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Executives

Michael Kleinman - Vice President of Investor Relations and Acting Vice President of Internal Audit, Ethics & Compliance

Angela F. Braly - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

James G. Carlson - Chairman, Chief Executive Officer and President

Wayne S. Deveydt - Chief Financial Officer and Executive Vice President

James W. Truess - Chief Financial Officer and Executive Vice President

Analysts

Scott J. Fidel - Deutsche Bank AG, Research Division

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

Justin Lake - JP Morgan Chase & Co, Research Division

Christine Arnold - Cowen and Company, LLC, Research Division

Matthew Borsch - Goldman Sachs Group Inc., Research Division

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Charles Andrew Boorady - Crédit Suisse AG, Research Division

Carl R. McDonald - Citigroup Inc, Research Division

Melissa McGinnis - Morgan Stanley, Research Division

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

AMERIGROUP Corporation (AGP) WellPoint's Pending Acquisition of Amerigroup July 9, 2012 8:00 AM ET

Operator

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

Michael Kleinman

Good morning and thank you for joining us today. This is Michael Kleinman, Vice President and Chief of Staff of WellPoint. With me this morning are Angela Braly, our Chair, President and Chief Executive Officer; and Wayne Deveydt, Executive Vice President and Chief Financial Officer. Also joining us are Jim Carlson, Chairman and CEO of Amerigroup; and Jim Truess, Amerigroup's Executive Vice President and CFO.

As you're now aware, we are here this morning to discuss details of WellPoint's announced pending acquisition of Amerigroup. A slide presentation that you can use to follow along with our prepared remarks is available on our website, www.wellpoint.com under the Investor's tab. Angela will begin with an overview of this transaction and then expand on the strategic rationale. Jim will then provide some additional perspective, followed by Wayne, who will review the financial aspects of the transaction. After Wayne's remarks, we will hold a question-and-answer session. Both WellPoint and Amerigroup will be making some forward-looking statements on this call. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of WellPoint and Amerigroup. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review the risk factors discussed in today's press release and in our respective quarterly and annual filings with the SEC. I will now turn the call over to Angela.

Angela F. Braly

Thank you, Michael, and good morning. Today we are very pleased to announce that WellPoint and Amerigroup have entered into a definitive agreement through which WellPoint will acquire Amerigroup, merging together 2 of the nation's leading health benefit and managed care organizations with a common goal of creating better, more affordable health care for our customers and more value for our shareholders. This acquisition will advance WellPoint's leadership in the high-growth, government-sponsored managed care marketplace, broadening our Medicaid footprint to include 19 states that have nearly 60% of the nation's overall Medicaid enrollment.

We expect our combined expertise and capabilities will significantly accelerate our future growth in multiple segments of this business. We will have a presence in 13 states with significant dual eligible opportunities, including a leading presence in the 4 largest states that have combined over $100 billion in annual dual eligible spending. The acquisition also advances our capabilities to serve the needs of seniors and persons with disabilities and the long-term services and support market and will also enhance our competitive positioning in future health insurance exchanges. The transaction will double our proportion of state-sponsored membership and provide us with new opportunities to improve the quality of care for millions of beneficiaries of state and federal health programs. We expect it to be accretive to earnings per share in the first year, including onetime transaction and integration cost and also provide a strong, long-term return on our investment.

Let me briefly review some important elements of the transaction. As described in today's press release, WellPoint will acquire all of the outstanding shares of Amerigroup for $92 per share in cash. This equates to a value of approximately $4.9 billion. We will be financing the transaction with cash-on-hand, commercial paper and new debt issuance. The transaction has been approved by the boards of both WellPoint and Amerigroup, and will now require approval from Amerigroup's stockholders. Customary filings will also be made with the SEC, various state insurance departments and the federal antitrust agencies under the Hart-Scott Rodino Antitrust Improvements Act. We expect the transaction to close by the end of the first quarter of 2013.

Upon closing, Amerigroup will operate as a wholly-owned subsidiary within WellPoint and will remain dedicated to effectively managing state-sponsored programs and further expanding this business. We're pleased that the key members of Amerigroup's management team, including Jim Carlson, will remain with WellPoint [Audio Gap].

So let me spend a moment on why this is the right time to combine with Amerigroup, as this is an important topic that our senior leadership team, Board of Directors and I have diligently considered over the last few weeks and months.

We recognize that the pure play Medicaid managed care companies, including Amerigroup, are currently trading at a premium valuation relative to historical levels, which reflects the potential growth in the markets that they serve and the new markets that are emerging. As we've discussed in the past, many state governments are facing significant budget challenges as they strive to provide access to health care for their most underserved residents. We expect states to take varying approaches to address these challenges, which will lead to more managed care solutions and innovative programs to serve those who are eligible for both Medicare and Medicaid. We've carefully evaluated these issues and the marketplace, and are confident that now is absolutely the right time for this compelling opportunity.

First and foremost, there are significant growth opportunities ahead in the Medicaid marketplace. Those resulted

[Audio Gap]

traffic and budgetary issues, as well as healthcare reform. The evidence that Medicaid managed care is a more effective way to manage what has become one of the largest expenditures for states is quite compelling. More and more states are adopting managed care strategies, not only for their traditional TANF population, but also for chronically ill populations and long-term care services. Many of these opportunities are emerging rapidly, including several related to serving dual eligibles.

Amerigroup is the right partner to most effectively capitalize on this future growth potential, and by moving forward now, we're confident we will have the leading value proposition in place to serve these opportunities.

Let me switch gears and focus on the unprecedented growth we see on the horizon in the Medicaid marketplace. Managed care remains significantly underpenetrated in this area, with less than 1/4 of our nation's Medicaid spending currently in a comprehensive managed care environment. To create more value for state government and their program beneficiaries are not only abundant but necessary. We expect Medicaid spending under managed care programs to increase by nearly $100 billion by the end of 2014. These opportunities will develop organically in addition to the Medicaid eligibility expansion under healthcare reform. From a near-term perspective, the Medicaid managed care procurement pipeline has been sized at approximately $50 billion from 2012 through 2014. Amerigroup is off to a positive start in several of these RFPs, with recent contract awards in Texas, Louisiana, Washington and most

[Audio Gap]

Amerigroup is also well positioned for several upcoming expansion opportunities including in some of our Blue-branded states. The long-term services and support marketplace is an underappreciated growth opportunity and is an area where our combination with Amerigroup truly blends some of the best capabilities of both companies. Amerigroup has leading, long-term services and support programs and deep experience serving special needs members, frail seniors and people with disability. Combining these assets with our CareMore services and care management model further enhances the ability to serve high acuity members. Our CareMore and Senior business expertise also more effectively positions our combined organizations to serve the dual eligible marketplace.

