Regina C. Nethery - Humana, Inc. Bruce D. Broussard - Humana, Inc. Brian A. Kane - Humana, Inc. Christopher Mark Todoroff - Humana, Inc..

Kevin Mark Fischbeck - Bank of America Merrill Lynch Joshua Raskin - Barclays Capital, Inc. Scott Fidel - Credit Suisse Securities (USA) LLC Justin Lake - Wolfe Research LLC Peter Heinz Costa - Wells Fargo Securities LLC A.J. Rice - UBS Securities LLC Michael Newshel - Evercore ISI Ana A. Gupte - Leerink Partners LLC Gary P.

Taylor - JPMorgan Securities LLC David Anthony Styblo - Jefferies LLC.

Good morning, ladies and gentlemen. My name is Letitia, and I'll be your conference operator today. At this time, I would like to welcome everyone to the IQ 2017 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you.

I would now like to turn the conference over to Ms. Regina Nethery..

Thank you and good morning. Welcome to Humana's First Quarter 2017 Earnings Call. In a moment, Bruce Broussard, Humana's President and Chief Executive Officer; and Brian Kane, Senior Vice President and Chief Financial Officer, will discuss our first quarter 2017 results and our financial outlook for the full year.

Following these prepared remarks, we will open up the lines for a question-and-answer session with industry analysts. Christopher Todoroff, Senior Vice President and General Counsel, will be joining Bruce and Brian for the Q&A session.

We encourage the investing public and media to listen to both management's prepared remarks and the related Q&A with analysts. This call is being recorded for replay purposes. That replay will be available on the Investor Relations page of Humana's website, humana.com, later today.

Before we begin our discussion, I need to advise call participants of our cautionary statement. Certain of the matters discussed in this conference call are forward-looking and involve a number of risks and uncertainties. Actual results could differ materially.

Investors are advised to read the detailed risk factors discussed in our first quarter 2017 earnings press release, as well as in our filings with the Securities and Exchange Commission. Today's press release, our historical financial news releases and our filings with the SEC are also available on our Investor Relations site.

Call participants should note that today's discussion includes financial measures that are not in accordance with generally accepted accounting principles, or GAAP. Management's explanation for the use of these non-GAAP measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release.

Finally, any references to earnings per share, or EPS, made during this conference call refer to diluted earnings per common share. With that, I'll turn the call over to Bruce Broussard..

Thank you, Regina, and good morning and thank you for joining us. Also thanks to many of you for participating in our Investor Day last week.

In conjunction with that event, we preannounced our first quarter 2017 GAAP EPS of $7.49 per diluted share, or $2.75 on an adjusted basis, and raised our expectations for the full year GAAP EPS to at least $16.91 with full year adjusted EPS projected to be at least $11.10.

This morning, we reaffirmed that increased guidance and provided the full detail behind our first quarter 2017 results.

While Brian will review the financials in more detail, I want to emphasize that these results reflect the commitment and effort of the entire Humana team to ensuring our integrated care delivery strategy is executed with focus and is flexible and adaptable to local market needs.

At our recent Investor Day, we spoke of our principles of focus, integration and flexibility, which are not new to us. By consistently applying these principles in our business practices, we've been able to advance our strategy even during the extended period of uncertainty. I'll begin with focus.

Our strategy is more focused than ever as we concentrate on those lines of business where our integrated care delivery model adds the most value. Second, we are focusing on the most effective way to extend our touch points with our members including healthcare experiences outside of the care physicians and other institutions.

Third, we are continuing to focus on strengthening our operating platform to optimize its productivity and dependability.

Integration is another area of emphasis and includes integrating more deeply with our providers to evolve to a more holistic care model, integrating both the lifestyles and healthcare aspects of a member's health, and integrating technology and processes to remove friction points in the healthcare delivery system, to improve the experience for our members and providers.

Healthcare is a local experience. That's why our strategy and capabilities have been developed to be flexible and adaptable to local market conditions. This means adjusting the care platform based on specific market dynamics, related product offerings and the health conditions of our members.

Our historical success in market differentiation are grounded in our ability to integrate our health plans and Healthcare Service businesses through leveraging our data analytics, clinical programs, and consumer-focused platform to drive health engagement and incentivize managing health holistically.

