Aetna's CEO Discusses Q3 2011 Results - Earnings Call Transcript

| About: Aetna, Inc. (AET)

Aetna (NYSE:AET)

Q3 2011 Earnings Call

October 27, 2011 8:30 am ET

Executives

Mark T. Bertolini - Chairman, Chief Executive Officer, President, Chairman of Executive Committee and Member of Investment & Finance Committee

Thomas F. Cowhey - Vice President of Investor Relations

Joseph Zubretsky - Chief Financial Officer and Senior Executive Vice President

Analysts

Carl R. McDonald - Citigroup Inc, Research Division

Charles Andrew Boorady - Crédit Suisse AG, Research Division

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Peter H. Costa - Wells Fargo Securities, LLC, Research Division

Matthew Borsch - Goldman Sachs Group Inc., Research Division

Doug Simpson - Morgan Stanley, Research Division

Christine Arnold - Cowen and Company, LLC, Research Division

Justin Lake - UBS Investment Bank, Research Division

Scott J Fidel - Deutsche Bank AG, Research Division

David H. Windley - Jefferies & Company, Inc., Research Division

Joshua R. Raskin - Barclays Capital, Research Division

Ana Gupte - Sanford C. Bernstein & Co., LLC., Research Division

John F. Rex - JP Morgan Chase & Co, Research Division

Operator

Good morning. My name is Dave, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Aetna Third Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Tom Cowhey, Vice President of Investor Relations. Mr. Cowhey, please go ahead

Thomas F. Cowhey

Good morning, and thank you for joining Aetna's Third Quarter 2011 Earnings Call and Webcast. This is Tom Cowhey, Vice President of Investor Relations for Aetna. And with me this morning are Aetna's Chairman, Chief Executive Officer and President, Mark Bertolini; and Senior Executive Vice President and Chief Financial Officer, Joe Zubretsky.

Following their prepared remarks, we will respond to your questions. During this call, we will make forward-looking statements. Risk factors that may impact those statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we filed with the SEC, including our 2010 Form 10-K and 2011 Form 10-Qs. We have provided reconciliations of metrics related to the company's performance that are non-GAAP measures in our third quarter 2011 financial supplement and our 2011 guidance summary.

These reconciliations are available on the Investor Information section of aetna.com. Also, as you know, our ability to respond to certain inquiries from investors and analysts in nonpublic forums is limited, so we invite you to ask all questions of a material nature on this call. With that, I will turn the call over to Mark Bertolini. Mark?

Mark T. Bertolini

Good morning. Thank you, Tom, and thank you all for joining us today. This morning, we reported third quarter operating earnings per share of $1.40, a 40% increase over 2010. These results were a continuation of our strong operating performance in the first and second quarters, bringing our year-to-date operating earnings per share to $4.19. Underlying these results, commercial underwriting performance continued to benefit from lower-than-projected utilization, our pricing discipline and our medical cost management strategies. These drivers resulted in the third quarter 2011 commercial medical benefit ratio of 77.8% and year-to-date ratio of 77.5%. Further, our Medicare business posted another strong quarter with a third quarter 2011 Medicare medical benefit ratio of 81.4%.

Based on these results and our outlook for the balance of the year, we have adjusted our 2011 guidance. Our full year 2011 operating earnings projection has increased to $5 per share. Projected net dividends from subsidiaries for 2011 have increased to approximately $2.9 billion, up from our previous projection of $2.6 billion. And we project the year end medical membership of 18.35 million, which includes the acquisition of the Genworth Medicare Supplement members. As we assess our opportunities and challenges in 2012, we are confident in an initial operating EPS projection of at least $4.80 next year. We will provide detailed guidance regarding 2012, including specific operational metrics, at our investor event on December 15 in New York.

In a few moments, Joe will provide more detailed results on the quarter and will review our updated guidance. But first, I would like to discuss our progress in executing against our strategic priorities in the third quarter. I describe our strategy to create shareholder value in 3 dimensions: advancing the core business; emerging business growth; and deploying capital effectively. In discussing the core business, I will focus on the outlook of our Medicare and Medicaid businesses and our strategy for improving our national account value proposition, which are all keys to our growth story.

Our Medicare franchise is a key element of our strategy to advance the core business. Medicare has been a strong growth driver for our business over the last 6 years. Starting from a small membership base of 100,000 Medicare Advantage members in 2005, we have grown this business to serve almost 400,000 Medicare Advantage members and over 400,000 Part D members, generating nearly $5.5 billion in annual premiums. In fact, following the close of the acquisition of Genworth's Medicare Supplement business in early October, we now serve almost 1 million Medicare members. The Medicare product portfolio is diverse and highly competitive. We currently serve 270,000 group Medicare lives. Our group Medicare product takes advantage of our core strengths in marketing, too, and servicing large employers as well as state and local governments to develop solutions that provide quality care while lowering plan sponsor cost.

Within our existing Commercial client base alone, we estimate that we serve up to 1.2 million Medicare eligibles with an opportunity to convert them to a group Medicare product over time. In addition, there's a growing opportunity in state and municipal governments to address their unfunded retiree health obligations, which are estimated to be $600 billion and which are severely stressing the state budgets. We also serve over 125,000 individual Medicare members. These members choose Aetna on the strength of our competitive product offerings in 19 states plus the District of Columbia. With the close of the acquisition of Genworth's Medicare Supplement business in October, we now have a complete product portfolio to serve the needs of this important and growing population. We now serve over 160,000 Medicare Supplement members with product offerings in 39 states and a substantial distribution network.

As seniors age into the Medicare program and as groups seek alternative retiree solutions, we are excited to have a strong Medicare Supplement product to offer to customers.

Finally, for 2012, we have also launched a co-branded Part D plan with CVS. The Aetna CVS Part D plan is available in 43 states and Washington, D.C. and encourages generic utilization by offering a $0 deductible on generic drugs. This plan represents an excellent value for seniors and is another example of how our relationship with CVS Caremark is yielding benefits for our customers and our shareholders.

We are very pleased with the outlook for our Medicare business. After CMS lifted its sanctions in June, we relaunched our Medicare Advantage marketing operations, and are again showing traction in this business. We are confident that our open enrollment season will be a success and project robust membership growth from our Medicare business in the first quarter of 2012.

