Cigna Earnings Call Nuggets: Budget Sequestration and Medicare Advantage
Matthew Borsch – Goldman Sachs: My first question and I realize this is not the biggest item for you, but as we are moving towards the deadline for budget sequestration, have you referred to that in your guidance and let me just ask I’m sort of calculating that on your Medicare Advantage revenue, which is a little over $5 billion annualized, the sequester would be I guess about $100 million on that, and if you pass through 75% of that, it would be about $50 million after-tax or about $0.05 EPS. Is that all correct and do you have that in your guidance?
David Cordani – President and CEO: First, as you frame the Medicare book of business where you started, when you think about our seniors portfolio, let me go back to the HealthSpring model is based on a model that the reimbursement structure with a vast majority of the physicians are actually tightly correlated to Medicare reimbursement. So the alignment there is very tight. That enables us to be able to flex the model as we go forward and any movement in Medicare reimbursement, point one. Point two, as you know, we have a range with any of our outlook and guidance. And point three is you should look that the range of our outlook and guidance contemplates any reasonable movement from a sequestration standpoint in 2013.
Matthew Borsch – Goldman Sachs: Just on a different topic here. Can you comment on what you’re seeing in the ASO and risk side of the pricing environment and to the extent you see any behavioral change in the industry worth noting as compared to 12 or 18 months ago?
David Cordani – President and CEO: It’s David again. At a macro level I would say no change in overall market conditions, patterns and otherwise, and just to elaborate on that a bit, as we’ve talked in the past, our view is that the marketplace is an appropriately competitive marketplace, and we’ve seen no major change in pattern. I would underscore we continue to see a high demand from employer clients for the more transparent products, health, wellness and incentive based programs and products that bodes well for us. But from the overall macro environment, be it ASO or risk, no major change in posture or pattern in the marketplace.
Josh Raskin – Barclays: Sticking with Medicare Advantage, I was wondering if you could give us an update on – CMS data was a little tough to read, so I’m just curious how your January enrollment membership came out in Medicare Advantage. And then maybe you could give us your expectations around the 45 day notice and anything we should be thinking about there?
David Cordani – President and CEO: It’s David. First is your frame MA, MD&A outlook, as you know from an MA standpoint the legacy HealthSpring model is predominantly focused on or solely focused on the individual MA portfolio of businesses. Two, we are pleased with the early enrollment data and early enrollment success we’ve had. And we expect to see in the early part of the year enrollment in the 5% to 6% range and over the course of the year an overall enrollment pattern of approximately 10% and we are pleased with that both in terms of the overall number as well as the geographic pattern. To the second part of your question, your indicating growth for the 45 day notice is nothing that we would expect based on our knowledge of that, on a retrospective basis, that is I call disturbing and bothersome to expectations for 2013 and we (2012) expectations and assumptions for the 2014 bidding process which as you know will be upon us in the near-term. So good movement in overall membership outlook and enrollment for 2013 both in terms of aggregate as well as geographic concentration and I’d say early insights relative to the 45 day notice no surprises for ‘13 or early indications for ‘14.
Josh Raskin – Barclays: So, David, maybe on that 45 day notice, can you give us an expectation in terms of even a range of what you think the rate will look like all in for 2014.
David Cordani – President and CEO: Sure Josh. I appreciate the question, but I don’t think it’s helpful to speculate in that. As you very well know and as the market knows, we have an inordinate amount of moving parts as a country relative to the overall programs, and I don’t think it’s healthy to speculate at this point in time stepping back from a Cigna, as I mentioned to Matthew’s prior question, the core of the HealthSpring model is a tightly aligned reimbursement structure and then a shared value creation model with the physician community for the benefit of individuals, and we continue to believe that any movement in the marketplace based on changes in regulation reimbursement we will be very well positioned to compete on a relative basis in our chosen markets.
Josh Raskin – Barclays: Right. And I think that’s one of the main reasons HealthSpring’s growth rate was higher in more competitive times in MA, so that’s sort of where I was getting at. I guess maybe just to ask one last one instead of that one is just the minimum MLRs, it sounded like you guys were looking to reposition the book in front of the minimum MLRs for 2014. So, I’m just curious, are you going off of sort of commercial like definition and what exactly did that repositioning mean? Did that mean more generous benefits or how did you do that?
David Cordani – President and CEO: Josh, just directionally and to the core of your question, as you know and the way you asked the question, the final (indiscernible) are now punctuated. So, we step back and we’ve made some assumptions and estimates as I would believe others are doing and using the directional guidance of the conclusions that were made for the commercial market. Taking that as a backdrop, we have a very strong performing book of business. We’ve taken steps, as Ralph noted in his prepared comments, in a market by market basis to step forward in 2013 to prepare for the implementation of those loss ratio thresholds in 2014. And while we are not going to go through market by market or our benefit strategies, you should think in general our approach was to further enriching the benefits for the benefit of our customers in those markets in 2013 that we think is going to bode well for us in ’13 and beyond.
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