Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Stephen J. Hemsley -President, Chief Executive Officer, Director

George L. (Mike) Mikan III-Chief Financial Officer, Executive Vice President

Simon

John S. Penshorn-Director of Capital Markets

Ken Burdick-Chief Executive Officer

Robert Oberrender-Treasurer

Analysts

Justin Lake-UBS

Lee Cooperman-Omega Advisors

Christina Arnold-Morgan Stanley

William Georges of J.P. Morgan

Cheryl Skolnic-CRT Capital Group

Tom Marsico-Marsico Capital

Gregory Nersessian-Credit Suisse

Thomas Carroll-Stifel Nicolaus & Company, Inc.

Scott Fidel-Deutsche Bank Securities

UnitedHealth Group Inc. (UNH) Q1 2008 Earnings Call April 22, 2008 9:00 AM ET

Operator

Good morning. My name is Dennis and I will be your conference facilitator today. At this time I would like to welcome everyone to the UnitedHealth Groups First Quarter 2008 Earnings Conference Call. (Operator Instructions) After the speakers remarks there will be a question-and-answer period. (Operator Instructions) For purposes of getting to as many participants as possible, we also ask those with questions to limit to one question per person. As a reminder, this conference is being recorded. This call and its contents are the property of UnitedHealth Group. Any use, copying, or distribution without written permission from UnitedHealth Group is strictly prohibited. Here is some important introductory information: this call will reference non-GAAP amount. A reconciliation of non-GAAP to GAAP amounts is available on the financial reports in the SEC filing section of the company’s investor information page at www.unitedhealthgroup.com. This call contains forward-looking statements under US Federal Securities laws. The statements are subject to risks and uncertainties that could actual results to differ materially from the current [ph] experience or present expectation. A description of some of the risks and uncertainties can be found in our press release this morning and in the reports that we file with the Securities and Exchange Commission from time to time, including the cautionary statements included in our periodic filings.

I would now like to turn the conference over to the President and CEO of UnitedHealth Group, Stephen Hemsley.

Stephen Hemsley

Good morning and thank you for joining us this morning. Our release today focuses on the first quarter results, but at the top of our call, I want to address the revision to our 2008 outlook. We have lowered our earning outlook for the rest of the year, reflecting what we feel will be near term pressures on revenue growth and related earnings and margin. We have been careful and measured in doing so. These projected reductions are caused by a number of concurrent events: top-line revenue short falls reflecting competitive pressures, impacting both enrollment volumes and net premium yield, a uniquely important shift in a difficult economic environment toward lower benefits and lower price points, as well as the continuing shift to self-insurance.

In the Medicare market we are seeing lower than expected engagement by seniors in traditional HMO style product offerings and interest rates have dropped dramatically, which will affect our projected investment income for the balance of the year. And so the 10% full year downward revision reflects declining risk-based member and revenue growth over the balance of 2008. Senior business mix and commercial premium pricing pressure, an unusually severe flu season, and reduced investment income, and we are addressing operating cost levels that need to be realigned to our revised growth outlook. At this stage we do not see changes in forecasted medical cost trends at the national level. We are clearly being impacted by the declining national economic outlook, including employment levels, the interest rate environment and inflation trends, which are combing to create pressures not seen for many years.

Our specific sector conditions are in flux as well, some positive and some not. New generations of products and services are moving forward, such as in the consumer domain, where we have dramatic national leadership. Emerging markets are beginning to open up, such as in state programs and in culture ethic offerings. We are also regaining traction in the large employer market; at the same time other products are beginning to mature, such as Medicare Part D. In addition we see increasing levels of employed consumers’ simply declining coverage of any type, particularly in smaller businesses. And the pricing economics across all markets continues to be intense, even given the relatively stable medical cost environment. Today, though it is not clear how quickly the positive trends will produce results against this challenging backdrop, our coach two and outlook for 2008 has been revised in light of the challenges we face, principally around growth in risk based offerings. To make it easier for you to see our current assessment, we have provided a summary of our revised 2008 expectations in the press release.

The first quarter earnings would have been in line with our original expectation, after a few factors: we saw perhaps the most severe and geographically broad flu season in five years. It cost us $80 million or approximately $0.04 per share above normal flu costs and we did not have the earning strength across our businesses to off set that cost surge. Our revenue plans are not being realized in risk-based products and accordingly operating costs were high and need to be realigned. We are addressing this promptly while thoughtfully keeping service levels and growth initiatives fully supported. Investment income was off in the quarter, but off set by realized investment gains.

Our first quarter operating cash flows of $280 million were negatively impacted, compared with the first quarter of 2007, by the timing of approximately $275 million in various government program reimbursements and payments, which will reverse over the course of the year, and more than $250 million in reduced medical payables related to accelerated payments and decreased in risk-based commercial and Part D membership, as well as the timing of payments to our pharmacy benefits fulfillment partner of roughly $150 million. We still anticipate generating nearly $6 billion in cash for the year.

For the full year we have revised our 2008 revenue outlook from a range of 82.5 to 83 billion, from a range of 81 to 82 billion. Although we previously updated this range in January, for ease of comparison we will refer back to the more comprehensive data elements from our investor day. Our outlook includes additional revenue from acquisitions of 1.7 to 1.8 billion, from Fiserv and roughly half a year from Unison; it is offset by a reduction of approximately $450 million for the delayed closing of Sierra and the related divestiture of the Nevada Medicare Advantage lives. This results in an organic decline in projected revenue of roughly 3%, excluding the impact from these acquisition related transactions.

The major pieces of our revised revenue and operating earnings are as follows: Commercial risk membership for 2008, which we have projected to decline by up to 300,000 people, is now expected to decline in the area of 700,000; as a results of this reduction, our revised full year commercial risk premiums will be 1 billion to 1.1 billion less than previously forecasted. Premium revenue will also be negatively by slightly lower than planned premium yields, partially offset by benefit reduction, for an additional reduction of approximately $200 million. These arise from local market pricing pressures and continued growth in lower price point consumer directed products, which is actually an excellent trend for us going forward. We retain customers that we otherwise might lose, while recognizing there is some margin trade off. The public and senior premiums are now projected to be lower than originally planned by approximately $1 billion; this is caused primarily by lower than expected growth in Medicare Advantage products, a 100,000 to 125,000 people, down from the 125,000 to 175,000 as well as the timing of much of that growth being realized from April 1 to December Premiums are further impacted by projected lower risk scores and product mix changes compared to plan, with the majority of the growth coming from our distinctive, special needs plans product offerings.