Turning to Medicaid. We continue to believe this business will be a growth engine for Aetna over time. In the 4 years since purchasing Schaller Anderson, Aetna's Medicaid membership has grown by nearly 500,000 members, including adding more than 250,000 risk members. We now have nearly 1.3 million Medicaid members, which makes us one of the largest Medicaid managed care organizations in the country. We have a leading Medicaid medical management platform with integrated medical pharmacy and behavioral health resources that excels in managing medically complex populations.

Despite our disappointment with certain recent RFP prospects, we have targeted 5 major expansion and rebid opportunities over the next 2 years. We are confident we can win a reasonable share of this membership. These Medicaid opportunities span all products, but we have a particular focus on the aged, blind and disabled and long-term care populations where our medical management approach improves quality of care and lowers overall cost for state governments.

Moving on to national accounts. As we previously disclosed, we've projected national accounts ASC membership will decline in the first quarter of 2012 by approximately 500,000 members. We are committed to improving our national account positioning and performance for the 2013 selling season, which begins in a few short months. We are focusing on improving our network discounts, and we have developed and are executing a local market-level action plan across selected geographies. Our initial results from this initiative are positive and encouraging. As we position ourselves for future success, we continue to work with our provider partners to develop high-quality, low-cost, narrow network options centered around aligned incentives. Our industry-leading service model continues to win awards. For the third straight year, Aetna was recognized by J.D. Power and Associates for providing an outstanding customer service experience through our Aetna One concierge customer service model. In addition, a recent industry survey found that consultants ranked us highest in service among our national account peers. We are also refocusing our marketing efforts. We believe we can improve our sales results by targeting selected customers where our total value proposition resonates. In particular, we continue to emphasize our customized integrated offerings, including our flagship Aetna One product, our narrow network choose and save product and our enhanced Aetna pharmacy management offerings. These innovative offerings increase employee engagement and wellness, while helping employers manage their health care costs. The second dimension of our strategy is to create shareholder value in our emerging businesses. In developing these new enterprise capabilities, we have 3 primary objectives: first, to improve our medical cost structure through innovative provider contracting; second, to increase medical membership and premiums across all of our products; and third, to generate incremental fee revenues from our technology and service assets.

As we execute on these objectives, we are confident that we can leverage these new capabilities and assets to strengthen our core health business. As an example, we are advancing new models of payment reform through our accountable care solutions business. These next-generation risk-sharing arrangements are an evolution of the capitated models of the past. They use Aetna's enhanced information capabilities and intellectual property while aligning financial incentives to achieve superior outcomes. Aetna's unique solutions supply providers with the information and tools necessary to make the shift from fee-for-service medicine to population management. Specifically, Aetna's accountable care solutions tie together a suite of Aetna capabilities that allow provider groups to evaluate and manage risk, including: Medicity, Aetna's leading health information exchange platform, which allows for the secure exchange of health information and can provide a suite of applications that enable physicians to meet meaningful use standards; ActiveHealth, Aetna's leading clinical decision support engine; and Aetna's intellectual property, including our industry-leading care management capabilities and our substantial underwriting and product management experience. Separately, these assets are powerful. Together, they are industry-leading. Our ability to bring a complete set of solutions to market that act as foundational elements for clinical integration and risk management and delivery systems has become a key value proposition that few others can offer. Building on our recent success with the provider systems we have mentioned on previews earnings calls, our accountable care solutions business has a strong pipeline of new opportunities. We are excited about working with providers to offer a variety of low-cost, local-market options, including narrow networks that address the changing needs of consumers, employers and government payers. Provider collaboration is a key element of our strategy for addressing the exchange marketplace in 2014 and beyond.

With respect to the third component of our strategy, deploying capital to enhance shareholder value. At the beginning of the month, we acquired PayFlex and Genworth's Medicare Supplement business. Both acquisitions will enhance our capabilities and strengthen our core business. PayFlex added a next-generation platform for administering consumer-directed fund accounts, and the Genworth acquisition added approximately 150,000 Medicare supplement members and a new administrative platform. The integrations of these businesses and of Medicity and Prodigy are going well. Medicity has a $200 million contract revenue backlog and recently launched the iNexx application store, which allows provider groups and delivery systems to download and install clinical and administrative applications. Prodigy continues to perform in line with our expectations, increasing its membership in the third quarter. Through October 2011, we have deployed approximately $1.6 billion on acquisitions to fuel future growth. Each of our acquisitions is consistent with our long-term strategy. Aetna continues to approach acquisitions with discipline, seeking to add members, fill capability gaps and diversify our business.

In summary, I am pleased with our third quarter and year-to-date performance. I am confident in our strategic direction and execution as we see increasing signs of traction and a return to growth: our updated full year 2011 operating EPS projection of $5, reflecting exceptional performance this year; and our initial 2012 operating EPS projection of at least $4.80. I would like to thank all of our employees for their dedication in meeting the needs of our customers. By focusing on sound fundamentals, creating new approaches to satisfy customers and generating significant excess capital, we believe that we can continue to create value for our customers and shareholders.

I will now turn the call over to Joe Zubretsky to provide insight into our third quarter results and our full year 2011 and 2012 outlooks. Joe?

Joseph Zubretsky

Thanks, Mark, and good morning, everyone. Earlier today, we reported third quarter operating earnings per share of $1.40, an increase of 40% compared to the prior year quarter. On a year-to-date basis, our operating earnings per share were $4.19, a 38% increase over the same period in 2010.

Third quarter operating earnings were $528 million, representing a year-over-year increase of 26% and resulting in a pretax operating margin of 10.7%. On a year-to-date basis, our pretax operating margin was 10.9%, a 200-basis-point improvement over 2010. These results reflect strong performance across all product lines as a result of lower-than-projected utilization and disciplined execution of our pricing and medical cost management strategies. We ended the quarter with 18.2 million medical members, a slight 11,000 member decrease from the end of the second quarter, though there were some positive underlying trends. While Commercial Insured membership decreased by 27,000 members, the decrease was driven by the lapse of an unprofitable student health account with approximately 45,000 members. This decline was partially offset by growth in some of our core commercial lines. Medicare membership increased by 3,000 members in the quarter, a result of adding agents following the end of CMS sanctions. And we also added 19,000 Medicaid members in the quarter with growth primarily in Illinois as we added members under our new aged blind and disabled risk contract.