By helping our members manage their conditions and by assisting them in slowing disease progression, we are seeing measurable improvement in several of our communities of members experiencing more healthy days.

We believe the combination of effective clinical programs, a productive platform, and an engaging experience for members and providers leads to an affordable product which ultimately drives profitable membership growth and growth in our Healthcare Services businesses.

All of this combined help to improve the productivity of our platform and allow for a disciplined use of capital. In closing, we believe in the strength of our company going forward and its ability to deliver double-digit earnings growth for our shareholders over the long-term. Our first quarter results strongly reinforced this strength.

We believe that concentrating on what we do best, helping seniors with chronic conditions, solidly positions us to drive multiyear quality Medicare Advantage growth while leveraging our Healthcare Service businesses to reduce cost and improve the clinical outcomes of our Medicare Advantage members.

Through integrating our health plans and Healthcare Service businesses more deeply and investing in clinical capabilities and physician partnerships, we have already made great progress improving outcomes, reducing cost and enhancing the member experience. With that, I'll turn the call over to Brian..

Thanks, Bruce, and good morning, everyone. My remarks today will also be relatively brief given our Investor Day last week allowing more time for analyst questions.

As Bruce mentioned, the first quarter of 2017 produced solid results ahead of our prior expectations, and consequently, we raised our adjusted EPS guidance to at least $11.10 and our full year Retail pre-tax target by $50 million.

We also expect our quarterly EPS progression to reflect just under 30% of the full year number in each of the second and third quarters, with the fourth quarter expected to reflect the usual cost increases associated with the open enrollment season. I will now provide more details about each of our segment's operating performance.

Led by individual Medicare Advantage, our Retail segment outperformed our initial estimates, largely due to better-than-anticipated prior-period development. Early indicators also suggest that medical cost utilization trends, including hospital admissions and pharmacy spend, are running well relative to our pricing expectations.

Initial indications of Medicare premium levels are also encouraging. Finally, we have lowered our expectations around 2017 individual MA membership growth to 15,000 to 25,000 from 30,000 to 40,000 while we are increasing Group MA membership by 10,000 members to 80,000 to 90,000. We do not expect these changes to impact overall Medicare profitability.

With regard to our Medicare Advantage bids for the 2018 plan year, our organization is working diligently on our bid submissions which are due in early June. With the overhang associated with the terminated transaction now behind us, we believe we'll be positioned for stronger growth next year while we maintain pricing discipline.

We continue to receive a number of questions about the assumptions that will be reflected in our bids. For competitive reasons, we won't be specific on these, but I will reiterate three of the key points we shared at our Investor Day last week.

First, we are incorporating our recent 2017 outperformance into our pricing and will reflect any new information as it becomes available in advance of the bid submissions. Second, we are assuming the nondeductible health insurance fee, also known as the HIF, resumes in 2018 as is scheduled under current law.

This will result in a reduction of benefits and/or increases in premiums for our members, which could create some member dislocation given the importance of stable premiums and benefits to member retention and new sales.

And third, our bids will reflect the outcome of our ongoing Stars bonus efforts with CMS, and we will update the Street on our progress in this regard during our second quarter conference call. Turning to our other businesses, our Group and Specialty segment is having another good year.

Our performance is running in line with expectations, with a focus on smaller employers paying dividends as it gives the organization focus as well as the opportunity to add meaningful value for our customers.

Our Healthcare Services segment also continues to deliver profits, steady cash flow to the parent, and importantly, clinical excellence and trend benders for our insurance lines. You will note that we have taken down intersegment revenue guidance by approximately $1 billion for the year.

Our Humana At Home optimization continues apace and is proceeding a little faster than we had expected. We expect this optimization to continue into 2018. Additionally, we are seeing lower-than-expected pharmacy volumes, which reflect lower health plan drug utilization than we had previously anticipated.

This of course is a positive development for overall Humana, though it is still too early to draw definitive conclusions.

If these trends continue, we expect that the increase in health plan pre-tax income would more than offset any reduction in pharmacy profits, though it is also important to note that any utilization reductions in the health plan would be meaningfully offset by lower member cost share and CMS reinsurance payments.

