Q2 2022 Humana Inc Earnings Call
Humana's, President and Chief Executive Officer, and Susan Diamond Chief Financial Officer will discuss our second quarter 2022 result, and our.
Our updated financial outlook for 2022.
Following these prepared remarks, we will open up the lines for a question and answer session with industry analysts Joe Ventura, Our Chief legal officer will also be joining Bruce and Suzanne 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 Ana.
This call is being recorded for replay purposes.
That replay will be available on the Investor Relations page of Humana's website Humana Dot 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.
That's yours are advised to read the detailed risk factors discussed in our latest Form 10-K, and other filings with the Securities and Exchange Commission and our second quarter 2022 earnings press release as they relate to forward looking statements and you know in particular that these forward looking statements could be impacted by risks related to the spread of and response.
Due to the COVID-19 pandemic are forward looking statements should therefore be considered in light of these additional uncertainties and risks along with the other risks discussed in our SEC filings. We undertake no obligation to publicly address or update any forward looking statements in future filings or communications regarding our business or results.
<unk> press release, our historical financial news releases and our filings with the SEC are all 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.
Did you Miss the 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 reference 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 Bruce.
Sorry.
Thank you Lisa and good morning, and thank you for joining us.
Today Humana reported financial results for the second quarter of 2022 that reflected our solid fundamentals and strong execution across the enterprise.
In the second quarter, our adjusted earnings per share was $8 67.
Which was above our initial expectations are.
Our outperformance in the quarter was driven by broad based strength across the organization.
Our updated full year guidance of approximately $24 75.
Represents compelling earnings growth of over 20% over at our 2021 results.
Susan will share additional detail on our second quarter performance and our.
Full year outlook in a moment.
As we look ahead, we are confident that we continue to deliver strong results as a leader in Medicare advantage and value based care delivery.
Over the last several months, we've taken deliberate steps to meaningfully advance our strategy.
In our Medicare advantage business, we finalized our 2023 product strategy is reflected in our bids and are confident the investments we've made will significantly enhance the value proposition of our offerings.
These investments.
We're supported by the enterprise commitment to delivering on our $1 billion of value creation initiatives.
Which we expect to significantly improve membership growth in 2023, while still delivering compelling earnings growth consistent with our long term target.
Beyond our product investments, we've worked with our external sales partners to enhance recruiting training and incentive programs, which we believe will lead to improved member retention.
We've enhanced the way we work with over all of our 40 external care partners centers partners, creating increased alignment by linking incentives to quality and retention metrics and many of our partners.
Also revised agent level incentives to emphasize retention.
We continue to see an increase in member satisfaction year over year, demonstrating the positive impact of our efforts.
We held our annual external sales partner conference last week and are encouraged by the optimism and excitement expressed by our distribution partners and our commitment to return to market leading growth and in the specific investments we've made.
We are also making significant progress in advancing our Medicaid strategy.
We received notification of a contract award from Louisiana in June .
We are very proud of the team's success articulating humana's unique Medicaid capabilities, and our ability to organically grow our Medicaid footprint.
We are actively preparing for the Ohio contract implementation later this year as well as the implementation in Louisiana, which is expected in early 2023.
In addition, we continue to actively work towards procuring additional awards in our priority States.
Within our healthcare services segment, we continue to expand our center while assets, we established a second joint venture with Welsh Carson that will deploy up to one point to $2 billion of capital to develop up to 100, New center well senior primary care clinics between 2002.
23 and 2025.
And the home business, we began expansion of the value based model in June with the implementation in Virginia.
Increasing the number of MA members covered by the model to 331000, a 22% increase.
These actions are building significant.
Within the organization and position us for continued strong growth and leadership in the delivery of integrated value based care.
Turning to our $1 billion value creation initiative, we've made strong progress towards our target and now have line of sight into initiatives valued at over 900 million hours in 2023 and design execute our full realization stages.
Is up from $575 million when we last provided an update in April .
We are confident in our ability to fully deliver against the important commitment and ultimately realize $1 billion of value in 2023.
As I've just highlighted we've made meaningful progress advancing our strategy in recent months, resulting in significant expansion of our healthcare service businesses and further strengthening our Medicare advantage and Medicaid platforms.
In addition to our strategy advancement the work completed our value creation initiatives has led to an organizational simplification and enables us to accelerate our previously planned organizational streamlining.
Beginning in 2023, we were realigning the company into two distinct units.
Insurance services and center well.
Insurance services will be made up of the businesses that currently sit in the retail and group and specialty segments, While center well represent the current healthcare service segment.
We believe this simpler structure will create greater collaboration across our insurance and center World business and will accelerate work that is underway to centralize integrate operations within the organization.
The realignment also expands the scope of authority for leaders and allows us to operate with greater agility and focus and increasing capture synergies across our portfolio.
Importantly, we are committed to providing the transparency you are accustomed to receiving from Humana. When we transitioned to the new segments to ensure you have the information needed to follow our progress and understand the economics of our materials businesses.
To lead this new segment, we've launched an external search for a president of insurance and enterprise services.
We are targeting candidates, who can look across insurance business and key centralized platforms and services driving enterprise level of strategic execution.
We also look for this individual to bring deep experience in running complex organizations.
A key focus of this role will be to help us continue to simplify our structure to make us more agile and to further improve our ability to increase synergies between our businesses and improve outcomes for our customers.
We anticipate naming this individuals by the end of the year.
As announced in our 8-K. This morning after a long successful career at Humana, Illinois, We will transition from his role at the end of the year.
Alan has had a distinguished 31 year career at Humana and I'm grateful for his significant contribution to the organization.
We are confident that our momentum Alan and team have created throughout 2022, and the Medicare business will drive a successful 2023 AEP.
I appreciate Allen's commitment to Humana and I'm pleased that he has agreed to serve as a strategic advisor into next year to ensure a seamless transition.
Alan has developed a strong leadership team with and the retail organization and we are fortunate to have the opportunity for these talented and experienced leaders to expand their responsibilities.
Effective August 5th George <unk> will take on the new role of President of Medicare and Susan Smith Senior VP will take an expanded role of leading our enterprise services, which includes our clinical consumer experience stars and Medicare risk adjustment teams.
John Barger will continue leading our Medicare Medicaid organization in his role as president of Medicaid.