The dual eligible expansion opportunity is tremendous and was the driving force for this transaction. Recent estimates have indicated that approximately 9 million people who are dually eligible for both Medicare and Medicaid today account for approximately $300 billion of annual health care spending. Our belief is that to appropriately meet the health care needs of this population while also reducing cost trends for state and federal governments, health plans need robust capabilities in 3 critical areas: first, a strong senior business. We are one of the largest benefit providers in this segment, with nearly 1.5 million senior medical members and 1.2 million Medicare Part D members. Second, a leading Medicaid platform. Our combined organization would now have the largest Medicaid enrollment base with more than 4.5 million members. And third, a high touch care management model that can effectively identify, engage and coordinate care for high acuity members. Our companies will be able to execute more effectively and efficiently in this area by combining our respective special needs programs and CareMore capabilities.

The dual eligible initiatives are providing an adjacent cumulative effect in the Medicaid seniors and persons with disabilities, or SPD, and long-term service and support or LTSS market. This is one of the most significant opportunities to improve value in the entire Medicaid system, representing an estimated 15 million lives, many of whom are dealing with chronic or highly acute medical conditions in an unmanaged fee-for-service reimbursement environment. Amerigroup has 5 long-term service and support programs today. Their model is scalable, cost efficient and synergistic with our CareMore capability. CareMore has been particularly successful improving the quality of care for their most fragile senior members and we believe their success in the Medicare market will be replicated in Medicaid and other business lines. CMS is currently working with more than 2 dozen states on initiatives to more appropriately manage the care for beneficiaries of various SPD and LTSS-related programs, which will provide even more opportunities to contribute to the success of this transaction.

We expected accelerating growth from this acquisition even without the changes associated with healthcare reform and we anticipate that the overall Medicaid market will expand by up to 15 million people beginning in 2014. Over half of this expansion will occur in our 19 combined Medicaid states. We project that 29% of the population in our 14 Blue markets will be eligible for Medicaid in 2014 based on their current income level. Another 15 million individuals are expected to obtain coverage through health insurance exchanges beginning in 2014, driven by the availability of tax subsidies for people at certain income levels. We estimate that 38% of the population in our Blue markets will be eligible for these subsidies based on their income level.

While WellPoint is already uniquely positioned for this movement given our strong brand name, leading market shares, valuable provider network relationships and underlying cost advantages, the addition of Amerigroup increases our flexibility to meet market demands as individuals migrate to and from commercial and Medicaid products. As members' income fluctuates across eligibility thresholds, we'll be there to help them move between any product, public, private or subsidized. This provides members with health security, improves quality of care and reduces administrative cost across all the product lines.

Let me reiterate that point. No matter where growth comes from in the future, whether in the employer, individual or government sectors, WellPoint will have one of the best platforms and brands to be able to capture that growth. That's part of the reason we believe that Amerigroup is the right partner for WellPoint to advance our future growth strategy. Amerigroup has the best Medicaid managed care platform and the best management team in the industry. In addition to a strong legacy of creating value for traditional Medicaid programs such as TANF and SCHIP [ph] Amerigroup is a leader in serving high-need populations, with approximately 40% of its revenues coming from SPD, LTSS, Medicare Advantage and dual eligible members. Furthermore, while revenue has grown rapidly at a compound annual rate of 13% over the last 4 years, the company is expanded with discipline and been thoughtful in selecting which RFP opportunities to pursue.

As I mentioned earlier, this acquisition expands and diversifies our Medicaid footprint to 19 states on a combined basis. Our business would be almost entirely fully insured in 17 of these states, and we would continue to provide administrative services in 2 states. Approximately 30% of Amerigroup's membership resides in our Blue states. The transaction brings us an important Medicaid presence in the Texas, Florida and Georgia markets, and expands our existing service areas in New York and Virginia. We expect several of these states to consider traditional Medicaid and dual eligible managed care expansion in the near future. Across the entire combined footprint, we will have a presence in 13 states with near-term dual eligible opportunities, representing a potential revenue opportunity of nearly $16 billion. We will be in a leading position in the top 4 dual spending states of California, New York, Texas and Florida. We will soon be opening CareMore facilities in New York, which will further enhance our positioning in that state's demonstration project. Across all 19 combined states, we estimate that state government spending on a -- on dual eligible programs comprises more than $180 billion.

Amerigroup has a consistent track record of excellent customer service, strong clinical care management and deep provider collaboration. This in turn has forged strong and valued relationships with various federal, state and local governments. Our companies have similar cultures and values, both centered around improving access to and affordability of health care. We know and appreciate that lowering cost for states while improving the quality of care for program beneficiaries is a winning proposition for our company, our associates, our shareholders and the entire health care system. Given the strength and

[Audio Gap]

and shared interest we all have in creating a better health care experience for millions of Americans, I'm confident that we will successfully execute our integration goals and achieve our future growth targets. Key members of the Amerigroup team will be remaining with the company to help us achieve our goals. We have entered into employment agreements with Jim Carlson, Jim Truess and Dick Zoretic, and look forward to working with them and many other senior Amerigroup leaders over the next several months and years. I'm very excited to welcome this team and the approximately 6,600 Amerigroup associates to WellPoint. With that, I am now pleased to turn over the call to my colleague, Jim Carlson, for his comments. Jim?

James G. Carlson

Well, thanks, Angela. First, let me say how excited I am about this opportunity. This is a tremendous opportunity. I'm excited for our associates, our members, our investors and the states we serve. We've talked for quite a while about the growing acceptance of the value proposition for Medicaid managed care. It's not simply because we can save the states money. It's because we can make health care more accessible and with better quality than ever for Medicaid recipients. It's because we can help seniors and people with disabilities, who are not always patients, have control of their care and live more independently than they did before enrolling in our program. It's about partnering with the

[Audio Gap]

Medicaid recipients and providing the tools and resources to make their work better. Today's health care arena is more transformative than ever and companies must have broad capabilities to succeed. This combination brings together 2 premier organizations with the common goal of creating better health care quality and access at more affordable prices for our customers, whether they're individuals or taxpayers.