Medicaid premiums and AmeriChoice continue to be aligned with expectations. These reductions in our risk-based volumes affect our OptumHealth businesses and coupled with lower than expected external new business; we are now reducing our revenue outlook by around $100 million for these businesses, including a modest Fiserv impact. Prescription Solutions and Ingenix are also affected by the revenue softness, which has already been more than offset.

The corresponding reduction in operating earnings related to these revenue changes, including the changes in business and product mix is about $250 million in the public and senior markets, principally in Medicare Advantage products, $300 million in the commercial risk business and $75 million in OptumHealth. We are also experiencing higher Medicare pharmacy utilization trends planned in the first quarter of the year, particularly in the low-income subsidy segment. On an annual basis, this increase in unplanned drug utilization translates to a range of 150 to $175 million of additional costs. We have included that in our revision and are incorporating it into our 2009 Medicare bid.

We announced that $100 million less in investment income net of estimated realized capital gains, which will also reduce revenues and operating earnings in these businesses, this assumes an estimated $150 of realized capital gain in 2008.

Finally, our outlook reflects the incremental cost of around $80 million from the unplanned high incidence of flue in the first quarter. Taken together we expect operating earnings to be between 7.5 to $7.7 billion or roughly $900 million less than previously planned for the full year.

Before getting into detail on the first quarter, let me make clear how unacceptable these results and revised outlook are to all of us. They do not reflect the capacities of our businesses and we are moving aggressively to address the performance related issues.

Let me now walk you through first quarter results beginning with revenues, than medical costs, operating costs and capital.

Our first quarter revenue of $20.3 billion increased 7% year-over-year: a number of elements impacted revenue growth. First, participation in our fee based benefits services was stronger than expected, reflecting the strong improvement in our service and value to the large employer market sector, even during the down turn in the economy. Mail order script volumes for our Prescription Solutions pharmacy benefit management businesses are ahead of plan to the first three months, and several other businesses were fully on track for growth for the quarter, including AmeriChoice for Medicaid, OptumHealth financial services and Ingenix for technology services, AARP Medicare supplement, Medicare Part D and others. Conversely, revenue was affected by net growth below plan in Medicare Advantage and a greater than expected decline in commercial risk business, as well as premium yield pressures and lower benefit uptake from retained commercial risk business.

Regarding investment income: with the bond markets focused on quality our portfolios gross unrealized capital gain position advanced from $162 million at December 31, to $240 million at March 31. We have monetized some of our treasury investments and will reinvest in other high quality securities. This sale produced $53 million in capital gains this quarter. Keeping with our long-term strategy we will likely continue to reallocate at a moderate pace in coming quarters, depending on market conditions, ensuring a continued, high quality, diversified investment portfolio.

Continuing the revenue discussion let me turn to our operating businesses, starting with our public and senior markets group business. Ovation growth was improved meaningfully compared with last year. We see 2008 as an important transition year as we continue to build new, dedicated, captive distribution capabilities to support even stronger growth and greater retention in 2009. Active Medicare supplement is off to a strong first quarter, with growth of 40,000 new people putting us well on track for our forecasted growth of around 125 for the full year, plus an additional 10,000 acquired from Sierra. Our Ovations Medicare Advantage businesses had net organic growth of 50,000 seniors as of April 1: this was underpinned by more than 200,000 gross new sales, an increase of over 50% on our performance for the same period last year. These were largely individual members, not group sales and almost all sales were network based rather than privacy for service products. With the opportunity to continue to sell A gyms, employers and in particular our dual and chronic special needs plan, which have seen outstanding growth, we expect net Medicare Advantage growth for the year at around 100,000 to around 125,000, excluding Sierra and related divestitures, and 135,000 to 150,000 all in. In addition, Ovations had singular success in winning new fee based state sponsored Medicaid benefit programs in which Evercare added 70,000 members during the first quarter of 2008, as well as being awarded a three-year contract for the state of Hawaii’s Quest Expanded Access program.

For Medicare Advantage in 2009 I would highlight three elements: first, our results confirm the strategy of building out our captive distribution channels this year. We expect to go into 2009 with greater control over how and where our products are sold and with greater member retention capabilities. Second: on our Medicare Advantage HMO products we made the decision for 2008 to hold margins broadly stable, rather than reduce them for membership gain. We will reevaluate the optimal positioning for this product county by county, as we consider benefits in light of CMS proposed 2009 rate. Third: our 2008 Medicare Advantage growth essentially all comes from retail sales to individual seniors, which can be meaningfully, strengthened in 2009 by aggressively focusing on the groups Medicare Advantage market, which we believe is beginning to open up.

Finally the Part D program lost fewer members than anticipated as we retained dual eligible’s who were slated to go to other plans under the governments auto assign process. With the addition of Sierra, Part D members and the growth of Medicare Advantage, total Part D participation stood at an industry best of 5.5 million people as of March 31. Overall for Ovations, we now forecast 2008 revenues at about $28 billion, including the affect of our Nevada Medicare divestiture.

AmeriChoice is growing steadily and we expect that we’ll add more than 500,000 people this year, without including any pending RRPs of which there are several in the market. This includes organic growth of roughly 85,000 to 100,00 people, from 60,000 from Sierra, another 370,000 3participants when the Unison acquisition closes and 30,000 more in Washington D.C. that Unison was just awarded. We expect AmeriChoice revenues approaching $6 billion for 2008, including a roughly ½-year contribution from Unison. Fundamentally our public and senior markets group is a $34 billion business that is performing at a very steady level of growth.

Continuing with our health care services businesses, in the commercial markets group we reported a net organic decrease of 560,000 people as we had projected on our fourth quarter call. The mix has changed meaningfully. We had an organic loss of 530,000 risk-based members, about 130,000 more than we had estimated in January. About 60% of the loss were either due to employers converting to fee-based arrangements or related specifically to specific care business. The economic down turn has put additional pressure on the all ready price sensitive small group market. We continue to protect our margins against that backdrop by raising our base rate and limiting our new business discounts. We are committed to sustaining a quality business without taking shortsighted pricing positions.