George Susan and John who have 55 years plus of combined experience across the different functions at Humana will report to Alan into the new role of President as Phil and.
In addition, <unk> will continue to lead our group and specialty segment businesses also ultimately reporting to the new president of insurance and enterprise services. When the segment realignment is finalized in 2023.
In conclusion.
I would leave you with the following.
First we are pleased with the momentum we have executing our strategy.
Our strong year to date results.
Positive outlook for the remainder of the year and in the significant progress we've made in our billion dollar value creation initiative to improve membership growth for 2023.
Second we are confident that the evolution of our organizational structure works accelerate the advancement of our strategy and result in a more efficient and.
Integrated organization.
And finally, we remain confident in our ability to drive compelling returns for our shareholders.
We invite you to join us at our virtual Investor update on September 15th or we plan to give you more insight into our go forward strategy and.
And our positioning for continued success.
We will provide you with a deeper view into our attractive financial outlook and appropriate kpis, our leadership position in the industry and our long term strategy, including additional detail into our home and primary care businesses.
With that I'll turn the call over to Susan.
Thank you Bruce and good morning, everyone I will start by echoing brief as confidence in our current year performance.
The steps, we have taken to improve membership growth in 2023, and our ability to drive compelling returns for our shareholders.
Our second quarter 2022, adjusted earnings per share of $8.67 represents 26% growth over second quarter, 2021, and is approximately $1 higher than our previous expectations.
The favorable results in the quarter were supported by strong performance across many of our lines of business and were driven primarily by lower than anticipated medical cost trends in our individual Medicare advantage and Medicaid businesses, partially offset by higher than expected non inpatient costs and group Medicare.
Advantage.
We also experienced lower than anticipated administrative costs, some of which was timing in nature.
Importantly, I want to reiterate that utilization in our core individual Medicare advantage business is running favorable to expectations.
The lower utilization trends and lack of COVID-19 headwinds seem to date give us confidence in raising our full year adjusted EPS guide by 'twenty five.
To approximately $24 75.
While still maintaining a 50 EPS COVID-19 headwind for the back half of the year.
In addition, the revised guide contemplates an investment of approximately 75 cents EPS and additional marketing and distribution in the back half of the year to further support our improved 2023 Medicare advantage product offerings.
Finally, the revised guide cover 65 cents EPS dilution related to the pending hospice divestiture versus the 50 <unk> contemplated in our previous guide, which is expected to close in the third quarter.
Our updated full year guidance reflects a compelling 20% growth in adjusted earnings for 2022, while funding additional investments to support our long term growth.
If we see additional favorability emerge in the back half of the year, including the remaining 50 and embedded COVID-19 headwind, we will be prudent in balancing further investments in support of long term growth and additional shareholder returns in 2022.
We are focused on maximizing long term value and we'll be transparent in our approach.
With respect to quarterly earnings seasonality at this time, we expect third quarter earnings to be approximately 25% of our full year estimate.
Finally, as Bruce shared we have made significant progress toward our $1 billion value creation plan.
<unk> during the quarter resulted in certain one time costs of $203 million, which have been adjusted for non-GAAP purposes.
These expenses were primarily driven by consolidation and retirement of technology assets during the quarter, resulting in more efficient operations and lower investment requirements going forward.
As we continue to advance the value creation plan, we expect to incur additional onetime costs in the back half of the year, which will also be adjusted for non-GAAP purposes.
With that I will now provide additional details on our second quarter performance by segment beginning with retail.
Medicare advantage membership growth and revenue are trending in line with expectations.
As previously mentioned total medical costs in our individual Medicare advantage business remain favorable to expectations in the second quarter.
We continue to see lower than anticipated inpatient utilization, partially offset by higher inpatient unit cost, while non inpatient costs were slightly favorable to expectations.
With respect to intra year development, you will recall that our first quarter estimates considered the higher unit cost experienced in the fourth quarter of 2021.
We were encouraged to see the first quarter restate favorably and have seen some moderation in inpatient unit costs relative to our previous estimates while non inpatient costs also restated slightly lower.
With respect to Covid, we have seen an uptick in cases in recent weeks, but hospitalization rates remain lower than we've seen in previous searches.
While we are not concerned with the utilization patterns observed to date, we acknowledged the continued uncertainty related to the pandemic and therefore maintained 50 of Covid contingency in our revised EPS guidance.
We are pleased with the performance of our individual Medicare advantage business to date and remain on track to deliver at least 50 basis points of improvement and pre tax margin in 2022.
Group Medicare advantage non inpatient costs were higher in the quarter than our initial expectations in part due to higher surgical volumes, which we have assumed will continue for the remainder of the year.
2021, we saw more significant depressed utilization and group Medicare and individual Medicare and expected some normalization in 2022.
Group Medicare inpatient costs are consistent with our expectations year to date non inpatient costs have been higher in recent months, some of which may be reflective of pent up demand post the omicron Serge.
We'll continue to monitor emerging group Medicare trends to determine if the higher than initially expected utilization continues as currently contemplated in our full year guide or if we ultimately see the trends moderate.
Our Medicaid business performed well in the quarter experiencing lower than expected medical cost.
We updated our full year Medicaid membership guidance from a range of down 25000 to 50000 to a range of up 75000 to 100000 to reflect the extension of the public health emergency to mid October .
We increased our retail segment revenue guidance by $350 million at the midpoint from a range of 81, two to $82 2 billion to a range of $81 7 billion to $82 4 billion, primarily reflecting the increase in Medicaid membership expectations for the year.
Despite the increase in expected Medicaid membership for the year, which carries a higher benefit ratio as well as the higher than anticipated non inpatient costs and group Medicare we have maintained our original full year retail benefit ratio guidance as outperformance in our individual Medicare advantage business is providing an offset in the <unk>.
<unk>.
Group and specialty segment results were slightly favorable for the quarter, largely driven by the specialty business and lower dental utilization trends in particular.
As previously shared we are focused on margin stability in the employer group medical business near term and as a result of rating actions taken in the back half of 2021 do you incorporate expected ongoing COVID-19 costs, we're experiencing higher attrition in our fully insured group medical business than originally anticipated.
We are updating our full year commercial Medicare medical membership guidance from down 125000 to 165000 to down approximately 200000.
In addition, we are reducing our revenue guidance for the segment by $200 million at the midpoint reflective in a lower membership expectations.