In 14 states, WellPoint has the most powerful brand in the healthcare industry, and we are looking forward to adding our -- our experience and reputation to their capabilities. I don't think you'll see the scale, sophistication or dedication anywhere else in the market.

In Amerigroup and WellPoint, you have 2 companies who work, live, and breathe our local markets. We know the business community, we know the government and regulators, we know the infrastructure, and most importantly, we know the specific problems facing our communities and members. This gives us unmatched insight on a very local and even personal level. So when we talk about the opportunities like the dual eligibles, the experience, knowledge and the assets we have already deployed in the ground give us tremendous advantage. Both companies were positioned to compete well in this dynamic place -- marketplace before, but with complementary resources and a 19-state footprint, we're really going to thrive. The same holds true in the exchanges. It's a consumer market and you can't approach it simply from a national or macro level. You need to know the local communities and the consumers who live there. Our intimacy with low-income families and their interaction with health care will help position us for those who move between Medicaid and the subsidized exchange offering. We built our company with these capabilities and we've been very successful. Similarly, WellPoint's Blues have been the model for how to succeed at doing this for over 75 years. So I think this is an absolutely astounding merger -- outstanding merger for both companies and for many, many reasons. But I'll stop there and just say we are all focused on simultaneously closing this deal and fulfilling our business commitments. And then we can start executing and showing all of you what we know we can accomplish together. I will now turn the call over to Wayne to discuss the financial details of the transaction.

Wayne S. Deveydt

Thanks, Jim. Let me start by saying I also think this is an outstanding transaction for our members and for our shareholders. Together, we further extend our leadership in the government-sponsored business and create the leading Medicaid managed care company in the industry. On a pro forma basis, our combined company will have more than 4.5 million Medicaid members, and Medicaid-related revenue would exceed $12 billion in 2012. This acquisition expands our scale and further diversifies our business mix by deepening our investment in the high-growth

[Audio Gap]

As a percentage of our overall enrollment, Medicaid will increase from about 6% today to 12% when the transaction closes. This increases the flexibility we have to serve customers across the economic spectrum, whether they qualify for Medicaid, Medicare, exchange-based subsidies or continue to be served through one of our group or individual products.

The acquisition will significantly enhance our future revenue and EPS growth profile. In fact, Amerigroup's revenue is expected to more than double over the next 5 years. Adding our CareMore capabilities, our broad Senior business experience, our leading positions in the individual and commercial markets and our strong capital position will further enhance our combined revenue opportunities. On a pro forma basis, our company would be providing healthcare benefits to approximately 36.4 million members or more than 1 in 9 Americans. We will also serve 1 out of every 12 Medicaid recipients, including nearly 1 of every 5 in a comprehensive Medicaid managed care plan. Our combined enterprise-wide revenue would exceed $70 billion in 2012. This will be supported by competitively low SG&A expense ratio that we believe is industry-leading for comparable books of business.

We will also continue to maintain our strong statutory capital position in excess of our required state and Blue Cross and Blue Shield thresholds. Both companies are committed to a smooth transition and integration process. While we will be investing for future growth and to ensure continued superior service to our customers, we understand the need to utilize our scale to drive greater operational effectiveness and efficiency. We have identified more than $125 million of annual fully integrated pretax synergies as part of this transaction. We expect synergies of approximately $50 million in 2013, with increasing amount in 2014 and 2015, and the full run rate achievable by 2016. We expect the transaction to be accretive to earnings per share in 2013 and that is inclusive of onetime transaction and integration costs such as banker and legal fees. We expect accretion to increase in 2014 and exceed $1 per share by 2015, inclusive of the build out cost associated with the expanding dual eligible and reform-driven Medicaid opportunities.

We are not changing our 2012 EPS guidance for this transaction. However, our 2012 guidance does not include modest financing cost should we choose to issue debt in 2012 to take advantage of historically low interest rates or should the transaction close earlier than we anticipate. While the near-term accretion of this transaction is below that which may likely be expected from a similar amount of share repurchase activity, we believe the acquisition of Amerigroup is strategically important and also provides an attractive double-digit, cash-on-cash return for our shareholders over the long term.

Our historical repurchases have significantly reduced the denominator and EPS calculation, and the increased revenue and income from this transaction will nicely advance the numerator. On an economic basis, our base case internal rate of return on the transaction is in the mid-teens. To fund the acquisition, we intend to use approximately $700 million of available cash on hand and raise approximately $4.2 billion through commercial paper and new debt issuance. On a pro forma basis, this will bring our debt-to-capital ratio close to 39%, with our intention to reduce it below 35% over the subsequent 18 to 24 months. We have discussed the strategy with the rating agencies and expect to have solid investment-grade debt ratings under this plan.

The acquisition does not alter our anticipated 2012 share repurchase or dividend plan. We continue to expect a capital return of at least $2.9 billion through repurchases and dividends this year. Looking ahead, our capital allocation strategy will continue to balance the need to reinvest in our business to drive future growth, with our near-term debt reduction plan and our desire to continue to providing a strong capital return through share repurchases and cash dividends. We expect to continue returning a meaningful portion of our free cash flow through these mechanisms for the foreseeable future.

In summary, both teams are very excited about this transaction, which furthers our objective of creating the best healthcare value in the industry. We are advancing our leadership in the rapidly expanding government-sponsored managed care marketplace and strengthening our position for exchanges, while also providing a strong, long-term return for our shareholders. We are pleased to be retaining key members of the talented and experienced Amerigroup management team, who, as you know, have a strong track record of growth and profitability in Medicaid managed care. We fully expect a smooth and successful integration and look forward to enhancing future value for both our customers and our shareholders.

I would now like to turn the call back over to Angela to lead the question-and-answer session.

Angela F. Braly

Thanks, Wayne. Operator, please open the queue for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Scott Fidel from Deutsche Bank.

Scott J. Fidel - Deutsche Bank AG, Research Division

First question just on the timing of the deal and obviously, just with the Supreme Court just upholding healthcare reform, obviously, that's something to consider. And one of the aspects of the court's decision was to give the states to the option of opting out of Medicaid and there's obviously been a discussion around what type of effect that could have on the Medicaid expansion. So just interested in your thoughts, maybe from both WellPoint and Amerigroup in terms of how significant of an issue that will be or do you expect most of the states to move forward with the Medicaid expansion? And just in general, how significant was the timing just of the court upholding the Medicaid expansion in terms of announcing this transaction?