Positive commercial developments this quarter include the closure of the Sierra transaction, the addition of 1.3 million fee-based participants through Fiserv Health and substantially stronger participation than expected in fee-based services on an organic basis. We are down 30,000 people through the first three months, as compared to an originally expected loss of 200,000 fee-based participants. We saw stronger than expected growth and retention of consumers at open enrollment for large employer-customers, even during poor economic conditions. This is a favorable, leading, indicate or the strengthening service execution and performance that we have been driving for the past nine months as well as a broad, stable, network access and clinical quality approaches that are part of our value proposition. We saw continued outstanding performance from our consumer directed offering where we remain the national leader. For the first time, we have more participants in the funded savings accounts than we do in the notional health reimbursement account. As consumer directed HSA offerings begin to scale in the individual, it’s called small group market place.

A total of 2.7 million people with CEH offerings hold the number one market position in that category and we grew at 25% year-over-year. Uniprise reports 42% of its employers are using a TDA program and more than 50% of its membership is in some type of CEH plan. A recent study of our national employers indicated our CEH programs provide 10 to 12% absolute cost savings sustained over a four-year period, driven in part by their employee’s use of preventive care and evidenced based care for chronic conditions. We now forecast a total net increase on commercial market of 4% or 900,000 people this year. This 900,000 gain is comprised of the addition of 1.3 million people at Fiserv and more than 300,000 at Sierra, the organic loss of 700,000 risk-based participants at UnitedHealthcare and flat fee based membership this year. This brings the commercial markets total estimated revenues to nearly 42 billion for 2008.

Moving forward we will continue revitalizing broker relationships, improving flexibility around local market needs and dynamics, and strengthening service performance. We will continue advancing in culture offering for targeted groups and consumer segments and driving new products that better meet affordability needs, all while pricing to forward costs and balancing the medical care ratio. These actions are also supported by on going efforts in the medical cost affordability and critical quality domains. We believe these are the right actions for sustained, long-term value creations.

Moving onto enterprise services revenue. Prescription Solutions is performing well, with mail order scripts ahead of plan for the first three months and generic utilization continuing to increase strongly. Prescription Solutions has already sold pharmacy benefits management services to plan sponsors representing nearly ½ million unaffiliated lives this year and is working an active pipeline with potential clients, representing several million people.

OptumHealth shows some signs of top line pressure due to the short falls in commercial and senior growth else where in our enterprise. OptumHealth is making targeted investments in its business to capitalize on existing and emerging market opportunities. Areas of focus include public sector product development, specialty benefits product bundling and external sales force expansion and our consumer engagement initiatives and care solutions. In the public sector, our new product capabilities have already created nearly 1 billion in emerging revenue pipeline and contributed to new sales in 2008.

Ingenix continues to consistently grow at a high rate, with record new order volume in pharma services, continuing strong sales in health information systems and analytics and a backlog of nearly $1.7 billion. We expect Ingenix revenues to reach nearly 1.7 billion, Prescription Solutions revenues well more than 12 billion and OptumHealth to be in the area of 5.3 billion. This represents all in revenues of some $19 billion for enterprise services.

With that I’ll move forward to an analysis of medical costs from across the company.

Our commercial markets group Medical care ratio came in at 82.5%, while UnitedHealthcare’s traditional Medical care ratio, now including Sierra, was 81.5% in the quarter. This was worth an incremental 40 basis points alone, putting us to close to the upper end of our first quarter guidance range of 80.5%, plus or minus 50 basis points. Realized premium yields have increased in the quarter, reflecting the strongest realized premium yield increases in several years, even in an intensely competitive environment. With the average coming in just short of our plan perhaps our 30 to 40 basis points, which is now incorporated into our full year outlook.

Medical costs continue to be in the 7.5% plus or minus 50 basis point range that we earlier anticipated: the total cost picture continuing to be driven more by unit costs than utilization, primarily in the hospital inpatient category.

In the senior businesses, the Ovations special needs plans have, by their nature, a higher acuity population and higher care ratios, particularly in the first year when seniors who have not had coordinated care initially join the plan. We have seen strong sales of these snip plans this year, so this membership mix is increasing the Ovations medical care ratio.

In our traditional HMO based Medicare Advantage business, the medical care ratio is performing on par with the first quarter of 2007.

Overall, we are focused on several key strategies: UnitedHealthcare will continue to be disciplined and consistent in its pricing and drive more affordable designs and stimulate growth. Evercare’s special needs plans are still a growth driver and a long-term opportunity for our enterprise to demonstrate the unique value in our coordinated care skills. We are now looking for a 2008 consolidated medical care ration in a range of 81%, 81.3 % plus or minus 50 basis points, including a UnitedHealthcare ratio that is likely to be in a range of around 82.3% plus or minus 50 basis points. The 80 basis points change in the consolidate guidance includes about 40 basis points from Ovations, 20 basis points related to commercial, 10 basis points because of flu and the remaining 10 points from other factors.

Moving on to operating costs, our ration of 14.35 of revenues in the quarter is high, particularly because of revenue volume short falls. There was also a 20 basis point impact from Fiserv Health and another more than 10 basis points due to stronger than expected fee-based service mix across our enterprise. We have taken targeted and thoughtful steps to realign operating costs to revise revenue levels while avoiding indiscriminate and potentially harmful just investments. We are very committed to fully supporting service, growth, and innovation across the full spectrum of our business. That said, we are focused on reducing our operating costs run rate by 3 to 5% as well as reducing capital spending.

Looking at capital, our long-standing approach is delivering benefits. We strengthened our commercial and senior benefits with accretive acquisitions that will provide prudent risk adjusted return. We also signed a merger agreement that will put us in a leadership position in Medicaid and safe services, bringing us to a total of two million participants and a presence across 21 states. These moves strengthen, expand, and further diversify the United Health Group services business. We’ve repurchased $1.5 billion in stock this quarter, bringing our debt to total capital ratio to approximately 40%, which is about the range of the capital structure we discussed last fall. With the decreased share price and the active repurchase program, our first quarter weighted average share count decreased 121 billion shares, to 1.28 billion shares from 1.4 billion shares 1 year ago. We are in position to repurchase a total of $ 4 billion in stock this year in addition to having completed the mergers I have described. This repurchase level represents close to 9% of the market cap of the company at recent prices.