Full year pre tax earnings for this segment remain on track aided by the specialty outperformance.
I will now discuss our health care services businesses.
Recall that this segment had a strong start to the year with pharmacy meaningfully outperforming in the first quarter, which we expected to persist throughout the year, although with some moderation.
<unk> results in the second quarter tracked in line with our increased expectations.
Mail order penetration was 38, 5% year to date for our individual Medicare advantage members and 90 basis point increase year over year.
Primary care organization results were slightly favorable to expectations for the quarter driven by ongoing operational improvements combined with administrative expense favorability we.
We added four de Novo centers and 10 wholly owned centers through acquisition in the second quarter, bringing our total center count to 222. After center consolidations, we are on pace with our targets for the year and continue to expect to operate approximately 250 centers by year end.
Turning to the home.
Health episodic admissions are up three 1% year over year, while total admissions were up four 9% year over year consistent with expectations for.
For the full year, we continue to expect total home health admissions to be up mid single digits.
The hospice business performed well in the quarter with total admissions up approximately 5% year over year, driven by increased access to facility based referral sources and incremental investments in the business to expand clinical capacity.
The kindred hospice divestiture is on pace to close in the third quarter, we have updated our full year guidance ranges to reflect this anticipated transaction, resulting in a reduction in health care services segment revenue of approximately $400 million at the midpoint, which reflects the hospice divestiture, partially offset by the increase.
<unk> pharmacy expectations discussed in the first quarter.
In addition, we have reduced our full year consolidated adjusted operating cost ratio guidance from a range of 13, 2% to 14, 2% to a range of 13% to 13, 5% as the hospice business carries a higher operating cost ratio than the Companys consolidated.
<unk> cost ratio.
From a capital deployment perspective, we anticipate our customary level of share repurchases in 2022, and expect our debt to capitalization ratio to be in the low <unk> at the end of the year as we utilize that utilized proceeds from the kindred hospice divestiture to deleverage.
Before closing I would again reiterate that we are pleased with our performance to date fueled by broad based strength across the enterprise supporting our full year guidance raise and providing capacity to make additional investments in marketing and distribution in the back half of 2022 to further support our improved 2023 Medicare advantage product.
Offerings.
We are well positioned to achieve our $1 billion value creation goal, which has allowed further investment in our Medicare advantage offerings for 2023 and expansion of our health care services capabilities, while remaining on track to generate earnings growth in 2023 within our long term target range.
With that we will open the lines up 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.
Certainly.
Yes.
Our first question comes from.
Within the line of BMO capital markets.
Okay.
Pardon me, Matt Please check your mute button.
Matt Borsch. Please check your mute button. Your line is now open.
Yeah.
Yeah.
And our next question comes from the line of Justin Lake with Wolfe Research.
Yes.
Thanks, Good morning can you hear me.
Hi, Justin.
Good morning.
I'm going to try to squeeze in a couple of numbers questions first on.
MLR in the quarter it sounded like.
MLR had some moving parts, but was in line ish give or take with your own expectations. Obviously consensus is a little bit lower than that so I was hoping you gave us some EPS seasonality.
Given your retail business still is all 100 basis points.
Over range maybe.
If you could tell us where you think youre going to be in that range for the back half of the year and then thinking about <unk> versus <unk>. So people like me don't Miss model It again for.
For the back half and then on the divestiture.
Can you kind of walk us through the numbers a little bit more IBD.
65 is a little bit bigger than I had expected.
Just trying to understand how much revenue are you selling annualized how much profit was there what are you doing with the divestiture proceeds in terms of just like mapping out because if you're 65 cents for let's just say a third of the year.
The dilution that would indicate to me that you have another $1 30.
Next year of dilution, so that's a pretty decent headwind to next year and just how do you offset that because it sounds like you reiterated the 11% to 15% growth next year.
Thank you Albert.
Sure Justin I'll try to address those.
Yes in terms of alum MLR as you said.
Currently it is meeting our expectation and as you mentioned you know analysts expectations did very I think there is on the consolidated any or about a 200 basis points spread in analysts' expectations and about 150 <unk>.
Rain basis point spread in retail there is a wide variation what came out in terms of consensus was based on just a few who happened to respond to this survey. So we do want to reiterate that what we are seeing internally from an individual Medicare advantage perspective, we are seeing better than expected results in better than expected M. E. R based on that and primarily the lower inpatient utilization.
We mentioned within this segment, though as we said there is some mix impact in terms of the higher Medicaid membership that comes with the higher Ami are typically as well as the group Medicare pressure that we mentioned in my commentary, but when you consider all of that as we said we are very pleased with our performance in particular, the strength of the individual Ma improvement, which.
Is reflective of the more conservative pricing approach, we took in our in our bids that we've been talking about all year for the full year. We also remain confident in what we are seeing will certainly continue to watch the emerging trends to see if that result in any additional favorability in the back half of the year relative to our estimates, but currently we are forecasting that we will be in line with our expectations.
<unk>.
For the retail segment for the year, despite the higher Medicaid membership and group Ma pressure.
On the hospice transaction as far as the divestiture you are correct. There 65 cents is reflective of the expectation that we will close that divestiture in the third quarter. It is a little bit higher than you might expect if you just run rate some of the numbers that we shared when we did the initial transaction. It was about one 5 billion in revenue associated with that segment.
The reason that there is a little bit higher deletion is the fact that the entity expects to take on debt once it diverse so the interest expense, particularly in this rate environment is a little bit higher than we had initially expected in our guide at the first quarter and then also some of the dis synergies that will occur as a result of operating independently from the home health organization.
All of that was considered when we contemplated the divestiture and so as we've been thinking about 2023 planning we were contemplating the divestiture of that position and so we still expect to deliver within our long term targeted range and be able to cover the impact of the hospice transaction, which we continue to believe is the right thing to do strategically as for them.
Proceeds as we've said before we do intend to use the majority of those proceeds to pay down debt to delever on the humana side, which allow us to get back down to about the low forties as we mentioned in my commentary.
Thanks.
Okay.
Yeah.
Thank you.
Our next question comes from the line of Matt Borsch with BMO capital markets Alright, let's try it. This time can you hear me.
Hi, Matt we can hear you.
Okay, great sorry about my mute button malfunction.
I was just obviously.
A quite quite a bit here.