Angela F. Braly

Jim here. I want to remind you, too, as we

[Audio Gap]

the expansion is only one element here. We expect organic growth in the Medicaid segment both because of areas where there hasn't been penetration of managed care, as well as how compelling our innovative programs are going to be. We also think the growth in the dual eligible marketplace is significant, and I have got to tell you, knowing CareMore and the capabilities we bring and knowing Amerigroup and the capabilities they bring, that is going to be a really important way in which we care for the most acutely needy patients or members of both of our companies. So I have to say irrespective of wherever Medicaid expansion were to go, that

[Audio Gap] opportunity. I think if you look state-by-state, [Audio Gap] There's some growth that is unquestionable. And as we look longer-term, we think these managed care solutions are going to be critical, both in the states in terms of addressing some of their budget issues, but also as we think about how exchanges are going to play in there. So Jim, why don't you speak to this as well?

James G. Carlson

Happy to, Angela. I think that rather than go over some of the same territory which I fully agree with and we talked for a long time about whether or not there was a Medicaid expansion in [ph] the Affordable Care Act, how much growth we were looking at, so that really doesn't change. But I think the way we'd like you to think about this is we do believe the Medicaid expansion will go forward. In fact, some states have already said they intend to go forward, some say they want to wait and sort of see what happens in terms of the elections and so forth. And so some have had some pretty pointed comments about their perspective on growth, but I think some of that is rooted in their frustration with the cost of their existing programs. When you step back from all this, there are billions of dollars of federal money that are going to flow into the states. We think the states are going to need to take it. They've got 100% match of their cost in the early years, it winds down to 90%. That's very compelling from a state budgetary standpoint. There's a couple other phenomena that I think people aren't paying as much attention to as they ought to, which is that if it didn't happen in the state, you create, in effect, sort of a new donut hole between the people who have Medicaid coverage and people at 133% of federal poverty who now are eligible for a fully subsidized benefit in an exchange. So what is -- what do people say to the people who are the vast majority of folks who fall in between there who are supposed to be covered by this? And when you think about those people still needing access services and participating in largely safety net hospital service offerings and so forth, those hospitals are going to be without the disproportionate share payments upon which they've depended and the pitch to them has been you can afford to lose that money because the Medicaid expansion is going to replace that money. Really, the hospitals in the inner cities are going to be crippled if this goes forward that way. And so we think once everybody sort of settles down and understands this from a budgetary standpoint and really from the human factor of the people that we're talking about, the states will wind around to participating in the expansion.

Angela F. Braly

And Scott, to get to your question about timing, let me say, as we look at our strategy, our plan to win, we anticipated winning new opportunities for growth. And this is clearly an area of growth as we look at who will be eligible for Medicaid, as we look at ongoing operations. And with the CareMore acquisition, we really studied this population very carefully. So we did this deal no matter what and are excited to do it no matter what the decision was from the Supreme Court.

Scott J. Fidel - Deutsche Bank AG, Research Division

Got it. And then my follow-up just -- question just around the integration of the 2 businesses, and is it your intention to essentially fold the WellPoint Medicaid assets into the Amerigroup subsidiary? And then if you can talk about maybe the timing of how long you expect to -- the integration to take place? And then from a systems perspective, what type of systems integrations would possibly need to be required? And then finally, just around the integration, just as you're thinking about brand and obviously, WellPoint has the powerful Blues brand but Amerigroup has a very strong brand within Medicaid, how are you thinking about branding your various Medicaid assets?

Angela F. Braly

Okay. Let me try a couple of those and you guys can jump in because there were a few questions in there. Good job, Scott, getting all those questions in. Let me say, first, in terms of an integration, part of the importance to us was this management team who have come over and are part of this deal, and my expectation is that they will lead our combined Medicaid business. And how we operate it, California is a very important state to us, and so when we talk about how we integrate, you have to keep in mind that we have an important presence in California in the Medi-Cal program there and we expect to continue to serve them there and in a number of other states as well. And Amerigroup does as well, and it's that being local that really is important in the way in which we operate these businesses. So you can think of the integration as described with an emphasis on really being local, which means we have feet on the ground, we have decision-makers on the ground, and those relationships are really critical. In terms of integration around systems, there's actually a lot of compatibility and similarity between our different systems that we use in this and other segments of our business. So while we'll describe it more as time goes forward, we don't see this as a particularly complex integration on the system side. In fact, we think there's some typical integration things, but a lot of things can just keep running on the systems that they're running on. In terms of the brand, we will coexist with -- some of our products are Blue-branded and Medicaid, and some of them will be branded Amerigroup. And because the way the Blue rules work and the licenses work, we anticipate continuing to do that. Did I get all of the questions, Scott?

Scott J. Fidel - Deutsche Bank AG, Research Division

Yes, you did.

Operator

And we'll go to the line of Peter Costa from Wells Fargo Securities.

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

Can you talk about how the national Blue Cross Blue Shield Association is going to see this and what -- remind us all of the proportion of business that you're allowed to have that is non Blue-branded? And then also talk about -- maybe this is for Jim Carlson, the perspective that Medicaid, without commercial, sometimes has better contracting capabilities. Is -- do you think that continues under this merger, in particular, in the Blue-branded states?

Angela F. Braly

[Audio Gap]

Blue Cross Association. The Blue Cross Association [Audio Gap] strong Blue plans to be successful and to meet the needs of our customers in whatever business segment that they -- that we are in. And so I expect support from the Blue Cross Association and actually that they'll be pleased with the transaction. My first call this morning was to Scott Serota to share this news with him as well. The way that the Blue rules work, we have to be 2/3 Blue essentially and we don't expect this transaction to affect that. So Jim, you want to speak to kind of the ability to be kind of independent around the contracting?

James G. Carlson

Yes, thanks, Angela. It's very important underpinning of our business, has been for a long time. There are sort of gradations in terms of unit reimbursement in our industry, as everybody is aware. We've talked in other settings about how difficult it is for somebody to have a commercial presence to get into Medicaid and be effective when they have to approach the negotiating table with higher unit reimbursements. So there is no part of this integration that will abandon that notion that Medicaid reimbursement has to be very correlated to what's built into Medicaid premiums. And so by operating Amerigroup under the same branding even as we enter new markets together and so forth, we're going to hold onto that rubric, that these medical costs have to be anchored into what the states are willing to pay for and there's no part of the integration that will cause an upward migration in our unit prices.