Third quarter 2011 revenue declined less than 1% year-over-year to $8.4 billion, primarily due to a decline in health care premium, partially offset by higher fees and other revenue. The decline in health care premium included a net decrease in Commercial premium of 1% due to volume declining by 5.5%, partially offset by a 4.5% increase in premium yields resulting from a 4% increase in rates, as well as mix changes related to customer market segment, product and geography.

Health care premium also reflected a 10% decrease in Medicare premium due to lower volume and a 29% increase in Medicaid premium, primarily related to membership gains. With respect to fees and other revenue, higher health care administrative fee yields, including pharmacy benefit management fees from our CVS Caremark relationships and the inclusion of revenues from Prodigy more than offset the revenue impact of lower Commercial ASC membership.

Our third quarter total medical benefit ratio was 78.9%, including $181 million before tax of favorable prior period reserve development. This favorable development included $141 million in Commercial, $22 million in Medicare and $18 million in Medicaid. Third quarter development included $21 million related to prior year medical cost, with the remaining $160 million primarily attributable to the second quarter of 2011. Year-to-date favorable prior year reserve development is now $218 million, which will be a key data point in understanding our 2012 earnings trajectory. On a year-to-date basis, the Commercial MBR, which includes an accrual for estimated minimum MLR rebates, was 77.5%, or 78.7% excluding prior year development. We estimate that less than 20% of our core Commercial pools are in rebates status, and these pools represent between 25% and 30% of the corresponding premiums. Our estimated rebates are highest in our large group business, followed by individual and lowest in our small group business. A high percentage of our rebate exposure is concentrated in just a few of the pools.

On a year-to-date basis and adjusted for favorable development, our Medicare and Medicaid medical benefit ratios were 84.5% and 87.4%, respectively. We continue to invest in our future to capitalize on opportunities for profitable growth and to improve productivity while ensuring that we appropriately serve the needs of our customers. The third quarter 2011 business segment operating expense ratio was 20%, higher than previous quarters but consistent with our historical seasonal spending pattern. The year-over-year increase in the business segment operating expense ratio was the result of the inclusion of Prodigy and Medicity as user fee-based businesses; the settlement of certain contractual disputes within the quarter; increased investment spending, including the open enrollment and marketing initiatives we highlighted last quarter; and lower revenues.

An example of our commitment to improving efficiency is our voluntary early retirement program. In the quarter, we recorded a onetime charge of $137 million pre-tax related to this program, as over 1,700 Aetna employees took advantage of this opportunity to leave the company with an enhanced financial incentive. This charge is excluded from operating earnings, operating earnings per share and all other metrics. We estimate that the voluntary early retirement program will have a favorable impact on 2012 operating expenses of approximately $100 million. These savings will help to offset some of the expense pressures we will experience due to anticipated membership losses in the first quarter of 2012.

The final area of financial performance that I will comment on relates to our investment portfolio and management of capital. Third quarter net investment income on our continuing business portfolio was $148 million, as declining yields continued to create downward pressure on earnings. At September 30, the continuing business portfolio had a net unrealized gain position of approximately $905 million before tax and is well positioned from a risk perspective. As of early October, we estimate our qualified pension plan was approximately 90% funded. In the third quarter, we made a voluntary contribution to our NOW-frozen [ph] pension plan of approximately $40 million after tax, consistent with our plan and original guidance. Based on our current funding status, we will not make any further contributions to our pension plan in 2011, and we are not required to make any contributions in 2012.

Our capital generation was very strong in the quarter. We started the quarter with approximately $100 million in cash at the parent. Net subsidiary dividends to the parent were approximately $975 million. We repurchased 12.8 million shares or $493 million. We ended the quarter with a holding company cash balance of approximately $570 million, which subsequently funded the PayFlex and Genworth Medicare Supplement acquisition in early October and left us with approximately $100 million in parent cash. Our basic share count was 362.3 million at September 30. For the third quarter, Health Care and Group Insurance operating cash flow was $1.2 billion. Year-to-date operating cash flow for these segments was approximately $2.2 billion or 1.4x operating earnings, a very strong performance. With this favorable performance in the first 9 months, we are increasing our full year 2011 operating earnings guidance to $5 per share. Our guidance increase versus the midpoint of our previous range is driven by our positive experience in the third quarter and underwriting margin improvements, partially offset by higher administrative expenses. The acquisitions of PayFlex and the Genworth Medicare Supplement business are projected to be neutral to operating earnings in 2011. Our 2011 projections include a year-end outlook of 18.35 million medical members, which is essentially flat to third quarter ending membership on an organic basis, but includes the acquired Genworth Medicare Supplement members.

We now project a commercial medical benefit ratio of 78.5% to 79% in 2011 and a Medicare medical benefit ratio that is in the mid-80s. Excluding favorable prior year development, our 2011 Commercial medical benefit ratio is now projected to be 79.5% to 80%. Our 2011 Commercial MBR projection reflects the favorable experience reported in the first 9 months and prudent estimates of our minimum medical loss ratio rebate obligation for the full year. Our projection assumes seasonally higher medical expenses in the fourth quarter as more individuals meet their annual deductibles and as flu season begins.

Our 2011 MBR projections reflect underlying medical cost trends that we expect to be 6%, plus or minus 50 basis points, a range that is 100 basis points lower than our previous guidance for 2011. We continue to actively monitor the environment and our experience for indications of an uptick in utilization. We continue to project that medical utilization will trend toward more normal levels in the fourth quarter of 2011 and into 2012. Our current projection is that medical cost trend in 2012 will be higher than our projected trend for 2011.

With respect to the specific medical cost trend categories, our guidance is unchanged except for inpatient costs, trending at mid- to high-single digits, down from our previous projection of high-single digits; and outpatient costs trending at mid- to high-single digits, down from our previous projection of high-single digits. We now project our full year business segment operating expense ratio to be approximately 19.5% to 20%. This revised range incorporates the impact of the previously discussed third quarter items, our recent acquisitions and integration-related expenses, all of which combine to increase our full year ratio by approximately 30 basis points.

