Question-and-Answer Session
Operator
Your first question comes from Bill Georges – JP Morgan.
Bill Georges – JP Morgan
Could you start off by addressing a little bit in more detail both your lower SG&A in the quarter, which is I think the lowest really in recent memory, as well as maybe a little more detail around the $0.11 catchall positive impact that you referred to in the revised guidance.
John C. Molina, J.D.
Bill, we’ve talked a lot about controlling administrative costs, starting about the fourth quarter of last year, we really clamped down on hiring and other admin expenditures. Given the sequential growth in enrollment, we have been able to leverage that over a larger enrollment base and larger premiums. That’s basically, why admin came down.
As far as the $0.11 improvement of other operations, there are a lot of moving pieces; we see some improvement in Michigan for example, some improvement in New Mexico. We’re going to see a little bit I think of a decline in expectations as far as Missouri went. So you’re seeing different pieces moving up and back and so we put it all into one line.
Joseph White
We’re seeing some administrative cost improvement overall which is part of that.
Bill Georges – JP Morgan
In terms of thinking about the lower G&A, is that a fair run rate for the balance of the year?
J. Mario Molina, M.D.
I would say yes.
Joseph White
Yes, I think we can see it, maybe bounce around a little bit, but that’s a pretty good run rate.
Bill Georges – JP Morgan
About your Ohio MLR, but 200 basis points improvement still needed for the balance of the year, and you are taking on arguably a challenging population with the addition of the former WellPoint members. So can you talk a little bit about where you derive the confidence from to get that improvement when you also layer in the additional thirty some thousand members from WellPoint?
Joseph White
Bill, we have been able to make fairly steady progress throughout 2007 into the first quarter of 2008 to bring our costs down. So that gives us some degree of confidence that what we’ve been doing has been showing some results. We were able to renegotiate a number of key provider contracts and those new rates didn’t kick in until either late fourth quarter or early first quarter.
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