Centene Corp (CNC) — Q4 2015 Earnings Call Transcript

Thank you, Emily, and good morning everyone. Thank you for joining us on our 2015 fourth quarter and full year earnings results conference call. Michael Neidorff, Chairman and Chief Executive Officer; and Bill Scheffel, Executive Vice President and Chief Financial Officer of Centene will host this morning's call. The call should last approximately 45 minutes and may also be accessed through our Web site at centene.com. A replay will be available shortly after the call's completion also at centene.com or by dialing 877-344-7529 in the U.S. and Canada, or in other countries by dialing 412-317-0088. The playback number for both dial-ins is 10078696. Any remarks that Centene may make about future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in Centene's most recently filed Form 10-K from February 23, 2015, and 10-Q from dated, October 27, 2015. Centene's registration statement on Form S-4 relating to the proposed Health Net transaction dated September 21, 2015, and in other public SEC filings. Centene anticipates that subsequent events and developments will cause its estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. As a reminder, our next Investor Day is June 17, in New York City. And with that, I’d like to turn the call over to our Chairman and Chief Executive Officer, Michael Neidorff. Michael?

Thank you, Ed. Good morning everyone, and thank you for joining Centene’s fourth quarter and full year 2015 earnings call. I would like to begin with an update on the status of the Health Net acquisition. We have made significant progress towards completing this transaction. We have received all necessary approvals with the exception of California, which remains pending. On January 22, Centene participated in a public hearing with the California Department of Insurance. We believe the meeting was informative and there were no surprises. It was conducted in a professional and respectful manner, a report of what has been a fair sale process. We continue to work through the process with the Department of Insurance and the Department of Managed Healthcare, and are finalizing our mutual agreement. We remain confident of the first quarter growth. We have slightly adjusted our 2016 guidance to reflect a March 1 closing date for Health Net. Jeff will provide further details on this. I would like to take a moment to remind you of the rationale behind the Health Net acquisition. It is a significant step in our strategy to build critical mass and expertise within the government-sponsored healthcare category. When the deal closes, Centene will be a $40 billion-plus company. We will be the largest Medicaid-managed care organization in the country and the leader in managed long-term support services. The addition of Health Net’s Medicare Advantage platform, including its four-star rating, creates numerous opportunities within our existing markets, which we estimate to be in excess of $150 million. Health Net will increase our marketplace presence to 15 states, with total membership of approximately 500,000 individuals. There are significant opportunities to deploy Centene specialty solutions across the Health Net platform. Health Net has been an innovator in value-based provider contracting and risk sharing. Finally, the deal is 20% accretive in adjusted EPS in the first year following the close. The planning portion of Centene’s comprehensive integration process is now largely completed. We have reorganized our management team to facilitate collaboration and efficiency. We will be ready to hit the ground running to begin executing a plan on the day it closes. Now shifting to fourth quarter and full year 2015 highlights; Centene ended 2015 in a strong balance and secure structural and financial position. What do I mean by this? Several months ago, when I questioned a single contractor, Bill Scheffel, our CFO for the next few days, commented, we are an aircraft carrier, and you don’t throw aircraft carriers off course very easily. Today, we are in 23 states, soon to be 24 with Nebraska. In these 23 states, we have 231 separate solutions, which our products could contract. This diversity provides strength and stability. In other words, if one product in one state has an issue, rate, something of that nature, there are more than enough offsets. Many of you will recognize that this has been our strategy from the beginning. Clearly 2015 was a banner year for Centene. Our long-term growth strategy is intact. We continue to execute against our pipeline, as evidenced by recent wins in Florida and Nebraska. We added over 1 million members, representing growth of 26%, with 5.1 million beneficiaries. Premium and service revenues increased 36% year-over-year, to $21.3 billion. The HBR improved 40 basis points year-over-year, to 88.9%. We reported diluted earnings per share of $2.89, or $3.03 when excluding $0.14 of Health Net merger-related expenses. This compares to $2.23 reported for full year 2014. The pretax margin excluding merger costs improved to 3.4%, from 2.9% in 2014 and 2.6% in 2013. We remain committed to margin and future margin expansion, with the targeted range of 3% to 5%. Bill will provide further financial details in his prepared remarks. A quick note on flu; current indicators point to a slower start to the 2015-2016 flu season; it is, however, still too early to draw an absolute conclusion. Overall, we continue to see, as well as anticipate stable medical cost trend. Next, market and product updates. First, we