trend finished just about 7% for the year in 2011. And obviously, our guidance for '12 is 7% plus or minus 50, but all things being equal, it's obviously year-over-year relatively flattish. However, when you look at -- we're pricing for rising trend. We believe trend is rising. If you consider PPACA, it was first implemented, though, in 2011. With the benefit of hindsight now, depending on markets, it had anywhere from a 1- to 1.5-point impact on trend for the year because again, as you know, you had the impacts of dependents up to the age of 26, no lifetime limits and sort of preventive care being part of the baseline policy. So when you evaluate from that perspective and you bifurcate that component out, you'll see we are predicting the trend will, in fact, rise from '11 to '12, with the PPACA effects pulled out. But because they're in the baseline, you get to a little more of a flattish trend year-over-year. And again, our pricing reflects that rising trend that we're expecting, excluding PPACA, and I would say fourth quarter on the Commercial book and Individual came even slightly lower than our expectations so far. So I would still say that I think we're entering the year with a more muted trend at this point.

And our next question comes from John Rex from JPMorgan. John F. Rex - JP Morgan Chase & Co, Research Division: I just want to continue on the Senior books. So I guess first, you referenced that there was also lower-than-expected performance in some other Senior books in the country. And can you talk about what you're seeing there and what was driving it? And then I think you commented that you think you incorporated that into your '12 benefit design, and maybe I'm overreading your commentary there because it wouldn't seem like in June, you had to submit those bids, that you would have had this kind of visibility into the poor performance.

John, let me -- I'll go ahead and start on this one, and then, Brian, feel free to add any commentary on this as well. I would say that first of all, John, we saw what we needed to see back by the time we submitted the bid. So in many of our bids, we reflected benefit design changes, pricing changes. We don't want to be an alarmist here. Our other markets still perform profitably. We still grew in our membership. We have roughly a 3-year lag though before you get all the revenue -- risk score rating revenue that you're entitled to on that membership, which actually deflates your profits in the early period, but not anything we're concerned about in our ability pulling out and getting the risk score adjusters improved year-over-year, and we expect that with our midyear spike this year. There'll be settlements as well as a final settlement related to this year. So not concerned on that. I would also say the new membership that we've seen coming on the books, we have a view of that and the average risk score premium that we're going to be getting on Day 1 for these members. And so I would say that -- I want to make sure folks are clear. California RPPO was a primary driver for our Senior issues. It was the primary driver. We have small pockets in a few markets, but they weren't pockets that meaningfully moved the needle relative to our ability to achieve our guidance or the fourth quarter. I mean, really, California RPPO was the major area. That being said, we feel very confident going into next year. But, Brian, do you want to comment on that?

Yes, I think, Wayne, you covered most of the points. Certainly, we adjusted the bid for the RPPO. We also took a look at all the other geographies at the same time. We have a growing book of business in certain geographies, and I think what we saw was a reflection of kind of the growth in those markets. And as Wayne indicated, it takes a period of time for the revenue to catch up, and so we've got aggressive programs in those markets that we've grown to drive the revenue up. And we're confident that our forecast and our guidance reflect current claims trends as well as expected premium for this year.

I would also add, John, that one difference between this year and next is next year, we'll have had the CareMore team as part of our care management capabilities. And their expertise in both maximizing the revenue related to the risk scoring as well as the care management capabilities, we think, can also be put to work here in terms of the Senior membership. So overall, we're expecting a $150-million tailwind in '12 for the Senior product. John F. Rex - JP Morgan Chase & Co, Research Division: So, Angela, can you just help us understand kind of how the CareMore team will fit in? I mean, my perspective here, kind of as the team expresses confidence in kind of getting it is like -- I mean, the track record in the Senior books over the last several years has been spotty at best, so kind of help us understand a little more kind of how we get more predictability and more consistency here.

Well, I think that's a fair comment and question, John. A couple of things. One, we did make some changes in the management of our Senior business line, and we do have this opportunity with the management team of CareMore to look at the whole model for Senior and the capabilities both, as I said, on the revenue side, as well as on the care management side. So the capabilities around a Healthy Start visit, collecting more risk information, improving the star rating are all brought together by this combined management group now that we have serving both the Senior product side as well as the Senior care management side. And we think these capabilities around care management are really designed for the senior population, and so we made changes there. We are going to focus on making sure we're integrating the capabilities that we have, maximizing the risk revenue, managing the cost of care for the senior population. So we carry -- the brand is attractive to seniors. We think that this is an asset that we have in our portfolio that can make a big difference. We're also motivating our local leadership, our plan presidents to have a specific incentive relating to growing the business in their state, that Senior business. So I think that alignment will also help us take advantage of the assets we have in the marketplace.

And our next question is from Charles Boorady from Crédit Suisse. Charles Andrew Boorady - Crédit Suisse AG, Research Division: My question is around how much are you budgeting in 2012 that you're going to spend on new care delivery models and also reform implementation, specifically for accountable care organizations, bundled payments, CareMore expansion and then healthcare IT-related changes for ICD-10 and other reformulated changes. I understand those have been pretty big expenses in the recent past for you. I'm wondering what's in your budget for 2012. And then, what do you hope to get out of those investments in terms of, by how much do you think you can bend the cost curve from implementation of bundled payment or ACO arrangements and from the rolling out of the CareMore operations into other markets?