Maybe I could just ask about the inpatient higher unit costs that you mentioned is that simply a function of lower admissions and therefore higher acuity on what remains or is that reflecting some other factors. There maybe you could touch on.
Yeah, Matt Good question and we spoke to some of this in the first quarter as we were seeing the center and accounted for it in our first quarter estimate. So if you recall some of it is as you said just a reflection of when you see lower inpatient utilization typically some of the lower cost admissions are the ones that are no longer occurring and so you tend to see a little bit higher unit costs on what's leftover.
So we did see some of that but we did see some higher unit costs for certain underlying procedures and we continue to evaluate that and as I mentioned in our second quarter intra year development. We were pleased to see some of that moderate relative to what we had seen and booked as of the first quarter. So we will continue to watch that the one other thing I would point.
And we mentioned this in the first quarter. Some of the reason, we're seeing lower inpatient volumes is a continued shift of procedures from the inpatient to the outpatient setting and when that occurs that typically.
Results in activity that is lower than average unit cost within the inpatient setting shifting to that outpatient setting also putting pressure on the unit cost that was something that we had not fully anticipated as we entered the year CMS. If you recall reinstated the inpatient only list and so we did not expect to see continued shifting both in our <unk>.
Utilization and unit cost estimates and so as we've seen that continue to transition. Despite cms's actions, we saw the benefits of that on utilization, but then some increase to the unit cost. The unit costs are still higher than all of that said than we would've expected. So we'll continue to watch that and see if in the coming months that doesn't continue to moderate.
We have great visibility in real time to inpatient utilization, but to fully evaluate the unit costs were dependent on those claims coming in over time and so we'll continue to watch that and keep you apprised of what we're seeing.
Just a quick follow up is there any drivers that you look for the shift to outpatient.
It's primarily orthopedic, which we saw in 2021 as well and so we saw a significant shift in 'twenty, one and continue to see additional shifts and it is primarily in the orthopedic space. Okay.
Okay.
Okay.
Thank you.
And our next question comes from the line of Kevin Fischbeck with Bank of America.
Great. Thanks.
Wanted to try and better understand.
What youre doing around 2023 grow because you're committed to re accelerating growth.
And obviously part of that is driven by the $1 billion of cost saves that you've identified but then trying to understand a little bit how the outperformance in reinvestment into growth effects.
At.
It sounds like Thats. In addition to whatever you did on the benefit side.
And we're already planning to do from the marketing side, we want to make sure I understand that and then also the outperformance in retail every individual Ma.
That captured when you submitted your bids or is it something that's.
Kind of develop more favorably since you submitted your bids.
Sure Kevin how do you take that in terms of 2023 growth.
We are very pleased with the progress we've made on the billion dollar value creation goal and as we've been saying the intent is to use the benefit of that work to primarily support investment in our Medicare business, but also supports some acceleration within our health care services capabilities and within the Medicare business. We've commented that the majority of it.
The dollars that will be directed to Medicare will support and create value proposition and our Medicare advantage offerings, but also support increased investment in marketing and distribution to support that as.
As we completed all of the planning work by the Medicare organization as they thought through their product strategy I would say the Medicare team was really pleased with the capacity that that $1 billion value creation effort created for them and they feel really good about the investments it allowed them to make and are feeling confident that we will be able to demonstrate significant improvement in our.
Medicare growth in 2023.
As Bruce mentioned in his comments, we had a chance to meet with our distribution external distribution partners.
<unk> and share some of those details and we're really pleased with the reaction and positive sentiment and optimism expressed and commitment to returning to growth that our investments demonstrated.
And our commentary. This morning, we were pleased to announce that you know given the outperformance we've seen in 2022 in the second quarter in particular that did give us some capacity to invest some of that outperformance into additional marketing and distribution that's anticipated to support the 2023, AEP and we felt really strongly that given.
The amount of investment we made in our Medicare products for 'twenty, three we're going to certainly make sure we appropriately supported it with marketing and distribution investments to ensure that we maximize the return off of those investments. So the team's really thrilled with what we've been able to do and we're feeling confident we'll obviously have to see how the landscape data comes out just exactly how we're.
<unk> and refine our estimates and we typically give you some sense in our third quarter call. So not prepared to do that today, but do you and expressed that we feel very optimistic and confident that we'll see significantly higher growth relative to 2022 off the strength of the investments that we've made.
In terms of the lower utilization I would say you know, we certainly talked in our first quarter commentary of some of the utilization depression that we saw I would say that generally we attributed that to COVID-19 at that time.
As you recall, we were seeing a much faster decline in Covid hospitalizations with this latest certainly we'd seen previously and so we attributed to lower non COVID-19 utilization to simply slower bounce back because that was not anticipated generally so when you think about our beds, we would not have anticipated any of the favorability we've seen this year.
Two signals sort of sustained below baseline utilization or medical costs and would've assumed in 2023, a more steady state sort of normal course level of medical cost trend. So to the degree we see further improvement that we think is reflective of just lower core trend then that would be favorable to what we would have anticipated at the time of it.
Alright, great. Thank you.
Yes.
Thank you.
And our next question comes from the line of AJ Rice with credit Suisse.
Hi, everybody. Thanks.
Maybe just to clean up quickly.
One of the questions have been already asked I know youre, saying hospice headwind for next year and value creation as a positive I wonder if I could broaden it out and get you to talk about at this early day without giving guidance what your head.
The headwinds and tailwind or in a major buckets for next year and then maybe also with the 11% to 15%.
Growth target, what's the jumping off point in your mind for 'twenty.
22 to get to that and then.
Bruce you had mentioned the reorganization insurance business in spares and services business.
I was like that's mostly to facilitate better coordination internally can you tell us where some of those opportunities are and then second is this a prelude to the services business is beginning to.
Focus on external clients more no home health or does that already but I.
I Wonder <unk>.
And some of those other areas that have historically just support humana or are you thinking about opening that up.
Let's take the first question I'll take the first and then transition to brief as.
As it respects 2023, our first quarter commentary did confirm that you can think about the baseline for 'twenty three is the $24 50 that we adjusted to you then.
But for right now, we're not going to comment on any further adjustment to the 2023 baseline our 2022 baseline rather for 'twenty three and that's just because we've got our Investor Day Conference scheduled for September 15th where we do intend to talk about our expectation long term growth expectations, and so don't want to get in front of any of that.