I will now make some comments regarding our long-term EPS targets that we discussed during our Investor Day last week. There have been some questions as to how we define low to mid-teens EPS growth.

To provide more clarity around regarding our intentions, our long-term annual EPS target is 11% to 15%, reflecting our conviction around our strategy and the results it can deliver.

As we discussed last week, our annual results will vary, sometimes performing above this range as in 2016, other times falling within the range and depending on the funding environment, competitive landscape and any prior year over-performance, there may be years in which EPS growth is below that range.

Given our integrated model, we have multiple levers we can pull to achieve these long-term results which will also vary year-to-year.

These levers include, among others, membership and PMPM premium growth, MA margin changes, depending where the prior year finished in terms of our 4.5% to 5% individual MA pre-tax margin target, Healthcare Services pre-tax growth in excess of insurance membership growth to drive additional margin, and of course, capital return and M&A.

Enhancing organizational productivity will also be a prime focus of the company to achieve these results while also increasing operational consistency.

Finally, before opening the call up for questions, I would like to share with you the news that Regina Nethery, our Vice President of Investor Relations, has decided to retire at the end of this month after nearly 22 years with Humana. It is impossible to overstate Regina's contributions to Humana over her career.

She has not only been consistently recognized as the Investor Relations leader in our industry, but she has also been a critical partner to Bruce and me, as well as to our predecessors, helping all of us navigate the tremendous change both Humana and the industry have undergone over her distinguished career.

Her wise counsel and impeccable market judgment have guided us through both good times and bad, demonstrating exemplary leadership and representing the very best of Humana. We can't thank her enough for all that she has done for the company. Regina, you will be greatly missed and we wish you the very best.

With Regina's retirement, Amy Smith will lead Investor Relations. Amy is a CPA, who has been at Humana for nearly 14 years, serving most of that time in progressively expanding leadership roles on the Financial Reporting team, driving SEC reporting and development of external messaging on key financial measurements for our earnings releases.

With this expertise, she joined the Investor Relations team in February 2017 and met many of you at our Investor Day last week. Bruce and I look forward to partnering with Amy in her new capacity and she's very excited about the opportunity of working with all of you. With that, we will open up the lines for your questions.

In fairness to those waiting in the queue, we ask that you limit yourself to one question. Operator, please introduce the first caller..

Thank you. And your first question comes from the line of Kevin..

Hello. Thanks. I guess I just would like to reiterate those comments that Brian just made about Regina; incredibly helpful over the years. So, you will be missed. But I guess my question would be I guess it's not clear exactly to me how you're thinking about 2018 in the terms of that 11% to 15% EPS growth target.

It sounds to me like you're highlighting a few headwinds there, certainly the HIF being the biggest one.

Is there any initial kind of thought about that making it difficult to hit that target as we see it right now?.

Well, Kevin, as you know, we typically don't provide even as much commentary as we've provided to this point on the following year and I think what we've provided at this point is really all we're going to say.

Obviously, the HIF is something that we're very focused on and it is a headwind that frankly all the industry will have to contend with, but we are very mindful of all the elements that are going to go into our bids and you should expect more commentary as we get to later in the year. So, that's really all we can say at this point..

Okay. That's fair. Thanks..

Okay. Thank you. And your next question comes from the line of Josh..

Hi, Josh..

Hi. Good morning, and congrats again to Regina and to Amy as well. My question on the exchange is the Commercial Individual business. I know the MLR was running particularly low.

I'm just trying to understand the performance relative to expectations and where you are vis-à-vis the PDR last year? I'm assuming that the MLR is just seasonally that low, so I'm just curious.

Is that in line with what you're expecting? And what's sort of a P&L impact for the Individual Commercial business this year?.

Hi, Josh. It is in line and you pointed to the reason why the MER is so low. It's really seasonality. There's a very steep claims curve in the Individual business as the year progresses given the benefit design of the product and so the MER and the profitability in the first quarter is within our expectations.

We do still expect to lose approximately $45 million overall for our ACA and our non-ACA combined individual products.