Operator

And next we'll go to the line of Justin Lake from JPMorgan.

Justin Lake - JP Morgan Chase & Co, Research Division

First question is just on the accretion. When you said the deal would be accretive to 2013, as you know, we're -- we all have a pretty significant share repurchase in our numbers that could set these estimates certainly probably in the neighborhood of $2 billion of share repo, maybe a little bit north of that. Will it be accretive, in your mind, to the consensus number out there or can you talk to us a little bit about what you think your '13 share repurchase would be given you thought -- you already talked '12?

Wayne S. Deveydt

Yes. So Justin, real quick, a couple of items to highlight this. I can't get ahead of our board in terms of repurchase authorizations and authority. What I can tell you, though, is a couple of things regarding the transaction and its accretion, and some of the assumptions we would make on a broader scale around the cash deployment or capital deployment. First of all, in terms of the accretion for 2013, it's obviously dependent on when the transaction actually closes. So what I can only provide is more of a hypothetical view if the transaction was to close on January 1, let's say. And when we say it would be accretive, we expect it to be mid-teens accretive inclusive of banker and legal fees and inclusive of the high integration cost in year 1. So obviously, that timing, though, also plays into the level of deployment because if we close later, we're able to deploy more sooner; if we close sooner, we'll deploy a little less. All that being said, when we modeled the 5-year period for the capital deployment, it was still meaningful to shareholders. It was our anticipation to continue to allow the debt to cap to come down through the collective earnings of the combined company, with all excess capital still being deployed to our shareholders.

Justin Lake - JP Morgan Chase & Co, Research Division

Okay. So when you said mid-teens accretive, that's, I assume, not percentage, that's pennies, right?

Wayne S. Deveydt

That's correct.

Justin Lake - JP Morgan Chase & Co, Research Division

Okay. And you're -- you expect to -- once you close the deal, to take a hiatus from share repurchases, is that the way to think about it?

Wayne S. Deveydt

No, absolutely not. We fully expect to still have a meaningful share repurchase program and a meaningful dividend for our shareholders.

Justin Lake - JP Morgan Chase & Co, Research Division

Would it be in that -- I mean you've taken a lot of pride in talking about that 100% of cash flow being deployed to -- back to shareholders in that share repo or dividends, is that number now going to be -- can you give us a -- even a target in terms of where that might be in 2013?

Wayne S. Deveydt

No. Again, Justin, I cannot get ahead of my board on any authorization that they may provide. Again, what I can tell you is the anticipation is that all excess cash flow will be deployed to our shareholders pending an acquisition we thought would be more attractive in the long term than that. So assuming that wasn't the case, though, you can obviously do the math to figure out what the cash flow would be. Our parent company only has one obligation, and that's our interest expense on our debt, so all their cash flow wouldn't [ph] be expected to be deployed. And as we mentioned, we fully expect the debt to cap to come down just through the underlying earnings of the organization, not through accelerated repurchases.

Justin Lake - JP Morgan Chase & Co, Research Division

Okay, great. And then just a follow-up here, more on the Amerigroup side, can you talk a little bit more about [Audio Gap] Team in terms of length of those contracts, how they're going to be incentivized, whether the team is going to move to Indianapolis. And then just a quick question on the Amerigroup PBM contract, it looks like you expect synergies here from that PBM. Will that be from moving it over to Express Scripts and when does that contract expire, Wayne?

Angela F. Braly

Let me speak to the management team and let them speak for themselves as well, we're delighted that they're coming as part of this transaction. In fact, they're important to it, which is why we described that we have employment agreements with 3 of the key leaders, Jim, Jim and Dick, who are coming along and will have important roles in the combined WellPoint. But details of the relationship have to be included in the proxy statement that Amerigroup shareholders will get. And so you'll get a little more flavor for what that means. But they are committed to being with us and taking care of our customers on a go-forward basis. So in terms of the PBM, do you want to speak to that?

James G. Carlson

Yes. So Justin, the one thing we do have to highlight is obviously, our focus right now is going to be on closing the transaction. It's also important to recognize that we will honor whatever contracts Amerigroup had in place currently. So our timing will be very much in line with that timing of their current contracts. So you're looking, really, a number of years out before we will be able to start integrating within the Express Scripts PBM contract we have. That is why we said by 2015 that we do expect the net accretion to be over $1 from this transaction by '15. But '15 is really just a launching point of when we get the real value accretion, because at that point now, we have all integration costs behind us that we would expect by 2015 and then we can start really putting a collective scale of the 2 companies together.

Angela F. Braly

Jim, do you have anything to add there?

James W. Truess

I don't think so. I mean we're just excited by being part of the team. This modern corporate environment has a -- usually a lot of virtual participants, people who spend a lot of time traveling and so forth to be together in critical settings. We haven't really made any sort of definitive decisions about relocating people or anything like that. There's a lot of people in -- at Virginia Beach that expect -- still expect to be led and managed, and for the time being, that's where I intend to be. I think I can speak for Jim and Dick as well.

Angela F. Braly

Yes. An important thing to remember, too, Justin, is we're a virtual company because healthcare is local, which means that we're local as well, and our members are in Virginia and California and New York and all across the United States. So you're going to see our associates and our leaders in those places and we stay very connected, virtually through technology and we get together and spend time together as well.

Operator

And we'll go to the line of Christine Arnold from Cowen.

Christine Arnold - Cowen and Company, LLC, Research Division

On the duals, Wayne, you said that you expect a loss kind of in year 1 with duals in general. Does this transaction change that expectation, either for the duals that might come on through AGP or through California for you guys? And can you give me a sense for D&A in the transaction in terms of how we should be modeling this from a pro forma prospective assuming a 1/1 close in 2013?

Wayne S. Deveydt

So previous comments I've made has been that as you're building up for the duals, obviously, you're making your investments on the front end and you're not getting your revenue to the later part. So depending on the timing of the dual rollout, you could have losses initially until you ramp up and get these individuals into managed care, and then of course, you build up from there. That being said, the accretion values that we provided are inclusive of those build outs already, so when we talk about mid-teens for next year, we're talking about the build out for the dual expansion. It's also including the banker and legal fees and it's also inclusive of all the integration costs we expect in year 1. That's why we're actually going to ramp up pretty quickly than on the accretion through this transaction in '14 and then over $1 by '15, and that really becomes the platform to really launch it because within 3 years, we think the dual space is going to move pretty fast and we think the heavy build out will be during that 3-year period, coupled with the Affordable Care Act expansion of Medicaid. So I think, Christine, if you're modeling, I would model more in the mid-teens for next year and then what I would model thereafter is an accretion value the following year. And that's more because some of the integration costs go away and then over $1 by '15 and then that becomes more the jumping point.