There are some additional non-financial matters to discuss today as well. We have renewed our relationship with Medco to 2012. UnitedHealthcare, together with Medco, has shown exceptional drug performance for customers for nearly a decade on both an absolute cost and trend basis. With the growth we have seen during that time frame, this was a logical time to reassess our approach to providing drug benefit management. For their parte, Medco was open to changes in approach, which improve our alignment and increase value for our customers. Under the new agreement we will continue to manage our formulary and benefit design, while Medco will continue to handle fulfillment. We will in source customer service and customer benefit set up, create a more integrated, seamless, experience in these customer facing functions. We have an extremely capable and scalable Prescription Solutions business. A business that today serves more than 10 million people and has a 15-year track record of performance, a business we are building for growth. We will continue to use Prescription Solutions for all our rapidly expanding business in the public and senior sector, government business and in selected commercial markets, including pharmacy carve-outs. In addition, Prescription Solutions will retain and continue to grow its Legacy Pacific Care business and consolidate UnitedHealth’s specialty pharma business, we have integrated in event, and the PDM purchase is part of the Fiserv acquisition inside Prescription Solutions. This renewal puts us in a strong and diversified position and we continue to invest in Prescription Solution and position it for future growth. We intend to leverage out enterprise wide scale and expertise on behalf of all our customers. We have been pleased with our two-platform approach and will continue to evaluate our strategies as the marketplace evolves.

We also continue our efforts to bring the very best panelists into our enterprise. Earlier today we were pleased to make announcements that represent very positive news for us. Gail Boudreaux will join us as a UnitedHealth Group executive vice president and president of the Commercial Markets Group. We know Gail well from her work in Illinois and Texas, where she was executive vice president of the Health Care Services Corporation. Gail will bring a new dimension to UnitedHealth Group and focus on the clear growth challenges within the UnitedHealthcare businesses. The addition of an executive of Gail’s caliber will further expand our capacities in a critical area of our business.

Our other announcement was that Dave Wichmann has become the of the UnitedHealth Group operations. This means that he will focus his considerable talents and the breadth of his understanding of our business to manage an enterprise wide basis, several areas that are among our highest priorities: these include areas such as optimizing our business performance, strengthening and better aligning our organization, over seeing our operations and related cost levels, technology, integration, capital management and quality agenda and managing corporate development, research, and international operations and all integration efforts. We are fortunate to have someone with Dave’s abilities take on this senior leadership role. Michael O’Boyle, former chief operating officer of the Cleveland clinic has joined us as our new president of National Network Services, where we believe he will be instrumental in enhancing our relationships with network physicians and hospitals. Tina Brown-Stevenson, formerly of Aetna Integrated Informatics will run all clinical and customer analytics and related services for Ingenix. Each of these people and others like them, reflect the caliber of individuals we continue to seek to attract to leadership roles at UnitedHealth Group.

I’m also pleased to announce that another new board member will stand for election at our 2008 annual meeting in June. Glenn Renwick, Chief Executive Officer of Progressive Insurance brings both expertise in consumer products and distribution and prospective on insurance and will be a great addition. He joins Michele Hooper and Bob Darretta as new independent directors and we expect additional new board members later in 2008.

Finally, I want to congratulate Dr. Reed Tuckson, our Executive Vice President, and Chief of Medical Affairs for being recognized by Ebony magazine and Modern Healthcare this month for his profound leadership and impeccable contributions to society.

Let me wrap up with some thoughts and a summary of our outlook. The pressure points we discussed this morning are clearly broader in UnitedHealth Group and related parts and national economics industry trends. In that category I will put interest rates and investment incomes, unusually high influenza costs, continued competitive activity around membership growth, customer demands for leaner benefits that increase buy downs and slow revenue growth, and the risk of declines in business from customers in challenged industries.

Other items are more specific to UnitedHealth Group including, most significantly, the area of commercial and Medicare risk membership growth. We expect revenues in the 81 to $82 billion range. We are currently forecasting full-year results at $3.55 to $3.60 per share. This includes a second quarter outlook of $0.81 to $0.83 per share, with progressively stronger results in the back half of the year. We believe this view is right, in light of recent trends, is consistent with what we see in the business today and we’re confident we can perform to this level.

Overall, I’m strongly confident in our businesses. Our operations and functions are well managed, we have attractive new products and represent a first rate value with strong customer acceptance, we are well positioned to advance to our current stressful market environment, we have a highly diversified business that serves strategically large and growing markets and that have compelling long-term needs. Our products and services across these markets allow purchasers to choose from an array of prices and features. We need to do a better job in maintaining our members in the commercial risk products; that has been the case for too long. It is strongly encouraging that we have increased our commercial pricing yields in 2008 and uniquely important that our medical outlook remains constant.

Taken together the UnitedHealth Group businesses represent a unique health care services franchise that is a strong earnings and cash flow machine. We do not accept our current disappointing positions relative to where we have been in the past and the permanent condition and are taking immediate action to change the direction of these trends. We appreciate your interest today and we can now move to questions. I am joined in this room by many of my business colleagues. After the call, John Penshorn, Brett Manderfield Mike Mikan and others will continue to be available to respond to any additional questions you might have.

-----------------------------

Question-and-Answer Session

Operator

(Operator Instructions) We also remind you that for purposes of getting to as many participants as possible, we ask those with questions to limit to one question per person. We’ll pause for just a moment to compile the Q&A roster. Your first question will come from the line of Justin Lake with UBS.

Justin Lake-UBS

Thanks good morning. A question first on the MCR for the business: when you look at the commercial risk MCR for ’08, it’s going to be 100 basis points higher than the total, which is with the remainder being mainly government business. I’m just wondering how long you think this could persist, I mean the government businesses running MCR that’s meaningful below commercial, and if it does normalize higher, what impact should we think about that having on your long-term growth?

Stephen Hemsley

Justin, can you just reframe that? I want to make sure I’m understanding your question and I’m not sure I caught it.

Justin Lake-UBS

Sure. When I look at the commercial risk MCR of 82-3, that’s 100 basis points above the UnitedHealth Group overall: the UnitedHealth Group, the remainder outside of commercial is normally government businesses, which typically, historically run higher MCRs; so if the government’s running materially lower than commercial, how long is that sustainable? You talked a little bit about Medicare Advantage and thinking about the trade off of growth versus margin; I’m just trying to think about how in 2009 and beyond, how we should think about that pressure from the government businesses possibly normalizing higher.

Stephen Hemsley

Yes, Mike do you want to respond to that?

Mike Mikan

Well Justin, there’s a lot of ins and outs and we’ve discussed this before that it’s not just the government business that is the delta between the commercial medical care ratio and UnitedHealth Group. There is Optimum Health and there’s also the pharmacy business that reduces the cost ratio because we purchase, Prescription Solutions purchases drugs for the Ovation’s business as well; so it’s not just the government business and particularly it’s not just Ovations, but it also include the AmeriChoice business and the myriad of different products within ovations. So, if you’re asking with respect to one product line, we don’t get into that level of detail, but the public and senior market group medical care ratio is higher than the commercial medical care ratio in total.