So, Charles, I'm going to let Wayne get into some of the numbers here. Let me talk a little bit about the new care delivery model. As we described, we've had a number of ACOs and patient-centered medical homes, and over the next few days, you're going to hear more and more about our primary care -- the patient-centered primary care model that we're going to be announcing. And so you'll see, we think, really, there's a lot of power in just better care coordination led by primary care focus. And in terms of the investment, a lot of the expenses associated with the processes are really already in the run rate. In terms of additional capabilities, there are some cost care analytics capabilities that we continue to invest in. As you acknowledged and we've described over the years, the ICD-10 expenses have been included and described. We've also made a number of transitions off of systems that went quietly -- you haven't heard much about those, which is exactly how they should be -- to avoid the remediation of certain systems for ICD-10 when we wanted to consolidate and get to fewer platforms. So, Wayne, can you be more specific about the budget impact?

Yes. So, Charles, if you look at what I'll call kind of discretionary investment dollars in total, let me first start there and then kind of pull you back into some of the questions you had. We are investing approximately $700 million total this year into a variety of programs, all of which are not related to the specific question you asked. And about $400 million of that becomes actual expense, about $300 million being CapEx over the period of time. If you get to some of the more detailed questions, though, around how much we're spending on ACOs; care management models, which we view CareMore being a care management model; and the expansion there; et cetera -- when you add up those combined, it's about $100-plus million. When you look at implementing reform, new regulations, ICD-10 is almost $100 million by itself for this year. Charles Andrew Boorady - Crédit Suisse AG, Research Division: Expense?

Yes, almost a big support -- a big portion of it is fully expensed, and the other thing I would say is we have about $100 million in additional costs associated with other mandates associated with the reform act and preparing for the exchange environment. We've also baked in incrementally additional expense this year, on top of the branding that we did, the investments we made in the fourth quarter. We're spending about $35 million more in branding this year in a multiyear branding strategy because we think as we get to the exchange, that the brand will be a very important asset for us, and so we're going to have incremental investments there as well. Charles Andrew Boorady - Crédit Suisse AG, Research Division: So this is a massive -- you're expensing a lone $400 million in 2012 related to these items and spending a lot more than that. When will that curve invert in terms of the return on these investments exceeding the amount that you're investing? Because these are all things that should have long-term payback in terms of bending the cost curve. When will we hit that inflection?

Charles, obviously, each investment has a different inflection point. ICD-10 itself will be complete, assuming they don't push the reg out. We're not going to assume that, so it will be done by October 13. So the benefits on a run rate basis of that will begin to see in '14. Obviously, under a CareMore model, we're expanding that this year. We expect to expand that again in '13. I think you'll start seeing some very good incremental benefits starting in '14 and beyond. The branding is more one that you'll start to see the real incremental values as we do a multiyear branding strategy as we get to the exchange, again, our '14, '15 period. And I would say that we are trying to make sure that some of the benefits that we are seeing each and every year, in fact, are going to the benefit of our shareholders in the interim. So as you've seen, we're trying to remain disciplined in the investments. We took down absolute G&A in 2010 by $270 million. We're down another $300 million in 2011, and that included all of CareMore, the acquisition cost, its G&A, as well as the $50 million that we took in charges in the fourth quarter. So we actually achieved over $400 million of savings in the quarter -- or in the year last year. So our goal this year, though, was to make some more of these incremental investments, maintain a flat PMPM in 2012, and as you'll see, on a total G&A basis, it's only up modestly despite our full year CareMore and all these investments. Charles Andrew Boorady - Crédit Suisse AG, Research Division: Are you holding back on the CareMore expansion? As a result of results coming in a little bit light in the fourth quarter, did you change your 2012 plan?

Quite the contrary. The CareMore model is a proven model that had excellent results, that continue to have those positive results that we would have expected in the 4 months that we've been fortunate to own this enterprise, and we see this as a future model around care management. So we will not be slowing down that expansion.

Your next question is from the line of Josh Raskin with Barclays.

Just a question -- maybe you could walk us -- I'm just trying to figure out the bridge for the MLR increases, up 310 basis points. Those are maybe year-over-year ranges, because you talked about the seasonality impact. So I think I know 80 basis points was clearly that $105-million release, but I just want to make sure I have all the moving parts on what's impacting the MLR on a year-over-year basis, maybe the rest of that, that 230 basis points extra.

Yes, Josh, a couple of things to keep in mind. I would tell you that almost the vast majority of that, though, still relates directly to the Senior business and what we spoke about. When you look at it by itself from a year-over-year basis, it was about 650 bps unfavorable relative to the -- so on a weighted average basis, though, it's about 95 bps of that 310. So almost a full point of that 310 when you weight-average it versus the rest of the books related to that. About 45 bps -- well, about 0.5 bps relates to -- basically relates to Individual. And while Individual improved in the quarter relative to California, this was the first year of PPACA MLR minimum requirements and so you have the whole rebate effect coming through in the fourth quarter and the continued true-up of that. And we took a cautious posture on those as well as we continue to wait for final definitions around rebates. State-sponsored was around 30 basis points of that delta, and that was primarily related to the fact that we took an AB 97 charge in the quarter, and we had the lower rates that we reflected. We've talked about it in the third quarter, and we said we see -- it's the one headwind we see going into '12 because the new rates went in effect on October 1 in California, in particular, which is our largest market. And then about 10 points is for FEP and other. And again, as you know, that's just a cost-plus program with the delta being what you highlighted, being the primary reserve changes in that.