If you compare versus last year, which you may be looking at, the losses were significantly higher than what we expect this year and as you know, we exited all of our off-exchange products and meaningfully pared back our on-exchange products particularly those areas where we were losing a great deal of money.

And so that really explains the difference year-over-year, but the seasonality is real in this product and that's what's explaining that low MER this quarter..

Okay.

And we should think of the $45 million as still the bogey in terms of what should be a, some sort of, tailwind for 2018? Whether you're in or you're out, I assume that the plan would be to fix it, right?.

Well, true, but remember that we are excluding the Individual business from our adjusted earnings, so it will help the GAAP earnings, but we've taken it out of our adjusted earnings..

Okay. Perfect..

Okay. Thank you. And your next question comes from the line of Scott Fidel..

Thanks. And first of all, I also want to just extend my best to Regina in your retirement and appreciate all your help over all the years.

The question, just first question I had is just on, so give us an update on how things are progressing in terms of reactivating the external distribution channel for MA? I know that there had been some disruption that you had cited just around merger uncertainty on the 2017 selling season and just how those efforts are going to reengage your distribution heading into 2018?.

Thanks, Scott. First, we never disengage from the distribution channel. I think there was just a lot of confusion in the marketplace that some of the brokers were creating as a result of the transaction specifically; are you buying Aetna product or are you buying a Humana product and just some of the confusion that would create.

And then in some markets where we were needing to sell membership, there was a lot of push on that we were selling membership and exiting, which also created some confusion in the marketplace. But that being said, there is a whole host of effort right now of deepening our relationships with the brokers.

I mean I know just in the last six weeks, we've had a number of one-on-one meetings and group meetings with our distribution channels, and basically saying we're back in action and we have some great products, and the Humana that you knew two years ago is even better than ever. And so I just think our continued touching with them will be important.

We are very competitive on the compensation side. I think this year we also will continue to support them in marketing actions and other things to help their book of business. And so we feel good about it and we feel that the confusion in the marketplace over the last few years that some brokers used to our disadvantage is gone.

And I think the strength of the company is strong, and I think we'll be able to continue to build deeper relationships with the partnerships that have proven to be successful for us..

Got it. If I could just ask a follow-up question just on the optimization process that's playing out in Healthcare Services, maybe just sort of walk us through in terms of what the key dynamics are for that and then in terms of how that impacts the earnings and sort of drives up the ROIs? Just more insight into that would appreciated. Thanks..

Yeah, I think it's general, we are very committed to Humana At Home and the benefits that Humana At Home offers.

What we were seeing, and I think this is a combination both of our effectiveness of the programs and how we've gotten better, that we were able to get the same clinical outcomes, the same financial improvements so that we would see by shortening the number of both the time and the visits and the method of the visit, and it's really the optimization of that that has allowed us to get – to leverage the great associates that we have in that area.

And I would attribute that to both technology and just continuing to advance the care model.

So, in result, what that does is, is it allows us to do more with less and, in result, lower the operating costs for HumanaOne – I'm sorry – Humana At Home, and that then allows us to pass those savings on to our Retail division that ultimately also helps in the ability to price the product in the marketplace.

So I would say, it's just really continued optimization of our organization and the effectiveness both leveraging the care plans that we have and then also the productivity of our associates..

Next question, please?.

Okay. Thank you. And your next question comes from the line of Justin Lake..

Thanks. Good morning. Again, Regina, thanks for everything. Congrats on your retirement and hope – I know everyone hopes you'll stay in touch. Questions – first, just a quick numbers question.

Brian, can you tell us what PYD added to the first quarter in terms of – obviously, a decent PYD number, was it more than you would expect to build in the guidance for Q1? And maybe I'll just stop there and maybe you can – I'm all choked up for – I'm going to miss Regina already..

We are, too..

So I'll just stop there, and then I've got one more question..

Yes. Well, again, the PYD, I think the $50 million is really reflective of sort of the excess PPD that we didn't expect is the way I would describe it, and that's what's been built in to the guidance. It's broadly in that range.

Remember that we don't – we expect some PPD beyond the traditional reversal of the margin that happens naturally every year and that's – we expect that in our Medicare business.