But I will say that you know broadly speaking as we thought about our bid planning and are planning for 2023, Yeah. We were mindful of our stated long term growth targets. There's always a variety of puts and takes that go into every year. The planning every year I would say some of the known headwinds would be would have been obviously that the anticipated hospice divestiture that.
There's always been contemplated in our thinking for 'twenty three so that's not a surprise more recently, we have seen the proposed rate negative rate adjustment for home health that would not have been something we previously contemplated and we'll have to see ultimately where the final proposal comes out and whether that <unk> see some improvement relative to the current proposal, but that would be.
Something that we hadn't contemplated in one of those puts and takes we would have to manage.
From a positive perspective, certainly membership growth in 2023, we're expecting to see improvement we'll have to see as AEP plays out whether that is more favorable than we might have expected, which could be a positive and also the medical cost trends, obviously that we're seeing this year as I mentioned in my commentary, we will continue to evaluate those and see whether some of that continues to be.
Positive through 2023, we always have to think about that any risk adjustment implications of any utilization variation that we see and we will certainly be mindful of that and.
And I would say the one other thing we continue to watch as flu.
Seemed very lovely the last few years some of the early indicators from Australia. In particular do you suggest a higher flu season for the fourth potentially for the fourth quarter. So we continue to watch that but again that would be one of those puts and takes that we continue to watch it's a variety of things, but I would say nothing.
With such an outlier there that is giving us concern at this point, but rather normal course things that we would manage through for 2023.
And then Bruce.
Hey, Jay just on them.
Segmentation.
The recruiting.
President of few things from that first we are seeing in our work on $1 billion from really great opportunity to create some simplification.
And the ability to leverage a number of our different areas.
Within the insurance areas. So theres a lot of work now going into really consolidated service centers.
One service center, the ability to use our clinical programs not only in the Medicare side, but also in our in our commercial book of business and a much more integrated way and then the third area. We're seeing a lot of work being done and being able to utilize a lot of our consumer technology, and so and the and the work that we've done in <unk>.
<unk> through our through our <unk> initiative, we just saw some great opportunity to be able to bring it together in a much more efficient way.
In addition, while we do see in our work in local markets of being able to integrate our various different.
Care services that there is a wonderful opportunity we refer to as the <unk>.
I will and will provide you a further update on at the Investor meeting on September 15th about the ability to integrate across the various different services and be able to create a much more holistic approach and being able to move from primary care to home and even into our pharmacy utilization bulk mail order and onsite.
As I always say the opportunity to leverage that along with the fact that you brought up the payer agnostic, we do see some great opportunity today, both center well primary care and the home are agnostic and continue to see great growth serving both other payors in other parts of the Medicare Medicare system and at the same.
Time, we're also seeing opportunity within our primary within our pharmacy area to offer some agnostic opportunities there. So so the ability for it to integrate and also to expand.
On the Medicare side of the business is really at the heart of what you see us more formally creating the center while service side, while on the insurance side.
And to leverage the efficiencies across the various different insurance platforms.
Okay, great. Thanks, a lot.
Yes.
Yeah.
Thank you.
And our next question comes from the line of Nathan Rich with Goldman Sachs.
Good morning, Thanks for the questions.
You talked about utilization in the individual MA business running favorable to expectations.
Is the lower admits per 1000 that you called out.
Is that related to Covid or are you also seeing favorability on non COVID-19 utilization as well and.
Can you talk about what you expect over the balance of the year and then.
Susan could you also address the increase in days claims payable in the quarter, what drove that and what you were expecting in the guidance and given that it is sort of above the longer term rate.
Target, how you expand expect that to trend over the balance of the year.
Sure Nathan happy to answer that.
So as you mentioned, we are seeing lower inpatient utilization, which we have seen all year. The first quarter. We did see certainly a faster decline in Covid. That's obviously now subsided as we've gotten further away from that last third we've continued to see lower inpatient utilization as we've analyzed that there are a few things that are primarily driving that one.
As lower flu as I mentioned, we have seen lower levels than historical that impacted the first half of the year that will certainly moderate in the third quarter did you see low flu activity in general and as I mentioned, we'll have to watch and see how it fully develops in the fourth quarter right. Now we are assuming that we don't return fully to sort of pre COVID-19 levels, but rather it's.
It's some moderation from that but we arent assuming it doesn't run quite as low as we have seen through the pandemic.
We also saw as I mentioned continued inpatient to outpatient shifts and that was something as I said, we did not contemplate in our initial guide and so that's positively impacting.
The inpatient utilization, we are seeing some higher unit cost as a result, but as I mentioned on the non inpatient side, while we're seeing that higher utilization. We are seeing in total, though slightly positive overall non inpatient or non inpatient costs relative to expectations. So we've been able to absorb that higher volume shift within the non <unk>.
Patient estimates as well.
And then we are seeing some improved impact from some of our utilization management programs that are also positively impacting inpatient activity. So other than the flu that will moderate some we don't have any reason to think the inpatient to outpatient or the positive utilization management impacts won't continue for the rest of the year and so that is.
And played in our full year guide.
In terms of D. C. P. As you said it is up three days sequentially.
And that was primarily driven as you can see in some of our disclosures by additional provider accruals as well as fee for service days and claims payable and so he is reflective of a stronger reserve positioning as of the end of the second quarter versus what you saw first quarter. You can also see that reflected in the higher I mean, our trends relative to premium I think are.
I mean, our trends were up two 9% versus premium trends are about one 9%. So we think reflective of an appropriately conservative posture with respect to reserves at the end of the second quarter.
Thanks.
Next question please.
Thank you.
Our next question comes from the line of Joshua Raskin with Nephron research.
Hi, Thanks, and good morning.
My question is how do you accelerate the movement of membership to value based care providers other than sort of building out the capacity. How are you working with the centers our external partners to get more of the MA lives in value based care next year.
Yes.
That worked for us and we are a little bit this quarter as a result of our efforts a few things there. We continue to look for partners that are.
Apt to wanting to move to value base.
We've seen some really great opportunities there, especially over the last year.
Sure so as we've exited out of Covid.
The ability for us to then provide resources for them.
But the technology area and the human resource area to allow them to make that transition and then provide them a contract that allows them to it to appropriately manage that risk, sometimes I want to take.