Okay. And so just so I understand, when you talk about that sort of 95 basis points, the overall Senior, that meant that the Senior MLR was up 650 basis points. And then maybe you could give us corresponding numbers for the Individual. What does a 45-basis point-increase mean? And Medicaid, what is the 30-basis-points contribution? What does that mean in terms of an overall Medicaid MLR?

Well, just to give you a feel, Josh, and I've said of every one of those pieces here, the Senior, obviously, was our big focus. We knew that was the primary driver. But what I can tell you is that Senior by itself, as I said, when you weight-average it, was at 95 but 650 in total. State-sponsored, though, is below the 650 but not substantially below that. Obviously, the other ones are much, much smaller numbers. Obviously, so you can pretty much see it's a Medicare and a Medicaid driver, the rebates being the biggest impact on Individual.

Okay. And then on the rebates, when you guys finally file your forms -- I know they'll be public at some point -- any sense as to what that total dollar amount is going to be?

No, we really can't speak to the total dollar amount yet. As you know, the regulations have continued to come out and be clarifying in terms of what that calculation is going to be. We still don't have the form of the rebate notice going out to consumers, so we're not yet ready to say the total amount. We try to be thoughtful about how we could use the potential for rebate strategically in certain markets, and we believe we price products and have the resounding commercial longer-term impact and value of that.

Our next question is from the line of Doug Simpson from Morgan Stanley.

Wayne, maybe just following on some of those G&A comments. Can you just walk us through a little bit exactly what you're doing to bring down the G&A dollar spend to offset some of these investments that you're making, and just talk about sort of your level of comfort that those cost reductions are not going to have any sort of adverse impact on the ability to execute?

Let me start that, and then Wayne can be more specific. We have -- and it's in flight now. We're in our third year of a continuous improvement program that's really a multiyear productivity enhancement program. And what's critical about it is it's a multiyear plan to take out the legacy of being 14 different Blue Cross plans. We have a lot of runway, frankly, to consolidate systems, simplify and standardize processes that are not distinctive in the marketplace but that can both reduce costs and improve capabilities. So we're both automating certain capabilities, creating more self-service opportunities for consumers and physicians' offices through our portals. We are improving our EDI rate, our auto adjudication rate. We have been improving significantly our member touch-point measures and other metrics that relate to service. So while we are taking out admin -- what I would call the traditional admin run rate cost, we're improving service levels at the same time and improving member satisfaction because we're giving them self-service tools. So I feel really good about our ability to execute on those fundamental administrative, operating deliverables, improving service while reducing costs at the same time, as Wayne described. And we make investments from some of those savings in the capabilities that we think will enhance growth for the future. So, Wayne, do you want to add to that?

Just a couple of things. As Angela said, one of the biggest savings, though, is we've been consolidating systems now over the last 3 years and have been doing that quite successfully while managing our inventories, having a good outlook on where that was going. We shut down another system this past year, and a vast majority of our membership now is on the surviving system. So while it may not seem like a big deal to move 200,000 lives off one system to another system and shut it down, the cost of running that system is no different whether we have 200,000 lives or 20 million lives on it. And so the more that we continue to consolidate these systems and platforms, the more that you'll start seeing the savings. And we're consolidating to the platforms that have better automation for auto adjudication, better EDI rates. We will be shutting down another system next month, and we have another one scheduled for later this year. And those are some of the benefits. The other thing I want to highlight, though, that we've said many times that should give you some comfort, too, is that we believe the brokers are a very important part of our business, and at the same time, we recognize the minimum medical loss ratio requirements and they recognize the shared responsibility we all have. So we laid out a multiyear program to help maintain our brokers, give them an opportunity to adapt their business models just as we're doing and that the benefits of the commission structures would inure over time. And so you're seeing in 2012 -- in '11, they were relatively flat, and we tried to maintain that. In '12, you're starting to see those benefits as well. And those will ramp up over time as well because of the PCPM model that we're on.

Okay. And then maybe just switching gears a little bit back to the Senior business, in the process of integrating CareMore, obviously. How do you think about your capacity to think about other opportunities to serve the more chronic populations, duals, those types of folks in light of some of the challenges that have popped up over the last 12 months in the Medicare business?

I think it's a fair question, but I do think that the CareMore capability and the lessons through -- that they have learned over their expansion, so part of the interest we had in CareMore was it had scaled to some level. They were up to -- now they're up to 29 neighborhood care centers. They grew their book of business when we acquired them, so their ability to scale and serve a broader population is evident and proven, and we think we can bring that to bear. And they are designed to address both the needs of a healthier Senior. They have in their neighborhood care centers these Nifty after Fifty workout training facilities. They do their Healthy Start visits. They have high member satisfaction there. But then with the very acutely ill population, they have this extensivist model. And so I think those capabilities are going to be critical to the dual-eligibles. As we look at where we think the dual-eligible marketplace will begin, our expertise and experience in the Medicaid population, the footprint we've had in Medicaid population in California, in particular, will be relevant here as well as CareMore's footprint was primarily in California as well. So I think in terms of readiness for our ability to do that, I think we're better positioned than anyone else in the marketplace.

Okay, great. Then maybe just one last one, if I can sneak it in. Wayne, in your list of investments, did I miss something about exchanges? Did you comment at all about investments specifically in preparing for exchanges in 2014?

Yes, they are in there. That's part of 2 things. One was we talked about ICD-10 being by itself $100-plus million. That does not relate to exchanges at all. Another $100-plus million are related to mandates and exchange preparation, as well as the additional incremental investment dollars for branding to prepare for exchanges, and that will be $35 million incremental this year.