We project a full year before-tax operating margin an excess of 9.5%, consistent with our increased operating EPS guidance. Adjusted for favorable prior year development, our 2011 before-tax operating margin is now projected to be approximately 9%. To date, 2011 has been an excellent capital generation year. Our revised full year estimate of net dividends from subsidiaries is approximately $2.9 billion, up from $2.6 billion. After funding our acquisitions and $1.2 billion in year-to-date share repurchases, we project that we will still have approximately $300 million of excess capital available for deployment in the fourth quarter. Our revised full year operating earnings projection is approximately $1.9 billion. Based on our updated estimate of approximately 381 million weighted average diluted shares, we now project full year 2011 operating earnings per share to be $5. Based on our current guidance, 2011 operating EPS will have increased by over 35% from 2010 to $5 per share. As we look toward 2012, there are items that we expect to both positively and negatively influence the year-over-year comparison of operating earnings per share, including the offsetting impact of the following items: the positive effect of repurchasing shares in 2011 and 2012 which would largely offset the favorable impact of prior year reserve development in 2011 that we do not, as a matter of course, project to recur; and the positive impact of the CVS Caremark alliance, which we now project to contribute an incremental $0.15 of operating EPS in 2012 over a better-than-expected 2011 result. This impact will more than offset the projected reduction in net investment income in 2012. We consider our initial 2012 operating EPS projection of at least $4.80 to be a floor on our 2012 operating EPS potential. In giving this early projection, we considered additional factors, including how the experience-rated nature of our Commercial Risk business will naturally result in some margin pressure in 2012, as a portion of the low utilization in 2011 will be reflected in our forward pricing models, driving margins towards our targeted levels. At our Investor Day on December 15, we will update our projections to reflect the increased clarity we will have on 2012 membership and operating margins as we approach the end of the year. I will now turn the call back over to Tom. Tom?

Thomas F. Cowhey

Thank you, Joe. The Aetna management team is now ready for your questions. [Operator Instructions]

Question-and-Answer Session

Operator

Our first question will come from John Rex with JPMorgan.

John F. Rex - JP Morgan Chase & Co, Research Division

So my question just comes back to -- maybe to tailing, Joe, off of what you were just finishing with there. So clearly, rebates, minimum CRs are not the throttle on margins for our industry that maybe anyone thought they would be. It probably goes back to more the competitive market. I think you're kind of alluding to that in terms of just being cognizant of it. So kind of in light of that and the current margin position, maybe I just want to go a little further. So first, if you could just give us more explicitly what you're looking for '12 cost trend outlook, what you're baking in? I think last year, you said you're looking for 8% in '11. And then do you see the ability to price to that, whatever your cost trend you're putting out for '11 -- for '12, or even the desire? And look, I think you were alluding to that in your commentary, so I just want to expand on that a little bit more.

Joseph Zubretsky

Thanks for your question, John. Let me address it this way. First of all, the competitive nature of this business and the fact that most of your commercial risk business is experience-rated means that over time, if you're overachieving on your targeted margins, the margins will revert to the mean just due to the competitive environment. That's fact #1. Number 2, you're right. Favorable experience could end up in rebate pools over time because you have that dynamic at this point. And third part of your question was about trend. We are projecting trend to be higher in 2012 than '11, higher utilization -- we just don't think utilization can stay this low for very much longer, offset by the continuing impact of our contracting initiatives, which has year-over-year produced better unit cost increases for the last couple of years. We expect that to recur in 2012 as well. Offsetting that, you have some onetime items. Next year is a leap year. It has higher days intensity. And if the [ph] buy-downs next year are expected to slow. And COBRA this year had an impact of being a positive influence on trend because of the lower COBRA participation than the prior year. In next year, that will moderate. So I think if you look at all those things combined, we're looking for a slightly increased trend next year, are pricing to that level and forecasting that as well.

John F. Rex - JP Morgan Chase & Co, Research Division

And just to be clear, that slightly increase is off your current 6%, or -- is that correct?

Mark T. Bertolini

John, the way I would think about it is that our current 6%, plus or minus 50 basis points, is the result of looking backward through 2011. However, we have been pricing and have literally 45% of our Commercial book of business priced, and 100% of our Medicare book of business priced already for next year on a member-months basis. So as a result, we've actually got a trend that was somewhat higher during our pricing models and an expected higher trend into next year already into our pricing.

John F. Rex - JP Morgan Chase & Co, Research Division

Okay. So I could expect this kind of still -- based on what you've already done, we should expect that at least a favorable spread of 100 basis points over current trend?

Mark T. Bertolini

It depends on where trend goes next year into our pricing. And we'll have a lot of very detailed guidance at our December 15 Investor Event. We'll go through those numbers.

Operator

And next we'll hear from Ana Gupte with Sanford Bernstein.

Ana Gupte - Sanford C. Bernstein & Co., LLC., Research Division

So following up on the pricing cost story, you said that the MLR rebates are only in large group. And in individual and small group, you're doing mostly okay and it's a very concentrated pool of groups that you have the rebate status. So what exactly is your pricing strategy going in? Assuming you have the 6% plus or minus 50 bps and then you're projecting higher trend next year, are you pricing to MLR floors? Or are there areas where you are above the rebate status, are you actually trying to optimize to the floors? So there's opportunity for you to potentially expand margins given the geographic disparity?

Mark T. Bertolini

At the highest level, Ana, we are pricing to an appropriate trend and margin based on where our book of business is now. We have not changed our pricing strategy. Joe, you can maybe give some of the ins and outs as it relates to this year versus next.

Joseph Zubretsky

I think 2011 is an unusual year in the fact that we had -- we did not have detailed regulatory guidance in how the rebates pools would work until after the business was priced. So here's the way I would think about it: In individual business, as we said, it's the second highest cohort of rebate pools that we have. That will be largely impacted next year by our commission strategy, which will moderate the level of rebates we'll have in the individual line. Small group, it's very small. And in large group, again, the business having been price before we had the regs, next year you'll see us, as Mark suggested, price closer to the minimum and using the rebate capital in pricing rather than paying large rebates. So I think you'll see that dynamic play out next year.

Mark T. Bertolini

And large group is experience-rated on us. So we have to run that through the numbers, anyway.

Ana Gupte - Sanford C. Bernstein & Co., LLC., Research Division

And then following up, what are your competitors doing exactly? Are you seeing them just focusing more on the rebates, and where they're in rebate status pricing down? Or is there more broad competition? And is that varying by the publics relative to the Blues?

Mark T. Bertolini

I would say that we see the pricing environment as competitive but still rational. There are key geographic areas throughout the country that from time to time become aggressive. We attribute some of that to rebate behavior.

Operator

And next, we'll go to Josh Raskin with Barclays.

