Herbert Fritch – Chief Executive Officer Kevin McNamara – Chief Financial Officer

Shelly Knowle for Daryn Miller - Goldman Sachs Tom Carroll - Stifel Nicolaus Justin Lake – UBS Chris Carter for Charles Boorady – Citigroup

Good morning and welcome to the HealthSpring Conference Call to review its financial results for the first quarter ended March 31, 2009. The financial results were issued before the opening of market trading today. If you did not receive a copy of the press release, you may find a copy under the Investor Relations tab on the HealthSpring website, www.healthspring.com. Before we begin, HealthSpring wishes to express that some statements made in this call will be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual performance of the company may differ from that projected in such statements. Investors should refer to statements regularly filed by the company with the Securities and Exchange Commission for a discussion of those factors that could affect the company's operations and the forward-looking statements made in this call. The information being provided today is as of this date only, and HealthSpring expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes in expectations. In addition, certain non-GAAP financial measures may be covered in this presentation. These non-GAAP measures are reconciled to the most comparable GAAP measures in the press release, or on the company's website. At this time, I'll turn the call over to Mr. Herbert Fritch, Chairman and Chief Executive Officer of HealthSpring.

Welcome to HealthSpring's 2009 first quarter earnings call. Despite all of the political rhetoric surrounding Medicare reform and 2010 Medicare Advantage rates, we have had a good start to what we hope will be a strong 2009 for HealthSpring. I will add more on the political front later but first let me report on the main drivers of our first quarter results. Both Medicare Advantage and PDP membership are up. Our Medicare Advantage membership in the May payment report was 179,509, which is a substantial increase over the 162,000 members we had at year end. The May payment report is the best reflection of our membership as of the end of the annual open enrollment and election periods. This increase in membership was our best since lock-in was adopted in 2006, not only reflects our well designed and enthusiastic sales and marketing efforts, but also stands a good indicator of the relative attractiveness of our plan products as compared to our competitor products. Perhaps even more significant, our disenrollment rates declined year-over-year, thus further supporting strong net enrollment growth. With the significant headwinds from member sales and marketing restrictions, we believe the membership growth demonstrates Medicare beneficiaries perceive value in Medicare Advantage plans benefits, which we believe is becoming more important in these troubling economic times. For these reasons we believe we will continue to see growth in membership during lock-in as we market to agents, dual-eligibles, and persons qualifying for our special needs plans. At this point we are optimistic that we may be able to meet or exceed the high end of our prior membership guidance of 182,000 members. On the PDP side our May membership was 290,955 as compared with 282,000 members at year end. This increase is more impressive when you take into account that we were below CMS benchmarks and selling fewer regions this year as we are in just twenty-four regions in 2009 versus thirty-one in 2008. Because substantially all of this membership is auto-assigned to us by CMS we do not have the member selection issues of many of our competitors and our cost of member acquisition is essentially the cost of our bid process. All things considered, I feel much better about our PDP operations and prospects now than at the same time last year, one of our more significant learning experiences in 2008 related to higher than expected member turnover, which cause declines in our Part D profitability. Our relative turnover thus far in 2009 has been more favorable than in 2008. Moreover, the new CMS facilitator process for member data in 2009 is also allowing us to better track where new members are relative to the donut hole. Both of these developments should better position Part D for enhanced profitability in the second half of the year. The results of the first quarter appear to support this conclusion. On top of the positive contributions of new membership in Part D, our first quarter's financial results were also driven by the comparably favorable performance of our Florida plan, which many of you will recall was the most challenged of our MA operations in 2008. Improved Florida results in the quarter were primarily attributed to a combination of the highest premium increases of any of our markets, lower unit costs resulting from the plans recontracting efforts in the third and fourth quarters of 2008, and lower in-patient admissions, resulting in part from heightened attention to medical management. Florida's MLR improvements were offset by seasonably weaker performance in our other plans. The erosion in MLR in general year-over-year was not unexpected as 2009 premium increases in the other markets are not keeping pace with medical trends. On the strategic front we are beginning to see the result of our competitors weaken, particularly those who are committed to private-fee-for-service plans or otherwise operating at thin margins. The Medicare business is getting tougher to operate profitably as a result of slowing rate increases and increasing regulatory compliance and enforcement efforts. With our commitment to provider engagement to control costs and focus on regulatory compliance, we think these trends play to our strengths. We also believe our singular focus on Medicare gives us an advantage in dealing with these issues. We expect competitors to exit the business at increasing rates or to put their businesses up for sale. Although we are seeing more acquisition opportunities become available we are not yet seeing a capitulation in value expectations that would lead us to make any moves. We will be patient and wait for the right opportunities. In the meantime, there are over 140,000 private-fee-for-service members in our existing service areas who will be needing to change plans in during 2010 and 2011. We think the combination of these various factors will create significant membership growth possibilities in the near term. As all of you are well aware, the big challenges for us on the regulatory front relate primarily to CMS's announcement of 2010 benchmark premium rates, which for us looks like a reduction of 4% to 5% compared to 2009 rates. We were disappointed that CMS felt legally compelled to assume the proposed position fee cut would not be fixed and we have assumed it won't be fixed in time to favorably affect 2010 bids. Accordingly, we are in the process of carefully evaluating our plan bids which are due at the beginning of June. Our challenges will be to enact best practices in contracting and medical management across all markets to curb medical cost increases. We will also be challenged to pare benefits while remaining attractive enough to be competitive for MA members. Currently, however, we think we think we will be able to maintain a zero premium plan option in each market and most important to us is to maintain our targeted average MLR of around 80%. On the political front we have ramped up our efforts in Washington to promote HealthSpring's business model with our commitment to care coordination with positions rewarded for cost effective delivery of high quality care as a part of the healthcare reform effort. I see some evidence that our message is gaining traction, particularly the documented successes in our partnership for quality and advance medical home initiative. The staff of the senators and representatives I have met with understand that some MA plans embody many of these principal while others do not. The staffers have a sincere interest in the health and financial well being of the Medicare beneficiaries. All of them have communicated a long-term commitment to the Medicare Advantage program. We are also encouraged by the recent document release by the Senate Finance Committee. They have called for incentives to positions and plans to improve quality and efficiency as well as rigorous care coordination, both of which have been cornerstones of our model. We were particularly encouraged by the recognition of the need to make fragile changes in moving MA payments to parity, which acknowledges that Medicare beneficiaries should not have to experience too dramatic a reduction in benefits. I know that many of you have inquired as to the status of our CFO search process. We still intend to have someone in place for some overlap with Kevin before he departs at the end of May. More on that at a later date. Finally, as to guidance, our performance this quarter gives us a higher level of confidence in our previous earnings per share guidance of $2.00 to $2.20. We are also taking advantage of the current environment to make investments in our business which will benefit us in 2010 and beyond. These investments include building out our management, medical management, quality and care initiatives, and technology projects. We believe the challenges we are facing after the end of this year require the result to invest today for the benefit of the future. With that, I would like to turn the call over to Kevin.