Just upside risk, sometimes I wanted to take up and down risk with some kind of color or full risk. So we really want to work with them as they evolve and to their risk.
Our risk tolerance, but what we see the most is really building on the partnerships that we have in growing our membership base and those partnerships and what we've seen in a number of markets, where we've added one.
Fairly agonistic relationship with both hospital systems and physician groups that they've evolved to be very positive and as they evolved are positive we see much more membership growth in that and that relationship which has been very positive for us.
What we also measured there Josh is not only what.
Many members, we have and value base, but also their surplus because we could get them into value based but if they are not really performing both in the stars a risk adjustment and in addition, the health outcomes, it's Roy for not and so a lot of the work we're doing not only is about getting more members in there, but also making it more effective.
For our members to be.
Our value based relationships to be more effective.
We've been averaging in the sixties, the mid sixties, we've increased a little bit.
Year I would suspect that we will continue to see more members, but also as our membership growth grows at all of that percentage doesn't move as much and so we are getting more and more members in there, but on a percentage basis. It might not look like we are moving as much but we are actually both are effectively getting more members in there, but as importantly being <unk>.
Much more effective in the way that were performing as value based providers are getting more into the surplus.
And Josh I would add to what Bruce mentioned I think in terms of some specific things we do to try to encourage.
The utilization of those high performing providers, we certainly work with our distribution partners, who have an opportunity at the time of enrollment to help with TCP selection and so they're certainly educated on all the benefits of those high performing primary care providers and know who they are and each market and can help with that.
We certainly work to make sure our provider any sort of physician finder tools. They both agents and consumer use properly reflect sort of the quality and the services are available by those providers and youll see that if you ever got to the site and how those providers are ranked based on cost and quality.
And then finally I would say you know certainly our provider organization and our health plans work and coordination on marketing efforts and continue to try various campaigns and learned what's proving to be effective in driving greater awareness.
And adoption of those high performing models. So all of those things I think contribute in addition to what Bruce mentioned to some of the progress that you've seen.
Got you and then if I could just sneak in I just want to confirm Susan did you say that the baseline for 'twenty. Two is still the 24 50 and has not changed or were you just saying we'll update it at September 15th.
I think given that we've got the September 15th Investor day, coming up where we've.
Committed to providing an update on how we think about our long term EPS growth range. We would just prefer to wait and have that discussion at investor day more comprehensively versus you know a discrete sort of commentary on the baseline today. So it's not that we're saying it won't change where you just want to go ahead and provide a more comprehensive update on September 15th.
Perfect. Thanks sure.
Okay.
Thank you.
And our next question comes from the line of Ricky Goldwasser.
Peter.
Yeah, Hi, good morning, and thank you for all the details.
A question for you I mean, clearly there is a lot of foreign parts inquiry utilization, but just as we think kind of like big picture, two and a half years into the pandemic you were seeing that move to sort of lower cost inflation, you talked a lot about home telehealth.
What are you seeing in the market as you think about things how do you think about sort of just kind of like structurally.
Core utilization, so I'm, assuming that that's something that will.
We will.
Part of how you're thinking about those long term targets that you could provide us in September .
Yes, we continue to believe two things are happening in the.
That are structural changes in the healthcare one is around the continued movement too.
Specialty oriented mindset to more generalist, whether that's primary care, but also the ability to leverage nursing.
And.
Physician assistance et cetera, So just who is doing the work received is continuing to be pushed out and then the second thing that we see is is where it's being conducted and how the procedures are being in the interventions are being offered and we see a continued movement of more convenient settings that are also more cost effective so.
Moving obviously, the outpatient has been a long long term turn.
Term trend, but in addition, moving to the primary care office, but move into the home moving to Telehealth and in addition, leveraging digital and so we see that all moving towards a much more proactive and convenient setting leveraging.
Many other professional clinicians.
And to the health care system, and we see that as an opportunity to continue to not only drive down where the cost is but also the health outcomes, where we can continue to be much more proactive and the ability to slow down disease progression.
It really prevent preventable events.
Next question so.
Alright.
Sorry Ricky.
So I'm just thinking how you kind of think about that as you think about them MLR I mean, clearly you saw kind of like the MLR in the quarter that was a little bit higher than then.
But then the street expectations, but are you starting to see that impacting the MLR when you parse.
So to the membership mix.
Yeah, So I'll take it.
So I would say as you know.
Jim I'll MLR.
What's different and didn't meet consensus that's again reflective of how I mentioned earlier, there's a wide range and the consensus estimates those are not necessarily reflective of internal estimates and so relative to our internal estimates we did see outperformance, particularly in our individual MA business and so it's important to keep that in mind I would say that we are seeing so.
Or are you know certainly in he argues.
And observations there continue to run lower than we saw pre COVID-19. Some of that I do think it is probably reflective of people seeking out other sites of care that are more appropriate whether that's physician and urgent care.
They became accustomed to during the pain Navigant has continued we do acknowledge however that we know there is capacity constraints within the health care system today, how much impact that's having on some of the lower utilization, it's hard to know for sure and that is something I think on a longer term trajectory, we're going to continue to monitor and see ultimately where the utilization levels come in.
The other thing to keep in mind is the higher mortality as a result of Covid. As we said has an impact on medical cost trend in overall utilization and a negative trend because those that passed away due to COVID-19 tended to be higher.
Utilize or they had multiple comorbidities and so that's also reflected in our estimates and we will see continued impacts from that going forward, but otherwise I would say a lot still to be learned we are seeing some favorability and want to continue to assess the team's thinking on how much of that will continue into 2023, but my team with some moderation as capacity hopefully starts to return with.
The clinical community.
Thank you.
And our next question comes from the line of Stephen Baxter with Wells Fargo.
Yeah, Hi, Thanks, just wanted to ask about the guidance to make sure I can follow what youre doing there it sounds like the quarter was $1 better and then you also remove the defense of the conservatism so that sounds like $1 50, a favorability, although maybe there's some double counting between those items.
When you are reinvesting in 75, and I think I heard you say there is an extra 15 cents of dilution from the hospice divestiture it.
It seems like those those items in aggregate would result in a guidance increase above the 25, so I'm clearly missing something can you understand help us understand how you see the moving parts there and how we should be thinking about that thank you.
Hi, Steven happy to do that.
The outperformance for the quarter was a dollar.
