Aetna Inc AET
Q3 2011 Earnings Call Transcript

Operator: John Rex, JPMorgan.

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

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

John Rex - JPMorgan: Just to be clear about slightly increase, is off your current 6%, is that correct?

Mark T. Bertolini - Chairman, CEO and President: John, the way I would think about it is that our current 6% plus or minus 50 basis points is result of looking backward through 2011. However, we've been pricing and have literally 45% of our commercial book of business priced and our 100% of our Medicare book of business priced already for the next year on a member months' basis. So as a result, we've actually got a trend that was somewhat higher during our pricing models and an expected higher trend in the next year already into our pricing.

John Rex - JPMorgan: Okay. So I can expect, there is kind of still a favorable – based upon what you have already done, we should expect at least a favorable spread of 100 basis points over current trend?

Mark T. Bertolini - Chairman, CEO and President: It depends on where trend goes next year into our pricing. And we will have a lot of very detailed guidance at our December 15 investor event, where will go through those numbers.