We were pleased with our performance for the quarter and believe it bodes well for a strong 2009. Our reported quarterly net income of $20.6 million, or $0.38 per share, increased 31.4% and 35.7% respectively over the first quarter of 2008 when you adjust the prior year's quarter to exclude out of period risk adjustment payments. As a reminder, our results in 2008 included significant out of period risk adjustment settlement payments related to the 2007 plan year. The 2008 first quarter included $12.0 million of additional premium revenue estimated for 2007 final retroactive risk adjustment settlements with CMS. This adjustment had a favorable impact on net income of $5.3 million, or $0.09 per dilute share, in the year-ago quarter. In comparison, the accrual for 2008 final retroactive risk settlements in the 2009 first quarter was not significant. As we reported in our 2008 year end earnings call, the as-adjusted 2008 financials will beat a comparison for our 2009 earnings and guidance as we believe that the magnitude of these out-of-period adjustments should diminish significantly in 2009. Moving to the specifics, we reported 175,138 Medicare Advantage members at the end of the first quarter, reflecting year-to-date growth of 8.1% and year-over-year growth of 14.8%. Growth during the 2009 open enrollment period was significantly better than we expected and member retention rates have improved year-over-year. During the first quarter we added approximately 13,000 net new members. PDP membership stands at 286,810, up 11.2% year-over-year and 1.6% year-to-date. As Herb pointed out, despite losing seven of our PDP regions in 2009, PDP membership remains robust. Total revenue in the first quarter was $646.1 million, an increase of $93.4 million, or 16.9%, versus the prior year first quarter. Medicare Advantage revenue was up 17.9%, or $82.1 million, to $541.4 million. Primary drivers of this increase were a 13.3% increase in member months and MA premium PMPMs of $1,047, an increase of 6.8% versus the 2008 first quarter as adjusted. PDP premiums were $92.5 million in the first quarter of 2009, an increase of $13.2 million, or 16.7% versus the first quarter of 2008. PDP member months increased 11% and PDP premiums PMPM were $109, an increase of 5.1% over 2008. Please remember that quarter-to-quarter changes in PDP PMPMs are significantly affected by risk corridor adjustments. Fee revenue for the quarter increased $3.0 million as compared to the first quarter of last year. The increase was primarily the result of higher premiums and management fees associated with IPAs that have come on line since last year. The percentage of our membership under IPA or risk-sharing relationships has continued to increase over the last 12 months. Investment income was down 67.8%, or $3.3 million, in the quarter due primarily to well known decrease in investment yields. Total medical expense in the quarter was $529.6 million, an increase of $85.4 million, or 19.2% versus the prior year's quarter. With respect to the components in the relative metrics, MA medical expense was $440.3 million, an increase of $74.9 million, or 20.5%, versus the comparable prior-year quarter. MA medical expense PMPMs of $852 were up 7.4% over the first quarter of 2008 as adjusted. The MA MLR was 81.3% for the current quarter versus the prior year's 80.9% as adjusted. The erosion year-to-year was primarily the result of MA medical trends exceeding premium increases, which we expected and forecasted at the beginning of the year. As Herb mentioned, the one exception to this was Florida where premium increases more than offset medical trends. Prior period reserve development was favorable in both periods, although lower in 2009 in absolute dollars and as a percentage of revenue. It was in line with our historical experience and operations. The drug component of MA also had a positive impact on the MLR year-over-year. PDP MLR in the 2009 first quarter was 95.8% versus 96.8% a year ago. PDP medical costs PMPM of $104 were up 4% year-over-year. The improvement in the PDP MLR year-over-year was primarily the of premium increases exceeding medical cost trends. SG&A expense decreased 20 basis points to 11.2% as a percentage of total revenue in the 2009 first quarter compared to 11.4% in the first quarter of 2008, primarily as a result of increased premiums. On a dollar basis, SG&A expense for the quarter increased $9.4 million, or 14.9%, versus the prior-year