will discuss recent Medicaid activity. Nebraska, we were pleased to be selected last week as one of three managed care organizations to administer Nebraska’s Heritage Health program. Heritage Health is the new healthcare delivery system that combines the state’s current physical health, behavioral health, and pharmacy program into a single comprehensive and coordinated system. This program covers 230 Medicaid and CHIP enrollees. Centene will operate statewide in Nebraska, which marks our 24th state of operations. The contract is expected to commence on January 1, 2017, and we expect a normal margin ramp. This entry point will provide future opportunities in the state, such as long-term therapy. Arizona, the fourth quarter was our first full quarter providing services under the expanded contract for Arizona’s newly formed southern region. Membership in Arizona doubled over the third quarter of 2015. At December 31, we served approximately 441,000 beneficiaries in the state. Mississippi; Mississippi became a $1 billion market for Centene in 2015. In December, we began managing inpatient services for Medicaid and ABD members in the state. We ended the year with 302,000 lives. This compares to 109,000 at the end of 2014. Louisiana; Louisiana also became a $1 billion market in 2015. During the year we executed a successful acquisition and integration in the state. We more than doubled our at-risk memberships to 382,000 lives. In December we further expanded our Louisiana contract to begin including behavioral health benefits. The carve-in of additional benefits to Mississippi and Louisiana is consistent with Centene’s holistic approach to provide integrated care for its members. Oregon, the fourth quarter marked the first full quarter of operations for our Trillium subsidiary, which provides Medicaid, Medicare Advantage, and marketplace services to Oregon residents. Membership at year-end was approximately 100,000. While it is still early, Trillium is performing in line with our expectations. Now on to Dual Eligible, we ended the fourth quarter with 26,300 members across our five dual demonstration contracts. We continue to work with our state providers and CMS to make these programs successful and sustainable. I remind you that we have always taken the view that the dual demonstration programs would not be a significant near-term growth driver for Centene. Next, Medicaid expansion, we ended 2015 with almost 450,000 Medicaid expansion members, more than double of what was at the end of 2014. In January, the government of Louisiana signed an executive order to expand Medicaid coverage under ACA by July 1 of 2016. This represents a future growth opportunity for Centene, given our status as the largest Medicaid health brand in the state. We have not yet included the Louisiana expansion in our 2016 financial guidance. We will provide an update when additional information becomes available. Health Insurance Marketplace, our exchange experience continues to be favorable; 92% of our membership is subsidy eligible. And we are achieving margins within our targeted range. We have taken a disciplined approach to pricing from day one. In fact, the aggregate in each of Centene’s states reflected a payable position for both 2014 and 2015 for the Three Rs program. This approach has allowed us to grow profitably from 75,000 members in nine states in 2014 to over 146,000 in 12 states in 2015. Please note, we have not been impacted by the special enrollment period. For 2016, we expanded into a 13th state, New Hampshire. We have also increased our geographic footprint in certain of our other 12 states. Enrollment so far in 2016 is in line or ahead of expectations. The demographics of these new members are consistent with previous years, and over 90% of our members are subsidy eligible. Our pricing and underwriting is also in line with prior years, and we are not reliant on risk corridors. Centurion, we continue to successfully expand our correctional health business. Last week, Centurion reached a formal agreement with the Florida Department of Corrections to provide comprehensive healthcare services to over 70,000 inmates through the three regions. The contract was awarded through an accelerated GAAP procurement, the restructure, as a cost-plus arrangement, with a maximum $267 million in annual revenue. Centurion was the only awardee. This contract is expected to commence in the second quarter of 2016, and runs through January 2018. Shifting gears, our rate outlook; the 2015 composite rate adjustment was approximately 1%, in line with our expectations. Composite rate adjustment had been consistent for the past few years. We expect a similar composite rate readjustment in 2016. In conclusion, our strong 2015 results reaffirm our growth momentum for 2016 and beyond. As we begin this New Year we are in a good place, both financially and strategically. With the additional products and capabilities Health Net provides, our growth pipeline is bigger than ever. We are well-positioned to gain market share in the government-sponsored healthcare space, the fastest-growing category in the industry. Thank you for your interest in Centene. Before I turn the call over to Bill, I want to thank him for his years of dedicated service. As previously announced, he will be retiring at the end of the month after the K is filed. We will now witness part of that turnover. Bill will cover 2015 information, and Jeff will pick up and report information relative to 2016. Bill, I turn it over to you.