Justin Lake-UBS

Okay and just a quick question on medical costs. Can you walk us through the different components? You mentioned the inpatient being pressured and can you kind of specify that, what you’re seeing there and how close to that 7.5 number you’re running?

Mike Mikan

Sure. It’s Mike again, Justin. As you recall last year we ended at the lower end of our original guidance between, we had originally guided at 7.5% plus or minus 50 basis points, we ended the year at the lower end of 7 to 7.5%. We guided for 2008 at 7.5% plus or minus 50 basis points. I broke out those details for you; I think Ken Burdick did as well at investor day. We would change those some, we are seeing some difference in mix and I’ll go through those, but, with respect to unit costs and utilization and aggregate, those remain the same. Roughly 5% for unit costs, roughly 2.5%, or so for utilization and mix and those components are positioned, we had been at, at the investor conference at I think 5% at the investor day. We are now estimating between 4-and 5% per position. On inpatient as a result of significant unit cost pressure, on the west coast as well as the east coast, we are now projecting inpatient trends at 11.5 to 12%, that’s up from 9.5 to 10.5%. Outpatient, which was at 78% is now at 6 to 7%, I think there’s some mix changing there and then pharmacy, which we had estimated at investor day at 78% we now forecast it at 6 to 7%. If you do the weighting of each one of those on the medical cost trend it remains consistent with our aggregate forecast that we had with 7.5% plus or minus 50 basis points.

Justin Lake-UBS

Great. Thank you very much.

Operator

Your next question will come from the line of Lee Cooperman with Omega Advisors.

Lee Cooperman-Omega Advisors

Thank you. We’ve had this conversation in the past and I really think, Steve, you should add to your list of things you’ve got to do better is capital management. From 2004 to 2007 we have spent $15 billion buying back stock and if the opening this morning is any indication of on going value, the program, there has been really an enormous mistake and it’s particularly aggravating because it took place at a time when there was substantial insider selling, back to the corporation in effect. We’ve had this conversation before, but I’d like to know how well thought out is this buy-back philosophy to where you’re excluding a meaningful cash dividend completely? In other wards, when I look at the statistics, 80% of the S&P 500 pay dividend, 100% of Dow Jones Company’s pay a dividend. Where do you think your stock would be selling at if you took say half of your 355 to 360 in earnings and paid out a cash dividend, of the remaining half, half went to grow the business and half went basically to offset option dilution and if the shareholders made their decision. Now I myself have historically been a fan of stock repurchase, but only when one condition exists: that we’re buying back something that’s meaningful under valued when we’re leveraging return to remaining shareholders, and clearly we don’t seem to have a good handle of what our business is worth or missed mister market is making an enormous mistake. What can we say here about this?

Stephen Hemsley

Well first of all, I appreciate your perspective and I believe I understand your perspective. Our approaches to capital have been consistent in terms of reinvesting in a way that we think is measured in our existing business. Dedicating capital where we see opportunities to strategically expand our business and we have seen and felt that share buy back provides the greatest shareholder value and we look at our business and assess what we consider to be the intrinsic value. I think we are influenced by the fact that we have not executed well and have not executed well over the last, I would say two years, and as result it has clearly been reflected in the share price. We continue to believe that the potential of this enterprise, executing near or to its potential, is extremely compelling and we are committed to that level of execution, and as a result share buy back appears to be the most compelling use of that capital. I take your point with respect to a dividend analysis and I can assure you that we look at that and evaluate that on a regular basis and evaluate it at the board level.

Lee Cooperman-Omega Advisors

My only suggestion, since you’re taking an extreme position. I mean today you said you were going to do about a $4 billion buy back of I guess 10% or there about of the market cap. Why don’t you share the valuations thinking that the board and financial management of the company has gone through in reaching this decision and send all of us a little letter in discussing this decision, because you know we spent 3.4 billion in ’04. 2.6 billion in ’05, 2.3 billion in ’06, 6.6 billion in ’07, these are substantial numbers. This is the biggest investment decision the company has ever made and it’s been so far flawed. Now, I myself, I get intrigued when you really get under valued. My guess is you’re probably significantly under valued, but I’d like to kind of understand the thought process that management is going through to reach this determination. Because, the, you know, I suspect if we announced this morning that we were to pay $1.80 dividend, which is half the earnings and the other half would be to grow the business or off set option dilution, your stock wouldn’t be trading where we’re starting at today.

Stephen Hemsley

I appreciate that solution. We’ll see if we can, in our next call perhaps, dedicate some time to

that and I appreciate the [indiscernible] and that about our shareholders.

Lee Cooperman-Omega Advisors

Thank you very much.

Operator

Your next question will come from the line of Christina Arnold with Morgan Stanley.

Christina Arnold-Morgan Stanley

Hi there. I’m really struggling with your assertion that you’re not seeing a change in forecasted medical trend. Because, if I look at your commercial loss ratio, you’re saying that you got better yields than a year ago and yet a year ago the commercial loss rates show benefited from 120 basis points positive development; so even excluding flu, your MORs up over 100 basis points; so that implies that costs have accelerated more than 100 basis points. Can you help me with that?

Stephen Hemsley

I think that one of the major themes there is that we have gotten better yield realization this year as compared to last few, the issue is, are those yields sufficiently covering the level of projected medical costs and Mike can, I think, provide some color.

Christina Arnold-Morgan Stanley

But how can the acceleration and premium yields not cover trend if trend isn’t rising or accelerating?

Mike Mikan

Christina, let me clarify that as best I can. What we’ve said is, and I’ll go back to my earlier comment with Justin, last year we ended the year at 7 to 7.5% at the lower end of that range. This year we have been forecasting and remain to forecast at 7.5% plus or minus 50 basis points. If you try to tie in yield, last year, as we disclosed to you, is we missed trend by about 60 basis points. If you assume that we’re getting 50 basis points better on yields, but we’re still short by 30 to 40 basis points from yield to trend, that would imply that your medical costs have increased by 20 to 30 basis points, well within the range that we had given previously. So last year we ended at the lower end of the range and this year we’re well within the 7.5% plus or minus 50 basis points. There is flu that works into that as well, but 30 to 40 basis points is relative to what we expected trend to be, so flu is in there at 10 basis points and then there are some ins and outs, but nothing major beyond that.

Christina Arnold-Morgan Stanley

So if you’re at the lower end of kind of 7 to 7.5%, lets call it 7%, I mean you’re saying trend could be as high as 7.5 plus or minus 50, trend could be as high as 8 so trend could be up 100 basis points, am I reading that right?