Your next question comes from Christine Arnold from Cowen and Company.

I just want to make sure I understood what your response to Josh's question. Did you say that the Medicare Advantage MLR was up 650 basis points?

Yes, if you look at the quarter by itself, Christine, that would be the driver [indiscernible]...

Can you give brief detail on kind of what had happened year-over-year? And $50 million year-over-year was the California PPO. Can you give us -- you said also, though, that x California, the operating gain was less than expected. How much less than expected was the x California Medicare Advantage operating gain? And then can you review for us your outlook for your Medicaid book? Is it still a $75-million headwind in 2012 for Medicaid versus 2011? And does that include or exclude the $650 million up -- or 650-basis-point uptick this quarter?

So I'll make sure I answer these questions in parts. For Medicaid, we estimated the headwind being up to $75 million. We do reflect still AB 97 and some run rate impact into next year. We still think that's a high-water mark, and I believe we can hopefully do better than that. But I would make that the high-water mark, Christine, not the absolute water mark. The other thing I would say is relative to Medicare, again, with us exiting the California RPPO, we were able to retain membership, but it was in the southern aspects in our local PPO where we had a very good book there. So we're feeling pretty good about that, that we'll actually get the tailwinds we expected. Relative to the miss in the other markets, it's not significantly off from where we would expect the long-term margin to be in this book, which is closer to a 5% margin. So I would say that as we were bidding for the next year and keeping that in mind, we're bidding closer to what we think a long-term margin is. So it's not substantially off the long-term margin target we had.

Okay, and then the deterioration in Medicaid, you said it could be up to $75 million. It sounds like you hope it will be better. Is that because you reserved for any retroactivity already? Is that because SPDs or medical trends and Medicare are coming in better? Why would it be less than the $75 million?

Christine, this is Brian. The reason for that is we did reserve for anticipated retroactivity. So we did take into consideration worst case, and certainly, CMS has not approved all aspects of it. So there could be upside there, depending on how that unfolds.

Our next question is from the line of Scott Fidel from Deutsche Bank.

First question. If you can talk to with the enrollment losses expected in Commercial for 2012, how much of those would you say specifically are due to some of the targeted actions that you said you've taken in the self-funded business? And maybe just talk a bit about your ASO pricing strategy. Our survey had shown you guys raising your fees a bit higher or keeping those in line a bit more than some of the competitors. So you're comfortable that, that's not resulting in the loss of any profitable business, and maybe your ASO pricing strategy in general.

Yes, I'm going to obviously have Ken speak to this. When you look at the total membership decline for 2012, we think there are specific actions we took. The California regional PPO comes out. Our actions in New York small group does come out. So, Ken, do you want to focus then on the ASO national...

Yes. Let me, really, take us back to first quarter of last year when we discussed that we would be doing this. We felt we were in a very strong position, and we indicated that we would be strengthening pricing in ASO, particularly for some existing groups that were not covering their share. We had a -- actually, we had a wonderful growth year last year. We had for 1/1/12 very good new business growth and expansion of current. But there were certain accounts that we set price levels that they would need to go up to, that were significantly greater than where they were. And we did lose about half of those cases that we had substantial increases on. We kept the others. 70% of the overall losses in our business were targeted, and the remaining 30% is really based on in-group change and the economy, where our numbers are right where we expected them to be a year ago when we stated we would take this strategy. And we feel very comfortable with it. So we are selling new. We're expanding, but we needed to clean up some of the book. The changes are in ASO. They're in -- and then in also New York where you saw that we repositioned our small group book.

I would say, too, we really know our market advantages in terms of our overall discount levels, and we're enhancing our cost of care and care delivery platforms significantly, as well as our other related offerings. And we think some of that membership will come back because when you interface with a procurement officer, they may look at the fees disproportionately. But when they experience the P&L impact, losing our discount advantage, we expect some of that membership will be back in a year for the greater value proposition that we have to offer.

Okay. And then just a follow-up, just going back to the dual-eligible opportunity in California. And certainly we'd seen the CareMore acquisition should help your platform from the cost management side. How do you feel though about how you think pricing will look in this dual-eligible opportunity in California? Obviously, it's still a ways out, but just given some of the rate dynamics we've seen with Medi-Cal recently and historically, do you think that this dual-eligible opportunity in California will be structured in a way that it could be profitable for the industry?

Let me speak to that broadly and then Brian will speak to it in terms of California specifically. We do believe that the dual-eligible population and the lack of coordination today between the Medicare and Medicaid programs creates a great opportunity, both for creating revenue opportunity to serve this type of membership across the country. But also, this is -- the disconnects between these programs are really tough on human beings. You have complexity that is unnecessary there, and so we're very supportive of the dual-eligible population and the rationalization of those 2 programs. We absolutely believe that the CareMore capabilities, as well as our history in Medicaid and in California, will position us uniquely to serve that membership. So do you want to speak to, Brian, the specifics for our California pricing?

Yes, I think you were accurate in that we're still a ways off. But I think early indications and discussions that we're currently having with the state and certainly, our experience with the expanded ABD population, we're hopeful that pricing will be adequate, again, as well. As Angela had mentioned, we feel very well positioned. We're the leading provider of Medicaid services today in California. CareMore is primarily sited within California. We feel that the combination of not only their care model and infusing some of that into how we manage the duals will set us up for success, but we're confident, based on where we are today in discussions with the state, that it will be a somewhat rational pricing environment.