Thank you, Michael, and good morning everyone. This morning we will cover both our fourth quarter and full year 2015 results. For the fourth quarter, premium and service revenues were $5.9 billion, an increase of 33% over the fourth quarter of 2014. And diluted earnings per share, excluding Health Net merger costs, were $0.95, compared to $0.87 last year. And as you will recall, last year’s fourth quarter included a $0.24 benefit from reporting the health insurer fee reimbursement for Texas for all of 2014 in the fourth quarter. Looking at the full year for 2015, membership was 5.1 million members, an increase of 26% between years. Premium and service revenues were $21.3 billion, an increase of 36%. Earnings from operations were $705 million, an increase of 52%; and diluted earnings per share excluding Health Net merger costs was $3.03, an increase of 36% between years, and well above our most recent guidance numbers, of $2.90 to $2.94. In more detail, premium and service revenues grew by $1.4 billion in the fourth quarter year-over-year, primarily as a result of expansion or new programs in many of our states. During the fourth quarter, we included some newly added revenue in several areas. We began an expanded contract in the Southern region of Arizona on October 1 and in Louisiana beginning December 1. The inpatient services were added in Mississippi beginning December 1. The fourth quarter included a full quarter of operations in Oregon relating to our acquisition. We also benefited from the addition of almost 250,000 more Medicaid Expansion members at this year-end over last year. During 2015, we recognized $344 million in revenue associated with the health insurer fee, compared to $195 million in 2014. For both years, the recorded revenue was virtually all of the health insurer fee on a grossed-up basis. Our health benefit ratio was 88.0% in the fourth quarter this year, compared to 89.3% in last year’s fourth quarter, and 89.0% in the third quarter. The 130-basis point decrease year-over-year results from improvement in the overall HBR for higher acuity membership, particularly long-term care, premium increases and adjustments, and a milder flu season in the fourth quarter of this year. Sequentially, the 100-basis point improvement in the third quarter reflects rate increases and adjustments received during the third and fourth quarter. For the fourth quarter, 20% of premium and service revenues came from new business, compared to 30% in the fourth quarter of 2014. The health benefits ratio for new business was 88.2%, and existing business was 88.0% in the fourth quarter, both of which are decreases of 120 basis points between years. The Health Insurance Marketplace product has performed well for us in 2014 and 2015, reflecting our disciplined strategy toward subsidized members familiar with our provider network. This same methodology and process is used for 2016 as well. Similar to last year-end, we continue to be in a payable position with the risk corridor and risk adjustments. We also have a payable at year-end recorded with the minimum loss ratio for the Health Insurance Marketplace business. For the 2014 plan year, we have settled the Three Rs amounts and paid the rebates related to the minimum loss ratio. Our general and administrative ratio was 8.8% in Q4 of this year, 8.7% without Health Net merger costs, compared to 8.2% last year, and 8.2% in the third quarter. The increase in the fourth quarter of this year, both year-over-year and sequentially reflect a higher level of seasonal cause related to the open enrollment period for the marketplace exchange process, and higher amounts of renewable compensation process. Excluding Health Net merger costs, the third and fourth quarters at $0.23 million. Investment and other income was $8 million for the fourth quarter, compared to $10 million last year and $8 million in the third quarter. The effective income tax rate was 48.4% in the fourth quarter, and 48.6% through all of 2015, the relatively high rate reflects... Diluted earnings per share from continuing operations in the fourth quarter were $0.91 excluding the Health Net merger. For the full year 2015, our EPS was $2.89 or $3.03, excluding Health Net merger costs. Cash in investments totaled almost $4 billion at year-end. Our risk-based capital percentage continues to be stable. Debt by December 31 was $1.2 billion, including $225 million of borrowings on our revolver. Our debt to capital ratio was 34.7%, excluding our non-recourse mortgage note compared to the prior year. Medical claims liabilities totaled $2.3 billion at December 31. Cash flow from operations was $201 million in the fourth quarter and $668 million for the full year, both amounts to approximately 1.8 times net earnings, within our expected range of 1.5 to 2.4 times net earnings. Now for 2016, Jeff Schwaneke will discuss the 2016 guidance.