quarter to $72.3 million, primarily as a result of a 20% increase in headcount and sales commissions from higher gross sales in the open enrollment period in 2009. Sequentially, SG&A expenses as a percentage of revenue improved 150 basis points from the fourth quarter of 2008, primarily the result of higher premiums and membership in the current quarter offset by higher selling commissions. As a reminder, the first quarter of the year is typically burdened by commission costs while the fourth quarter of the year includes higher advertising and member mailing costs. Moving to the items below the line, depreciation and amortization expense in the 2009 first quarter was essentially flat versus the 2008 first quarter. Interest expense in the current quarter decreased $1.1 million over the 2008 first quarter as the result of a lower average debt balance and reduced interest rates in 2009. We continue to expect that the interest rate environment will translate into lower interest rates for both our investments and our debt in 2009 compared to 2008. There was no share repurchase activity during the current quarter under the company stock repurchase program. We currently have $2.7 million remaining of our original repurchase authorization level of $50.0 million. The current program expires June 30, 2009, and further expanding our repurchase requires an amendment to our credit agreement. Looking at earnings, our net income for the first quarter of 2009 was $20.6 million, or $0.38 per diluted share. This represents an increase of 35.7% over 2008 first quarter as adjusted EPS of $0.28. I will note that net income for the current quarter includes a tax rate of 36.5% compared to 36.1% in the same quarter last year. The increase in the current year is primarily attributable to estimated annual decrease in nontaxable investment income in 2009. Additionally, you will note from our earnings release that weighted average shares outstanding used for earnings per share calculations decreased by 2.2 million shares as compared to the first quarter of 2008. Moving to the balance sheet and cash flow, our balance sheet at March 31, 2009, reflected cash and cash equivalents of $304.9 million. Unregulated cash was $44.2 million. Not all of this cash is freely available as we make significant cash tax payments in the second quarter. Funds held for the benefit of Part D members at March 31, 2009, consisted of a $38.8 million current asset, which relates to the 2008 plan year and a long-term liability of $35.5 million related to the 2009 plan year. As discussed in our year end call in February, the asset balance related to the 2008 plan year is a result of our being in an under-funded status in terms of these subsidy amounts provided by CMS requiring the use of internal funds to pay pharmacy claims which should have been covered by the CMS subsidy amounts. We expect to collect the funds related to the 2008 plan year late in 2009. We expect that any shortfall or excess subsidy amounts in 2009 and future years will be less significant than in prior years. Days claims payable were 36 days at the end of 2009 first quarter, down one day from 37 days at the end of the 2008 first quarter. We will include a schedule detailing the components of the medical claims liability in our Form 10-Q which we intend to file over the next few days. Total debt outstanding was $258.5 million at March 31, 2009, compared to $268.0 million at year end and $292.5 million at March 31, 2008. Operating cash flow for the quarter was a source of $7.9 million compared to a source of $14.0 million in the same quarter last year. Operating cash flow during the current quarter trailed net income due primarily to the accrual of current year risk adjustment payments, a large portion of which will be collected in Q3 and the payment of 2008 incentive compensation during the first quarter of 2009. We continue to expect cash flow from operations for the full year to exceed net income absent the unusual and unforeseen timing of significant amounts of cash received or paid related to working capital accounts. We are currently maintaining our financial guidance for 2009, including earnings per share guidance in the range of $2.00 to $2.20. It appears that we are well on track to reach, if not exceed the high end of our MA membership guidance of 182,000. All other operating guidance remains unchanged. That concludes our prepared remarks. We can now open the line for questions.