Joshua R. Raskin - Barclays Capital, Research Division

Question relates to hospital contracting, you guys have made a couple of comments. I know it's a big focus for the company internally. So specifically, as you're re-contracting your hospitals for next year, are you seeing any changes in the terms, first? Two, are you focusing more specifically on that network discount number? And then three, are you seeing -- are you guys projecting a difference in terms of what you expect to pay the hospitals in terms of a rate increase relative to sort of recent historical numbers, i.e., do you think those rate increases are going up or going down?

Mark T. Bertolini

Josh, we are being much more pointed and data-based in our hospital re-contracting efforts. And we have not only opened -- or renegotiated contracts that came up for renewal, but we also opened up other contracts where we felt that we needed to get better discounts. We have been willing and more than willing, along with employer support to take hospitals to term, if we need to. That usually, and most times, results in us coming to better terms on both sides. The discount -- or the actual increase in pricing year-over-year is down this year, and we expect it to be down again next year on a year-over-year basis. And overall, we see the terms of contracts changing as we go after issues like stop-loss coverage and carve-outs.

Joshua R. Raskin - Barclays Capital, Research Division

And Mark, when you -- I'm sorry, Joe, when you say the pricing is down year-over-year, could you just give us a magnitude? Or was your unit cost down 100 basis points this year, and you'll get another 100 next year? Or just any sort of magnitude on that.

Mark T. Bertolini

More to come at the December 15 conference.

Operator

The next question will come from Justin Lake with UBS.

Justin Lake - UBS Investment Bank, Research Division

First question is just around the commercial MLR, and then MLR full world. [ph] Joe, I know you spent a lot of time in kind of spread-sheeting all the iterations of MLR forms. [ph] I'm just curious, by my calculation your commercial MLR guidance if we x out prior year development is right around 79.5%, 80% range. Just curious what you think kind of a bottom number would be or the best possible outcome in MLR full world. [ph] How much upside would remain from kind of the 2011 results in the MLR full world [ph] x development?

Joseph Zubretsky

Justin, as we said, we're not giving detailed guidance for next year at this time, but there's no question that the MBRs that we produced this year were better-than-expected. We do expect, as we said, because of that experience-rated nature of the book, the margins to come back toward their targets over time, which suggest that the MBRs at this level are not sustainable. We'll give detailed guidance on our Commercial, Medicare and Medicaid MBRs at our Investor Day. But as we suggested, sustaining them at this level is just not something we're forecasting.

Justin Lake - UBS Investment Bank, Research Division

Okay, that's helpful. And then just a second question on the M&A environment, we saw the first large kind of public-for-public deal got announced recently with CIGNA acquiring HealthSpring. I'm just curious what you thought of that transaction, whether -- if you can maybe talk about whether you're involved there, and whether you think this would be a precursor to more activity of this kind after not seeing much of it in the last 5 years?

Mark T. Bertolini

Well, I think, Justin, I have been very clear that there's a lot of consolidation going on, not only on the insurance industry but on the health care delivery side. And I would expect and we expect the consolidation will continue going forward here as health reform shakes out winners and losers in the process. As it relates to any specific transaction, we don't comment on rumors or speculation. And we will talk about what we do and not what others do.

Justin Lake - UBS Investment Bank, Research Division

Do you think it will be public-for-public market at this point? Do you think it would be larger transactions? It just seems like what's been going on is the public companies with a lot of cash flow buying smaller, one-off type of deals. Do you think that goes bigger?

Mark T. Bertolini

Again, it depends on the marketplace. And when you've got a few big players left in the marketplace, it really is about willing buyers and willing sellers.

Operator

Next we'll go to Charles Boorady with Credit Suisse.

Charles Andrew Boorady - Crédit Suisse AG, Research Division

My first question is on the impact of the acquisitions that you've made in 2011 on the earnings for 2012. So roughly how much of the $4.80 in 2012 is from full year impact of the businesses you acquired this year?

Joseph Zubretsky

Charles, we're going to give detailed guidance on that at our Investor Day. We plan to show the revenue and profitability profile of the acquisitions we made this year. But let me give you some qualitative guidance. Number one, obviously, the revenues and the EBITDA will be there. Keep in mind there's dragged from the amortization of purchased intangibles and also integration cost, which will continue on into 2012. So the 2012 impact is going to be muted by those 2 factors.

Charles Andrew Boorady - Crédit Suisse AG, Research Division

Got it. And then second question just on commission trends, recent calls I've made with brokers suggest that there's a slower rollout than we originally anticipated, kind of earlier this year, on the concept of customers paying the broker commission directly, which would give you even further opportunity to improve your med loss ratio. Clearly, you didn't need the benefit from that to achieve an excellent loss ratio this year. But is this still something that could potentially drive your loss ratio or reduce the rebate payable even further next year? Or is a slower rollout suggestive that maybe this is not such a good idea after all, and you're not going to push forward with it?

Mark T. Bertolini

Charles, we have fully implemented, and except in a handful of states where we need to do more work in getting them comfortable with specific issues they have with state law -- let me be very clear, though, we are not having employers paying brokers directly. What we have done is we have separated the fee for brokers in the large group space from the premium and had the employers acknowledge that they are a separate fee, which we continue to pay.

Charles Andrew Boorady - Crédit Suisse AG, Research Division

Got it. Are you administering that?

Mark T. Bertolini

We're administering that. So that program continues to move forward. We have fully implemented, it except in states where we have further conversations to have. We have seen slower rollout by our competitors, but we expect you'll see more in 2012. And it will have, based on the fact that we've rolled it out through 2011, a full year impact in 2012 on certain businesses.

Charles Andrew Boorady - Crédit Suisse AG, Research Division

Got it. Are you going to give us more on that on the Investor Day or...

Mark T. Bertolini

Yes, we will.

Operator

Our next question will come from Matt Borsch with Goldman Sachs.

Matthew Borsch - Goldman Sachs Group Inc., Research Division

I want to ask a question about your -- you mentioned the benefit buy-downs. Look, if I heard it right that you're seeing less of that going into 2012, it seems maybe a little counter -- the date is all over the place and not definitive, but we've been hearing employers are making bigger decisions going into next year with health reform having been sort of a paralyzing factor -- not resolved, obviously, but a paralyzing factor in the last couple of years. So just comment on what you see going on there.

Mark T. Bertolini

I think, Matt, a couple of things and I'll have Joe give you the details for this year. But we have actually seen benefit buy-downs start to fall this year versus last year. They were much higher last year. And I would caution you not to just think about benefit buy-downs as an employer cost-shifting strategy but also the premium shift. So employers are asking employees to pay a bigger piece of the premium each month, which is a hidden way within [ph] overall numbers.