Christine Arnold - Cowen and Company, LLC, Research Division

And then D&A, how should we be thinking about modeling D&A on this?

Wayne S. Deveydt

Right now, Christine, I really can't give you any suggestions or advice on that. It's still an area that's...

Christine Arnold - Cowen and Company, LLC, Research Division

Working on? Okay. And then can you refresh our memory on the CareMore AGP overlap? Where do those markets overlap? And that's my final question.

Angela F. Braly

Well, let me go back to the CareMore, because as you were asking that question about the ramp-up, remember as we were evaluating and participating in discussions in California, one of the benefits is that the counties in which we are working on are places where CareMore is fairly built out with neighborhood care centers and other things and that will prove -- it will be a great opportunity, I think, for us to get going with those existing CareMore assets that are in place in California.

And then as we have described in our talking points earlier, we're expanding in New York CareMore now, as we speak, and we have opportunities in Virginia to do so as well and some other geographies. And so what we're going to do together is look at where those dual eligible opportunities we think are and when, and plot together out where we think those CareMore assets should go strategically. I think the combination of the 2 are going to be very powerful. And so we're looking forward to that part.

Operator

And we have a question now from the line of Matthew Borsch from Goldman Sachs.

Matthew Borsch - Goldman Sachs Group Inc., Research Division

I'm just wondering if you could maybe go through a little more detail on the synergies that you're expecting. And I think you said it would start at $50 million next year, wasn't ramping up to the full amount in 2016. I'm not sure -- I guess I didn't catch the full amount.

James G. Carlson

Yes, Matt. So the full amount, we expect at least $125 million annual fully integrated pretax synergies on a run rate basis, emphasis on the at least component of this because during this period, we'll be doing significant build out, not only of bringing the 2 companies together, but building out the dual and the Medicaid reform expansion. The synergies in 2013 will obviously be a combination of G&A synergies primarily, balance sheet synergies, it's not till the out years that we can fully integrate PBMs over time and that's when we'll start getting even further opportunities for us in terms of synergistic value. But ultimately, I would model [Audio Gap] pretax synergies.

Matthew Borsch - Goldman Sachs Group Inc., Research Division

Okay. And just on the transaction, can you tell us if there were other bidders and maybe how many?

Angela F. Braly

Matt, we're -- all of that will be in the proxy that will go out to the Amerigroup shareholders. And that will be a couple of weeks.

Operator

We have a question now from the line of Kevin Fischbeck from Bank of America Merrill Lynch.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

I just wanted to kind of build in or to get an understanding of what you thought the sustainable margins were for the Medicaid business and your $1 accretion assumption. I think we were trying to back into what it will be for 2015 and we were coming up with something in a 2% to 2.5% range net profit margin. Is that kind of what your thinking was?

James G. Carlson

Yes. As we did our modeling, we said as margins long-term, we modeled in the 2% to 3% range. So I think your 2.5%, if you're splitting the difference, is a reasonable basis for modeling.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Okay. And then have you had any discussions with any of the states? I guess, obviously, the big RFP that's coming up would be Georgia; I guess Florida's also pretty big. But my understanding is the Georgia RFP will be coming out -- winners would be announced somewhere around the time that you'd be expecting to close this transaction. I mean, how would that work? I guess you have to do this on a separate track and any comments there about how the states are receiving this news?

Angela F. Braly

Well, let me say, we obviously couldn't call the states before today, and so, we'll be making a lot of those calls today. Jim, you want to give me what you think their reaction might be?

James G. Carlson

Oh, I think the states are going to respond overwhelmingly favorably to this. I think it strengthens the presence of the company to be shoulder-to-shoulder with Blue Cross in a market like Georgia. We're very optimistic and excited by the Georgia opportunity. We have a fantastic team on the ground. We're doing the best job from a quality standpoint. We think we've built an outstanding relationship with the folks in Georgia and we're looking forward to having some personal interaction with them very soon, as early as this morning, to make sure they understand what we're doing here. And this only strengthens our hand as far as we're concerned as we face the rebid and the potential to perhaps even double the size of our footprint there and perhaps even more depending upon how their RFP actually unfolds.

Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Do you submit a joint bid or do you bid separately and then they -- I guess how would that whole process work?

James G. Carlson

We would have to bid as Amerigroup and then we would have to certainly -- we would certainly disclose the pending transaction and so forth. And then [Audio Gap] who we are and what to expect. But again, I don't think that would detract from the competitiveness of our bid in any fashion.

Operator

We'll go to the line of Charles Boorady from Crédit Suisse.

Charles Andrew Boorady - Crédit Suisse AG, Research Division

This acquisition aligns WellPoint much better with where the market is heading in terms of customer end markets, Medicaid, et cetera. And I'm wondering what's your appetite for continued acquisitions in that regard, sort of build your noncommercial enrollment base versus more of the CareMore-type acquisitions of vertically integrating into the provider space?

Angela F. Braly

I always want to remind people about how CareMore operates because it's a really unique model. And while you can argue it's more integrated model into the delivery system, it does so in a way that is unique and very coordination-oriented. It's really supplementing existing primary care relationships and working really closely with hospitals and ACO-like deals as well. And so it's not necessarily a full integration into the delivery system in the way that some of our other integrated competitors would be. So I think actually, it's the perfect combination because the alignment of interest are really critical there, the way that they contract with primary care and other -- others works really well and that's really reflected also in our primary care initiative, our patient-centered and primary care initiative enterprise-wide. So I would say we have a plan to win, and that's growing in ways and as you've identified, we expect this to be a growing marketplace. When we look at the populations in our states that we serve, the growth we do expect here, we expect growth in dual eligibles and we expect growth overall in the population who will be eligible for exchanges when they come in and out of Medicaid. So we continue to be interested in acquisitions and we'll continue to consider them as they come and we are uniquely positioned for them. And so you can count on us continuing to do that.

Charles Andrew Boorady - Crédit Suisse AG, Research Division

That's great. And just as a follow-up, can you give us a little more background on how the 2 of your companies came together?

Angela F. Braly

Well, that's all going to be in the proxy statement. It's going to be for good reading.