Our next question is from the line of Tom Carroll from Stifel. Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division: I want to be super clear on the Medicare Advantage book issue, and I want to make sure that there was nothing -- no new reason over and above what you gave us on second quarter that would account for the deterioration that you saw at the end of the year.

And let's be really clear, Wayne, in terms of the number. We think that we had a $150-million impact from the California regional PPO. We've exited that program. We saw some impact, but the other business, while we saw the impact, we did see, to the earlier question, the ability -- we see that some of those [ph] claims and we priced and made adjustments in benefits and the filing that went in to improve operating margin in the Senior line. We think, overall, it's a $150-million tailwind for 2012. But, Wayne, do you have more to say than that?

Yes, Tom, I think, I want to be very, very clear. Our other markets had some slight deterioration relative to our margin expectations, but relative to our long-term margin goals, they don't. The benefit designs that we wanted reflect them. We think we'll be at our margin -- targeted margins we want to be at for this year. And our $150-million tailwind that we committed to earlier in the year that we thought would be the tailwind for Senior, we also believe that's an at least $150-million tailwind for us. And I feel very confident of that going into the year. Thomas A. Carroll - Stifel, Nicolaus & Co., Inc., Research Division: Right. And just as a follow-up, given the changes you made in Medicare products and moving into the second year with some Accountable Care Act items in plays and the SG&A items that you've highlighted for us today, how do you expect the quarterly earnings to progress in 2012, so that maybe current expectations that are out there could perhaps be rationalized as we kind of move through the year?

Tom, we don't give specific quarterly EPS guidance. Wayne, I don't know that we can say too much more. We have tried to be clear about the progression of the quarters in terms of seasonality. But do you want to speak to that?

The only thing I would say, Tom, is that obviously, always directionally, there's nothing secret here about our history that the first quarter is always our highest EPS quarter and the fourth quarter is always our lowest, and I don't expect that to change. The only thing I would highlight as you're doing your models is keep in mind that our first quarter of '11 is a little distorted, just as our '12 -- our second quarter is because of the unfavorable development of our Senior business from the first quarter. And then, we took an opportunity then to move our reserves to the higher end of our adverse deviation range. So just keep that in mind. I would say, first quarter last year is probably a little -- it's overinflated, and second quarter is underinflated. And you got to adjust for that, but you should be able to pull all those adjustments from our public comments.

Our next question is from Matt Borsch from Goldman Sachs.

Just wanted to get a little more on the 2012 Commercial trend view. I think, last quarter, you guys have talked about seeing utilization increase in 2012. The -- your outlook for flat trend, does that embed some utilization increase? Or are you not expecting that at this point?

Matt, we have embedded some utilization increase, although I will tell you, we are still finishing with admits per thousand still down at this point, and bed days per thousand are just slightly up, so -- but we are assuming that utilization will, in fact, rebound in inpatient. But we do have improved unit cost trends, which we have great visibility on regarding our contracting, that we think would offset that. But nonetheless, we are assuming a rising utilization pattern.

And we did price for that.

Okay, got it. And relative to fourth quarter, I realize you don't give the Commercial MCR but if you were to -- if I could ask the question this way: if we back out the reserve changes and we back out the impact of rebates, would the Commercial MCR have been flat or higher relative to a year ago?

Let me maybe answer it a little bit differently. I would say the Commercial MCR was much lower in the quarter than we would have anticipated, but Senior offset that delta.

Okay, okay. And last question on the pricing. Can you spike out any markets or any general change in the intensity of price competition, either risk or ASO, relative to your view maybe 3, 4 months ago?

Ken, you want to address that?

Yes, Matt, I would say it's consistent with what we've been saying. 2011 was a different year and '12 will be slightly as well simply because there are certain pockets where a competitor may work around an MLR issue, and we may do the same as we're working towards our MLR baselines, but it's a competitive but rational market. There is no spike out of any area where we don't understand what's going on. And then all of our markets we've fully priced for our forward cost, and it seems to be we're well positioned in 2012 and feel very comfortable with where we are.

And our next question is from Kevin Fischbeck from Bank of America Merrill Lynch.

It sounds like most of the commentary around the government business and the headwinds there has been from kind of a pricing perspective. Can you talk a little bit about trend on the Medicare and the Medicaid side? Was there any change there? And are you forecasting it as a change going forward in 2012?

On the Medicaid side, we didn't see any real change at all in the trend there. So again, it was pretty much as expected. In some ways, it was a little bit better than expected, slightly better than expected in the quarter as well. So again, I'd say when you look at Individual, Commercial and Medicaid, slightly better than expected pretty much across the board. When you look at the Senior, we obviously knew what the big item would be, which was the California RPPO. And again, I want to emphasize we did make a decision because of run-off to put up additional reserves of about $20 million for any adverse deviation that could occur. So that also causes, obviously, I would say something normal -- above normal. But that was an intentional decision we made, and whether we'll need that or not, we'll see as the first quarter progresses.

Okay. Then maybe just to follow up on that because as far as the reserve positioning, I think last quarter you categorized as kind of the high end of your range, and I think it sounds like you boosted it here in Q4. Do you still feel comfortable with that categorization?

Yes. And having the benefit of 930 running out, I would say we are at the high end of our range.