Matthew Borsch - Goldman Sachs Group Inc., Research Division

And is that piece more than the cost-sharing at the point of care that's slowing?

Mark T. Bertolini

It is -- no, it's the piece of benefit buy-downs that are shifting. We are not seeing as high level of benefit buy-downs this year as we did last year.

Matthew Borsch - Goldman Sachs Group Inc., Research Division

And would you say, is that a factor in your view of higher utilization in 2012?

Mark T. Bertolini

I don't understand your question.

Matthew Borsch - Goldman Sachs Group Inc., Research Division

Well, I mean, in other words, if the benefit buy-downs historically -- by increasing benefit buy-downs, that tends to retard utilization demand to some extent. If you're getting less of that, does that mean that, that might mean, on the margin anyway, that, that would be a factor leading to more utilization demand?

Mark T. Bertolini

No, I think employers are seeing -- no, because if they're doing premium sharing, you're still getting the same effect. Over the last 4 years, employers have handed off 50% of the increase in health care cost to their employees, but it's been through benefit buy-downs and premium sharing. And so they're getting the same effect. The question is whether or not ,as they look toward health care reform, whether or not their benefits can pass the tests they need to pass, and whether or not their employees will continue to stand for cuts in benefits.

Matthew Borsch - Goldman Sachs Group Inc., Research Division

Okay. Great. Let me just -- one last follow-up. Is there any specificity on the pricing that you can give us in terms of which geographies you see as more competitive?

Mark T. Bertolini

No.

Operator

And next we'll hear from Kevin Fischbeck with Bank of America.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Joe, you mentioned earlier that you expected the Commercial margin to revert to the mean over time. I guess, when you think about that for Aetna, what are sustainable margins, either on an operating margin basis or on an MLR basis, in the Commercial business?

Joseph Zubretsky

What we're saying, Kevin, that based on our current product and revenue mix, and then customer segment mix, that high single-digit is our target. Obviously, with the performance in the first 3 quarters of the year and our projected performance in the full year, we've overachieved that. We're at the very high end of that range. So right now, we're sticking with our prior forecast that high single-digit margins at our current mix is our target.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Okay. And then just give a little more color about the experience-rated nature of the book. Can you be more specific about what percent of the book does that relate to? And how exactly as far as timing go does that flow back through the numbers as we think about mean reversion?

Joseph Zubretsky

I think the best way to think about it, it's really anything with a 100 lives or above has some element of experience rating, which is a substantial part of the commercial risk and the government risk business. It could take a pricing cycle or two. But like I said, over time, as a quote goes into the market, you're overachieving your target margin, someone is going to come after that business at an 82%, 83% MLR. And if you're producing 80%, you have to move up. As long as you're hitting your target margin -- that's what we've said, over time, you would be willing to lower your price to that target if the competitive forces get you there.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Okay. And then, lastly, just following up on the previous commentary about benefit buy-downs and things like that. It sounds like a lot of what you're doing in the provider re-contracting is around narrowing the networks. And I guess, do you feel like the change that you're seeing as far as employers shifting to premiums rather than benefit buy-downs and maybe embracing the narrower network, I mean, are we -- does it feel like we're about to see a change in how people are buying things and how we end up structuring projects -- products. Is there going to be an increasing move to this narrow network product? I mean, we've been talking about it, I guess, for a while now. But does it feel like what you're seeing in those trends points more in that direction than we have in the past, or is it still an evolving marketplace?

Mark T. Bertolini

It is still an evolving marketplace but we see a lot more interest in narrow networks and focused concentrations of membership going to certain institutions, and employers being willing to make that tough choice, because if it's a trade-off with price and their employees are using that institution anyway, we can provide a much more affordable product. And so our whole accountable care solutions strategy is built around creating those kinds of networks for both the future of exchanges in 2014 and beyond, but also the huge leverage it gives us on the core business by linking these accountable care networks across the country for our national account employers and for regional employers.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

So how much of that improved pricing on a unit cost side is a function of actual pricing year-over-year for the same provider versus maybe narrowing the network and shifting to more cost-effective providers?

Mark T. Bertolini

It's a mix of both.

Operator

Next we'll go to Peter Costa with Wells Fargo Securities.

Peter H. Costa - Wells Fargo Securities, LLC, Research Division

If I look at the improvement in your MLR in the 3-month period versus in the 9-month period, it was fairly similar for the 9-month period, excluding PPD, for all 3 of your product lines, ranging from sort of 2.5% to 3% -- 300 basis points, whatever. But if I look at it for the 3-month period, the Commercial MLR didn't improve by quite as much. Would you attribute that more to pricing of your small group business, more rebates in the quarter or higher utilization in the quarter?

Mark T. Bertolini

I would say we haven't seen higher utilization, but we have been, as we said, appropriately using rebate pools into our pricing models as we go forward into 2012 -- but not for to 2012 pricing, but for 2011 effect. And so we have had cases where we've given premium holidays, et cetera, to employers as part of renewals going into 2012.

Peter H. Costa - Wells Fargo Securities, LLC, Research Division

So more in the rebates, as more of your businesses improve there. So where do we max out in terms of the improvement in the Commercial book, in terms of rebate status?

Mark T. Bertolini

Well, at some point in time -- and it depends again on all the pools that we manage, and we only have a few pools that are in rebate status. It depends on where it happens and when it happens. We've also seen trend falling [ph] throughout the year, and we've also been rolling off of our 2010 pricing that we put into last year as that full year effect comes out of our pricing from last year. So it's having an impact on our pricing models across the whole business.

Joseph Zubretsky

Peter, I wouldn't read anything more into it than we had a very, very good Medicare quarter, outstanding underwriting results.

Operator

And next we'll hear from Christine Arnold with Cowen.

Christine Arnold - Cowen and Company, LLC, Research Division

First question is, could you help me with ACOs? Put a little meat on the bones in terms of what kind ASO fees could you see from this, over time? What kind of discounts are you achieving as you implement this in selected markets? Just a little bit of maybe anecdotal evidence that this is producing some kind of an earnings impact and revenue impact over time? And then also -- if I look at SG&A cuts, you're going to have a $100 million from early retirement program, $57 [ph] million next year from lowering SG&A relative to marketing and advertising. Are you to grow Medicare Advantage? Probably adds about $200 million? And that's also the difference between a 9% margin and an 8% margin in Commercial. So they roughly offset each other. Is that the right way to think about things? Am I missing anything else in terms of the pluses and minuses relative to what you've given to bridge us from 2011 to 2012?