That does that include what you can think of as the 50 conservatism that we had included in our original guide in the first half of the year related to Covid. So you can consider that as as releasing that 50 cents of conservatism within the second quarter results and part of the dollar not additive to it we have maintained the 50 in our back half of your estimates.
As I mentioned in my commentary. However, so as you think about the dollar and then how we've used the dollar 25 goes to the guidance raise the 75 of additional marketing and distribution investments that was not previously contemplated in our full year guidance. Instead of 75% is being used for that and then as you mentioned, we have acknowledged 15 sensitive additional hospice.
Deletion that was not contemplated in the revised guide as of the end of the first quarter. So technically that's a little bit more than a dollar and that just recognizes that we do have still got 50 cents of COVID-19 contingency in the back half and we also have any continuation of the outperformance we've seen in the second quarter that might trend into the third and fourth quarters, which is the reason why we think that we made.
Some additional improvement relative to our current estimates.
So that's how we think about the dollar and how we've spent it.
Based on the current performance.
Okay.
Sure.
Thank you.
And our next question comes from the line of Scott Fidel with Stephens.
Hi, Thanks, good morning.
Was hoping you could just drill a little bit more into the proposed 4% home health costs for next year, and I guess sort of two parts to that one.
If those contracts you did go forward and the final how much impact you would see on.
Home health margins or EBITDA, and then how that influences the shift that youre, making over to value based care I would assume that that would even even sort of further motivate the acceleration over to BBC contracting from fee for service spot just interested in how you would think about that if the court still got throat hi.
Yeah happy to take that so as you said this is a 4%.
Ray reduction as proposed we certainly will continue to advocate and educate in terms of just while it's predicated on the behavioral adjustment is the driver of that.
We certainly want to make sure that people also consider the inflationary environment.
Challenges with clinician labor there is broad support for continued.
Shift of care to the home and the benefits of home health care and so we do hope to see some moderation that's more reflective of the current cost trends within this space, but if it were to move forward as proposed it about a 4% cut for the enterprise you can think of that as about a $30 million impact it slightly higher for the kindred business specifically, but.
Within our Medicare business, we did not contemplate that level of rate reduction in our thinking for that health plan for 'twenty three and so there is some mitigation within the year relative to that so that net impact at the proposed rate is about $30 million.
You said you know given that rate cuts certainly there is more emphasis on value based payment models, we've seen that from other providers as well, which we're pleased to see as it respects. Our plans we were already well down the path of working on a value based payment model and as we said in his commentary we were pleased to see that we were able to expand our Val.
Based on broader value based home health Damian infusion model in the state of Virginia. This quarter as we had initially planned and remain committed to expanding that model to about 50% of our MA members within the next five years. So we're I think ahead of that curve, but we are encouraged by some of the discussions we're having with some other home health providers, who I think are becoming more focused on.
Value based payment models, which we do think is important and will provide an opportunity to get after some of the you know adverse.
Implications in terms of hospitalizations and avoidable admissions that we think home health has an opportunity to impact them. If they become more focused on it. So we're pleased with that and Scott just to add to Susan's comments I think over time, you're going to continue to see this as being a great opportunity to leverage home health as being much more proactive as opposed to oriented to just the safe.
For service side, and then more payment it begins to be paid on outcomes relative to a lower margin.
Emergency room visits and submissions et cetera.
We're excited about that change obviously there are is.
Static in the air as a result of rate changes, but we do think changes will accelerate the move to value based.
Thank you.
And our next question.
And it comes from Valiquette with Barclays.
Great. Thanks, Hey, good morning, everybody.
In this earnings season, we heard one of your major peers talk about the annual wellness visits among their MA members only now tracking back to pre pandemic levels.
So I guess I was curious to hear how that is progressing for you guys. So far this year relative to your book, what's the early implications might be for MRA payments you might receive next year in 'twenty three.
Versus 22, and also I'm not sure if I missed this but if you have any.
Just the color on the MAA payments that you might have just received in 'twenty two.
Are your expectations I would also would be great. Thanks.
Hi, Steven I'm happy to answer that so in terms of annual wellness visits I would say our experience. This year is inline with expectations. So no significant outperformance or underperformance, but generally in line and Havent heard anything in terms of any concerns in terms of the ability to get into patients' homes, I think thats tracking as expected.
In terms of MRI for 2023, certainly as I mentioned, you know to the degree we continue to see lower utilization in 2022.
Relative to expectations, we will certainly do.
Assessment to understand whether there would be any implications to 'twenty three risk adjustment, but I would expect net net for that still to be positive even after considering MRA on the group MA side, where we're seeing higher utilization as you think about 2023, we would expect to see some mitigation as a result of that with increased MRA expectations as well so it works both ways.
In terms of 2020, we did receive the midyear payment and I would say, it's generally in line with expectations, maybe just slightly positive, but broadly in line with expectations I know meaningful variance there.
Okay. That's perfect. Thanks Youre welcome.
And our next question comes from the line of David Windley with Jefferies.
Hi, Thanks for taking my question I was I was hoping to follow up on margin progression as a topic and thinking particularly in retail you will expect to have a bigger and coming membership cohort in 'twenty three.
Which will not be coded relatively lower margin, you'll have a smaller cohort kind of maturing out of 'twenty two.
And then I presume youll have some offsets from investments from the value creation $1 billion I guess I'm just wondering how we should think about the relative toggle of revenue growth versus margin expansion contribution to your earnings growth in 'twenty three.
If you want to talk about it hi, David Yeah happy to address that.
So as we think about it as you said the.
Higher 23 membership growth as you mentioned does tend to bring members who would have lower margins.
Till they're appropriately coded overtime, we get their star scores et cetera.
So that is true, but keep in mind that we are also anticipating as a result of our product investments that we will also see higher retention and so the higher retention that we will see those are gonna be members, who will positively contribute. So ultimately, we'll just have to see what the ultimate mix is.
From a combination of sales and retention in terms of any year over year change that that might imply in terms of the margin.
In terms of the investment that we've made as you mentioned you know the $1 billion value creation go all of that is going to generate savings across the enterprise. So it will not obviously be fully generated within the Medicare organization, but we intend to disproportionately invest those savings into the Medicare organization. So all in you would think of that from a just a pure individual Ma.