(Operator Instructions) Your first question comes from Shelly Knowle for Daryn Miller - Goldman Sachs. Shelly Knowle for Daryn Miller - Goldman Sachs: Was there any commercial revenue or commercial medical expense in the quarter?

There was commercial revenue and expense. It's become totally insignificant so we have ceased reporting that as a separate line item. Very, very insignificant. Shelly Knowle for Daryn Miller - Goldman Sachs: And on the in-patient utilization, could you talk a little bit more about what you are seeing, update us on the trends relative to what you were seeing in the back half of last year.

I think in general we saw a lighter flu season so admit rates were down. We are seeing somewhat of an uptick in the acute levels, driving a little higher cost per admission rate. Shelly Knowle for Daryn Miller - Goldman Sachs: And on PDP utilization, is that coming in better than expected?

I would say coming in about as expected.

Your next question comes from Tom Carroll - Stifel Nicolaus. Tom Carroll - Stifel Nicolaus: You mentioned our medical expense, PMPM, earlier in the year you mentioned that you expected it to go up. Maybe give us some details on really what's driving it. And then secondly, just a point of clarification. Did you indicate that you expect to have a zero premium product in all of your markets in 2010?

Pretty much. I mean, I don't know, we haven't finalized bids to know if that's true in all segments of all markets, but for the most part yes. The medical trends are always a combination of unit price increases, which are largely tied to Medicare, in combination with some acute increases and new drugs, new products, that kind of thing. I don't think anything really abnormal or unusual there, but it's always a little bit of something. I mean, I think the biggest challenges tend to be on the outpatient and ancillary side in the hospital run.