Okay. And then just one last question here. I just -- can you just give a little more color on your Medicaid plans? I mean, you talked a little bit about the ABD side of things. But when we look at some of the RFPs, you weren't really aggressive in Kentucky, which is a state that you're in. You've got to exit Kansas, rebid where you're the incumbent but you're not the actual Blue in there. Any thoughts about your willingness and ability to compete for new RFPs?

Yes, let me speak to it broadly, and then Brian can speak to it more specifically. We do think we have opportunities to look and expand the Medicaid managed care business. A couple of things we did. If you look back 2 years ago, we had a platform that really now is quite scalable for this business and the processes and procedures all around it to really grow in a couple of different ways. One way is to grow in the states in which we have the Blue Cross licenses. Other opportunities include partnering with other Blue plans. With each of these RFPs, we really need to look at that -- at the sustainability of that program as evidenced by their RFP. And some of those -- frankly, some of the RFP situations do not look sustainable from a pricing perspective or they create pretty significant predictability issues in terms of kind of drawbacks into prior performance. So we're going to be thoughtful about the choices that we make in those programs, and we do have opportunities here to go beyond what have been our traditional borders. So, Brian, do you want to be more specific than that?

Yes, I think, that's right. Certainly, we're taking a look at all the opportunities, both within our Blue states and then potentially with other Blue partners. As we evaluate that, it's got to be -- we've got to feel comfortable from a rate adequacy standpoint, and outside of our states, our partners have to feel comfortable with that. And so that kind of all goes into the mix. And sometimes, it's our partners that aren't comfortable, and sometimes, our evaluation of it is that it's not a sustainable rate environment over time. So that all goes into the mix. So we're taking a very measured approach to growth in that segment, as we also prepare for the dual opportunity within the states that we do business in.

Yes, I think there's an important element of the Medicaid managed care business in that it's strategic for 2 opportunities: One is the dual eligible population and our combination of our Medicaid managed care and our Medicare capabilities, which obviously we've invested with CareMore and other things. The other strategic element is how the Medicaid opportunity aligns with the exchange opportunities in the future. And as we've said, we can't predict yet what states will be in or participating in exchanges or participate off exchanges and in exchanges. But the idea that the Medicaid managed care members may be, in some respects, very similar to the exchange members who are subsidized and they make a minute [ph] out of Medicaid into a subsidized exchange product means that, that Medicaid -- those Medicaid capabilities are strategic and important for the long run. So we don't want to get distracted by difficult contracts that we don't think are sustainable. We're going to stay focused on the more strategic opportunities that, that platform will allow us.

And just maybe to build on that, if you have those opportunities outside of the core business that you're bidding on, it sounds like you're not willing to use that as a loss leader to get access to these other opportunities. You want the core plan to make money before incorporating some things. Or is it, potentially, you make sort of lower margin on the initial bid for the opportunity to address those other strategic markets?

Yes, "loss leader" is not a word that we accept for most contract discussions. So I think it's important that it be a rational contract, it be worth both the investment in terms of setting up for that state and having a successful execution over time and strategically positioning us well with those state regulators who are administering the Medicaid program, as well as they then start to consider both the exchange opportunities, as well as the dual eligible opportunities. We want them to think about us as the preferred partner.

Okay. Then one last quick question here. I think last quarter when you highlighted the headwind from interest income expense as being about $125 million. Did I have that -- is that still the right number?

Yes, Kevin, that's still the number that we anticipate at this point in time.

Our next question is from David Windley from Jefferies. David H. Windley - Jefferies & Company, Inc., Research Division: So, Wayne, I believe you said that share repurchase and dividend will consume about $2.9 million, which is -- or billion, excuse me, which is also the amount you expect to generate in operating cash flow, I believe. So I wondered what your appetite was, if you could characterize, around M&A, if you do have appetite there, and confirm for me that you would feel comfortable taking up the leverage to do that.

Wayne, before you do that, I do think it's important for you to talk about the whole approach we have to capital management. Let me talk to the M&A idea, though, for a minute, because I think that's an important one. We do think there are opportunities in M&A. We always, always have and will. Having the opportunity uniquely to be a Blue consolidator has always been important. But in this environment, that hasn't been as apparent in the process that Blue plan goes through. It's unique in every state, but those are time -- they take time. And so our approach has been, and has been successful, to continue to partner with our Blue brethren in terms of capabilities. For example, our acquisition of Bloom Health was a shared acquisition with other Blue plans. As we've talked about, we have the opportunity to partner with other Blue plans on Medicaid managed care. We think there are other opportunities beyond that as well, which we think are ways to create more scale, and then it's short of an ultimate M&A acquisition but gives us new capabilities and opportunities. When we look at other capability acquisitions in the M&A market, we're interested, and we're looking at those consistently. But we -- they need to make sense economically and financially. We always do a build-versus-buy analysis in terms of the opportunities out there that are similar to our core capabilities. We also look at opportunities that are more diverse than our core businesses, and those need to make sense economically. So, Wayne, why don't you talk about both the way we analyze that and then also go back to the question about capital management?