Hey perspective, as being somewhat dilutive to the margin because we will be investing more dollars in in that product then the savings that that that line of business alone will generate within retail will get some further offset obviously from the savings that the rest of the retail organization will contribute but then some will obviously be outside of that retail segment. So we will certainly.
To give you some more visibility to that as we talked in September about how we're thinking about our margin progression and EPS growth over time, but for right. Now those are some of the bigger things that you can think about impacting 2023.
That's helpful. Thank you sure.
Thank you Steve.
Our next question comes from the line of George Hill with Deutsche Bank.
Yes, good morning, guys and thanks for taking the question I think a lot of my topics have been covered just two quick numbers ones I guess, Susan on the 75 cents in marketing spend I guess can you talk about where that's going more specifically how much do you think about us going to brokers versus maybe member outreach given that retention.
It was an issue in 'twenty two.
Yeah, George happy to do that so we've been talking a lot about just our.
<unk> strategy and the goal of over time trying to see a little bit more volume shift back through our proprietary channels to create a bit more balanced and also recognizing that we tend to see better retention and customer satisfaction in our proprietary channels versus external so as you think about the incremental investment that we're making.
Year over year, we that will be more weighted towards our internal channels in terms of the marketing and then investment in resources and our proprietary channels, but some of it will be going to external partners as well to make sure that we get the return that we would expect in the the growth out of that channel as well within the external partnership.
Port that we're providing I would say some of it is going towards making sure that our reimbursement is sort of the sales partner level is on par with peers I think we've talked before about the fact that we were trailing behind the compensation level at some of our peers are providing so some of the dollars are going to address that and get to more of a parity position and also support some increased mark.
Getting.
In order to make sure that we can get the this shows volume out of that channel that we would expect in order to achieve our overall improvement in Medicare growth.
Okay couple thank you sure.
Thank you.
Our next question comes from the line of Gary Taylor with Cowen.
Hey, good morning, just a quick two parter just one numbers question and then my real question.
It looked like the proprietary of.
Sure.
Risk providers went down 200.
Sequentially and I presume most of those were like some call. It in your own centers. So just wondering why that went down and then the broader question I wanted to ask about 23 glad.
Glad to hear Youre still optimistic and confident about higher growth in 'twenty three but just wondering conceptually is there an enrollment growth number that that's too high that that's too much I mean, I think there's I think there'd be an over under on a growth number with the street would be worried about adverse selection and your benefit.
<unk> an impact on margin in that trade off.
Wondering if you really think that's.
And that's the case or do you just look at the net present value of an incremental member and your ability to retain them.
The earnings contribution over time, and not really thinking about.
Higher bound as being an issue for 'twenty three.
Hi here, Yeah, I'll take your second question first and.
And we may have to get back to you on the first one but for the second question I'll say.
Certainly as I said, a minute ago, new members do tend to pressure they come with a lower underwriting margin and tend to be about breakeven as we said I think in years past. So they can pressure sort of some of the returns that you might expect I would say, though given how the trends we've seen in the last number of years and I think we've been really smart about the investments we've made in <unk>.
'twenty three we werent trying to position ourselves to be in the number one sort of product value position everywhere that would result in outsized growth or any thing that I can think of from an anti selection for a second so I'm not overly concerned about that I think we've stated our goal is to get back to industry, leading growth as quickly as we can we'd love to do that.
One year, we'll just have to see whether peers made other investments for 2023, and how our ultimate offerings stack up but I would say that's not something that I'm concerned about in terms of your first question at least in the U S. N Hey, Gary So I think all of that is it just the difference.
Difference in the way, we're kind of showing our <unk> related to some ipas and this is really to ensure we are aligned with the new disclosures, we're giving around our primary care business back in the stat pages. So no big shift there is just a little over 40 different that you're seeing there.
Okay. Thank you.
Okay.
Thank you and.
And our next question comes from the line of Rob Cottrell with Cleveland Research.
Hi, Good morning, Thanks for taking my question just wanted to dig into the divergent experience you are seeing in the individual MA book versus group Ma.
Is it about the group MA membership that you that utilization is higher than expected in <unk> and that you expect that to continue through the rest of the year.
Sure I'm happy to take that so as I mentioned in my commentary in 2021, we did see different utilization patterns across individual MA and group and as I mentioned in group MA we saw significantly more depressed utilization relative to individual some of that we attribute to the fact that we did see lower overall.
All Covid hospitalizations in the group MA population and we attribute that to the fact that they tend to have a higher vaccination rates in the individual so we had lower COVID-19 utilization, but similar levels of sort of depression, and non COVID-19 utilization, resulting in overall lower utilization in group N. A as we assess that going into 2022, we also have.
To assess the impact of mortality as a result of Covid and what the resulting impact was to your morbidity.
And as we've been able to review the trends that we're seeing it as we entered the year, we believe that some of that lower utilization wasn't reflective of lower morbidity and I think based on the trends we've seen what we'd say is some of what we thought was lower morbidity has turned out to be more reflective of just deferred utilization and pent up demand that's working its way through now we are.
We're seeing higher surgical volumes in particular in group MA relative to individual the volumes are about 600 basis points higher year to date in the group MA side than individual that's one of the reasons. We have some reason to believe that this maybe to some degree reflective of pent up demand that may still moderate in the back half.
For the year, and we'll certainly continue to monitor it but.
But as I said it is trending a little bit differently. Some of that was probably just a reflection of sort of what we anticipated and allocated and attributed to morbidity versus pent up demand will continue to watch it as I said you know as you think about 'twenty three if this does persist we would expect to mitigate some portion of it through higher risk adjustment than we previously com.
And played it and review it is you know on a net basis manageable within our 2023, but it is.
Particularly reflective in the non inpatient side and like I said, we are seeing in particular, some higher surgical volumes.
Got it thank you.
Thank you I'm showing no further questions at this time, so with that I'll hand, the call back over to CEO , Bruce Broussard for any closing remarks.
Well, thank you and thanks, everyone for your support and continued confidence in the organization and obviously I want to thank our 70000 teammates that may make this.
Successful company in this quarter, because it's such a successful quarter and then we do look forward to seeing each of you at our at our September 15th to virtual.
Investor Conference I will go over a lot of more details about our longer range views along with our.
Continued.
Tried to drive towards growing our center world.
Services businesses. So again I. Thank you and look forward to seeing you on September 15th.
Yeah.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.
<unk>.
Yeah.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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