Your next question comes from Justin Lake – UBS. Justin Lake – UBS: First question on risk adjustment payment. Herb, this was the first first quarter I can remember that you didn't have any real impact from the benefit of kind of an updated risk scores. Should we read anything into that from a perspective of the continued potential to improved coding, especially given what CMS is doing on the risk adjustment payments?

I'll take that. No, I don't think you should read anything into it. It really relates to over the past couple of years, if you remember, we've transitioned from totally cash basis on these to then we went to accruing mid-year and ultimately went to accruing final. As we eased into it, we started very conservatively accruing and then we worked very hard throughout both years trying to get our methods as close to accruing for everything we were aware of and all of the submissions. Where we've really gotten to in 2008 and going into 2009 is we really think that our accrual methods will really be absent the mid-year update. We are looking at all the submissions to CMS and we are accruing pretty close to where we expect it to come out. Justin Lake – UBS: So what you would say there is then that you are still getting a relatively similar benefit. You're just accruing more [inaudible].

Correct. It's more accounting than the experience itself. Justin Lake – UBS: And Herb, you did mention on the ability to keep premiums at close to zero or at zero going forward, anything you can tell us as far as where you kind of think your cost trend is, how much you think you need to cut benefits, and how should we think about the MLR impact. Our maybe even for 2010 and even as we go beyond, how much of excess benefit do you think is out there that you are comfortable lowering before you would think that you would have to go in and lower those, maybe potentially have to accept lower margins, higher MLRs.

I think we still have room to add some co-pays cost share. We are looking at everything that is very market- and product-specific so I know some of the markets are looking at a little narrower networks that perform a little better and we still have the ability to add some premiums, that should be pretty modest in the future. We are hoping we don't have to do that in 2010. One of the benefits of this position fee cut is that we expect we will get a little retrospective bump in 2011 from that. That should help with any potential decrease due to movements to parity and soften those a little bit for 2011. But there is still room in most markets and most products to add some cost sharing and still have a benefit that is of value to the seniors. At least certainly compared to the option of buying a supplement. Justin Lake – UBS: So it sounds like you are indicating not only that premiums will be relatively flat or at around zero, but also that you don't expect much, at least for 2010, much of a margin impact. You think you will be able to pass it through on the benefit line?

Yes. I mean, our benefits, clearly they'll be higher cost sharing, fewer supplemental benefits. So I mean, I think the impact on cost sharing and supplemental in and of itself will be fairly dramatic. I mean, we are still running mid-single digit trends. So you are going to have to offset something like that in terms of these reductions and supplemental and increased cost sharing. But so far I think we think we can do that.

Your next question comes from Chris Carter for Charles Boorady – Citigroup. Chris Carter for Charles Boorady – Citigroup: Could you discuss your capital deployment strategy for the rest of the year? I know you didn't repurchase any shares this quarter. I don't know if you're planning for the rest of the year, but maybe you could discuss that a little bit.

Where we are on share repurchase is we had a $50.0 million share repurchase which was open and actually expires at the end of June 2009. That share repurchase was actually carved out when we did the debt related to the original Leon transaction. So it was a basket that we had within that credit agreement. To do additional share repurchase requires an amendment to our credit agreement and then of course would take the authorization of the Board. We are constantly in communication with our banks and talking to them about that.

Your next question is a follow-up from Tom Carroll - Stifel Nicolaus. Tom Carroll - Stifel Nicolaus: Regarding the shares in escrow, I think there were 2.7 million shares related to the building out of some Living Well centers. Could you give us an update on that? I think that was to hit in 2009?

Currently they are due to come out of escrow and go into the share account in the fourth quarter. The event that will cause them to come out of escrow is getting the two centers open and up for business and currently the Leons are tracking towards that expectation. They would go into the share account in Q4. Tom Carroll - Stifel Nicolaus: And I have the number right? 2.7 million.

2.8 million I think.

There are no further questions in the queue.

Thanks for attending the call and we look forward to the call next quarter.

This concludes today’s conference call.