Thank you, Bill, and good morning. I would like to spend a few minutes to discuss our combined guidance for 2016. In our press release this morning, reporting our full year results for 2015, we have also included our 2016 annual guidance. The guidance has been adjusted for the following items; first, we have changed our assumption with respect to the closing date of the Health Net transaction. We're now assuming the transaction closes on March 1. While this does not impact our run rate revenues or earnings, it does change the number of months in Health Net we're able to include in the consolidated financial statements for 2016. As mentioned in our December Investor Day, one month of Health Net revenue is approximately $1.3 billion. The March 1 closing date is an assumption we have made for guidance purposes, and the transaction remains subject to regulatory approval in California. The actual closing date of the Health Net transaction will determine the number of months and days of Health Net results that will be included in our consolidated financial statements for 2016. Second, we recently announced the pricing of $2.4 billion of senior unsecured debt in connection with the Health Net transaction and have updated our assumptions with respect to interest expense. Consistent with what we have done in the past in matching our balance sheet exposure to short-term interest rates, we intend to swap up to approximately $1.6 billion of the senior debt to a floating rate of interest at transaction closing. Since we have entered into the interest rate swap agreements, the ultimate interest rate of the transaction financing will continue to fluctuate. Third, we have adjusted our range on Health Net merger-related expenses, which will continue to change until closing and have reduced the guidance range for the amortization of intangible asset associated with acquisitions by one month to reflect the assumed March 1 closing date. Finally, we have updated our guidance to include the recent contract award for Centurion in Florida. As a result of all these items for 2016, our combined guidance is as follows; total revenues of $40 billion to $40.8 billion, GAAP diluted earnings per share of $2.80 to $3.15, adjusted diluted earnings per share of $4.05 to $4.40. Adjusted diluted earnings per share excludes the amortization of intangible assets associated with acquisitions, which we estimate to be between $0.50 and $0.55 per share, and Health Net related merger expenses, which we estimate to be between $0.70 and $0.75 per diluted share with both items reflecting the revised closing date assumption. We have adjusted the bottom-end of our diluted earnings per share range to reflect the one month delay and the assumed closing date of the Health Net transaction. For 2016, we expect approximately 45% of our annual adjusted diluted earnings per share to be earned in the first half of the year, and we expect the first quarter to be lower than the second quarter, due to seasonality of the business, the extra day from leap year, and only including one month of Health Net in our consolidated results for the first quarter. Additionally, our guidance assumes no receivables for the risk corridor program and a payable for the risk adjustment program in 2016. We will provide further details on our 2016 guidance after regulatory approval, and the closing of the Health Net transaction. This concludes our remarks. Operator, you may now open the line for questions.

Thanks. Good morning. First question just is on Nebraska and just interested first what type of start-up expenses the guidance may assume now for this year ahead of that. And then secondly, just if you can talk about how you feel the initial rates are looking for this program? I know it’s a mature managed care market already, but obviously they’re moving more to an integrated benefit now. So interested how you feel about the rates.

Yes, this is Jeff. I can cover the start-up costs included in our current guidance. As for the second question, was about rates?

Yes, Scott. This is Jesse Hunter. I think as you mentioned, Nebraska has got the experience with existing Medicaid managed care players. I think when you take that, plus the benefits of the integrated services that you referenced, particularly on behavioral and pharmacy, we think there’s been a very prudent process with good visibility on rate setting, actuarial soundness and the like. So we feel, you know, there’s always some question mark when you go into these things. But we are not looking at this as a negative rate kind of entry point. We think there’s good visibility on the path to achieving our target margins in Nebraska.

I believe we have established the necessary structure, and the team has done an excellent job organizing everything. As I mentioned earlier, we are prepared to move forward efficiently. We will be engaging with Jim in a consulting capacity as needed, and we are in discussions with Jay as well, but neither will be actively involved in the new company; they will both serve in a consulting role.

Hi, good morning. Thanks for taking my questions. Just to follow up on Health Net quickly, I know during the hearing your counsel suggested that if you fulfilled the last remaining document requests, the insurance commissioner might close the record by January 29. Has the record been closed at this point?

Chris, as I understand it, it’s still open. They’re reviewing all the documents they have. And they just want to make sure they have what they need before they close it, but we’ve had no additional requests since then. We’re discussing the agreements that we’ll have between the two of us. The lawyers are... It’s moving along. And as you probably saw, if you watched the hearing, it was a very professional, well-conducted hearing.

