BILL GEORGES, MANAGED CARE ANALYST, JP MORGAN: Good morning, and welcome once again. My name is Bill Georges. I'm the JPMorgan Managed Care Analyst. This morning we are pleased to welcome Dr. Anthony Marlon, CEO of Sierra Health Services. Based out of Las Vegas, Nevada, Sierra is a diversified health care company that provides an administered managed care benefits for employers, government programs, and individuals. Sierra's membership is concentrated in Nevada where it boasts leading market share. The Company also participates in the Medicare Part D program, giving it a national presence in that business.

And with that, I will turn it over to Dr. Marlon.

DR. ANTHONY MARLON, CEO, SIERRA HEALTH SERVICES: Thank you very much and good morning. It is good to be with you. The details of the presentation goes something like this. We are a managed care company. We're in Las Vegas, Nevada. We have operations outside of Nevada, mainly in some of the Medicare fee-for-service programs and the Medicare Part D program. But basically we are a health insurer. We have HMO products, PPO products, ASO products. And we also deliver health care in Las Vegas, Nevada. We are very, very fortunate we started a long time ago. And of that business that we're in we have somewhere between a 60 and a 70% market share. So we do very well in Las Vegas.

The medical care ratio I will be talking about excludes the PDP. The days in claims payable excludes the PDP. And the cash flow is adjusted for CMS payments. We do Medicare Advantage, and whether or not that payment comes to us on the 30th of the month or the first of the month can really wildly skew cash flow numbers. We reconcile all of this with GAAP.

This is kind of the breakdown of what happens in Nevada. We have variously estimated between 19 and 23% uninsured. All of us read with some interest today what Schwarzenegger wants to do here in California. I would submit to you that Nevada, even though the legislative session is about to go into session, we will look with interest, but there is probably no appetite for any kind of employer mandates in the state of Nevada.

In Nevada Medicare represents 12 to 13%. [Medicare] is about 6%. We have a very meager Medicaid program in the state of Nevada. What I mean by that we have categoricals. We have pregnant women and children, and we have aged, blind and disabled. We do not have a medically needy program.

The HMO products represent some penetration somewhere between 18 and 20% of the market, depending upon where you are. The private self-insured market is either PPO insured or PPO self-funded. There is very little indemnity business, and there is very little high deductible plans in the state of Nevada. There is very little appetite for those.

This is our membership and our growth in thousands over the last five years. You can see that we've done very, very well in unit growth as time has gone on. We announced in the last earnings report that we lost a couple of accounts for January, including HCA, which is our hospital company in which we are having a contract dispute. We will talk a little bit more about that. This will be first year that we will not have double-digit growth rate in our commercial product, and I'm talking about '07.

We ended '06 at 10% net commercial growth. We did better than we projected. And again, in '07 we expect it to be somewhere between 3 and 5%. January enrollments were better-than-expected. So we may come in at the higher end of that 3 to 5, but the rest of year remains to be determined. Again, Nevada, we've got a 66% market share of the HMO product in all of Nevada, and actually 78% market share in Las Vegas. The penetration is variously estimated at somewhere between 18 and 20% statewide.

Typically we have - 63% of our business is in large groups. The midsize group, which we describe as 51 to 500, is a growing segment of our business thanks to the better business climate in Nevada, and some of the difficulties that some of the surrounding states are experiencing.

You may be surprised to learn that only 20%, 20% of our enrollment comes from gaming. We are typically a slice offering in the gaming establishments alongside of a self-funded plan. Atypically in none of the gamers is there another HMO. We're the only HMO offered. We run up against United PacifiCare occasionally in the mid group and the small group market. We run up against Aetna. I will show you some numbers, but we do not run up against the competition very, very much.

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