Mike Mikan

Well the range is 7.5 plus or minus 50 basis points. The map I just walked you through would be somewhere around you know 30 to 40 basis points, if you take flu into consideration and some other items.

Christina Arnold-Morgan Stanley

Okay, it’s just it seems to me that x flu, you’re running an 81-1, a year ago x positive development or x negative development in commercial you were at 80% even, so even x flu you’re up over 100 basis points with higher yield, so I guess I’m still struggling, but I’ll take it off line.

Mike Mikan

I think we can take you through that map off line. I think that would be a more productive approach.

Stephen Hemsley

Well Christina, let why don’t I just quickly, just give you some other guidance that we’ve given before. When you’re just for the development, both the favorable development from last year and subsequent development true ups for the first quarter, we estimated the loss ratio to be 80.5%. If you adjust for flu and you adjust for this pricing discrepancy that I just discussed, you would get in the range of what we booked the first quarter out of, at 81.5%; so, yes, I think between John, Brett and I, we can follow up with you on that.

Christina Arnold-Morgan Stanley

Okay, thanks.

Operator

Your next question comes from the line of Bill Georges with J.P. Morgan.

William Georges of J.P. Morgan

If we could focus just for a second on your Medicare Advantage and the new guidance and maybe if you could start off just by helping us square the membership that you say which is 50,000 adds versus what CMS is reporting and I believe they talked about that being 19 and then, how realistic are your new guidance points given the fact that open enrollment has closed, so you no longer have access to the full 45+ million members. Is it realistic to think in the balance of the year, with a far smaller adjustable population, that you’re going to be able to hit those targets?

Stephen Hemsley

I think Simon can respond to that.

Simon

Yes, thanks Bill. So if you look at the CMS numbers, we do believe they reconcile and obviously the CMS monthly numbers are lagged by three or four weeks, so January they have us at -12, but in fact there was a cost trend number in there which got us flat. For February they were up 13, for March they were up or April up 9 getting us to a net of 27 and then we saw a ramp up in sales at the end of the open enrollment period to give us our estimated 50,000 equal first effectives. As for the rest of the year, we obviously aren’t able to sell unexpected replants in 34 markets and in those markets we think we have potentially six million seniors who are potentially available, able to join those on a special needs plan, so we don’t think we’re going to be out of runway for the rest of the year.

William Georges of J.P. Morgan

Okay and if I could ask a quick follow up on your cash flow guidance. I think you’re prior guidance points were 7 billion, but if I recall that was a five-quarter look. The math that I’ve got is that you report about 2.2 billion in the fourth quarter, so that would imply that you’ve cut your share repurchase guidance from about 4.8 to 4 billion. Could you confirm that I’m getting that correct?

Stephen Hemsley

You’re not talking about cash flow; you’re talking about projected share repurchases?

William Georges of J.P. Morgan

Share repurchases in 2008, yes.

Stephen Hemsley

Right, Mike?

Mike Mikan

It’s about a billion-dollar reduction from that original forecast.

William Georges of J.P. Morgan

Okay, great. Thank you very much.

Operator

Your next question will come from the line of Cheryl Skolnick with CRT Capital Group

Cheryl Skolnic-CRT Capital Group

Okay great, thank you very much. I guess the answer to the question is that you’ve reduced your outlook on repurchasing the stock, which I have to say, given the changes to the balance sheet and the cash flow of $280 million in the quarter is a good thing. But, I guess I have to go to a broader question. We’re confused about how you’re pricing your product. I really don’t understand what it means that your premium yield is ─I do understand in terms of the numbers that your premium yield was better than it was last year. It’s still not good enough to cover trend. I’m going back right to Christine’s question on this and I guess where I’m very confused is, is it that you expected, you priced for a cost trend say at the 7.5%, what you’re getting on premium yield is 7.3%? Is that the right way to look at this in terms of just putting it in simple English and simple numbers? Then the broader overall question is, with the increase in debt, with the lack of performance ─ which Steve, unfortunately you’ve had to preside over for the last couple of years, with changes in management, how do we get confidence that this is sort of the last time we’re going to hear the results are unacceptable? I just, the message gets more confusing, not less. Do you have the right team in place? Are you pricing the product correctly? Is the quality of earnings where it needs to be? Is the cash flow where it needs to be? That’s the general broader question, or are we looking at a period of prolonged readjustment before the company can get back on track?

Mike Mikan

Okay, Cheryl, there is two questions there. I think the first one we can respond to quickly and than I’d like to respond to the second one.

Cheryl Skolnic-CRT Capital Group

Thank you.

Mike Mikan

Cheryl, to use your numbers, the way you’re looking at using the 7.5%, we are, of cost trend, if you were to use that number, we’re 30 to 40 basis points below that. Yes, as Steve noted on the call, we are falling short on premium yield by about $200 million or $1.50 to $2.00.That was roughly, call it, 50 basis points or $1.50 PMPM that we needed; so we would have liked to have gotten that in our pricing, but as a result of the competitive pricing dynamics, the market mix, all those things, we are again falling short by 230 to 40 basis points. That doesn’t mean the cost trend that we assumed changed, with the exception of flu and some other non-recurring items, but de minimus albeit, but nonetheless we are falling short again 30 to 40 basis points this year, compared to 60 basis points last year.

John Penshorn

This is John Penshorn Cheryl. The difference between the 50 basis points that Mike just referred to and the 30 to 40 would be mix, including the HAS growth which Steve talked about.

Cheryl Skolnic-CRT Capital Group

Got it, thank you.

Mike Mikan

Cheryl, the second part of your question is clearly fair and I would tell you that I see perhaps things that aren’t reflected in the performance and I’ve talked, I think, in terms of changes that have been initiated, I would say over the last year, to address needs, I think, within our enterprise to position it for a long-term, consistent performance. Those are areas around a culture that focuses on organic growth and the innovation and the kind of service environment that is required to sustain it, an organization that has the kind of relationship orientation to work effectively with all the participants in the healthcare market place, so that it’s presence in that marketplace is welcomed and encouraged and I think we have made significant advances in that area. We continue to struggle with our capacities around growth. Growth in principally risk-based products, products that have extreme price sensitivity where we endeavor maintain an economic discipline about how we price that product and how we over see that product in terms of its attributes, so that we have some visibility with respect to the economics of that. That has been a challenge for us, it’s been a challenge across the marketplace and that growth issue and the inability to predict that growth, I think has been at the core of our issues and is clearly the core contributor to our guidance with respect to that. I would say that we have taken steps and we will continue to take steps. We will continue to try to find the right mix of leadership; we will continue to adjust our approaches so that we are more effective as an enterprise in delivering the kind of value that stimulates a consistent pattern of growth and growth that has reasonable economic return. And there are other things that can be done, but in the main of this business, to optimize this performance, it’s performance is far from its potential and I would say this team and its management are very , very focused on that and a number of good things are proceeding, but they are not reflected in our performance to date.