Yes, I think Michael had quoted the number in his script as far as what the annual revenue is. Yes, it’s over $267 million, and I think the start date is in Q2.

Thanks. So first all I just wanted to ask on the service revenue. I saw that it’s declined sequentially from $480 million in the third quarter to $442 million. Is that just seasonality or is there anything else going on there?

I would say that’s primarily seasonality, and a lot of that's going to be based on Hep C.

Okay. And then the comments on the financing around the Health Net deal, I wasn’t 100% clear. Is that the rates that you were able to attain in the marketplace? Were they consistent with what you had anticipated? And is your guidance based on current debt that’s outstanding, or are you factoring in those swap transactions, which I guess would probably lower the rate flip into the floating rate, and maybe I should confirm that as well.

Yes, you’re correct. So obviously we’ve already priced the debt. And I think what I’m saying today is that we are anticipating swapping up to $1.6 billion to a floating rate of interest consistent with what we’ve done in the past. Our current guidance does assume some blending form of the coupon plus the benefit of the swaps. Obviously, we wouldn’t execute the swap transactions if they weren’t beneficial. So I would say right now we believe we have a relatively conservative assumption based on where the spreads are on the swaps today.

Hi, thanks. Good morning. Just wanted to see if there was any seasonality around the Health Net earnings, just taking the low end down by just $0.5, maybe some of that's offset by the Centurion win as well, but if it does get delayed a little bit longer, past March 1, should we think about earnings coming in kind of ratably through the year for Health Net or is there some seasonality that we should be aware of?

No, Josh. This is Jeff. I mean, as you are aware, not all months are created equal. So I’m not going to get into the details on a month-by-month basis of Health Net. However I would say, when you shift out an entire month of the transaction, there are a lot of things that play into that, amortization, share count on the diluted shares outstanding, et cetera. So I think we had a lot of puts and takes. And when you add it all together we feel comfortable with our guidance range where it is now.

I think we’ve indicated that we will enter three new markets in January next year in a methodical and careful manner, although we aren’t disclosing which ones due to competitive reasons. The significant difference this time is that some of us have prior experience with Medicare and understand it, coupled with certain systems and capabilities, including having the four stars, which provides a premium benefit of 5% in the first two years. The major distinction, Josh, is that there is now a corporation committed to developing the systems and capabilities to continue growing and expanding the MA, rather than a company that was previously in a different mode and outsourcing many tasks before the acquisition. This reflects a shift in mentality as much as anything. There are very capable individuals here who are enthusiastic about the opportunities that working with us presents.

Great, thanks. I just wanted to follow up on the services question. When you mention that Hep C was down, should we expect this trend to continue in 2016, or is there just a seasonal or economic factor affecting this in Q4?

Well, I think on Hep C, we’ve seen a little bit of plateauing that has occurred. And I think with some of the changing guidelines in the future, that may ramp up again. But right now I think what you’re seeing, our 2015 results are more of a plateauing.

Okay, so is that what you’re assuming in 2016 or you’re assuming that ramp now spike up?

We don’t have any significant ramp up in 2016 in our initial guidance and plan.

I think you know we’ve been by our abundance of caution.

Hi, a follow-up to that last one. In terms of your comments in the prepared remarks about, I think you said enrollment in the individual business was in-line to maybe slightly better than what your early expectations were. Can you confirm that? And then what are your expectations for margin performance in the individual business baked into your guidance? Thanks.

I think we mentioned that the growth aligns with our expectations. The initial enrollment numbers and those who paid the premium were good, reflecting our forecasts. We continue to focus on pricing, and our performance fully meets our margin goals. We have not pursued aggressive pricing, which is why we have a payable when looking at these factors on a normalized basis within the state. We remain confident that this will not change. Our approach has remained the same, and the profile of our individual goals is consistent. Ultimately, we are in the risk management business.

First off, let me tell you, thanks and congratulations Bill, you did a great job for us and for Centene, and good luck Jeff going forward. And I get to my question which is really about reserves for the company and days in claims payables. What do you expect days in claims payables to do this year given all the moving parts with sort of what's new business and help that coming on board? What should we be expecting to see in the days claims payable end?

Yes, this is Jeff. I mean as far as on a combined basis with Health Net we haven't given out anything on that as far as Centene is concerned. I think we have a range from the low 40s to mid-40s. I'd still expect to be in that range. I don't see anything unusual happening there. I think the biggest thing that impacts that is that how fast we receive claims and the EDI rate that we have, and we have continued to see an increase in the EDI rate. And so over time you would expect that to reduce your days in claims payable, but nothing significant that I would expect.