What we said on the last quarter call is that what we achieved in 2016 we didn't expect to recur again in 2017, and so while the PPD is down year-over-year, it's still higher than we had expected, and that's really the $50 million number that we called out..

Next question, please..

Thank you. And your next question comes from the line of Peter Costa..

Good morning, and I'll second everybody else's comments on Regina. Good luck in the future, Regina, in all you do. And moving on to – go back to the broker question, Bruce. Your membership in Individual MA, you've taken it down in terms of the growth that you're expecting.

It was down sequentially when you look at the CMS numbers in both March and April, so it doesn't sound like what you're doing is actually having an impact today in terms of your broker outreach.

Can you describe? Are you thinking about changing your broker outreach at this point given that you haven't had success in turning around the decline there, or the low growth? And then what else could you – just your plan designs at this point? Or what should we be expecting going forward?.

Yeah. A few things there. First, just keep in mind that the transaction terminated in February, so anything that carried over would continue to carry over from one period to another, so I think the environment really hasn't changed, and I would say that the clarity we have now in the environment is going to be a tailwind for us as an organization.

So we don't want to make massive changes in what we are doing there. I do think we are studying in the AEP or in our bid process for AEP, our plan design and being very thoughtful around that as it compares to the competitive plan design, and I think it's going to be the combination of both efforts we're doing in those areas.

And as Brian said, we really don't want to share what we're doing on the plan design today as a result of the competitive positioning of the product and the period of time we're in. So we're very optimistic about what we're doing.

I know, Peter, you're looking for details, but I'm not going to provide those to you as a result of where we are in the process, but I think we'll do better next year, but I do think the plan design's an important part of that going forward..

Yeah. And remember, for 2017, just we're not talking big numbers here and on a 3-million-member base, you have small levels of dis-enrollments or small differences in sales, that can easily swing numbers 10,000, 15,000, 20,000 members one way or the other. So I wouldn't make too much of the 2017 change..

That's fair. Just a follow up. Has the issue been more with the brokers that you employ? Because I know you have some of your own brokers versus brokers that you work with that are not Humana brokers..

We saw – with our existing proprietary sales network, we see consistency there in our sales and in retention. It was probably more on the extended brokered channel that we have had. A little bit of inconsistency there. And I don't want to make a big deal out of it.

I think it's as much about the relationships with the brokers as it is about the confusion in the marketplace. And I think both in product design and with the clarity of the transaction being behind us, I think those two things will be helpful.

And just one other note, just on 2017, to provide further perspective on that, we did exit a number of markets on a – purposefully, which also reduced our growth significantly down and that's not reflected in the – it's reflected in the net number and it also affects the growth in an absolute basis..

Yeah, I understand. That's what I was pointing out, the sequential change in March and April of CMS (28:28) numbers. Thank you..

Okay..

Okay. Thank you. And your next question comes from the line of A.J. Rice..

Thanks. Hello, everybody. Best wishes, Regina, on the retirement as well. I might just ask you about – there have been a lot of new developments since you guys had your Investor Day, but we have had a couple of your peers report and there seems to be several of them pointing to the Group MA market talking about strength there and renewed optimism.

I know you were up 10,000 lives or increased your guidance by 10,000 lives, rather.

Can you give us your thoughts on the Group MA and what you're seeing what the pipeline of new business looks like there? And just any commentary or perspective on that market and whether there's any – they're talking about incremental investments that they're needing to make, where do you stand on that, is that something we should think about for the rest of the year?.

Hi, A.J. I would say that we are selectively looking at Group MA opportunities. There is a pipeline there. We have a team out there that is, I think, doing a really great job looking for those opportunities and we're going to pick our spots, as we've said in prior context, to make sure that we're able to earn an adequate return of capital.

There's no real additional investment in 2017 for the Group MA product that's not already built into the plan. But we are looking at a number of opportunities, as I think a number of folks are, but we're going to continue to be disciplined.

But we think we have a very good product that we can offer and, again, it's really going to depend on the competitive landscape, our relative market position, depending where the members are and how aggressive we want to be. But, again, I think we're going to be quite disciplined in this product..

Okay. All right. Thanks a lot..

Okay. Thank you. And your next question comes from the line of Mike Newshel..