Cheryl Skolnic-CRT Capital Group

Okay, perhaps I’ll be able to follow up offline with some additional questions, but in the interest of time I’ll let it go. Thank you.

Operator

Your next question will come from the line of Tom Marsico with Marsico Capital.

Tom Marsico with Marsico Capital

Hi, thank you for taking my question. In listening to the conversation today and the questions that have been brought up with some of the analysts and also with Mr. Cooperman, I think it’s very insightful to look at what’s happening to some of your businesses including the Pharmacy Solutions business. Today you announced that you signed the contract with Medco. Medco today is up 8%, it’s adding $2 billion worth of value to its market cap and it sells at 22 x earnings. I’d like to understand what you think the strategic relationship would be worth if UnitedHealthcare were to sell prescription solutions to Medco. Also, in light of that, looking at the Ingenix business, which I think is a terrific software business and also Optum Health, which has very specialized services, it seems like the value in those three businesses, which represents about roughly $20 billion worth of revenues is a dramatically higher multiple business, especially looking at the Medco business, than the way that the HMOs are trading. So, I think that, in my view as being a long-term shareholder for our clients, in looking at the valuation on United Healthcare, it seems to me that the parts are worth dramatically more than where the stock is trading now. Other HMO companies don’t have the product diversity that United Healthcare has and it seems to me that, when looking at the sum of the parts solution to what United Healthcare might be worth, is dramatically greater than where it’s trading at today; so your share repurchase program you’re almost looking at a 15% free cash flow yield and we’re going through a normal cycle, I think. I like the pricing discipline that you have in the PM business and I like the fact that you’re holding to making certain that you’re not pricing the product too low, because the cost trends have not changed, so I like the pricing discipline. And looking at what private equity’s paid for businesses in the medical arena, such as the private equity acquisition as HCA, it seems like the valuation, when the credit markets start to normalize, would find United Healthcare dramatically under valued. So, Steven, in light of signing the Medco contract and some of the other comments I’ve made as far as Ingenix is concerned, how do you look at these special businesses that are within United Healthcare, given the valuation on your company, and is it something that we should be talking to the board about as far as realizing the opportunity? I mean, I just , you know, the markets down 57 basis points today, Medco is up 8% adding $2 billion worth of value and we’re looking at the stock at United Healthcare down another 10% and I’m saying to myself, the cash flow valuation is very supportive and I’m just interested how you look at this?

Stephen Hemsley

Well, we have had parts of this conversation before and I’m very familiar, I think, with the spectrum of value dynamics across our diversified portfolio and I can assure you that we look at that and assess that in terms of what I will call the long-term interest of shareholders and we do that, not just by ourselves, but we use external experts in terms of making those assessments and you are very correct in terms of seeing the distinctions in value across that spectrum. Taken together, if you think about the total health care marketplace, it meets its potential and the systemic fashion in which we think it is appropriate to address it. That diversification that has been cultivated in this company for more than ten years has been distinctive and it’s helped us grow in a variety of different domains. Much of the growth in these special businesses that you’re referring to has been stimulated and leveraged off the assets and capabilities of businesses that perhaps are not as vibrant at this moment. And I would also say that the view may be clouded by the lack of consistent execution to getting this portfolio of businesses to all perform to their potential. My sense is that the evolution of this enterprise, to that more complete business model has distinctive capacities in the marketplace and has distinctive value potential. That said, Tom we look at these pieces and will look at these pieces and assess whether we can accomplish those same elements, those same goals, without necessarily controlling those, and we look at that on a regular basis and assess whether the position and so forth would be appropriate to unlock value. In fact, we thought that unlocking value was appropriate at that time for long-term shareholders. I use the PBM as an example. Rx Solutions, we think, is a very high potential business its’ potential is far from fully realized. We are making investments in it and making sure that it flows and can be positioned to something that could be quite distinctive in the marketplace and I might look at the extension with Medco as a bridge to that ultimate kind of potential. So I think, for example, you could look at that as a piece in the strategy that might play exactly into what you’re suggesting. We’re looking at these across the spectrum, whether it’s Ingenix or Rx Solutions, Optum Health, AmeriChoice, across the board. I would offer one other element and that has been consistent for many years, is that a core element that has allowed us to cultivate these businesses the way they have, has been the competency around care access and clinically integrated care management, information, which is key to the, I think, success of all of the businesses and the leverage and use of technology and those are present in all those businesses, an important leverage point that one has to consider if these were ever to be separated. It is a point that our board does deliberate over and would always welcome your thinking and our discussions with you on that level.

Tom Marsico with Marsico Capital

Okay, thank you very much Steve.

Operator

Your next question will come from the line of Gregory Nersessian with Credit Suisse.

Gregory Nersessian-Credit Suisse

Hi, good morning. I just wanted to get the commercial margin maybe from a different perspective. I guess it’s at a basic level, you know the commercial risk membership is declining, you know, even faster than we expected, while the MLR is going up. To us that would suggest that the absent mix changes of the UHC risk pool is deteriorating. I guess one is that the correct conclusion and two, if it is a factor, is it because you’re seeing this enrollment and maybe that this enrollment is coming from healthier groups or healthier members within your groups, or is it two because of these competitive pressures you’re mentioning? You know perhaps competitors are picking off your better risk membership through, maybe not irrational pricing, but maybe pricing to a lower margin, are any of those factors?

Ken Burdick

Greg, this is Ken Burdick, let me respond to your question. I would say that the pricing pressure that Steve outlined in his opening remarks is intense, but I would describe it as rational. To your point we do see the strongest pressure in those markets where we compete against non profit players and we continue to focus on pricing our business to our forward look of costs and so well we are pleased that we are getting stronger net premium yields this year than last year, we remain displeased that we aren’t hitting our target of matching medical cost trends.

Gregory Nersessian-Credit Suisse

On the disenrollment costs that you’re seeing, is there a way to characterize that as being healthier members being priced out of the insurance market altogether and just opting out or is there any conclusion you can draw around the relative risk of the membership that you’re losing, relative to the stuff that you’re keeping?