I have mentioned in several presentations that we are achieving an average payment accuracy of 98.6%. When you consider all these factors, it instills a strong level of confidence, which is important for some investors. This is a variable aspect, and with a constant such as the date received methodology, if conditions remain stable, we could observe a positive effect on that.

We have stated that we are going to be very methodical in bringing our operational synergies. Too many times when people try to do it quickly they fail, and we anticipate that it's going to take approximately two years to fully integrate all systems. They have a lot of people offshore that will be coming back. So there's a lot of different aspects. So it's anticipated couple of years, and we’ll keep you informed as we move along.

Thanks, good morning. So in the past when you provide guidance, you've called out kind of an investment and expansion cause. I mean given the new programs and expansion to share, excluding Health Net, maybe how should we think about investment costs in either ideal absolute terms or at least relative to 2015 and how should we think about that trend going forward? Thanks.

Yes, this is Jeff. We are currently waiting for the Health Net transaction to be finalized, so we haven't discussed those details yet. Once the transaction is complete, we will provide the usual guidance information, including tax rates, shares outstanding, and start-up costs. At this moment, we need to hold off until the closing occurs.

I have had some discussions with various states regarding the needs they have to reduce the system enrollment. We've been performing at roughly 30% versus 50% in some other states, but I think the states recognize the opportunity and it's just a matter of what they have on their plate and their willingness and ability to execute it.

Yes, just on the second part of that, Andy, we have seen momentum is around states looking at the LTSS programs as kind of an extension of the dual demo program. So you're not seeing a lot of new dual demo programs coming up, but you are seeing momentum on Managed long-term care contracts, either embedded within existing states or RFEs that would be specific for that set of services.

Yes, hi good morning. Any update on the disk drive issue?

Yes. So let me clarify; this is a data issue with no inclusion or hacking involved. It was very important. If we continue down the process with continued look at it, we continue to apply an abundance of conservatism and transparency. We have seen no hint or any indication of any inappropriate use of users' data, and we’ll continue to investigate. We don’t exactly know when we'll conclude our search, but we’re following through and notifying everyone about what we’ve discovered.

Thanks. Good morning. I just want to go back to the exchanges real quick. I understand that the enrollment numbers are aligning with your expectations. Can you provide the current numbers regarding open enrollment? Additionally, can you share the renewal percentage of last year's exchange book? What percentage is renewing?

Roughly my memory is that total enrollment was around 600,000, but that doesn’t include those that have paid for their coverage. So we expect probably around 75% renewal rate from last year's total.

Again that’s about the number for the peak enrollment. It's important to know that enrollment peaks and then continues to reduce through the year. We anticipate that experience, so your 146 is the low point of the year in terms of that.

Yes, this is Jesse; I would just add that the growth we are seeing is in the states where we have had longstanding participation. We are known in those products and we've seen the demographics consistent with what we’ve seen over the past two years.

Hi, good morning. I apologize if this has already been discussed, but could you share your thoughts on the outlook for the California Duals program? I understand it's not currently within your scope, but that might change soon. I know the program has faced political delays, so I'm curious about the opportunities you foresee and how you expect it to develop.

It was important. We have no expectation about any new enrollments from the dual product. We recognize the slow nature of this market. This issue has been discussed at length, and for that reason we have said from the beginning that it's just not something that we prioritize. That said, we are doing enough to demonstrate our readiness to assist the state in its development should they choose.

Thank you for the question. Good morning. My first question is regarding the guidance. You may have covered some of this yesterday, but based on one of your contracts, what are you projecting in the guidance for your consolidated loss ratio across your fixed growth, expansion growth, and any rate changes?

Yes. This is Jeff. You're a little hard to hear there, but I think as I commented in our Investor Day, we're not going to give standalone guidance for Centene. So we'll have to get into that on a combined basis once the transaction closes.

I think you are going to have to see dramatic changes to minimize the opt-out rate. There always will be some, but you can't have a 50% opt-out and have continuity. That has to change.

Thank you. I want to thank you all for your interest, comments, and I look forward to another very strong year. I hope Jeff will be giving the same kind of reports that Bill has. So, thank you everybody, have a good day.