Yes. So David, just at a very high level, obviously, our debt-to-capital is 29% at year end. Our targeted range is between 25% and 35%. Our preference would be, obviously, over time to be closer to that 35%. But right now, we like where we're at because it gives us the financial flexibility to lever up quite significantly for an M&A opportunity if we wanted to. We would be willing to go higher than that, both of the asset actually having enough cash flow putting off that we could drive that back down pretty quickly to our targeted range. We our finishing the year with $2.7 billion at the parents. You are correct in saying that if we just generate our operating cash flows for that and dividend buybacks, you'll see that does give us additional powder as well for an acquisition, either through cash or through levering up and accessing debt markets. We have about $350 million coming due, though, in January. It has come due, actually. We're paying that down out of the free cash flow we have at the parent. About $800 million in August, but we do plan to refinance that during that period. So we -- I would tell you we clearly have a bias towards M&A and the opportunity for top line growth. But that bias will never be trumped by the economics of what we think makes sense for longer-term returns. And if -- very few things would be better than buyback initially, but as long we can show that the long term growth potential and the top line is better over the longer term, we will err on that side of an M&A that we think makes a lot of strategic sense for our business and have a longer-term return for us. CareMore is a perfect example of that, but there's many assets we think we can build as well. David H. Windley - Jefferies & Company, Inc., Research Division: Super. If I could go back to trend and just understand -- I don't know if you're willing to put numbers on it but if you would, put numbers on the relative difference in trend between the books of business, Commercial, Medicare and Medicaid. If not, talk relatively to those and specifically, help me to understand how the composition of trend changes as you move to '12.

We really don't break down the segment -- the trend by segment. But what we have done is we do describe the trend expectation for '12 and where it comes from. So about 22% of it, we think, is coming from inpatient. It's in the high-single digits, and that's down from the low-double digits in 2011. We see improving unit cost trends in '12 due to our contracting efforts and our care management efforts, partially offset by some rebounds that happens mathematically and over time in inpatient utilization. And the inpatient trend is still primarily unit-cost-driven. The outpatient piece of that is about 24% of the total. It's in the high-single digits, up just slightly but in the same range as 2011, unit-cost-driven as well. Shift of services from inpatient to outpatient is something we're managing carefully. The professional piece of that is about 34% of the total, mid-single digits up slightly but in the same range as 2011. Our contracting changes are driving an increase in unit cost and we'll hear more, in the days to come, about how we really want to motivate primary care physicians and reward them appropriately for care throughout the system. So we do expect a slight increase in physician utilization, a bit of that rebound and expectation of the utilization overall. Pharmacy is about 20% of the total. It's in the mid-single digit. It's down from mid- to high-single digits in 2011. It's improving due to unit cost, and there are a lot of branches in there in conversions in 2012: Lipitor, Plavix, Lexapro, Singulair. They're -- so we think those have an impact. So that's kind of the breakdown. David H. Windley - Jefferies & Company, Inc., Research Division: If I could just clarify or ask it a slightly different way. So if I think about book of business, I would expect that you think your MLR for MA is coming down significantly, and you're expecting the consolidated MLR to increase, I think you said 20 basis points. And so I was hoping to get a little bit more clarity on the composition of, say, trend across all books of business as it affects MLR difference, as we think about how it affected MLR in 2011 versus how it will affect MLR in 2012 and it being 3 different books of business.

Yes, let me take a stab at that. Maybe this will help. When you look at Senior, we think Senior, obviously, will improve quite a bit. That improvement though, we expect to be offset by FEP, which, again, it's a cost-plus program. We're expecting a lot more FEP members. It's an MLR that's in 90%-range plus, and we're expecting that to be offset by state-sponsored business because we've taken a more cautious view on AB 97 and the rate environment that we've seen out there. Commercial has a very small impact on it in total, about 10 basis points at most.

Our next question is from Chris Rigg with Susquehanna.

I just had one qualifying question -- or clarifying question on the Medicaid headwind for this year and the $75 million that you guys characterized as the high-water mark. What -- I think you made it -- you commented on an earlier question that there's a retroactive assumption in the $75-million headwind. Can you help me better understand what you mean by that? And then, in addition, when did you guys assume, in 2011, the AB 97 hit in your MLR assumptions?

Wayne and Brian, do you want to address that?

Let me first start off. The retro impact we have reflected in our fourth quarter of 2011, so that's the first part. But we've also assumed that because the implementation continues to get delayed in how it's going to be effective, we also have approved a prospective projection at the pace we'll be able to implement. We're not allowed to take certain actions until it's finalized. And then as soon as it is, we'll be taking the actions we need to take to try to mitigate. We've also baked into our 2012 guidance a prospective view of how that could affect us as well. That prospective view is part of that "up to $75 million" number, but we think we have opportunities throughout the year to hopefully improve either on that or other areas of our Medicaid.

And I guess -- so in 2011, in the Medicaid business, when did you assume -- I'm assuming you're that saying AB 97 is the 10% reduction. When did that begin to impact your numbers? Was it June 1 or July 1? Or how did that impact you guys last year, at least from a timing perspective?

The impacts of it are in the fourth quarter, right, in the fourth quarter. We guided in the third quarter that we would be assuming some impact for that in the fourth quarter. We do not have anything reflected in the third quarter for AB 97. At that point, it was still unknown as to even if it was going to move forward in any capacity.

And our next question is from Ana Gupte from Sanford Bernstein. Ana Gupte - Sanford C. Bernstein & Co., LLC., Research Division: The question is on the PBM, and I'm just going back to 2009. I think on the other segments you used to run $450 million to $500 million, and if I remember right, your initial expectation had been that the sale would be accretive on op earnings even before share repurchase. So while in 2010 and 2011, there have been multiple moving parts on Individual and Medicare and Medicaid and other headwinds, are you -- have you realized those synergies in terms of your cost and SG&A? Is there more room to go there? And can you comment on what the sourcing driver was of the dispute with Express and where you are on that?