Ken Burdick

You know, we look at that on a monthly basis, we do not see a degradation of the underlying demographics and the quality of the risk pool. What I can tell you to the earlier comment is that we are seeing a much higher level of in-group attrition, the enrollment declines due to the soft economy. So for example, in the first quarter of ’07 we saw 55,000 members within existing customers leave. For first quarter of ’08 we’re seeing double that amount, but we’re not seeing a substantial or any differentiation in the quality of the risk pool.

Gregory Nersessian-Credit Suisse

Okay great. Then just a last quick one, is there any reserve release from Sierra included in the $200 million of DPRD in the quarter?

Ken Burdick

No.

John Penshorn

This is John Penshorn. Ken, could you clarify that attrition number you just provided. Is that risk based only or is that UnitedHealthcare only or what does that pertain to?

Ken Burdick

That’s UnitedHealthcare only and its risk base.

Gregory Nersessian-Credit Suisse

Okay thank you.

Mike Mikan

We can take questions for about ten more minutes, so could we get the next one please?

Operator

Yes sir. The next question is from the line of Thomas Carroll with Stifel Nicolaus.

Thomas Carroll-Stifel Nicolaus & Company, Inc.

Hey good morning, a quick one here. How much of your revision was related to fed rate action? Then secondly, could you provide us with some metrics that illustrate the flu season this year relative to others, be that admits per thousand or some type of script that would indicate magnitude of change, you know this year being a unique year in the flu season relative to others as we try to learn about this flu season?

Mike Mikan

One of my, it’s Mike, Tom. Why don’t I, I’ll start with the second question and I’ll ask Bob

Oberrender, our treasurer, to answer your first question.

Mike Mikan

You know we’ve obviously been analyzing the flu season for a number of years. We always take a look at when the flu season occurs, what is the duration, what is the influenza like, patients as a percentage over the baseline; as you know, this year was a dramatic spike in the mid February time period. We generally estimate that the flu costs, across our book of business, somewhere around $150 million a year. We estimate that range to cost us for the first quarter in 2008 to be roughly $230 million, say 70 to 90 million, or I you want to put a core door around it, of incremental flu costs and each one of the ─ you know we manage the different diagnoses, but each book of business is different, whether it’s physician visits in the commercial business, inpatient stays in the Ovations business, its all across the board for the AmeriChoice business, so there isn’t one unique item, but we do manage it across each individual block. In an aggregate we estimate it to be around $80 million incremental.

Thomas Carroll-Stifel Nicolaus & Company, Inc.

Great.

Robert Oberrender

And Tom, Bob Oberrender, with respect to investment income up to 200 basis point decrease, the fed action impacting rate impact on our investment income going forward and then the incremental part is some lower average balances as we trued up with CMS compared to the last year. So it’s about $260 million degradation off set by, as Steve indicated in the comments that he made in the opening, of about $150 million of estimated realized capital gains, of which we realized $53 million in the first quarter.

Thomas Carroll-Stifel Nicolaus & Company, Inc.

Okay, I can figure that out, thanks.

Operator

Your next question will come from the line of Scott Fidel with Deutsche Bank.

Scott Fidel-Deutsche Bank Securities

I’m just interested if you can give us an update on where enrollment stands currently in commercial for the Legacy Pacific area and AMS books, just in terms of thinking about, you know, how much more potential attrition risk is there before we essentially get to zero with that commercial business.

Ken Burdick

Yes, this is Ken Burdick again. The Pacific Care losses for the first quarter of ’08 came in about 50,000 members higher than expected; we were planning on 200,000, it came in at 250,000. I would note that 130,000 of that is attributable to four large customers, where we were operating with very, very thin private margins. Over the remainder of the year we expect continued losses substantially subsiding 80 to 90,000 over the remaining three quarters of this year and our business is much better positioned now. We know that we have felt the effects of the very rapid transition that we implemented and the way we manage the business operationally, but the remaining customers are seeing the service improvement and the network stability, so we are going to continue to see a dramatic improvement in the losses.

Scott Fidel-Deutsche Bank Securities

And Ken, just remind us, what is remaining at this point in terms of commercial membership from Pacific Care, what’s left in that block at this point?

Ken Burdick

11.6 million members.

Scott Fidel-Deutsche Bank Securities

Okay and then I just had a quick follow up in terms of on the Part D business and some of the comments you made around the cloche in the LAS business. Can you help us think about what you think pre-tax margin in Part D will look like this year? I know historically you’ve talked about targeting a 3 to 5% pre-tax margin of that business?

Simon

Yes, Scott, this is Simon. Part D continues to be a successful and profitable business for us and the new benefit designs that we introduced for 2008 are generally performing well. We certainly have been successful in stimulating increases in generic male penetration as we planned. As Steve said, we are, however, how seeing higher than planned pharmacy trends, particularly for our low income Part D members and this is to some extent a spill over effect from last years low income benchmark bidding process. As to margins, obviously, as we’ve said for many years, we typically look to a minimum hurdle rate of 3 to 5% with an established government program, recognizing that returns can often be better for individual participants in programs who are high performing.

Scott Fidel-Deutsche Bank Securities

Simon, is it fair to think a little bit lower than that long-term hurdle rate, but still profitable for Part D?

Simon

It’s certainly still profitable, the Part D and that’s the basis in which we participate in all government programs.

Stephen Hemsley

I think we’re going to half to wrap it up. I apologize we can’t get to all questions and we will have management available broadly for questions through the course of the day. I would like to, though, comment on something that occurred here this morning at 9:00. The state of Tennessee awarded AmeriChoice both the east and west agents for the state Medicaid business. That business will largely start in the beginning of 2009; it should represent about $1 billion of revenue growth for AmeriChoice. I think that’s an example of the RMPs that we said were in the marketplace that we think are fruitful, so AmeriChoice was successful in securing the state of Tennessee business, should represent about $1 billion of revenues for 2009. Our orientation for its growth like this needs to come back into our commercial risk businesses, we’re focused on that, we’re focused on our operating costs; we’re focused on making sure that this enterprise performs to its potential and we are urgent about it. The steps that we’re taking, I think reflect that. We’ll be happy to have an opportunity to talk to you about your questions through the course of the day. Thank you.

Operator

Ladies and gentlemen, that does conclude our conference for today. You may all disconnect and thank you for participating.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: UnitedHealth Group Inc., Q1 2008 Earnings Call Transcript
This Transcript
All Transcripts