Joseph Zubretsky

Christine, this is Joe, there's like 3 or 4 questions in that question. Let me just take it one at a time. First you asked about ACOs, and I think Mark was really clear about our strategy. I'll put an exclamation point on it. The strategy with ACOs is really to enhance the value of the core business. And we think, by bringing our health information technology tools and Aetna's intellectual property, do we actually help an integrated delivery system engage in the management of the patient population rather than episodic health care is the wave of the future. When you do that and engage them in that, they will enjoy the revenues and fees from delivering those services. But more importantly, we will negotiate what we hope to be a best-in-market provider contract with gain sharing and risk sharing. Off of that contract, we will launch Aetna branded, facility branded or co-branded commercial Medicare and Medicaid products. But the entire ACO strategy is around cost containment, medical management, provider behavior change to grow membership and profitability for the core enterprise. That was question #1. Can you remind me of your second question please?

Christine Arnold - Cowen and Company, LLC, Research Division

Well, I'm thinking about the pluses and minuses to bridge us from '11 to '12. And you did a great job saying we've purchased and offset PDP and CVS has offset investment income. SG&A $100 million from your early retirement program. You got $57 million you're incrementally spending second half in marketing and advertising. I guess you're like $160 million -- you're growing MA. So that gets you to like $200 million. That roughly offset 100 basis points in lost Commercial margin. Does that capture the big pluses and minuses that bridge us from '11 to '12 or am I missing some pieces?

Joseph Zubretsky

The pluses and minuses we gave you in our prepared remarks, I think, are important to understanding that year-over-year bridge at this preliminary and early stage. We'll give you a lot more detail on December 15. But the $218 million of prior year reserve development is $0.37 right there. And if you look at our share repurchase activity this year, projected share repurchase potential for next year, you could largely offset that development with a lower share count. And then the incremental CVS Caremark revenue and fees will probably be offset by lower net investment income. Our book yield is going to go about 4.8% to 4.4% year-over-year just due to the very, very low-yield environment. So all those things really net off. And then obviously, we're giving a prudent outlook for 2012, given that it's early to look at membership. National accounts is all we really know at this stage. We don't know about Medicare. We certainly don't know about Commercial. And we want to look at a couple of more months to really see where trend settles for 2011 so that we could give you a clearer forecast on medical trend for 2012 on December 15. So the items that we gave year-over-year largely offset each other.

Christine Arnold - Cowen and Company, LLC, Research Division

What about the SG&A? Is $160 million a reasonable number from those 2 items?

Joseph Zubretsky

I think the $100 million of impact on the early retirement we gave for next year is going to help offset the negative fixed cost leverage from losing some of the membership that we're going to lose early in the year.

Operator

The next question comes from Scott Fidel with Deutsche Bank.

Scott J Fidel - Deutsche Bank AG, Research Division

So just sticking on this topic of membership views for 2012. I think last quarter you had signaled hopes that you may be able to grow Commercial risk in 2012. And just interested if you have an update there, now that clearly we have a lot more pricing and accounts closed in the selling season?

Mark T. Bertolini

We will give guidance on 2012 on December 15. However, we are pleased with our third quarter Commercial risk membership growth, particularly in the middle market.

Joseph Zubretsky

Just to give you maybe a little more color on that, we did say there was 27,000 negative in the Commercial risk line. 45,000 of that was a very low premium and very unprofitable student health account, so there's actually 18,000 Commercial risk membership growth in the quarter. And the middle market business did very, very well, offset by some small declines in small group. So it looks like our middle market business really has turned the corner and starting to produce results for us.

Scott J Fidel - Deutsche Bank AG, Research Division

Got it. And then just directionally around in-group attrition trends, there have been a lot of cautious comment from a number of the commercial players in terms of the potential for that to potentially intensify, given the stagnant economy. But frankly, just so far in the third quarter, it looks like most of the MCOs have been beating on commercial enrollment. So should we imply from that attrition or in-group trends have been relatively stable in the third quarter?

Mark T. Bertolini

Attrition has been stable pretty much throughout all of 2011.

Scott J Fidel - Deutsche Bank AG, Research Division

Okay. And then just I was interested if you could maybe give us a preliminary look on how sales of the co-branded CVS product are performing so far in the open enrollment season for [indiscernible].

Mark T. Bertolini

Way too early.

Scott J Fidel - Deutsche Bank AG, Research Division

Okay. Then just one quick numbers one. Joe, can you just spike out, in terms of these contractual dispute settlements that you mentioned were included in SG&A, how much the dollar amount was for those?

Joseph Zubretsky

We're not giving the specific dollar amount, but about 1/2 of the increase in the full year outlook in the SG&A ratio is related specifically to those contractual disputes.

Operator

Next we'll hear from Carl McDonald with Citi.

Carl R. McDonald - Citigroup Inc, Research Division

I was interested in the trajectory of cost trends this year. So you ended 2010 with around a 7% cost trend. You're talking now about 5.5% to 6%. After you go back and reallocate the development, should we think about cost trend starting in the first quarter at 6.5% or 7% and coming down over the year? Or has it been relatively stable throughout 2011?

Joseph Zubretsky

It's been declining steadily over the year. A couple of facts, when we you look at what we call core trends, just broad-based utilization across all medical cost and care categories, has been steadily performing favorable to our expectations throughout the year. In addition, the flu season was slightly lower than we thought. COBRA coming in better than we thought. And the last point that we would make on the trend coming down year-over-year is many of the increases in preventive services, due to the federal mandates, they came in far more favorable than we originally expected. So core trend coming in more favorable. And then all those artifacts that do influence trend coming in much better than expected steadily over the year, which has caused us to step down our trend guidance throughout the year.

Carl R. McDonald - Citigroup Inc, Research Division

Got it. And then the second question on the Medicaid business, as you've done the postmortem on some of the recent RFPs, any common factors that stand out in terms of some of the lack of the success in winning the business?

Mark T. Bertolini

Not really. I think each situation is in and of itself. I think we expected in the Texas situation that we'd see some changes in Houston. We didn't get them, and that's where we sort of banked our opportunity. In Louisiana, we have been contesting the whole purchasing process there and continue to push on that.