Let me speak to that. I think, even though we will speak to some of the issues with Express Scripts, we are pleased with the results of the transaction and have done a number of look backs and are really very supportive of having done that transaction. I'll let Wayne be more specific to that. We continue to have a multiyear contract with Express Scripts, and we are in negotiations with them to resolve the differences that were expressed by them, and we'll continue to focus on that. We need to get resolutions, and those resolutions are important to us and important to our customers. And so we're going to stay very focused on resolving that in the right way that needs to happen. So I think that's our expectation, overall. As we described earlier, we took a very proactive approach to the Walgreens contract issues with Express Scripts, and that is not really the most significant concern we have in that discussion. Wayne, do you want to be more specific than that in terms of our analysis?

Yes, Ana, the one thing I would say is the transaction did exactly what we wanted it to do. In some ways, I would say it's turned out better than we would have expected. Clearly, part of the better-than-expected was at time we were deploying the capital, we were able to deploy it in a period when the stock price was closer to $45 a share, and we were able to take advantage of that. At the same time, in the last 2 years, as you said, while there's been a number of moving parts, one thing that we can comment on is -- that everybody, I think, would agree with, is that the economy has been anywhere but up. It's been down substantially, and it's had a substantial drag on in-group change in membership. And at the same time, we had PPACA implemented, which put a floor on minimum MLRs. And if you look at our 2012 guidance of our op gain that we said approximately $4 billion and you compare that back to '09, you'll see that our op gain is actually not that far off at all, despite the economy and despite the PPACA regulations. Now keep in mind, because of the minimum MLR though, some of the benefits that we would get, obviously, have to be passed on along the way, and it's all the more reason we wanted to protect our shareholders and get to the $4.675 billion upfront. Ana Gupte - Sanford C. Bernstein & Co., LLC., Research Division: Okay. So I'm understanding that the $450 million was somehow absorbed or recovered in the other 2 segments. So follow-up to the Walgreens issue, can you just give us an update on your retail selling season and how that looked in terms of the gross adds, the retention, both across the Part D as well as MAPD book?

Yes, let me speak to it, generally. So we -- what we did is took a very customer-first approach here and, anticipating that Walgreens would not be in the network, we did very direct outreach to the members who had access to or were utilizing the Walgreens pharmacy. We also made sure almost in every case, there was another pharmacy that was in our network that was within 0.5 miles of an existing Walgreens pharmacy. So we took -- and that we made a number of communications and outreached to them, and as a result, we do not think it had a meaningful impact on our medical management enrollment. And I think people are adjusting, frankly, to it in the marketplace and we aren't seeing -- I'll turn it over to both Ken and Brian in terms of other impact that it had. In terms of the Part D membership, really when we look at Part D, we don't think that Walgreens, specifically, had that much of an impact. We do think that membership is going to PBM-available Part D program and moving in a number of ways. So I'll let them speak to that.

Yes, I think, as far as MAPD sales, we didn't see any deterioration in our sales expectation as a result of those. MAPD sales were strong. Standalone Part D, we have been seeing, obviously, more competitors with the PBMs entering the space, so that is kind of a challenging environment. Although on an overall basis, our Part D membership is pretty flat, and it's what we expected. So no deterioration as a result of Walgreens.

And same on the Commercial. I would simply say that we did a tremendous outreach to all of our clients who were both at the employer level and at the member level, gave the options, shared the information, and it was a very smooth transition for us.

Our last question this morning will come from the line of Carl McDonald from Citigroup.

There's been some commentary from other parts of the healthcare chain that utilization picked up a bit in the fourth quarter. So I'd be interested if you correlate that your commentary about a 7% cost trend. Are you seeing the utilization pick up in the fourth quarter but it's being offset by lower unit cost? Or are you seeing utilization pick up in certain areas but more than offset by, say, the drop in the admits per thousand?

Carl, I think it's a combination of normal seasonality. I mean, we always see utilization uptick in the fourth quarter, so I'm not so sure if people are publishing this wrong or writing about. We did see an increase slightly in most categories but in accordance with our expectations, but still a little bit lower than maybe we would've expected at this point. And then again, with our admits per thousand being down, it's more an elevated case that you were seeing, but then our unit prices are improving quite dramatically from our negotiations. So all in all, I would say that it's going to move up in the quarter because it always does in the fourth quarter for utilization. It's just a common pattern we typically see in most lines of business and with deductibles being met. But I would still say it's not the levels we would have expected.

Thank you, and thank you for all your questions. In closing, I'd like to reiterate that we're pleased with our 2011 results, and we're excited about our business prospects for 2012. We have made important changes to address some of the challenges that our businesses face, and we do have the right strategies in place to continue improving the lives of the people we serve and the health of our community. I'd like to thank our more than 37,000 associates for their commitment, their dedication and their innovation. It's their hard work that provides excellent service to more than 65 million individuals that we touch each and every day. As a team, we produced "better than originally expected" 2011 results, and we believe we are well positioned for the future. I want to thank everyone for participating on our call this morning. And I'll now turn it over to the operator who can provide the call replay instructions.

Thank you. And ladies and gentlemen, this call will be available for replay after 11:00 today through February 8. You may access the AT&T Executive Replay system by dialing 1-800-475-6701 and entering the access code 228586. International participants can dial (320) 365-3844. And that does conclude our conference for today. Thank you for your participation and for using AT&T.