Thanks. Good morning.

Can you size any regulatory capital you might be able to free up from the individual market exit and just the timing on that and how long you have to wait for the claims to run out?.

Sure. I mean, you can look at our premiums and they're sort of north of $3 billion and, call it, 10% to 12% of premium over time that we can ultimately get out of our statutory subsidiaries.

There is a tail there and I would imagine in 2018 we'll start pulling out some of that capital from some of the prior reductions, but ultimately it's going to probably, likely, take into 2019 before we can get all of our capital out..

Got it. Thanks. And also given it's in the news this week that the DOJ has joined in some more – intervening in some more lawsuits with Medicare Advantage risk coding.

If you can you just give us an update on the subpoenas that you've received in the past or just the status of anything you've publicly disclosed around the government looking into risk coding?.

Hi. It's Christopher. What I would say is we've been saying for a long time, which is there's been an industry-wide review going on for quite a while and we've disclosed that in the past in our SEC filings and I would say that continues. And I think that if you look back at our prior Ks and Qs, it's got a full description of what's going on..

I think it's fair to say, we feel very good about our risk adjustment processes. We take this very seriously. We look for outliers. We've a lot of analytics around this. We do self-audits. Again, we feel very good about our risk-adjustment practices..

Yes. That's an important point. I mean we do very fulsome self-audits against a fee-for-service measure that we calculate and we disclose the results to the agency..

Next question, please..

Thank you. And your next question comes from the line of Ana Gupte..

Hi, thanks. Good morning.

I just wanted to get from you, directly, what the retail MA MLR is running at now and what you're expecting for the full year? Not retail so much, the Medicare MLR because there are assumptions built around the individual commercial book and risk-adjusted receivables and so on?.

Yes, the retail MER is disclosed in the financials because it's been pulled out. So it's in our press release. The reported MER for retail was 88.1% for the quarter..

This includes individuals? I'm just asking..

Ana, It's Regina. Remember we did segment – we realigned the segments and we pulled individual out of that? So the individual commercial is its own segment and would not be included in that retail number any longer..

Right. The 88.1% excludes individual..

So why is it so high at 88% now, seems on the higher side to me..

Well, again, the full-year guidance is out there in 86% range.

Remember the PDP product, in particular, drives the seasonality of that business, so over time the PDP MER as you move forward through the quarter given the product design, that MER goes down and so that's what's driving the, sort of, the high MER in the first quarter relative to our full-year guidance..

And might you see margin expansion through 2018 or is this your normalized....

I'm sorry, Ana. We couldn't quite hear you..

Is this your normalized look or might we see some margin improvement into 2018, as you're targeting....

Well, remember, a couple of things are going on. First from a pre-tax perspective as we indicated at Investor Day, given where our guidance is right now with the $50 million, we're at the low end of our individual MA number. But remember with the HIF coming back in 2018, that's going to impact the MER.

While the MER was slightly up, there were a number of things driving the MER that ultimately pulled it down, but the HIF offset that because you put more back into benefits. With the HIF coming back, you'll have to reduce the MER and increase the admin ratio to reflect that HIF.

So the components are going to change between the admin ratio and medical cost ratio, but as it relates to specific pre-tax margin guidance, again, we're not providing 2018 guidance at this point..

Okay. Thank you. Your next question comes from the line of Gary Taylor..

Hi. Good morning, and thanks, Regina, as well. Just one big question about individual or big in terms of just a few component parts to it. Of the 200 individual commercial I'm talking about, of the 201,000 enrollments, can you give us largest, say, breakout on and off exchange, because I still think there is grandfathered stuff.

And tell us what you think that enrollment number does next year?.

Yes. Well, so remember that we've exited the individual exchanges as of the end of 2017. So we're not going to have any members for 2018. For 2017, we exited the off-exchange in total. So of our call it 200,000 members today, we have about 155,000 on exchange and about 45,000 legacy members, or grandfathered members.

From a state perspective, Tennessee now is our largest state, followed by Louisiana and Florida. But Tennessee by far is our largest state with over, call it, 65,000 members..

Perfect. Thank you..

Okay. Thank you. And your next question comes from the line of David Windley..