Operator

And next we'll go to the line of Carl McDonald from Citigroup.

Carl R. McDonald - Citigroup Inc, Research Division

From the WellPoint perspective, you've talked to it for a few years about how you thought your Medicaid business was pretty well positioned to compete and win in Medicaid. So I'd be interested in terms of what the turning point was that pushed you to the decision that you thought you needed to get bigger in Medicaid.

Angela F. Braly

Well, a couple of things. We looked at our Medicaid business and while we've served our states well, we believe there were lots of growth opportunities. And as we learned more and more about Amerigroup and the team, we're impressed with their ability to grow, their ability to scale, the effectiveness of their management team. And so it was a deal that was a win-win from our perspective and we were delighted to become their partner. We also think that dual eligibles, while there's this kind of start-stop conversation that continues with them, as we looked at the potential for this partnership with the assets that we have and the assets that they have and bringing those together and being ready for that dual eligible membership, I mean, we take this very seriously that we take care of these members very well. They have unique needs and the ability to combine and meet those needs are really critical to it. So we're delighted to be together. Jim?

James G. Carlson

Yes, if I just might punctuate that a little bit. I would say I think it's important to understand how the nature of competitiveness in Medicaid keeps changing. And because of the Freedom of Information Act, everybody can see one another's capabilities on full display every time we look at the scoreboard to see who won a market. And so I think Angela and Wayne and the team here has done something that's truly transformative and strategically wise. It's a recognition of it's hard to be great at everything simultaneously.

[Audio Gap]

the combining forces here, we really moved to the top of the charts in terms of being able to display our capabilities to the state government. We couldn't be more -- we haven't had much of a chance to talk about this [Audio Gap] by the Kansas [indiscernible]. Kansas is the most thorough, innovative, comprehensive bid that the industry has ever seen. More is expected of the vendors here than in anything we've ever been asked to do. But the wonderful part of this is if we are able to perform to what we think our potential and capabilities in Kansas, what we learn there is going to be so exportable to so many more markets. And however compelling the WellPoint phase [ph] -- state-sponsored business has been positioned in the marketplace, it's hard to keep up with that rate of change unless you do something that is truly transformative and strategically savvy. And that's really sort of an unappreciated part of what we're putting together here beyond the economics of -- it's a strengthening from a competitive standpoint in the underpenetrated part of the entire health insurance marketplace. And when you think about the challenges of Medicaid, they're just like Medicare. It's accessing -- accessibility and financing of an aging population. CareMore is one and very, very critical part of the spectrum. The states are looking to serve, the needs of people who rely upon them for long-term services and support, that's where the real activity is in the Medicaid pipeline, by putting these complementary capabilities side-by-side and facing that opportunity, we're going to be a stunning competitor for others to keep up with.

Carl R. McDonald - Citigroup Inc, Research Division

And then once you decided to do the Medicaid deal, can you walk through why Amerigroup versus some of the others, was it really anything more complicated than Molina has too much overlap in California, Centene has too much overlap in Indiana, so process of elimination, Amerigroup is it?

Angela F. Braly

No, absolutely not. It was -- Amerigroup was it. I'm telling you, this is the best group, the best company, the growth trajectory that they have and their successes. We did look deep at their quality and their ability to take care of their members in a way that gets them what they need and the way in which they do it, I have to tell you our cultures are very similar, our values are very similar. We're both very mission-driven organizations. In fact, our missions almost mimic each other. And so there was no real consideration of anything but how great Amerigroup was and how important the management team would be to us.

Wayne S. Deveydt

Carl, the one thing I would add, too, is keep in mind, when you bring our 2 companies together, as you think about the dual opportunities and as those grow and evolve, you're still looking at pace and scale and how do you go after it, and how do you go after it aggressively. But at the same, doing it in a meaningful way that rewards the states the way they expect to be rewarded with better cost and also has the best outcomes for the consumer. And when you look at our 2 organizations together with our CareMore asset and then their representation of Texas and Florida with ours in California and New York, you're talking about over $100 billion of revenue opportunity in those 4 states alone as well. And so when you consider the great cultures of the 2 together, you consider, as Jim talked about, the unique assets what each one of us bring to the table. Bringing those 2 together, too, gives us a real focus, not only on the immediate dual expansion but also helps us prioritize our investments on a long-term basis.

Operator

Our next question comes from the line of Melissa McGinnis from Morgan Stanley.

Melissa McGinnis - Morgan Stanley, Research Division

I guess first, just to quickly understand again, on the -- that we're thinking about the cash build the right way for next year, I think we had in our model that you would end the year with something like $1.3 billion in parent company cash. And then just thinking through you can probably get dividends from your subs again, something like $2.4 billion, $2.5 billion, general corporate uses, $600 million, maybe dividends, $400 million. Obviously, $700 million on the deal. [Audio Gap] parent company cash about $1.9 billion? Is your stated target for holding cash parent still about $1 billion, leaving us $900 million for deployment?

James G. Carlson

Yes, so let me answer this, Melissa, a little bit differently from the question. But we are still targeting to maintain at least $1 billion of free cash flow at our parent. We like to conserve the balance sheet and having the flexibility of putting that to work for our shareholders. What I would say, though, is we would still expect to fully deploy $2.9 billion this year for buybacks and dividends while maintaining that conservatism on our balance sheet. And prospectively, while we cannot get ahead of our board, I think you could model around $2 billion between dividends and buybacks over the near term. And again, that will be subject to board decisions and approvals, but that also assumes no other transactions come forward that we like. But I would anticipate in the near term of about $2 billion of free cash flow available over the next several years as well.

Melissa McGinnis - Morgan Stanley, Research Division

$2 billion is like a good annual rate for buybacks and dividends beyond 2012 would be your view?

James G. Carlson

Yes, I think $2.9 this year, and that would be a reasonable run rate. But again, we can't get ahead of our board and we plan to continue to be opportunistic if we see transactions in the long term that will be more accretive.

Melissa McGinnis - Morgan Stanley, Research Division

Okay, great. And then I guess just from a strategic perspective, there's been a lot of focus on the idea of -- on the exchanges, there being a population that would churn back and forth between Medicaid and kind of the bronze level coverage at the lower income areas of where you're getting subsidized commercial experience in the exchange. Could you talk a little bit about how recognizing market overlaps aren't perfect between where you'll have Medicaid exposure and where you have Blues exposure in the small group and individual, but maybe what the opportunities there are in terms of strengthening WellPoint's positioning for exchanges?