Operator

The next question comes from Doug Simpson with Morgan Stanley.

Doug Simpson - Morgan Stanley, Research Division

A lot of my questions have been answered. But maybe just following on the employers' interest in benefit coverage, to what extent do you see interest in moving more towards defined contribution models? You talked about premium cost shifting. But to what extent do you see evidence that they want to go to a more defined contribution model? And how do you kind of position for that?

Mark T. Bertolini

We've heard a lot of talk. We've actually engaged employers in very detailed discussions about what it would take to do it. But we haven't seen anybody really interested in pulling the trigger yet.

Doug Simpson - Morgan Stanley, Research Division

Is there anything -- any capability would feel you need to add, specifically to be able to handle that if that became more prominent as we get into the, call it, 2013, 2014 timeframe? Or is it kind of tweaking the process around the edges that you have in place now?

Joseph Zubretsky

Doug, the problem with defined contribution as a concept, sort of concept versus reality, is really the issue of trend. It's all about arresting the rate of growth of medical cost trend because that trend has to go somewhere. It has to go to the employer. It has to go to the employees. It has to go to our margins. Or it has to go to the provider. So we believe the game-changing event here is bringing the providers into the relationship, collaborative care, accountable care and being able to take the trend, spread it out amongst all parties, have gain sharing and risk sharing because it's really the issue of trend. Where does it actuarially go? And it can't go all to the employees because with the cost share at 70-30, if all the trend goes to the employees, the premium increases are unaffordable. That's the nascent issue. And so it's really a question of cost containment and control. We think ACOs will be a big help toward employers being able to synthesize a defined contribution product.

Doug Simpson - Morgan Stanley, Research Division

Okay. And then you talked a little bit in the prepared comments about the provider discounts. You've noted some success you're seeing in certain geographies. Any incremental color on maybe where some of those geographies are? I don't think you gave specifics on that.

Mark T. Bertolini

No, not at this time. I mean, we will cover a little bit more of this when we talk at our investor conference. But we've actually looked at our book of business and the markets that we want to compete in, not only now, but in the exchange environment post 2014 and have really targeted those markets -- we call it "market optimization" and focusing on those places where we can have the greatest leverage.

Doug Simpson - Morgan Stanley, Research Division

And how much does that discussion focus on not just discounts but the actual price at the end of the day and thinking about cost disparities within a given MSA? I mean, obviously, in certain procedures you can see a pretty wide variation within a given area. How focused are you on trying to bring some equivalents across different providers when you think about it by treatment?

Mark T. Bertolini

I think that is part of our whole rollout of our health information technology platform in having consumers -- have much more available information and transparency to drive that disparity away over time. We ultimately believe the total cost/value equation makes a big difference. Obviously, this market is very focused on discounts at this point in time, so we're straddling those 2 lines as we have that conversation. But the narrow network models that we are evolving are very definitely focused on that price disparity between systems.

Operator

Our final question will come from David Windley with Jefferies.

David H. Windley - Jefferies & Company, Inc., Research Division

With the removal of the sanctions in Medicare, is your thought there to primarily grow organically? Is an acquisition of a supplement book enough from an acquisition standpoint? Or do you have an appetite to acquire more in MA?

Mark T. Bertolini

We believe Medicare Advantage is a very important market for us, and Medicaid for that matter. But Medicare Advantage continues to be an important market for us, as well as the whole Medicare mix. I mean, by -- over the next 20 years, the baby boomers will all turn 65. And so that's a very important trend that we cannot ignore. The Medicare Supp business acquisition was important to us. We believe that we have strong organic growth in some markets, and we'll show that in the first quarter 2012. And as it relates to acquisitions, again, they're on the table. We're always looking. We're always checking. But we really don't comment or speculate until we actually have a deal on hand.

David H. Windley - Jefferies & Company, Inc., Research Division

Fair enough. Your views of ACOs, I think, if I interpret your comments correctly, you're really kind of thinking about lowercase ACO, not necessarily Medicare-only definition. But I guess, I'm wondering to the extent that it does, obviously, overlap with Medicare, do you need a bigger Medicare book of business fairly rapidly to leverage what you're trying to do in ACOs?

Mark T. Bertolini

No, we don't think so, and I think your observation is a good one. Our entire ACO is smallcase letters. It's aimed at the commercial market because providers know they have to change the way they practice. The regs that just came out on the federal ACO, with capital letters, just gives us another opportunity. If we can go into a market and develop an ACO-like arrangement, and it meets the federal criteria, then we not only have access to Medicare Advantage lives, we now have access to Medicare fee-for-service lives, which is just a whole -- another 50% of the whole market might become available to us to generate some fee income.

David H. Windley - Jefferies & Company, Inc., Research Division

And Mark, to your last -- very last comment to Doug's last question on the price differences among systems, there was an article about some of the price transparency platforms and cash like [ph] in particular. Would you be willing to delve in a little bit, put a little bit more meat on the bone around how you're using price transparency?

Mark T. Bertolini

Sure. We publish for virtually all of our markets now the prices, the actual prices we pay providers and have negotiated with them for their top 30 procedures in each of their practices. And it's available to our consumers online for free. And we also can now realtime auto-adjudicate a claim on a smartphone at the doctors office, by the consumer or the provider should they choose to do that, because we've now been able to create realtime auto-adjudication connection mobilely. [ph] The real issue, the ultimate issue here is whether or not people have the incentive to use it. And I think that's where plan designs and the accountable care organizations and how they link to these platforms -- that's why we bought Medicity, will create people's ease-of-use in using the system and using this technology to make decisions at the point-of-sale. And that's ultimately where this needs to head. As it relates to third-party vendors, they have a tougher row to hoe because they actually have to integrate with other platforms over time. Just pure price transparency in and of itself, which we've had for more than 5 years, isn't necessarily effective.

Thomas F. Cowhey

A transcript of the prepared portion of this call will be posted shortly on the Investor Information section of aetna.com, where you can also find a copy of our updated guidance summary, continuing details of our guidance metrics, including those that were unchanged and not discussed on this call. As previously mentioned, on December 15, we'll be hosting an Investor Conference in New York City. We will be providing you with more details on how to access this event over the coming weeks. If you have any questions about matters discussed this morning, please feel free to call me or one of my colleagues in the Investor Relations office. Thank you for joining us this morning.

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