Hi, there. It's Dave Styblo in for Windley. Congratulations again, Regina and Amy.

I want to just ask a bigger macro question on industry growth for 2018, and just to get your guys sense of how you think that shakes out? I guess as we look at the individual Medicare Advantage industry growth, it was either flat or declining year-to-date or year-over-year, depending on what you're looking at.

And I guess with the HIF moratorium, we would have thought that would have helped first in acceleration.

So as we go into next year what data do you look at or what is your thoughts about how industry growth tracks? Could it have increased pressure as we go through the 2018 cycle, or again, what sort of things do you look at that can help size what the HIF had an impact in terms of market growth this year?.

So it's Brian. At our Investor Day, we suggested working with other outside independent groups that, call it, 6% plus or minus growth rate year-over-year was something that we could expect. The variance, I would agree that the HIF had probably less of an impact this year than perhaps one would have thought on overall market growth.

And that might suggest that next year it also, by coming back, may not have as much of an impact on market growth, but it's too early to tell. I mean the thing that worries us about the HIF a little bit is that it's a big number and when you go the other way and reduce benefits, that could have an impact on that overall growth rate.

But it's really frankly hard to tell and hard to model human behavior and how they respond to the reduction of benefits and increased premiums. There are also a number of demographics that vary year-to-year just in terms of the number of people who are aging in to Medicare, and so that's going to vary. It's geographically based as well.

And so again it's very hard to say whether that 6% is going to hold next year and what the variance around that may be, but that's broadly the number that we're thinking about..

Thanks. That's helpful. And then just real quick, kind of coming back to the EPS targets, the 11% to 15%; thanks for clarifying that. I think the components there are mid-to-high single-digit revenue growth, and then capital deployment adds around three points, sort of looking at what you've historically done.

What, obviously margin expansion is baked in there to some extent. I guess what's the lever there if you're already operating pretty close to your targeted MA retail margins? I think those are already at the 4.5% mark of your 4.5% to 5% range.

Is there just more upside there or more upside from other business mix that would allow you to drive margins on a consolidated basis higher?.

Sure. I think there are two elements there. The first is, you mentioned around the MA side. As I said, we are at the low end of our margin range at this point, but remember, this is a long-term target, so every year is going to be different.

There will be years where we'll be below our long term individual MA range, and sometimes we'll be above that pre-tax range. And so that's where that lever comes in depending on where you are exiting the prior year. The second element relates to our Healthcare Services franchise.

We believe that over time – and there are going to be, again, years where it's faster and years where it's slower, but there are opportunities to further engage with our members and drive pre-tax Healthcare Services growth faster than revenue growth. And that ultimately leads to more margin for the enterprise.

And so I think those are the two elements of margin and how they play into the long-term EPS growth..

And I think that there it is just the improved productivity of the platform we have, and that is going to be both because of their growth, but in addition a concentrated effort by our organization, as it has been over the last few years of continuing to lower our corporate cost as a percentage of revenue..

Okay. Thank you. I will now turn the call back over to Regina Nethery..

Hi. I just wanted to quickly say thank you to everyone on the call for the well wishes that they're greatly appreciated. It's been my privilege for the past many years to share the results with you of the hard work that's come from associates across the enterprise and our management team.

I appreciate all the interactions that I've had with The Street, and I will miss you guys. But I know that you are in good hands with Amy and the team, and she'll do a terrific job. So with that, I want to turn it over to Bruce..

Thank you, Regina. And first, I want to thank our associates who have enabled our company to stand stronger today than ever before. Our results would not be possible without our team's hard work and commitment by the 50,000 associates that are part of our organization.

And obviously, we all want to thank personally Regina for her many contributions over the years in serving our company.

I share Brian's sentiment that Regina has been a critical colleague in helping navigate the tremendous change both as a company, but as importantly at the industry level, and as Brian talked about, her wise counsel and judgment has been invaluable over the years.

And so thank you, Regina, for all your contributions and we're looking forward to working with Amy. But again, thank you..

Thank you..

With that, we thank everyone's support, and we look forward to talking to you during the quarter. Thank you..

Thank you. That concludes today's presentation. We now ask that you disconnect your lines..