Angela F. Braly

Yes, let me speak to that because I think it is critical. As we look at the assets that we could bring to the marketplace for the exchanges in our Blue states, we think that could be a very powerful opportunity for us in terms of having brands, having the ability to deliver the products in an affordable way and very competitive way. We think that's a powerful thing. However, as you know, each market may be different and we need to consider what the dynamics are of the given exchange in a given state and how that might work. So we're looking at the opportunity, though, from a perspective of in our state, and there's a slide in the PowerPoint deck as well. If you look at the populations that are at 400% of the federal poverty level and below, so those that are eligible for Medicaid as well as for the exchange subsidies, we are looking at almost 2/3 or over 2/3 of the population in our state either being eligible for Medicaid or subsidy. That's a powerful, powerful dynamic, and one that we think we're going to take advantage of and serve our members in a number of ways. We also have a private exchange vehicle. As you know, we acquired Bloom Health with a couple of other Blue plans and have an opportunity to offer to employers a very defined contribution like opportunity in healthcare, and one that they're very, very excited about hearing. So -- but on the public exchanges and the opportunity to really ease the administration and the questions about a member who may fluctuate between different types of eligibility, I think this is a powerful combination. So we expect that Amerigroup, no matter where

[Audio Gap]

information and use it in a way in which we -- in a place where we may not be in exchange or where we may not be Blue in an exchange. So we think all those learnings will be critical and exportable from state-to-state.

James G. Carlson

Yes. If I could just go join on, I think this is really important from our perspective as well. As we sort of started planning out multiple year scenarios in terms of exchange participation, one of the things we always struggled with a little bit is the question of how many markets could we reasonably enter given all of the other commitments we had from an implementation standpoint attached to the growth that we are experiencing.

So by teaming up with [Audio Gap], of capabilities that are requisite to participate that are well established here at WellPoint and it will broaden the number of markets where we can participate in exchanges. And when you think about the churn of people back and forth through what I call the gateway of eligibility between Medicaid and exchange participation, on one side of that doorway, you have an -- typically an RFP-based field of competition that's usually narrower than what one should -- one would anticipate on the other side of the doorway. This allows people to move fluidly back and forth as they gain and lose eligibility to either a Blue-branded product or Amerigroup in urban communities where low income people are congregated. So it really solves the big strategic conundrum that we were trying to work through, recognizing that with everything else going on in 2014, it was going to be hard for us to really participate as far as we would like to from just a basic opportunity perspective, so this really checks off that box.

Angela F. Braly

Yes, and that's something we also have in common which is a value that we call customer first. Which is what is the reality for that customer? Somebody who might be eligible for Medicaid and who might be eligible for exchange subsidies and going back. We focus on what that person's going to experience and how that's going to work. That's a real critical element of how we see this coming together. We also thought about that in terms of the dual eligible. Because our teams, both at Amerigroup and at CareMore, service a lot of dual eligible folks today. And part of the reality from their perspective is that these programs are very uncoordinated. And we have social workers at CareMore who are experts in trying to coordinate 2 uncoordinated programs. So the fact that these programs are coming together and we've experienced what their lives are like and what their needs are, that's going to be a powerful combination as well.

Operator

Our last question this morning comes from the line of Ana Gupte from Sanford Bernstein.

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

Just wanted to follow up again on the $1 in synergies in 2015. It sounds like it's about $0.30 from cost synergies. Can you just give me a rough breakdown on what

[Audio Gap]

is it more about the Medicaid, the duals, exchanges and what kind of margin assumptions, particularly on the duals and exchanges, are you baking in on a normalized basis?

James G. Carlson

And I want to clarify that 2015 is the net accretion that we would expect net of our investments that we would still have in expanding the markets on that. So what you'll have is -- you'll have a mid-teen accretion in 2013, again, assuming a 1/1 close date and that will cover banker fees, legal fees as well as our year 1 integration cost. That will obviously grow in year 2 to a number much higher than that because we will not be bearing those integration costs with banker or legal fees in 2014 and then, of course, it'll grow to over $1 per share accretive by 2015. And I would actually say '15 is when the platform really starts to take off for us too, because that gives us not only 3 years of finalizing the integration, but it gives us the build out for the reformulated Medicaid expansion and the build out for the dual opportunity. So for modeling purposes, it's not the accretion just from the synergies, it's the net impact of a combination of the revenue accretion we expect but also synergy accretion around the SG&A. And it's closer to that time frame when we'll have the opportunity of combining our PBM contracts as well.

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

Okay, so just -- yes, I get that. But I'm just wondering then with the cost synergies, there's a certain percentage which you've been pretty explicit about. What are your normalized margin assumptions even if it's not in 2015. Some of your competitors are saying 2% to 4%, others are higher. With the CareMore platform, how would you see the dual margins evolve on a normalized, sustainable basis and then similarly for exchanges with the joint platform?

James G. Carlson

Well, on a pretax basis, both CareMore and Amerigroup has generally had margins that have been well north of the 2% range. We've been very fortunate. But at the same time, we look at the long-term sustainability of the model and our goal is to have a mutual win for the states as well as for the members, and in this case, for our shareholders. So when we talk about margins long-term, we really look in the after-tax basis of the 2% to 3% range, with a bias towards the higher end of the range. We think Amerigroup has shown a great track record of being at the higher end of the range versus peers, and we would expect to continue to maintain that higher level of margin and CareMore has done the same. So bringing these 2 together from our perspective, we would expect the 2% to 3% aftertax margin range with a bias towards the high end of that range.

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

Both for duals and for exchanges, as what you put that, would be in that range, 3%...

James G. Carlson

If you're blending it all in, that's where I would look at it.

Angela F. Braly

All right. Thank you. Let me, again, say how pleased we are about this transaction, about joining with this team. And together, we look forward to serving these members, our members now and in the future, and creating value for our shareholders. I want to thank all of you for participating in our call this morning, and I'll now turn it back over to the operator, who can provide the call replay instruction. Thanks.

Operator

Thank you. Ladies and gentlemen, this conference will be available for replay after 10:30 a.m. today until July 24 at midnight. You can access the AT&T Teleconference Replay System by dialing 1 (800) 475-6701 and entering the access code 254066. International participants can dial (320) 365-3844. That does conclude our conference for today. Thank you for your participation and for using AT&T Executive TeleConference Service. You may now disconnect.

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